Bionics: Review and Reload

Reminder of what Bionics is about

Bionics is atonra's theme on making healthy aging possible and affordable.

Robotic surgery, implants, and rehabilitation enhance the human body, extending healthspan and improving quality of life. AI complements this by reducing system costs through improved diagnostic precision, shortening hospital stays, preventing complications, and streamlining workflows. 

With affordability pressures amplified by the One Big Beautiful Bill Act (OBBBA), the parallel becomes clear: just as industrial robotics became unavoidable in manufacturing when labor costs surged, healthcare automation is emerging as the only viable solution as labor and care costs spiral out of control.

A trip through the past: Bionic's performance across market cycles

*as of August 31st 2025

2017–2019: Outperformance of MedTech themes

The Bionics strategy started with a strong MedTech tilt. Initially, in line with global healthcare indices returns, the strategy began to outperform through exposure to surgical robotics, implants, and hospital efficiency plays, keeping pace with the Nasdaq 100. The strategy was mainly supported by the FDA Breakthrough Device Program, which enables faster market access and an easier path to reimbursement.

2020–2021: Pandemic tailwinds and reversal

During the pandemic, demand for telemedicine, monitoring, and diagnostics surged. Given its heavy reliance on devices and a move to hospital-efficiency tools, the Bionics strategy benefited more than traditional healthcare.

In addition, lower interest rates fueled a frenzy that benefited high-beta, high-growth stocks in our strategy.

Unfortunately, post-COVID normalization left hospital budgets squeezed by wage inflation and elective procedure backlogs resilient but slower than expected. Growth in Bionics segments stalled, triggering earnings multiple compressions in smaller players and deeper drawdowns than broader MedTech indices.

2022–Mid 2023: Rising rates hit SMID MedTech hardest

Rising interest rates post-COVID reset valuation multiples. Still, in 2022, MedTech indices and Bionics outperformed the broader market on resilient hospital procedure volumes. 

Mid 2023–End 2023: The GLP-1 "death knell" and the 10Y US treasury yield

August 8th, 2023, Novo Nordisk's publication showed that the benefits of weight-loss drugs, GLP-1s, extended beyond weight to cardiology and triggered a massive MedTech sell-off. Even mega-cap MedTech performance, which until now was tracking the Nasdaq, took a massive nosedive.

The secular premium paid by investors for MedTech companies vanished. The historical premium was ~25–30% above the S&P 500 and hovered around parity (0–5%), and still does today.

For our Bionics strategy, it's a double whammy as investors rotated to MedTech mega caps, illustrated by the overperformance of the IHI (a market-cap weighted MedTech index) over XHE (an equal-weight MedTech index).

The third blow came as the U.S. 10‑year yield climbed to 5% from mid-year to late October 2023, the highest since 2007, further crushing valuations.

As rates eased, Bionics tracked Tech (Nasdaq), not Health Care, thus beating the MSCI World Health Care index by ~30% through the end of 2024. This was especially boosted by the Transitional Coverage for Emerging Technologies, a CMS initiative to improve reimbursement for new MedTech devices.

2024-2025: Recovery underway but uneven

While the Nasdaq made new highs with the AI theme, large diversified MedTech (Abbott, Boston Scientific, Intuitive) were stopped in their recovery due to headwinds from the U.S. reimbursement policy changes signed into the One Big Beautiful Bill Act and tariff fears.

These headwinds hit smaller companies hardest, as shown by IHI up 6% versus XHE down 8% YTD. Still, our Bionics' allocation to resilient subsegments kept performance positive at 3.2%.

To sum it up, the Bionics strategy performs well when: 

• Supportive policies enable fast market access or fast adoption.

• When the GLP‑1 narrative exits fear mode.

• When the 10‑year yield falls, Bionics behaves like Tech

Portfolio and valuation are ready to capture the next catalysts

Macro & policy catalysts

Three forces line up in our favor on the same three items and on a clear timeline.

• Easing interest rates : If the 10‑year yield moves toward 3.5–3.8% by mid‑2026, MedTech valuations could rise ~10–20% even before accounting for earnings growth.

• GLP‑1 normalization : Weight‑loss drugs aren’t killing MedTech. Use is settling, so procedures should be flat to slightly up in 2025. That supports Insulet, Dexcom and ResMed.

• OBBBA/CMS (final Oct–Nov 2025; live Jan 1, 2026): Once rules are set, hospitals will adopt automation that cuts costs by ~3–10% within 6–12 months. Likely winners: RadNet, Pro Medicus, Intuitive, TransMedics.

*Implied price effect combines multiple expansion with EBITDA growth; excludes idiosyncratic surprises.

Strategy positioning and allocation

Our portfolio balances quality growth by combining fast‑growing innovators with pure-play established, profitable names. The allocation spans the full automation stack:

• Imaging & diagnostics with Pro Medicus Limited, Natera Inc and Tempus AI automate data-to-decision: fewer manual steps, faster answers. Pro Medicus streamlines radiology reading and reporting (AI triage, auto-hanging, worklist routing); Natera’s assays algorithmically risk-stratify patients from genomic data; Tempus turns EHR/omics into point-of-care decision support. 

• Surgical & robotics through Intuitive Surgical, Stryker, and TransMedics Group automates precision and standardization. Intuitive’s systems guide and stabilize key surgical tasks; Stryker’s Mako automates pre-op planning and intra-op execution to reduce variability; TransMedics’ OCS automates organ perfusion, monitoring, and logistics turning a manual cold-storage process into a controlled, sensor-driven workflow.

• Monitoring & chronic care via Insulet, Dexcom, and ResMed automate continuous disease management, shifting work from clinic visits to software. Dexcom’s CGM captures and analyzes glucose in real time; Insulet’s Omnipod closes the loop toward automated insulin dosing; ResMed’s cloud platform automates adherence tracking and remote therapy tweaks.

• Digital health platforms like Doximity Inc, Hims & Hers Health, and Talkspace automate front-door operations: higher throughput with fewer admin hours. Doximity digitizes physician communications, referrals, and scheduling; Hims automates intake, prescribing, and refills via asynchronous care flows; Talkspace automates matching, triage, and ongoing therapy logistics.

How "GLP‑1" fits into the portfolio

In investor portfolios, GLP-1 exposure is now a structural allocation decision. The market heavily punishes MedTtech players on GLP-1-related headwinds.

Our portfolio integrates this shift by holding companies positioned on the right side of the trend: continuous monitoring, advanced imaging, and organ‑care/surgical robotics that remain resilient. At the same time, digital health platforms and AI analytics benefit from the push to track outcomes and prove cost savings. This ensures the portfolio adapts to GLP‑1 disruption while reinforcing the core automation and efficiency theme.

Strong metrics underlie the strategy

Bionics delivers superior growth at a lower price vs. the Nasdaq 100, MSCI World, and iShares US Medical Devices, as exemplified by a lower PEG. Profitability is high too, with 82% of the stocks in the portfolio net‑income positive and 83% FCF positive by 2025, giving resilience in case of "higher for longer" rate environments.

Conclusion: the automation trade for healthcare

This is the moment to own Bionics. Rates are drifting lower, the GLP‑1 scare is normalizing, and OBBBA/CMS will start rewarding cost‑saving technology from 2026. Virtually all our Bionics holdings qualify, setting up a clean re‑rating path.

Over the next 12–24 months, we expect our performance to land in the bear case at +10% and in the bull case at +50%.

The best time to buy Bionics was October 2023; the second‑best time is now.

Catalysts

• Policy tailwinds are acted upon. U.S. protectionism supports TransMedics, Boston Scientific, and Abbott and limits foreign competition.

• Digital health efficiency brings cost savings. Platforms like Doximity, Hims, and Talkspace expand adoption as OBBBA pushes payers and hospitals to prove cost savings.

• Procedure & innovation cycle continues. If Intuitive, TransMedics, and Stryker increase their guidance, MedTech will rerate further.

Risks

• GLP‑1 uncertainty. Faster penetration could weigh on demand for segments tied to obesity and diabetes care, even if offset by monitoring and adherence opportunities.

• Regulatory and data integration hurdles pile up. AI‑centric names need FDA acceptance and payer buy‑in for reimbursement of AI‑driven diagnostics.

• OBBBA reimbursement cuts too deep: New site‑neutral rules and device payment adjustments compress margins for hospital‑linked innovators like Stryker or Intuitive.

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