FTSE 350 Review: Pockets of resilience evident in medical technology

Even giants of the UK sector, Convatec (CTEC) and Smith & Nephew (SN.), were not immune to the Covid slowdown. However, their respective capacities for a swift recovery have proved to be drastically different.

Following its 2016 listing, Convatec faced a few difficult years, culminating in the departure of its chief executive in 2018. Under new leadership, the company narrowed its focus on the chronic diseases market and began trimming back its less profitable lines of business. Products used in the management of long-term conditions, such as insulin pumps, now make up an estimated 97 per cent of Convatec’s sales.

Meanwhile, Smith & Nephew is less than a year into its own turnaround initiative, which has not yet produced the intended results. Rising input costs and execution issues in its key orthopaedics division have triggered downgrades in profit expectations. While shares might look relatively cheap, Liberum analysts say it may take time for them to perform “given the lack of any obvious positive short-term catalysts”.

In the higher-risk world of biotech, clinical trial readouts remain the major catalysts for share price movements – either positive or negative. Markets will therefore be keeping a close eye on PureTech Health (PRTC) this year, as it’s due to report data from a phase 2 trial of its leading drug candidate. 

Known as LYT-100 and intended for the treatment of idiopathic pulmonary fibrosis, the results will indicate whether the treatment is likely to be approved by regulators. If it does get the green light, it will be PureTech’s first wholly-owned asset to make it to market. Investors should watch for an upgrade.