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Quarter-End Insights

Our Outlook for Health-Care Stocks

Med-tech multinationals look to the East for growth in China.

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  • Though investors often have a vague impression that the emerging Chinese market for health care will be large, we found the potential size of this market to be eye-opening once we sat down to examine reasonable scenarios for growth.
  • China's medical-technology market is already $21 billion--second in size only to the U.S.--and has been growing in the high teens. We think there is plenty of room for further growth in cardiology, orthopedics, and neurology.
  • We think multinationals in the narrow-moat business of making drug-eluting stents will face major challenges to establishing the efficient scale that characterizes their economic moats in developed markets. On the other hand, we are confident the orthopedic multinationals can translate their wide moats in developed markets to the burgeoning Chinese market.

 

Debbie Wang has a position in the following securities mentioned above: ANTM, GE, SNY. Find out about Morningstar’s editorial policies.