Why is Bionics up 73% since the bottom while MedTech is up 21%?

What happened

Rewind back to 2023 with two shocks, one month

July 2023 delivered two shocks at once. Novo Nordisk's glucagon-like peptide-1 (GLP-1) results triggered a market-wide repricing of obesity-adjacent devices, while the Fed's rate path compressed multiples across every pre-profitability name in healthcare. The strategy fell roughly 40% from July to its end-October trough. The selling was indiscriminate: the MedTech 100 finished 2023 up 2.4% against 24.2% for the S&P 500.

Then the long middle

What followed was not a recovery. Between late 2023 and early 2026 the NAV oscillated between 140 and 180, with a second trough in April 2025 on Inflation Reduction Act drug pricing, Medicaid cuts and tariff disruption to device supply chains.

The reimbursement squeeze underneath

The GLP-1 scare also masked a structural drag: reimbursement. A device is paid inside a bundled procedure rate, so a manufacturer cannot reprice the way a drugmaker can. The Centers for Medicare and Medicaid Services (CMS) has tightened that frame since, expanding the ambulatory surgery centre list and phasing out the inpatient-only list, which pushes volume into bundled settings. A six-state pilot has also brought prior authorization into traditional Medicare for a short list of elective, device-heavy services: small today, but the first time fee-for-service Medicare has worked this way. Volumes feel it: bariatric surgery alone is down roughly 13% year-on-year as patients try GLP-1s first.

That is the part of the complex we no longer want concentrated exposure to. A diagnostic test is reimbursed on its own code. A device is reimbursed inside someone else's procedure.

Impact on our Investment Case

We were right about the selloff and wrong about the portfolio

We said the GLP-1 repricing was an overreaction, and we said it in print at the time. Not because the drugs had no effect, but because the market generalized across the whole device complex. Our note titled Dexcom's exceptional results defy GLP-1 concerns was published on 27 October 2023, the month the NAV bottomed, arguing that GLP-1 drugs and medical devices could thrive together. That call was right.

Being right about the narrative did not protect us. Over a third of the July 2023 strategy sat directly in the crosshairs, notably Dexcom at 9.4%, Insulet at 8.7%, and Inspire Medical at 8.5%. The problem was the concentration, not the stock picking: good individual calls like Shockwave, Inari or Penumbra do not offset a book clustered on one side of a single narrative.

The rotation: from devices to diagnostics

The thesis is that the most durable growth sits at the diagnostic front end and in the enabling procedural layer, not in the middle tier whose economics depend on procedure volumes and reimbursement cycles.

None of this was decided after the fact. Our December 2025 outlook, Healthcare: From Underdog to Front Runner, set the 2026 stance out in the open, with molecular residual disease (MRD) and multi-cancer early detection named as the two focal points. The conviction runs back further: we have been invested in liquid biopsy since late 2019, Guardant Health was a top-two position in Q1 2020.

In July 2023 the core genomics and molecular diagnostics names were 15.4% of the book. Today they are 41.3%, or 49% once imaging and radiodiagnostics are included, and none of the three names carrying it were held then. Natera generated $753m of revenue in the second quarter of 2026, up 38% year-on-year at a 64.5% gross margin, and raised full-year guidance to $2.85-2.91bn. Twist supplies the DNA synthesis becoming standard in next-generation sequencing (NGS) library preparation. Illumina has finally cleared the GRAIL INC. overhang: we argued in February, when the stock halved on the National Health Service (NHS) Galleri endpoint miss, that the headline missed and the screening revolution did not, because the Food and Drug Administration (FDA) was being asked to judge the test's safety and effectiveness, not the population-level mortality endpoint the NHS trial was designed around. Seven months later the panel voted the application through.

Only eight of the twenty-one positions held in July 2023 survive today.

The gap against the device benchmarks

The clearest evidence that the universe design did the work is the spread against pure device exposure:

Measured from	Bionics	iShares U.S. Medical Devices ETF	SPDR S&P Health Care Equipment ETF
30 October 2023 trough	+73%	+21%	+36%
July 2023 pre-crash peak	+8%	-5%	-4%

^{*Data as of 29/10/2026}

Both benchmarks are what a conventional MedTech mandate owns, and both are still below where they stood before the GLP-1 shock three years on. A strategy that had remained in procedure-dependent device exposure would be sitting with them.

Where we could be wrong

Concentration cuts both ways. The book is less concentrated than it was, 30 positions against 21, with the top ten down from 70.4% to 55.1%. But 41% in a single sub-theme still amplifies a genomics-specific shock in exactly the way July 2023 amplified the GLP-1 shock.

Much of the book is not yet profitable. On fiscal year (FY) 2027 consensus, five holdings representing 30% of the portfolio are still loss-making, including the two largest. The thesis rests on those companies crossing into profit broadly on schedule.

Approval is not reimbursement. The Galleri panel vote was 6-4 on effectiveness, and Medicare coverage is a separate process with a separate evidence bar. MedTech tariffs remain unresolved and the FDA has no confirmed Commissioner.

What takes it from here

On consensus, aggregate portfolio earnings roughly double between FY2026 and FY2028, taking the implied multiple from 89x to 44x. That is not a re-rating story but a book whose constituents are crossing into profit: four positions worth 20.3% make that crossing by FY2028, with Natera moving from a loss of $1.39 a share to $1.57, ($GKOS) from -$0.31 to $1.65, Tempus AI from -$0.22 to $0.66. These are the same holdings flagged as loss-making in the risk section above. Unprofitable today and profitable by 2028 are not competing descriptions of this book; they are one fact at two dates, and only the first is in the price.

The catalysts are dated rather than hoped for. GRAIL's FDA decision is expected in the coming months and a Medicare benefit category for multi-cancer early detection is now law, though coverage cannot begin before 2028-2029 and phases in by age: structural, not near-term. Tempus is expected to close its acquisition of Personalis around the turn of the year. And individualized cancer therapy, validated in Phase 3 this August by Moderna, cannot dose a patient without sequencing them first.

Our Takeaway

Getting back to where we stood in July 2023 is not high water: that was 270 in November 2021, still 40% above here. It is the undoing of two mistakes: the market's about GLP-1s, and ours about how exposed the strategy was when the market made it.  But the portfolio that recovered the drawdown is structurally different from the one that suffered it, and six of the top ten holdings were not in the strategy three years ago.

For anyone deciding whether to enter now or come back, the question is narrower than the three-year chart suggests: the rebuild is done, earnings arrive in 2027 and 2028, and almost none of them are reflected in the price yet.