Medical Devices & Supplies

Medical Devices & Supplies covers surgical robots, implants, cardiovascular and diabetes devices, imaging, eye care and hospital supplies. MoatScope covers 195 companies here. Three have a wide moat, 59 a narrow moat and 133 none.

How the industry makes money

Device makers earn most reliably when a single sale creates years of follow-on revenue: instruments and supplies used in every procedure, sensors replaced every few weeks, service contracts on installed equipment. Intuitive Surgical builds that model around its da Vinci surgical robots. Stryker sells implants and equipment that surgeons are trained on and trust. Abbott spans medical devices, including its FreeStyle Libre glucose monitors, diagnostics, established pharmaceuticals and nutrition.

Where the moats are

Switching costs appear in 58 of the 62 moat-rated companies and intangible assets, meaning patents and regulatory approvals, in 53. The surgeon or clinician, not the hospital's purchasing department, often decides which product gets used, and changing products means retraining and new risk.

• Intuitive Surgical: the dominant maker of surgical robots, with an installed base, trained surgeons and procedure data that reinforce each other.
• Stryker: implants and equipment embedded in surgeons' training and preferences.
• Abbott: a market-leading glucose-monitoring franchise alongside diagnostics, established medicines and nutrition.

The narrow-moat group is large and includes Medtronic, Boston Scientific, Becton Dickinson, Edwards Lifesciences, Dexcom, Alcon, GE HealthCare and Smith & Nephew. Most of the 133 companies without a moat are smaller makers with one or two products or technology still in development.

What wears moats down

Hospitals and group purchasing organizations push hard on price, reimbursement changes can cut what a procedure pays, and a recall or safety problem can damage a product line for years. New technologies, such as competing robotic systems or next-generation monitors, can also reset a market that looked settled.

What the quality scores say

Intuitive Surgical scores 81 on MoatScope's quality scale, Abbott 71 and Stryker 65. Several narrow-moat companies are close behind, including Dexcom at 68 and Edwards Lifesciences at 67, while the industry averages 30.

What to watch

• Procedure volumes at hospitals and surgery centers.
• New product approvals and launches.
• Pricing, reimbursement and hospital purchasing pressure.
• Competition in surgical robotics and glucose monitoring.

Moat ratings and quality scores on this page update as companies report. Price versus fair value for every company in the industry is in the screener.