Hidden GEMs: The bull case for emerging markets just got stronger
Improving corporate earnings, resilient economies and a changing global investment landscape are creating a compelling backdrop for emerging market assets.
Clyde Rossouw, Head of Quality, discusses two high-quality medical device companies operating in different areas of healthcare - Align Technology in orthodontics and Edwards Lifesciences in structural heart diseases – and what makes their businesses so durable.
Align Technology occupies a rare position in medical devices: its flagship product Invisalign has become the household name for an entire treatment category – embedding the brand into its competitive moat and shaping patient demand.
Beneath the brand sits a strong structural position: technology/IP advantages (stemming from millions of patients treated to date and continued innovations), scale (Align’s manufacturing operations are factors bigger than the next peer), direct-to-consumer marketing initiatives (driving customers towards Invisalign providers) and an incumbent position with dentists.
However, the “incentivise the middleman” commercial model is the cornerstone of the business. Align has deliberately structured its economics to make Invisalign the most attractive treatment option for the orthodontist, as well as the patient, with clinicians earning strong gross profits per case. Critically, each Invisalign case requires significantly less chair time than wire-and-bracket treatment, a direct margin benefit for the practice, and equally a benefit for the patient, who faces fewer appointments, less disruption to daily life, and a faster overall treatment experience. In addition, it allows the practice to take on more patients without expanding capacity. The iTero intraoral scanner further embeds Align’s technology into the practice workflow, creating hard switching costs while also functioning as an in-chair sales tool. The patient, meanwhile, receives a more comfortable, less socially visible treatment experience than the alternative. When the orthodontist's economics, the practice's workflow, and the patient's preference all point in the same direction, adoption compounds.
The growth and innovation pipeline extends the platform's reach, with products such as Invisalign First and Mandibular Advancement expanding Align’s market into children and teenagers. This should make the business more resilient, because whilst adult cosmetic cases are exposed to the consumer wallet, parental spending on a child's treatment is a different decision entirely. With the majority of orthodontic cases still treated with traditional methods, the clear aligner market remains underpenetrated globally, providing further scope for growth and helping offset short-term fluctuations in discretionary demand.
Structural heart disease affects tens of millions of patients globally, many previously without a viable treatment option. Edwards Lifesciences has spent more than sixty years addressing that gap. Its transcatheter aortic valve replacement (TAVR) platform is the most consequential step in that journey: a catheter-based approach that displaced open-chest aortic valve surgery for many patients and has converted a procedure too risky for most of the affected population into one accessible to many more. Each successive generation of its balloon-expandable SAPIEN valve has improved delivery, expanded eligibility, and strengthened the clinical evidence base, a pattern of compounding innovation that defines the franchise.
The value Edwards delivers to each participant in the treatment pathway is concrete and well-aligned. Patients receive a 45-minute procedure in place of a 3-5 hour open-chest surgery; 80% are discharged within c.24 hours, with mortality outcomes superior to surgical alternatives for the highest-risk patients. Healthcare systems, despite the higher device price, benefit from significantly shorter hospital stays and reduced follow-up costs - a rare instance where clinical and economic incentives point in the same direction, allowing Edwards to create value across the ecosystem.
The competitive moat rests on clinical evidence, which accumulates over decades and cannot be easily replicated. Edwards holds approximately 60-65% of the global TAVR market, underpinned by safety data across millions of procedures, deep relationships with cardiac surgeons and hospital administrators, and a net cash balance sheet close to US$3 billion that supports uninterrupted R&D. The demand profile provides further resilience: heart valve disease is severe and urgent, procedures are rarely deferred, and revenue is acyclical - a meaningful characteristic in a portfolio context.
Edwards has not stood still. Growth in TAVR has been supported by a continued push into asymptomatic and lower-risk patients. Most critically has been the passing of the baton to transcatheter mitral and tricuspid therapies (TMTT), where current treatment rates are near zero and the unmet need is acute. PASCAL, EVOQUE, and SAPIEN M3 give Edwards a portfolio spanning repair and replacement across both valves, each addressing patient populations with limited treatment options today. Importantly, TMTT is being introduced through the same clinical relationships, catheter lab infrastructure, and reimbursement expertise built during TAVR's scaling phase, helping accelerate the adoption curve relative to what TAVR faced a decade ago. Each chapter of Edwards' history has built directly on the last. TMTT looks set to continue that pattern.
This is not a buy, sell or hold recommendation for any particular security.