Red-Hot Medtech Firms Face a Gut Check as Illumina Whiffs

(Bloomberg) -- High-flying makers of medical device implants and diagnostic products faced a heat check in Friday’s trading as the group pulled back from record highs after heavyweight Illumina Inc. slashed expectations for the year.

A number of the last year’s hottest health stocks in the S&P 500 saw shares slip as investors weighed the possibility that the most bullish hopes may prove too lofty for companies that have already seen their prices balloon. Shares of medtech names including Abiomed Inc., Mettler-Toledo International Inc., Intuitive Surgical Inc., and Thermo Fisher Scientific Inc. underperformed Friday, helping push health care stocks as a group lower, even as the broader market hit new peaks.

“Higher multiple names with pie in sky valuations will be hit the hardest just due to a normal reaction when a growthy name such as” Illumina shows its vulnerable side, Jared Holz mused from the Jefferies trading desk.

The iShares U.S. Medical Devices ETF, which Illumina is not a part of, retreated from a record high Thursday to fall 1.1% Friday. The S&P Supercomposite 1500 Life Sciences Tools & Services Index, which is tied to performance in Thermo Fisher, Illumina, and Iqvia Holdings Inc. fell as much as 4.2%, on track for the worst day since October 2018.

Johnson & Johnson, the world’s largest maker of health-care products, will kick off earnings season for the sector on Tuesday, followed by reports from Abbott Laboratories, Intuitive Surgical, and Danaher Corp. next week.

To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

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