SEPTEMBER RECAP & BEYOND

Healthcare continues to outperform the broader market.
Healthcare stocks continue to outperform the broader market gaining 2.8% vs. 0.4% for the S&P 500. Equipment & Supplies and Medtech were the top performers, gaining 4.9% and 3.4% respectively. Flipping the script from August, large caps stocks outperfomred SMIDs on signs of profit taking from the recent run-up in smaller names. Given ptemium multiple. this sets a high bar for the remainder of 2018 for the group.

MARKET COMMENTARY

Notable Conferences –Industry conferences TCT and NASS; Morgan Stanley.
COAPT data presented at this year’s TCT meeting dramatically surpassed expectations, boosting shares of Abbott and driving optimism in the mitral space. Meanwhile, the start of the annual spine trade show was marked by Medtronic’s acquisition of Mazor Robotics shortly before the conference where robotics continues to be a predominant theme. Morgan Stanley drove some volatility in the med tech sector with optimistic comments made by Teleflex, Integra and Zimmer drove stocks higher while Nevro and Avanos saw pressure coming out of the conference.

Biotech Strength – continued financing activity.
Within the biotech sector, financing activity remains high. Through the first nine months of 2018, >$65 billion has been raised via IPOs, follow-on offerings, venture capital debt and PIPEs and other equity. This represents the the 2^nd highest level in 20 years and is important as biotech financing activity often serves as one of the metrics which the Street uses to define the overall sentiment of the healthcare sector.

IPO Pricings.
As expected, the IPO market saw an uptick in volume following the August slowdown. In total, 23 IPOs priced in September, nine of which were in the healthcare sector. The healthcare deals were dominated by seven biotech deals and rounded out with one animal health spinout from Eli Lilly and one medtech deal, Ra Medical Systems. Pricing and performance were mixed with three IPOs breaking issue price by the end of the month, including one deal priced at the high end of the filing range (the other two priced at the low end of below). The sole medtech deal, Ra Medical Systems priced at $17 versus its $14-16 filing range and finished the month up 13%.

Source: Thompson Reuters and FactSet