The general mien of AdvaMed 2015’s day one mirrored the outlook presented by Ernst & Young’s Medical Technology Pulse of the Industry report. It was flat.
There’s a marked lack of investing in early stage companies – stifling tech growth in the entire medical device industry. Innovation capital is on the decline.
We’ve had a record number of IPOs in the life sciences sector, and medtech M&A has been booming. The burst biotech bubble doesn’t even come into play here. Yet: The global medtech industry continues to display tepid growth, with the report calling out a “dwindling pool of investors for early stage companies, raising important questions about the longterm sustainability of the sector.”
Some notable figures:
- U.S. and European public medtech companies grew revenue 2 percent in 2014 to $341.8 billion – the second year of such nominal growth.
- Venture capital is steady, but the capital allocated to early stage investment has dropped a whopping 19 percent to less than $1.3 billion. Between July 2014 and June 2015, only 29 percent of venture funding went to companies raising their seed, first or second rounds of investment.
- IPOs performed well, at least – raising $2.3 billion.
- The 16 M&A deals announced between July 2014 and June 2015 exceeded $1 billion.
“Over the last 12 months, the disparity between the ‘haves’ and the ‘have-nots’ in the medtech sector has grown increasingly stark,” Glen Giovannetti, EY’s global life sciences leader, said in a statement.
The lack of funding in early stage investment comes from “an increasingly uncertain reimbursement climate, exacerbated by the repetitive nature of medtech innovation, and the resulting pressure for companies to find new ways to demonstrate the value of their products,” Giovannetti 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.
However, there’s been an upswing in R&D and a reduction in dividends and share buybacks suggests the industry’s rebalancing its priorities and focusing again on much-needed innovation.
