What Do the Next 7 Years Bring for Medtech?

The past year has seen some shake-up in world news, but it remains to be seen precisely how developments will affect the medtech industry moving forward. Significant considerations include the United Kingdom’s decision to leave the European Union and the outcome of the United States presidential election.

“U.K.-based companies – which include several large multinationals who have based themselves in the U.K. for tax reasons – could find it harder to attract the skilled scientific workforce on which they rely, and already face import pressures from the weakened pound,” said Elizabeth Cairns, a medtech reporter for EP Vantage.

She continued, “Companies outside the U.K. will have to negotiate different laws on regulation and intellectual property, and — partly because there is very little clarity so far on how this might play out — there is anecdotal evidence that some companies are already delaying investment decisions in their U.K. subsidiaries.”

On the U.S. front, much of the uncertainty revolves around the fate of the Affordable Care Act (ACA). While Hillary Clinton has pledged to expand the ACA, Donald Trump has stated his intention to repeal the legislation entirely. Changes to the legislation may affect the medtech industry due to the device tax that currently goes toward funding the ACA.

The far-reaching implications of both events are likely to influence the medtech industry on a global scale, but it’s hard to predict to what extent. There are, however, other factors that can be analyzed to predict where medtech is going over the next several years.

The recently published annual EvaluateMedTech® World Preview from Evaluate Ltd, [a client of Chempetitive Group] highlights trends in medtech including: consensus sales forecasts of leading industry analysts by device area to 2022; the top 20 companies in 2022; R&D spend current and future; FDA approvals; M&A; venture financing and IPOs.

We’ve compiled some of the key findings so that you can get an at-a-glance look at the future of the medtech industry.

  1. Medtech Mergers and Acquisitions

Mergers and acquisitions (M&As) declined in 2016, but that’s nothing to be alarmed about. 2015 saw major M&A activity, so a period of decreased activity is to be expected while companies reorganize.

Last year saw a record total value of $127 billion in closed mergers, but deal value in 2016 is projected to be less than half of 2015, and lower than 2014 as well.

Although the overall value of 2016 M&As was 79 percent lower than in 2015, the number of deals is up 18 percent. This indicates that smaller deals are surging, which is good news for start-ups that rely on smaller acquisitions.

There are still significant deals on the horizon for 2016, as Abbott Laboratories is poised to acquire St. Jude Medical for $25 billion.

  1. Venture Funding Decreases, but Retains Value

The total number of venture financing deals decreased 39 percent in the first half of 2016, but the overall value of venture financing fell only 6 percent.

This represents a continuing trend toward fewer venture capital deals, despite a relative lack of change in overall deal value.

Flatiron Health, an oncology-focused healthcare IT company, led venture funding with a $175 million series C round in January.

  1. Medtech IPOs Drop Drastically

The number and value of medtech IPOs significantly declined in the first half of 2016. Initial public offerings raised only $164 million in the first half of 2016, compared to 2015s much more substantial $853 million.

The first half of 2016 saw only 10 IPOs, compared to 17 in 2015 and 25 in 2014.

  1. Medtech Is Growing, but Not as Fast as Pharma

The medtech industry is growing, with a projected compound annual growth rate (CAGR) of 5.2 percent. By 2022, the industry as a whole will be valued at $530 billion.

Within the medtech industry, in vitro diagnostics will represent 13 percent of total industry sales in 2022. With a CAGR of 5.6 percent, this device area will boast sales of $71 billion.

However, neurology devices will be the fastest growing area between 2015 and 2022, as experts forecast a CAGR of 7.6 percent.

At the same time, the prescription drug market will reach $1,121 billion by 2022, outpacing medtech industry growth with a forecasted CAGR of 6.1 percent.

For a more detailed analysis, including FDA regulatory updates, top companies, and individual market projections, download the full World Preview report.