In 2025, the medical device industry saw a steady stream of dealmaking activity. Among the year’s largest transactions were Abbott’s acquisition of Exact Sciences for $21bn, Becton Dickinson (BD)’s $17.5bn divestment of its Biosciences & Diagnostic Solutions business to Waters Corporation, and Stryker’s $4.9bn acquisition of Inari Medical.
So far in 2026, dealmaking activity has fallen somewhat short of expectations. At the J.P. Morgan Healthcare conference in January 2026, a period that typically sees a flurry of M&A activity, Boston Scientific’s $14.5bn acquisition of Penumbra was the standout medtech megadeal. However, activity has picked up modestly, including Medtronic’s acquisition of Scientia Vascular in March.
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On the initial public offering (IPO) front, activity in the medtech industry saw a slight resurgence in 2025, as anticipated by various market observers, with companies including Kestra and BillionToOne going public, with Medline’s $6.26bn offering closing out the year in December. In 2026, despite January representing a common IPO launch window, activity has been limited, with highlights including diabetes specialist MiniMed going public with a $560m raise in March, albeit short of the former Medtronic division’s $784m expectation.
In September 2025, EY published its 19th ‘Pulse of the Medtech Industry’ report. Authored by John Babitt, EY’s global medtech leader, and Arda Ural, EY Americas life sciences leader, the report highlighted that the medtech industry has been experiencing steady VC and M&A activity, with deal-making “judicious”, with less deals being made yet ones with higher valuations overall.
Since the release of EY’s last report, the US and Israel have initiated a war with Iran that is affecting supply chains globally. Meanwhile, investors continue to pay close attention to the ongoing rise of artificial intelligence (AI), which continues to have a strong impact on end markets within the medtech industry.
Medical Device Network spoke to Babitt to learn what impact rising challenges such as investor perception, conflict in the Middle East, and Iran’s closure of the Strait of Hormuz are having on factors such as pricing and IPO activity in the medtech industry.
This interview has been edited for length and clarity.
Ross Law (RL): Have there been any surprises since EY’s latest Pulse of the Medtech Industry report released, or has recent activity in the medtech industry broadly been in line with your expectations?
John Babitt (JB): From abroad-based, fundamentals perspective, things have stayed the course. I think there’s been good growth in the overall industry, with the underlying dynamics of volume increasing at mid-to-high-single digits, with pricing remaining stable.
The narrative around medtech, however, has continued to be negative, in that it’s a sector that’s definitely out of favour with investors. Traditionally, medtech has traded at a premium to the S&P-500, and now it trades at a discount. That’s been a bit of a surprise compared to more of a return to the mean that we had been expecting.
RL: What are some of the influencing factors surrounding this shift?
JB: From what we can tell, there are two key influencing factors. The first is that investors are still chasing technology, and with the emergence of artificial intelligence (AI) in the medtech industry, certain companies have become more AI and customer facing and have embedded that into their end markets. And unsurprisingly, those companies have been rewarded.
The other influence relates to uncertainties surrounding the current situation in the Middle East, which has drifted stocks directionally lower. And we’ve seen multiples on higher growth companies contract, closer to multiples on lower growth companies. In essence, there’s been a compression. Whereas a year ago, we saw a very wide dispersion, with high growth rewarded with higher multiples, that risk off trade has caused multiples to contract for higher growth companies.
Fundamentals for those companies, I think, have remained relatively intact. Ultimately, and as the Middle East situation hopefully resolves, and potentially more AI comes into medtech and there is less capital chasing those types of companies, we will again begin to see medtech gravitate more towards the median, maybe even to a premium, just given the strong underlying fundamentals within the industry.
RL: What impact is the situation in the Middle East having on the broader medtech industry?
JB: Of global medtech sales, the direct impact was in the 2%-3% neighbourhood, so not a tremendous impact. There is a potential downstream impact, though, in that a lot of the electronics and semiconductors and a lot of the supply chains are reliant on Asia for production. Those inputs into manufacturing could potentially result in cost increases for medical equipment and procedural delays. We haven’t seen that manifest itself yet, but it’s one of the feed stocks that I think people are paying attention to, to see if there is going to be any ripple effect.
RL: Is it fair to say that this situation hasn’t had an appreciable impact so far?
JB: Speaking anecdotally, we’ve been hearing that the impact so far has been relatively benign to the medtech sector. We haven’t heard about big supply shocks, and factors such as the Strait of Hormuz closure regarding the demand side, is just not that significant from a size and scale perspective. Fundamentally, I think medtech is probably one of the sectors that is less impacted.
The bigger concern regarding the conflict’s overall impact on the medtech space is more in relation to the capital markets. We definitely see the concern there. We had two big offerings that went out, I think either the week of the conflict starting or the week after. Both those deals got done, but since then, we’ve seen limited activity on the IPO front from a public market perspective.
What I can also tell you, though, is that companies are beginning to put the work in to be ready for H2 2026. A lot of medtechs continue to raise significant amounts of capital. For instance, one clot removal company recently raised around $80m, and there have been a couple of neuro deals recently, too, that were in the neighbourhood of $200m, so there’s still investor appetite in the private market.
RL: What are your thoughts on medtech M&A activity seen in 2026 to date?
JB: There’s been a relatively decent flow of activity in the year to date. A key dynamic that we observe is that corporates are more willing to invest in interesting technologies, and you can go down the list of many recent $100m plus financing rounds and see that they’ve brought in a strategic investor along the way. Part of that is because most of the OEMs want to wait until there’s a clear path to profitability, so they don’t have to take as much, or any, real dilution, along with funding losses or clinical trials. They’re funding things along the way to have a more profitable company that they end up kind of taking out.
RL: What is your general outlook for the rest of 2026 in the medtech industry?
JB: The first thing, I believe, is that the underlying fundamentals will continue to prove out, and the second is that the end markets matter. So, if you’re going to be above that 5% revenue growth, you must be in the right growth markets such as pulsed-field ablation (PFA), structural heart, robotics, and diabetes. Those are just some of the markets that everyone wants to be in that are growing above a 5% clip.
The other thing we’ll continue to see is that large OEMs will continue to scrutinise their portfolio, opportunistically looking at selling or divesting assets that aren’t part of their core strategy, while doubling down on assets in some of the spaces I just mentioned to increase their revenue growth.
