Orthopedic and spine device companies are hot in healthcare investment today, and many investors are looking for the next best opportunities.
William Plovanic of Canaccord Genuity discussed the medical device market outlook for investors with Equities. He mentioned several orthopedic and spine device companies emerging as interesting for investors, including NuVasive and Exactech. Here are eight observations on medical device investments from Mr. Plovanic:
1. The medical device sector provided solid returns for investors in 2013, a trend for the past few years. Valuations moved up significantly last year and many companies did well.
2. This year — 2014 — has been more challenging for high-growth companies to provide returns. The high 2013 valuations made it tough for medical device company stocks at the higher end of the long-term ranges.
3. Orthopedics is still growing in the medical device arena, but is a more mature market than others. Technologies in wound care, obesity and diabetes are advancing more quickly to improve patient outcomes.
4. NuVasive stands out in the mature spinal fusion market by pioneering a new market — the lateral approach — with clear benefits such as reduced blood loss, smaller incisions, shorter recovery time and shorter hospital length of stay.
5. In orthopedics, the extremities market is still a high-growth market, making Exactech with its reverse shoulder system stand out among other orthopedic companies.
6. Regulatory and reimbursement environments had more of an impact on venture capital investments than the Affordable Care Act. Venture capitalists are looking for better, quicker, faster and cheaper technology, and the ACA hasn't impacted that, according to Mr. Plovanic.
7. FDA changes have made gaining clearance more difficult and slowed investment in medical devices significantly. However, now the investment is beginning to pick up.
8. Mr. Plovanic's favorite wound care company — MiMedx — provides "better, faster and cheaper technology compared to current therapies."