One underlying trend in the medtech industry is a shift toward commoditization if it doesn’t start mixing up the product offerings, led Ernst & Young’s latest pulse of the industry analysis, which it released today at the Advamed conference in Chicago.
“As purchasing decisions become increasingly centralized and influence shifts from physicians to hospital administrators and managers, the historical value drivers for purchasing a device — brand, quality and design — will lessen, leaving price as a main consideration,” E&Y’s Global Life Sciences Leader Glen Giovannetti said in a statement.
He added that to stand out, companies will have to design and market their products such that they lower costs while demonstrably improving patient outcomes. Much of the innovation will be driven by small and mid-sized companies, as well as startups, the report notes.
Beyond that, here are some of the key trends that occupied the bulk of the report:
– Revenue’s up. Combined U.S. and European medtech revenues from public companies were $336.2 billion last year, a 4 percent increase over 2012. While respectable, it’s still much lower than pre-recession growth rates, E&Y said. The growth’s been primarily in the cardiovascular sector.
– This one’s a gimme: IPOs soar. For the 12-month period ended June 2014, 31 medtech companies went public, raising $1.5 billion – a whopping 600 percent increase over the like period the year previous.
– Financing’s okay: Medtechs raised $27.3 billion between July 2013 and June 2014, E&Y said, with the majority – 71 percent – coming in the form of debt financing. This is a 14 percent decrease from the previous time period, but still managed to be the second-highest capital raise since 2008. U.S. companies took the bulk of this financing – they brought in $22.2 billion. Venture investing crept up a touch in that period, from $4.2 billion to $4.4 billion, thanks in part to more investments from corporate VCs and strategic investors, E&Y said.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
– M&A’s up: It rose 135 percent to $85.6 billion in the U.S. and Europe. And excluding the $10 billion-plus megamergers so common these days, M&A rose 28 percent to $29.3 billion.
