The medical technology industry has overall shown conservative activity in the past year, but signs point to a digital transformation lying ahead, EY says.
Kevin Lobo, chairman and chief executive of US medical device company Stryker, comments: “We are at the beginning of a digital transformation in health care. Data-driven medical devices will be at the forefront of that transformation,” working to deliver “whole person care” to ‘patient-consumers’.
Patient consumerism means that a consumer becomes more able to bypass physicians when obtaining medical information, goods and services.
Accounting firm EY highlights in a report titled As data personalises medtech, how will you serve tomorrow’s consumer?, the opportunities for medtech in this area. To create value, the sector has to transform to personalised, patient-centered care models and generate demand, it says.
While the medtech industry grew 7% year over year to $407.2bn (€368.1bn) in 2018, this lags annual revenue growth rates before the financial crisis, according to EY.
At the same time, medtech’s cumulative public valuation soared 38% between 1 January 2018 and 31 July 2019, far outpacing the broader life sciences industry.
EY finds, however, that amidst uncertainty of future direction, the sector falls trap to focus on the short term.
The proportion of cash returned to shareholders increased in 2018 and exceeded R&D spending (see chart below).
“The industry’s willingness to return cash to shareholders still seems symptomatic of uncertainty about how to invest for growth.
“With medtech’s future dependent on innovation, this strategy may please shareholders in the short term but has long-term potential downside,” the report notes.
Medtech companies are cautious about acquisitions as they are unsure about what the next big device innovation will be and because of strong valuations of target companies, EY says.
This leads to medtechs closing smaller deals and prioritising tuck-in acquisitions and portfolio optimisation rather than bold or transformative deals.
This is reflected in a decline of overall industry financing levels for the second year running in 2018, EY says.
While overall caution about unproven new technologies remains, which hurts start-up companies that drive innovation in medtech, validated concepts see fast uptake due to intense competition.
As an example the report cites US medical equipment company Intuitive Surgical’s robotic surgery platform, an area in which competitors have become active.
In the future, as the health care ecosystem becomes more connected, the advances in diagnostics, genomics, AI and other emergent data technologies will reinforce each other, driving an exponential acceleration toward personalised care, EY predicts.
“Ultimately, this acceleration toward personalised care points toward the realisation of an anytime, anywhere care paradigm that will transform medtech in ways that cannot yet be fully anticipated,” it writes.
Signs pointing towards a more personalised, data-driven future in the sector are:
Originally posted in Expert Investor
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