Value creation priorities shaping medtech
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(8 pages)Medtech value creation has been a story of haves and have-nots in recent years. Since 2019, the top value creators have outpaced the S&P 500, while the rest of the industry has struggled (Exhibit 1).1Based on McKinsey analysis of the top 60 medtech companies, by market capitalization. Weighted average is based on market capitalization. Average of the rest of medtech is 2 percent, with median –3 percent. Based on data from S&P Capital IQ, accessed September 4, 2024. Industry and capital market volatility during the COVID-19 pandemic masked the differences in performance between the top medtech companies and their peers. In the years since, investor behavior has revealed just how wide of a gap they see between these cohorts.High performers share a success profile that distinguishes them from other companies: above-average industry growth, relentless focus on quality, rich innovation pipelines, rising profit margins, and steady levels of free cash flow. Underneath the financials,...