The MedTech sector faced considerable challenges in 2024, making it a difficult year for investors. In the year, the slow growth of the global economy drew a lot of widespread attention. The year was also marked by significant elections around the world. As per World Economic Forum insights, the U.S. presidential race had an immediate effect on the global economy, with shares hitting record highs and the dollar rising against many currencies. Concerns about the global economic outlook have negatively affected the market conditions, including the broader Medical Technology or MedTech industry. Economic slowdowns led to reduced government research funding, delays in orders and fewer product purchases. Here’s a quick glimpse.
Supply-Chain Disruptions: The complexity of a medical device supply chain is further challenged by a weak macroeconomy. Geopolitical tensions, such as the Russia-Ukraine conflict, the Israel-Hamas war and shipping disruptions in the Red Sea, have significantly affected the supply of critical components. The 2020-2023 worldwide semiconductor chip shortage triggered by the pandemic continues to affect companies meeting the end market demands, leading to lost sales and rising operational costs.
Cybersecurity Challenges: With the Internet of Things (IoT)-connected devices becoming more integrated into healthcare networks, the risk of data security breaches is rising. The February 2024 ransomware attack on Change Healthcare, due to the lack of multifactor authentication on the server, remains the most significant cyberattack in U.S. healthcare history. These risks often lead to major consequences, including hefty penalties, delays in product approvals and damaged reputation.
Worker Layoffs: Several companies are conducting strategic workforce reductions to optimize their organizational structure and reduce costs. These layoffs are largely linked to driving better profitability and cash flows and realigning staff after acquisition. A shortage of skilled and trained employees in the current competitive landscape is forcing businesses to reallocate resources and invest in the right talent.
These headwinds have made it difficult for companies to maintain their usual growth levels, putting pressure on key performance metrics. Yet, companies with solid fundamentals, such as McKesson MCK, Haemonetics HAE, Accuray ARAY, LivaNova LIVN and Prestige Consumer Healthcare PBH, are expected to perform well, backed by their pipeline developments and business optimization initiatives.
Heading into 2025, the MedTech industry will continue to lead the way with groundbreaking innovations, prompting the regulatory bodies to refine their device safety guidelines. The FDA’s final rule, classifying all laboratory-developed tests (LDTs) as “device”, takes effect on May 6, 2025, commencing a four-year phaseout policy. The landmark change will impose extensive premarket review and post-market compliance, sparking mixed opinions about the timely availability of these tests during health emergencies.
Adding to this, President-elect Donald Trump’s proposed tariffs could affect nearly 75% of medical devices manufactured overseas and sold in the United States, according to GlobalData. Yet, there’s a brewing optimism that MedTech dealmaking activities will spur even more this year in anticipation of a less stringent regulatory environment. Also, the Fed’s three consecutive rate cuts are bound to stimulate more technology-driven investments and scaling of operations. According to a Research and Markets report, leading MedTech companies are allocating nearly 7-8% of their total revenues to R&D, particularly in Cardiology and Neurology.
Consumer-centric healthcare offerings are likely to gain more traction, opening up new revenue opportunities for medical device companies. Also, with breakthroughs like CRISPR technology and the reduced costs of next-generation sequencing, the hyper-personalized medicine area is poised for remarkable growth, tailoring treatments to an individual’s genetic profile and lifestyle. We expect a surge of new AI/machine learning-enabled medical devices in 2025, supported by the FDA’s new recommendations to simplify their approval process.
Overall, 2025 is shaping up to be a transformative year for MedTech. Several MedTech stocks that struggled in 2024 due to the externalities we discussed could be poised for a strong rebound in 2025, thanks to emerging trends and an improving market outlook. Investing in these undervalued MedTech stocks can be a strategic move for potential growth in 2025. We ask investors to focus on companies that leverage cutting-edge technology and provide personalized solutions.
Using our propriety Stock Screener, we have shortlisted five MedTech majors carrying either a Zacks Rank of #1 (Strong Buy) or #2 (Buy) and a Value Score of A or B. These stocks are currently trading below their actual worth, which the value-driven investors may find appealing.
A diversified healthcare services company, McKesson is making strides in its strategic growth pillars. In the U.S. Oncology Network, the company signed an agreement to acquire a controlling interest in Community Oncology Revitalization Enterprise Ventures, LLC (Core Ventures), expanding the breadth of community-based oncology care solutions. The biopharma services platform includes a portfolio of technology-driven solutions focused on improving access and affordability of prescription drugs.
McKesson also rolled out several initiatives aimed at bolstering the business platform and operational efficiency, such as leveraging AI and automation and investing in technology applications. In October, it launched InspiroGene, a dedicated business within the U.S. Pharmaceutical segment focused on supporting the commercialization of cell and gene therapies.
McKesson sports a Zacks Rank #1 at present and has a Value Score of A. The stock has a P/S (price-to-sales) of 16.17X, lower than the industry average of 17.09X. Moreover, the Zacks Consensus Estimate indicates a 19.3% increase in the company’s earnings on 16.2% growth in revenues in fiscal 2025. You can see the complete list of today’s Zacks #1 Rank stocks here.
Boston, MA-based Haemonetics is solidifying its leadership in plasma collection with its NexSys platform and the proprietary Persona technology, achieving more than 35 million collections to date. The company is working on the full market release of its new Express Plus technology, designed to significantly improve collection time, door-to-door time and center throughput.
In the Hospital business, Haemonetics is focusing on accelerating product adoption, exploring opportunities and achieving operating leverage through scale. The VASCADE MVP XL system has bolstered its leadership in atrial fibrillation treatment and expanded its presence in left atrial appendage closures. The company continues to progress with the Enzo ETM esophageal cooling device and SavvyWire, a sensor-guided technology.
Haemonetics carries a Zacks Rank #2 at present and a Value Score of B. The stock’s P/E (price-to-earnings) stands at 15.34X, below the industry’s 20.89X. Its P/S of 2.74X is also discounted relative to the industry’s 5.67X. Moreover, the Zacks Consensus Estimate predicts 15.9% growth in the company’s fiscal 2025 earnings.
Innovative radiotherapy solutions provider Accuray’s Tomo C radiation therapy system has gained approval in China, positioning it to compete in the region’s $3 billion Type B radiotherapy market. Meanwhile, robust customer installations of the CyberKnife and Radixact systems are reinforcing its leadership in the Type A segment. In the APAC region, Accuray benefits from several first-in-country shipments to new markets, such as the VitalHold surface-guided radiotherapy for the Radixact system in Thailand.
Furthermore, the new Accuray Helix platform achieved the CE mark approval in August 2024, opening opportunities for advanced radiotherapy treatments in underserved regions like India. The full Adaptive suite for the Radixact system, including the Cenos online adaptive solution, can potentially distinguish the company in the radiotherapy space.
Accuray carries a Zacks Rank #2 at present and a Value Score of B. The stock’s P/S of 0.38X is well below the industry’s 4.44X. It has a P/E of 26.20X, which is also below the industry average of 31.91X. Going by the Zacks Consensus Estimate, its fiscal 2025 earnings are expected to grow by a staggering 106.2%.
Our third pick is LivaNova, a UK-based medical device manufacturer making strong progress in the pipeline across its business segments. The company is gaining market shares through commercial execution and its ability to supply cardiopulmonary consumables. The new Essenz Perfusion System will strengthen its position in heart-lung machines, serving as a foundational platform for future innovation, particularly around future upgrades, including data capture and analytics.
The oxygenator business is expected to continue to outpace global supply, with increased manufacturing capacity to meet rising demand. LivaNova is also developing a next-generation oxygenator with an advanced design and performance standards. Meanwhile, in Epilepsy, the company is enhancing its VNS Therapy system to include features such as remote programming connectivity.
LivaNova PLC Price
LivaNova PLC price | LivaNova PLC Quote
LivaNova carries a Zacks Rank #2 at present and a Value Score of B. The stock’s P/S of 1.92X is less than the industry’s 4.44X. It has a P/E of 12.79X, which is also below the industry average of 31.91X. Furthermore, the Zacks Consensus Estimate projects 8.2% growth in the company’s 2025 earnings.
Leading consumer healthcare products company Prestige Consumer’s well-executed brand-building strategy remains the cornerstone for its strong performance. Its diverse lineup of products provides multiple sources of growth, minimizing the impact of any individual category slowdowns. Prestige Consumer has a fast and growing international business, with its Canadian portfolio comprising several leading brands in niche categories.
In particular, the long-term growth prospects of Gaviscon, the largest brand in Canada, sets up well for its continued success. The Hydralite brand continues to headline the International segment’s performance. Meanwhile, the company’s multi-year investments in the e-commerce channel have been delivering impressive results, continuing the long-term trend of higher online purchasing.
Prestige Consumer Healthcare Inc. Price
Prestige Consumer Healthcare Inc. price | Prestige Consumer Healthcare Inc. Quote
Prestige Consumer carries a Zacks Rank #2 at present and a Value Score of B. The stock has a P/S of 3.36X, lower than the industry average of 5.67X. Its P/E of 16.77X is discounted than the industry’s 20.89X. The Zacks Consensus Estimate predicts 5.5% growth in the company’s fiscal 2025 earnings.
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