Dive Brief:
- The medtech industry is approaching 2026 in an improving position, with investors increasingly optimistic and funding rebounding, PitchBook said in its outlook for next year.
- PitchBook analysts said strategic investors are targeting companies that are approaching clinical milestones in cardiology, orthopedics and diagnostics. The analysts named neurostimulation, artificial intelligence-powered surgical navigation and precision medicine as other top areas to watch.
- Tariffs on China-sourced components are a manageable, persistent headwind, the analysts said, but the potential for more levies is a risk. PitchBook sees Medline’s planned initial public offering as a strong indication that tariff uncertainties are now less top of mind.
Dive Insight:
Despite a slowdown in venture capital activity in the third quarter, the medtech industry remains on track for a year of strong investment by recent standards. The uptick in VC investment and private equity activity, which has happened as valuations fall and founders seek exits, informs PitchBook’s predictions for 2026.
“After a two-year downtrend in capital deployment, the tone from investors is more optimistic, although selectivity remains high,” the analysts wrote in the outlook report. “Capital has been concentrating around higher-quality assets instead of retreating entirely, and strategic investors are reengaging around companies nearing clinical milestones.”
The re-engagement has targeted cardiology, orthopedics and diagnostics, areas where companies such as Abbott, Boston Scientific and Zimmer Biomet have struck deals in 2025. PitchBook analysts expect to see “incremental M&A acceleration” into 2026. Large medtech companies have healthy balance sheets after spending two years integrating earlier acquisitions and spinning off units, the analysts said.
Buyers will focus on “tuck-ins that add AI or data-driven capabilities or can meaningfully improve scale against emerging competitors,” the analysts said. The report identified neurostimulation, smart implants and augmented reality surgery platforms as part of the next wave of technologies that are in the early stages of commercialization.
M&A has historically been the primary exit route for investors in medtech startups. IPOs offer another option. The analysts said the IPO window is narrow. Heartflow, Caris Life Sciences and BillionToOne have gone public since June, the analysts said, but the post-IPO public market reception has been mixed.
The analysts see Medline’s IPO “as a key test case of investor appetite in the traditional, non-AI-native medical device space.” While excitement about AI may have helped companies such as Heartflow, which raised $364 million to commercialize software for making 3D heart models, Medline is a more traditional medtech company that sells around 335,000 products including surgical and procedural kits.
PitchBook analysts said the global tariff situation has mostly stabilized, with the exception of ongoing U.S.-China negotiations. The analysts called tariffs on Chinese imports a manageable but persistent headwind, adding that the ongoing Section 232 investigation means there is a risk of broader medtech levies in 2026.
