Reinventing MedTech and empowering healthcare

A strategic shift toward prioritizing profitability over top-line growth is being seen. This emphasizes the need for companies to stabilize core operations, and reassess strategic priorities amid evolving business landscapes.

The MedTech industry continues to expand its impact. Consider the mother of two, who avoided a stroke thanks to innovations in atrial fibrillation; the diabetic who replaced daily finger pricks with glucose monitors; and the overworked nurse who saved a patient’s life with the help of digitally enabled remote monitoring. MedTech companies have created more than two million types of medical devices for patients and caregivers worldwide. With a focus on patient impact, MedTech companies have largely aligned their innovation priorities with areas of highest unmet need.

Despite the value created for patients in the past decade, many are still waiting. Patients remain unserved across therapeutic areas and geographies, and are still coping with conditions that MedTech could potentially ameliorate or cure. In the United States, more than 50 percent of 2023 deaths were preventable, the patient experience remains highly variable, and the financial burden of cardiovascular conditions alone is projected to grow rapidly, doubling between 2017 and 2035. MedTech leaders have the opportunity and the responsibility to continue to grow, innovate, and create value for patients and caregivers.

Indeed, 2023 marked the fourth consecutive challenging year for MedTech, following a boom from 2012 to 2019. Despite many advances, a value creation slowdown may force companies to make bold moves to reset their trajectories in response to investor skepticism and other macroeconomic headwinds.

Industry growth will likely stabilize at a higher level than the pre-pandemic average. Since Covid-19, MedTech has seen accelerated growth due to higher patient volumes, aging populations, and innovative technologies for conditions like diabetes, heart failure, and stroke. New care sites, such as alternative surgery centers, medical offices, and outpatient settings, also contribute to this growth. In 2024, MedTech revenue growth is expected to stabilize at 100 to 150 basis points above pre-pandemic rates, with key areas like cardiovascular health, digital healthcare, and robotics leading the way. Challenges include meeting rising market expectations, reallocating resources due to varying segment growth rates, and intensifying competition to serve new care sites.

Investors will continue to seek profitable growth. While sales growth remains vital for value creation, profitability and cash flow are gaining importance. Since 2019, the link between profit margin improvement and valuation has tripled. Top-quartile MedTech companies have improved profitability and are expected to expand EBITDA margins by at least 200 basis points over the next two years. Despite historical trends, where declining interest rates shifted focus to revenue growth, recent trends show MedTech valuations have remained relatively stable even with rising interest rates. Thus, investors will likely remain focused on companies’ ability to expand margins, even if interest rates decrease in 2024.

Moreover, MedTech is poised to deliver another banner year for innovation. In 2023, the FDA approved many novel medical technologies driven by advancements in artificial intelligence (AI), miniaturization, and digital health. Approval time has decreased by nearly 15 percent from 2020 to 2022, and innovation is expected to accelerate in 2024, particularly in cardiovascular, digital health devices, and neuromodulation. Advances in imaging, microelectronics, and new treatment modalities like renal denervation are spurring growth in underserved areas. However, this rapid pace means more competition, with major innovations driving commercial relevance and growth, as incremental improvements alone will not suffice.

Furthermore, the MedTech sector in India is on the brink of significant expansion, drawing increasing interest from global investors. Historically dependent on international giants for medical devices, India is now witnessing its domestic firms emerging as strong contenders. This shift is largely fueled by the government’s supportive policies, such as the National Medical Devices Policy 2023, which aims to bolster the sector’s global market share to 10–12 percent by 2030. Top-tier investors, including KKR & Co., Morgan Stanley, and Warburg Pincus, recognize the substantial growth potential in India’s MedTech industry. The promise of high-quality, affordable medical devices produced domestically positions India as a lucrative hub for investment. This trend is further bolstered by the sector’s low-cost manufacturing advantage and a growing global demand for affordable healthcare solutions.

The evolution of India’s MedTech industry – An inflection point of innovation and growth
The MedTech industry in India is at a significant turning point, witnessing rapid growth fueled by technological advancements. AI, machine learning (ML), and the IoMT are now integral to the industry. Over the past decade, India’s healthcare sector has undergone transformative changes, accelerated by the pandemic, which spurred the adoption of digital technologies to deliver healthcare.

This growth is driven by increasing domestically manufactured device exports and innovative product development. The industry’s future focus will be innovation, supported by government initiatives like the production-linked incentive (PLI) scheme and the promotion of research and innovation in pharma (PRIP) schemes.

Key areas shaping the industry
Companies increasingly look at end-to-end product development in India, supported by government policies and financial incentives. This trend fosters an R&D culture and moves the industry up the manufacturing value chain.

MedTech has been quick to adopt AI-ML technologies, initially driven by startups. AI-ML-powered clinical decision support (CDS) systems are now widely used, improving patient outcomes through predictive capabilities. These systems can address laboratory-based diagnostics and treatment challenges by analyzing vast amounts of data to provide insight-driven care.

The pandemic has shifted the point of care from hospitals to home settings. The MedTech industry has responded by developing products and services for remote patient monitoring, enabling effective home care. This trend is expected to continue, with more services being offered at home, reducing the need for hospital visits, except for surgeries and critical care.

Virtual reality (VR) transforms medical and procedural training for healthcare professionals by providing immersive, life-like simulation experiences. It also benefits patients by reducing surgery time and pain and improving recovery timelines.

The government’s role in creating a supportive environment through policy, regulatory initiatives, and financial support is crucial. These efforts will significantly improve health outcomes and reduce healthcare costs in the country.

Market dynamics
The Indian MedTech industry is Asia’s fourth-largest medical devices market, trailing behind Japan, China, and South Korea. This sector exhibits a significant presence of multinational corporations, with around 75-80 percent of sales dominated by imported medical devices, underscoring a reliance on foreign products.

In 2023, the Indian MedTech market exhibited robust growth, reaching a market value of ₹96,550 crore. Projections indicate a substantial leap to ₹410,000 crore by 2030. Equipment and instruments have the largest share in the Indian medical devices market, contributing 54% of the market in FY23. The other significant categories include consumables and disposables, implants, and patient aids.

India manufactured ₹68730 crore worth of medical devices, of which ₹34370 crore was for the domestic market, and ₹34360 crore was exported in FY23. However, achieving the full potential of the sector will require further support as the sector faces a 15 percent cost disability due to the high cost of power, long and expensive multiple regulatory approvals, supply chain inefficiencies, etc.

750 domestic medical device manufacturers contributed ₹34370 crore, a 35.6 percent of the ₹96550 crore Indian market in FY23, while imports, valued at ₹62180 crore in FY23, contributed the remaining 64.4 percent.

At present, exports include cannulas, blood collection tubes, IV administration sets, medical waste disposable plastic bags, gloves for surgical purposes, spectacle lenses, intraocular lenses, ophthalmic Implants, x-ray, x-ray tubes, ECG, EEG, MRI machines, pulse oximeter, hand sanitizer, and orthopedic or fracture appliances. India is one of the leading suppliers for syringes, needles, IV cannula, surgical blades, surgical gloves, contraceptives, IOL lenses, orthopedic trauma implants, stents, and ventilators.

Some of the high-end and critical equipment is being manufactured in India. These include heart valves, joint implants, linear accelerators, cath labs, robotic-assisted surgical system, C-arm, high-end x-ray machines, mammography, radiotherapy equipment, fundus imaging, ophthalmic excimer laser, endoscopes and endoscopic camera systems, molecular diagnostic systems, clinical chemistry analyzers, chemiluminescent immunoassay analyzers, 3D-4K laparoscopy systems, and high-end operating microscopes.

Funding and bridging the gap with IP
Finance is a critical driver in the MedTech ecosystem. It enables the development of innovative medical technologies, scales up production, and expands distribution networks. Investment in MedTech leads to faster adoption of new technologies, boosting productivity and strengthening economic growth. For developing countries, a strong private sector is essential. Private businesses drive economic growth, create jobs, increase income, and raise living standards, thereby contributing to poverty reduction and overall economic improvement.

Intellectual property (IP) serves as the engine of progress in MedTech. IP provides strong incentives for continuous innovation by ensuring inventors can protect their innovations. Strong IP rights also facilitate collaboration between universities, research institutions, and private companies, fostering a dynamic environment for technological advancement. A robust IP ecosystem fosters innovation, attracts investments, and ensures fair competition, supporting economic growth and development.

Despite significant advances in medical science and technology, health inequities persist globally. Developed economies typically have access to advanced medical facilities, comprehensive healthcare systems, and robust funding mechanisms. In contrast, low- and middle-income countries (LMICs) often face inadequate infrastructure, limited access to essential medicines, and a shortage of healthcare professionals and medical devices. Finance and IP play pivotal roles in bridging these gaps by enabling the development and distribution of affordable, high-quality medical technologies.

A well-developed MedTech private sector is crucial for building a resilient global MedTech industry and strengthening healthcare resilience worldwide. Historically, MedTech companies focused innovation on products for developed markets. However, there is a growing demand for products tailored to developing countries’ unique challenges and needs. By supporting environmentally and socially responsible enterprises, investments in MedTech can promote sustainable development that balances economic growth with environmental protection and social equity.

The combination of MedTech and digital health holds great potential to transform healthcare delivery, enhance patient outcomes, and democratize access to quality healthcare services worldwide. This integration can shape MedTech innovation and access in developing countries through:

Data-driven insights, leveraging big data analytics and AI to derive valuable insights from medical data, informing clinical decision-making, personalizing treatments, and facilitating preventive healthcare measures.

Introducing innovative technologies like telemedicine, digital health platforms, portable ultrasounds, and AI-powered diagnostics to enhance healthcare accessibility, efficiency, and quality, and address critical health challenges.

Developing portable diagnostic tools for diseases like malaria, dengue fever, and cholera, which are increasingly prevalent due to climate change, enables rapid diagnosis in remote or disaster-affected areas, potentially saving lives.

Therefore, finance and IP are key to bridging the gap in MedTech, enabling the development and distribution of innovative medical technologies that address global health inequities.

Mergers and acquisitions
The MedTech industry needs to move forward; in the first quarter of 2024, the medical devices industry saw a total of 122 M&A deals worldwide, collectively worth USD 6.7 billion. This represents a significant decrease in value and volume, compared to previous periods. The quarter’s largest deal was Ingersoll Rand’s USD 2.3 billion acquisition.

The total value of M&A activity in Q1 2024 declined by 29 percent from the previous quarter’s USD 9.4 billion and by 3 percent, compared to Q1 2023. The number of deals also fell by 10 percent from the previous quarter and by 22 percent from Q1 2023.

Foreign direct investment played a more prominent role, accounting for 39 percent of M&A activity, a 7-percent increase from the previous quarter. The downturn in M&A activity suggests a more cautious investment environment in the medical devices sector. However, the increase in FDI-related deals indicates a growing interest in cross-border investments and the potential for international collaboration.

The first six months of the year brought a series of multibillion-dollar deals globally.

Johnson & Johnson completed the acquisition of Shockwave for approximately USD 13.1 billion, aiming to enhance its portfolio in coronary and peripheral artery diseases. The acquisition contributed USD 77 million in sales in the second quarter but also incurred related costs. Consequently, J&J increased its full-year sales guidance by USD 500 million, expecting accelerated sales in the latter half of the year, driven by premium pricing opportunities due to the Shockwave acquisition.

BD agreed to acquire Edwards Lifesciences’ critical care group for USD 4.2 billion. Edwards had initially planned to spin off the group but opted to sell it to BD following interest from potential buyers. Edwards will continue to focus on structural heart projects and smaller M&A deals. Additionally, Edwards exercised an option to buy Innovative Bio-Medical for USD 300 million and agreed to invest 15 million euros in Affluent Medical to access its technologies.

Boston Scientific Corporation announced a USD 3.7-billion takeover of Axonics, but the acquisition is delayed due to scrutiny from the US Federal Trade Commission. Initially expected to close in the first half of the year, the deal is now pushed to the second half after a second request from the FTC. The FTC report said Boston Scientific’s ownership of the market’s top mesh and bulking agent could cause antitrust concerns. The company is also embroiled in an ongoing patent spat over its SNM technology.

Boston Scientific Corporation has entered into a definitive agreement to acquire Silk Road Medical that has developed an innovative platform of products to prevent stroke in patients with carotid artery disease through a minimally invasive procedure called transcarotid artery revascularization (TCAR). The purchase price is USD 27.50 per share, reflecting an enterprise value of approximately USD 1.16 billion. Boston Scientific expects to complete the transaction in the second half of 2024, subject to customary closing conditions. Silk Road Medical has guided to net revenue of approximately USD 194–198 million in 2024, representing 10–12 percent growth over the prior fiscal year.

Private equity firm, Thomas H. Lee Partners (THL), has acquired provider of medical technology management and service solutions to the healthcare industry, Agiliti, for USD 2.5 billion. Agiliti, which went public in 2021 with a share price of USD 14, was taken private by THL at USD 10 per share.

In India, the MedTech market is experiencing a surge in merger and acquisition (M&A) activities, signaling a transformative phase in the industry. In recent months, several high-profile deals have highlighted the dynamism in the Indian MedTech sector:

KKR announced acquiring Bengaluru-based Healthium Medtech from an affiliate of funds advised by private equity firm Apax Partners. The value of the acquisition is around USD 839 million. The acquisition, conducted through a KKR special purpose vehicle, is expected to close in Q3 2024. The investment will be made via KKR’s Asian Fund IV.

Warburg Pincus’ has acquired around a 65-percent stake in Appasamy Associates for nearly USD 300 million. The deal is Warburg’s largest healthcare investment in India to date.

Maiva Pharma, an injectables contract development and manufacturing organization (CDMO), has raised about ₹1000 crore in primary and secondary funding from a fund managed by Morgan Stanley Private Equity Asia and India Life Sciences Fund-IV. The two investors have jointly acquired a controlling stake in Maiva from existing investors and have infused primary capital in the company.

Jashvik Capital and Futura Surgicare have announced a USD 25-million investment to build innovative devices and consumables across multiple specialty areas, drive organic and inorganic growth, and deliver affordable access to high-quality medical products in India and various international markets.

These strategic moves are driven by India’s competitive manufacturing costs and the government’s production-linked incentive (PLI) scheme, which aims to reduce import dependence and boost exports. Companies investing in innovation and technology and expanding their global footprint will likely see substantial profitability, positioning India as a key player in the global MedTech landscape.

Nurturing tomorrow – Redefining patient experiences
As the market evolves, MedTech firms are pressed to keep up with the changes afoot for competitive edge and business growth. The early mover advantage will be crucial as the heat intensifies. Three key areas are continuing to shape the industry:

Internet of Medical Things (IoMT) for connected care is becoming essential as MedTech leaders turn to intelligent devices and AI-powered, cloud-first platforms. Providers are adopting smart sensors for real-time patient data transmission to AI-enabled applications, enabling remote monitoring. IoMT allows healthcare providers to deliver remote care via connected devices, transmitting patient results online. This technology facilitates real-time data analysis for optimized patient care, which is especially crucial with the strain of chronic diseases on limited medical resources. IoMT offers a solution for effective, affordable remote monitoring and rapid emergency response. However, MedTech firms must ensure data security, safety, and compliance.

AI, especially GenAI, offers vast opportunities in medical imaging and chronic disease management by leveraging data. For example, AI systems integrated with colonoscopy equipment can scan images in milliseconds, flagging potential lesions and improving early detection of colorectal cancer. To personalize treatment recommendations, AI algorithms analyze extensive patient data, including medical history, genomics, demographics, and lifestyle choices. This includes tailored medication, diet, and exercise regimes, showcasing AI’s transformative impact on healthcare and MedTech advancements.

Digital platforms are revolutionizing patient care beyond hospital walls. Continuous monitoring, virtual hospital wards, and e-clinics powered by wearables, AI cloud platforms, AR/VR, and connected devices are reducing in-patient visits. Recently, the FDA approved a digital clinic using VR and AR for at-home therapy. These platforms help hospitals, critical care, and rehabilitation centers address mental, physical, and occupational health challenges, including chronic pain, anxiety, fibromyalgia, and dementia.

Moving forward in 2024
The dawning of each new year brings with it new opportunities and challenges. Since 2024 could potentially be both historic and dynamic, it is worth examining some of the key issues that might affect the MedTech industry this year and ongoing undercurrents driving change and fostering growth.

The changing dynamics of major OEMs have seen significant buyouts and spinoffs to enhance competitiveness and streamline operations. Notable moves include Medtronic’s USD 2.2-billion spinoff of its patient monitoring and respiratory interventions businesses, Baxter’s divestment creating Vantive, and 3M Healthcare becoming its own entity.

Medical versus consumer health technology companies, the distinction between traditional MedTech companies (e.g., Abbott, Medtronic) and health tech firms (e.g., Apple, Alphabet) is blurring. Medtronic and Abbott’s glucose monitors are now consumer wearables, while Apple and Google have developed health monitoring devices. This shift extends healthcare beyond hospitals to hospital at home care.

Shifting regulatory environments, the FDA is significantly changing diagnostics testing and AI regulations. The new testing certification and clearance requirements could limit consumer access to simple diagnostic tests, raising concerns about patient access despite safety being the top priority. The FDA also differentiates between AI for precise medical devices performance and generative AI, each needing distinct regulation. Outside the US, the European Union’s stringent AI regulations and the MDR hinder innovation and complicate the product approval process, prioritizing rules over patient care.

Innovation in hardware and software is revolutionizing MedTech, enabling devices like atrial fibrillation-detecting watches and continuous glucose monitoring systems. However, innovation faces challenges due to economic uncertainties and funding shortages, with last year being notably poor for new device investment. Start-ups, despite creating efficacious FDA-cleared products, struggle with reimbursement issues, often deterring progress. Advocates call for automatic reimbursement for FDA-cleared devices, yet systemic inertia hampers patient access to innovative care.

Global success in a time of nationalization is becoming increasingly complex. With elections scheduled in the US and 40 other countries, companies must prepare for potential regime changes and geopolitical challenges. Despite these hurdles, 2024 is a pivotal year in MedTech, offering numerous opportunities to improve patient care and advance medical technology. Navigating these dynamics effectively will be crucial for MedTech companies aiming to sustain growth and leverage new technological advancements.

Bringing MedTech innovation to life
Technological advancements in MedTech are enhancing diagnostics and treatments with AI-powered innovations and wearables, leading to more personalized and real-time care. The aging population and rising chronic diseases drive innovation and digitization in the industry, and the global MedTech market is estimated to reach USD 996.93 billion by 2032 from USD 600.21 billion in 2023 at a CAGR of 5.8 percent. Wearable sensors, edge computing, and wireless devices create seamless connections within the medical ecosystem, making healthcare products smarter and more efficient for doctors, patients, and other stakeholders.

Wearables and personalized treatment, as well as creating and launching new medical devices, involves overcoming stress testing and regulatory approval. Many companies are now bringing user-friendly devices to market, leveraging IoT, sensors, and wearables to help patients monitor vital signs like blood oxygenation, heart rate, and blood pressure. By 2025, one in three adults is expected to own a wearable device, promoting lifestyle changes and home-based care. These technologies enable remote data review and personalized treatments, such as adjustable beds that mitigate snoring by altering the incline for better airway positioning.

Edge computing in healthcare enables real-time access to personal health data by processing and analyzing information closer to the source, like a patient’s phone or smartwatch. This reduces the need for extensive cloud data exchange, optimizing privacy, storage, and costs. Semiconductor companies lead this field, providing products that enhance real-time data processing and security. Medical-grade power solutions support these advancements by ensuring safe and efficient energy use. This technology allows patients to continuously monitor and review their health data easily, improving their ability to manage their wellness.

The Covid-19 pandemic accelerated the adoption of wireless medical devices, highlighting their benefits for efficient healthcare delivery and continuous patient monitoring. Devices like heart monitors and glucose level trackers are key in the Internet of Medical Things (IoMT), connecting patients with healthcare providers via the internet. Wireless technology facilitates near-field communication and broader data aggregation in the cloud, enhancing remote monitoring and diagnostic accuracy. Anomaly detection can trigger detailed data collection, providing comprehensive information for better patient management.

Opening access to patient care. Medical technology is personalizing and expanding access to healthcare by easing burdens on patients and physicians. The AI and data revolution is transforming care, surgery, and medication. Despite regulatory issues and cybersecurity challenges, the MedTech industry is advancing innovation. The growth of IoT and medical sensors will enhance secure data delivery, and drive AI models for better detection and personalized healthcare. Continuous monitoring with these devices is already demonstrating significant benefits in personalized care.

In 2024, India is experiencing a radical upheaval in its healthcare industry, driven by strategic initiatives, such as Pradhan Mantri and Ayushman Bharat Jan Aushadhi Yojana, which offer financial security and affordable prescription drugs. Efforts to limit the cost of vital medicines and medical equipment, along with the introduction of 100 percent FDI in the pharma sector, promote technological advancements and growth.

Creating medical devices parks and R&D centers further enhances innovation and industry self-sufficiency. The seamless transition to digital health and telemedicine and advanced technologies, like robotically assisted operations and AI-powered diagnostics, highlight India’s dedication to building a robust and inclusive healthcare ecosystem for its diverse population.

At its core, MedTech is an industry in which companies can do well by doing good. With a clear vision, a passion for innovation and excellence, and a steady guiding hand, MedTech leaders can chart their next path of value creation to benefit patients and stakeholders.