ANNOUNCEMENT: Expert Investor is now PA Europe. Read more.

Data-driven medical devices to transform patients’ lives

Trends in the sector signal a more personalised, data-driven future

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.

Medtech sector

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.

Top 10 changes of US and European medtech companies in market cap

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.

Trends

Signs pointing towards a more personalised, data-driven future in the sector are:

  • Medtechs optimise their portfolios to lay the groundwork for future growth strategies.
  • Non-imaging diagnostics grow in commercial importance, signaling the growing emphasis on data-driven, personalised and proactive care. The advance of genomics toward mass-market availability continues.
  • Digital-based, data-driven technologies win validation from regulators. AI is a significant driver of decentralised care that can be delivered anywhere and anytime. Value creation is driven by a combination of devices and interoperable, patient-centered networks of devices and data analytics.
  • Progressive providers show a readiness to move toward a more data-driven approach to health care.

 

MORE ARTICLES ON

  • Can M&A and buybacks breathe life into UK market?

    Can M&A and buybacks breathe life into UK market?

    Both buybacks and M&A should help realise value in UK shares, boosting prices and giving investors another reason to consider the UK stockmarket Not only does M&A activity appear to be picking up, with a high-profile bid for UK electronics retailer Currys, but the scale of company buybacks continues to accelerate. If it goes well,…

  • Capital Group launches multi-thematic Article 8 funds

    Capital Group launches multi-thematic Article 8 funds

    Capital Group has launched a set of multi-thematic sustainable funds that are available for investors in Europe, writes Christian Mayes. The Capital Group Sustainable Global Opportunities fund (LUX) will invest in global equities, while the Capital Group Sustainable Global Corporate Bond fund (LUX) will target fixed income exposure. The launch also includes a multi-asset offering…

  • Bond funds pull in €29.7bn in January – LSEG

    Bond funds pull in €29.7bn in January – LSEG

    Bond products were the best-selling asset class in January, according to LSEG Lipper’s European Fund Flow report, writes Christian Mayes. The asset class pulled in a net €29.7bn in the month, while Money Market USD grouping was the best-selling Lipper Classification after receiving €11.2bn inflows. Providers of mutual funds pulled in €22.5bn, while passives saw net…

  • Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    A quarter of all Article 8 funds could be accused of greenwashing based on their sustainability framework and practices, according to MainStreet Partners, writes Christian Mayes The 24% of funds classified as a greenwashing risk by the 2024 ESG Barometer report marks a four percentage point increase from the 20% flagged at the end of…

  • EU green rules could stymie decarbonisation projects – ExxonMobil

    EU green rules could stymie decarbonisation projects – ExxonMobil

    The European Union’s climate regulations may lead to it halting its investments in Europe, ExxonMobil has warned. Speaking to the Financial Times, Karen McKee, president of the product solutions division, said the oil and gas giant had struggled to begin decarbonisation projects in Europe due to the regulatory burden. The result, she added, was that…

  • ICE flags need for Europe to double green investment

    ICE flags need for Europe to double green investment

    Investments to modernise energy and transport must double by the end of the decade to reach 2030 climate targets, the EU has been warned. According to the Institute for Climate Economics (ICE), which has released the European Climate Investment Deficit report, the bloc lacks what it calls a “consistent tool” to ensure monitoring of the…