The Nanosonics Ltd (ASX: NAN) share price hit a record high of $6.97 this afternoon and has now doubled since just February 2019 prior to it releasing its interim profit report for the six months ending December 31, 2018.
It was the February 2019 profit report that first definitively showed investors that sales of its latest Trophon 2 ultrasound disinfectant device were taking off in the US and Europe.
This after it finished FY 2018 on a disappointing note with total sales down 10%, compared to total sales lifting 39% in FY 2019 almost all on the back of the launch of a new medical device.
This goes to show how for investors in medical device businesses new product development is crucial. Of course this also means medical device companies have to invest heavily in new product development, but that should put investors off from looking to own the best medical device businesses.
Recently, sleep treatment mask and ventilation machine manufacturer ResMed Inc. (ASX: RMD) has seen its share price take off as new product sales soar.
While hearing aid manufacturer Cochlear Ltd (ASX: COH) told investors it expected strong sales of its latest Nucleus Profile Plus Series cochlear implant in FY 2020 to help lift net profit up to 13%.
New product development is crucial for businesses like these as market-leading products help maintain high profit margins as many private patients for example simply want the best product on the market regardless of price.
Public reimbursement healthcare cycles may also pick up as healthcare procurers delay orders in anticipation of a better product being around the corner. Much like someone may wait a few months for the latest iPhone to come out before buying.
For professional analysts profit margins matter as well, because rising margins are a traditional 'buy' signal that lead to valuation upgrades, while falling margins could spell trouble, downgrades, and competitive pressures.
