Like all tech investing, this is a dicey sector to dabble in. However, compared to biotech, it’s far more fathomable — and that helps a lot.
The standard advice for investing in medical-technology companies is the same as for all high-tech areas: Enter at your own risk. The Food & Drug Administration approval process can be lengthy — and unpredictable — and the competition is cutthroat. That said, if you pick the right horse, it can be very rewarding.
One of the more enjoyable aspects of looking at medical-technology companies is that, compared with other sophisticated fields, it’s often easier for laymen to understand what a medical device does and why it might succeed. In other science-based industries, a new technology’s benefits may not be so easily explained to
outsiders.
A REAL PLUS. The comparison with biotechnology is particularly stark. Inventing a new drug is so complex that it can require an advanced degree even to get a handle on how a compound functions. Pharmaceutical investors might comfort themselves knowing that a company has a proven research or management team. Another approach: Investing in areas where a huge medical need exists (e.g., the treatment of Alzheimer’s) and at least the market opportunity is a known quantity.
However, to some degree investors must trust that the pill or liquid will in some way surpass all the liquids and pills already out there. Call it faith-based investing.
Looked at from this angle, the more-easily understood functioning of medical devices can be a real plus. Even though it’s often possible for more casual observers to understand how a device functions, that doesn’t detract from its ingeniousness.
CHIP IN MY SHOULDER. So what should investors look for? Check the accompanying slide show for highlights of some cool technologies as well as for insights into some important trends. One thing became clear in assembling those examples of med tech: Multifaceted chronic diseases like diabetes and cancer
continue to attract research dollars, since they present so many opportunities for treatment.
There’s also a great deal of emphasis on systems like Xillix’ cancer imaging device, designed to help prevent diseases from advancing to their most destructive phases. And another striking development: Companies seem to think people are growing more willing to have microchips and other informational devices implanted in their bodies. Paging Dr. Orwell.
Some of the technologies featured here are in early clinical trials, while others have won government approval. Naturally, the earlier investors in successful cutting-edge technologies stand to pull in the largest returns, but the risks remain considerable. Perhaps researchers should work up a gizmo to keep med-tech investors’ blood pressure steady.