Michael Barbella, Managing Editor10.04.22
The COVID-19 pandemic has created numerous healthcare challenges over the past two years—a gnarled supply chain among the most inhibiting—but it’s been quite a boon for medtech research and development.
The virus that has killed more than 6.5 million individuals worldwide led to a major boost in R&D spending in 2020, with the top 10 medtech companies collectively investing more than $15 billion, Evaluate Vantage data show. And while that figure rose to $17.4 billion last year, the financial news analyst organization expects R&D investment to slow in 2022 and rise only moderately through 2028.
“However, even modest growth year over year represents a record level of spending,” David Stuart, Life Sciences senior analyst, director, wrote in a Fall 2022 Industry Outlook for RSM, a London-based accountancy network. “We expect the trend of record R&D spend will continue as companies jockey for technical superiority and the pace of innovation continues to accelerate. There are no viable substitutions; if medtech companies don’t maintain strong R&D spend, they risk being left behind in a highly competitive and segmented industry.”
Substantial R&D investment has long been tied to healthy product innovation and market capitalization. Whether R&D spending levels stay consistent or falter in the near future remains to be seen, but medtech firms will most certainly have maintain robust research and development pipelines to ensure their future success.
MPO’s R&D feature details the trends and market forces driving medtech research and development. MichaelMcShane, a project engineer at Flambeau Inc., was among the experts interviewed for the feature; his full input is provided in the following Q&A:
Michael Barbella: How has COVID-19 changed companies’ approach to R&D, if at all? Why did it change the approach to R&D?
Michael McShane: Not the approach, just the timing. R&D has to now be done earlier than before due to unforeseen illness, supply chain, labor, and shipping constraints.
Barbella: In your observations and customer dealings, what areas of healthcare are companies focusing their R&D on (for example, diagnostics, cardio, robotics, etc.)? Why are companies investing in these particular areas?
McShane: In the medical market diagnostics and robotics have a greater R&D push—both processes help with speed of process and reduction in required labor to execute. Medical in practice is non-scalable, however, data gathering can be. And medical is now more obsessed with data than ever before.
Barbella: In your observations/customer dealings, are companies allocating their R&D dollars more into transformational or incremental innovation? What is the reason (or reasons) behind their choice?
McShane: Incremental innovation because it is faster and often a better investment to improve on the new than to re-invent. In uncertain times, people stick closer to what they know. Additionally, by making existing products easier to use, more user friendly, and containing more data gathering capabilities, they can produce better returns in the industry. Only in direct data-gathering like the Internet of things and wearables will you see a more transformational approach.
Barbella: Is there an ideal or best R&D outsourcing strategy that companies should employ when pursuing new innovation? Please explain your answer.
McShane: Yes, R&D should be explored to the best of a company’s capabilities and then outsourced. Even before Covid times everyone needed a firm grasp of their own scope. Building the strength and knowledge base internally is only as good as your most curious R&D team, and once their limit is reached, outsource.
Barbella: When does it make sense—if ever—NOT to outsource medtech R&D?
McShane: When there is not a good partnership available. If a company cannot be found that wants to collaborate on combined efforts then keeping the product/process in-house is a must. It’s better to take longer to get a product to market then it is to break productive partnerships.
Barbella: What benefits do an academic partnership bring to R&D?
McShane: Academic partnerships help bring an idealism and ideation to the business. Typically, academics think and conceptualize what can be done, not necessarily, what makes business sense. That approach can be very fruitful in R&D if the ideation can be harnessed for a product or market.
Barbella: How has virtual interaction benefited medtech R&D? Do you expect it to continue?
McShane: Virtual interaction has replaced in-person meetings during COVID and yes, it will continue. It has helped by providing an alternative to a phone call and provided an opportunity to collaborate while still isolating. However, it hurt camaraderie and collaboration, and the best ideas are not always shared virtually, due to an underlying skepticism of the technology.
Barbella: How will approaches to R&D evolve in the future?
McShane: There will be three major ways:
The virus that has killed more than 6.5 million individuals worldwide led to a major boost in R&D spending in 2020, with the top 10 medtech companies collectively investing more than $15 billion, Evaluate Vantage data show. And while that figure rose to $17.4 billion last year, the financial news analyst organization expects R&D investment to slow in 2022 and rise only moderately through 2028.
“However, even modest growth year over year represents a record level of spending,” David Stuart, Life Sciences senior analyst, director, wrote in a Fall 2022 Industry Outlook for RSM, a London-based accountancy network. “We expect the trend of record R&D spend will continue as companies jockey for technical superiority and the pace of innovation continues to accelerate. There are no viable substitutions; if medtech companies don’t maintain strong R&D spend, they risk being left behind in a highly competitive and segmented industry.”
Substantial R&D investment has long been tied to healthy product innovation and market capitalization. Whether R&D spending levels stay consistent or falter in the near future remains to be seen, but medtech firms will most certainly have maintain robust research and development pipelines to ensure their future success.
MPO’s R&D feature details the trends and market forces driving medtech research and development. MichaelMcShane, a project engineer at Flambeau Inc., was among the experts interviewed for the feature; his full input is provided in the following Q&A:
Michael Barbella: How has COVID-19 changed companies’ approach to R&D, if at all? Why did it change the approach to R&D?
Michael McShane: Not the approach, just the timing. R&D has to now be done earlier than before due to unforeseen illness, supply chain, labor, and shipping constraints.
Barbella: In your observations and customer dealings, what areas of healthcare are companies focusing their R&D on (for example, diagnostics, cardio, robotics, etc.)? Why are companies investing in these particular areas?
McShane: In the medical market diagnostics and robotics have a greater R&D push—both processes help with speed of process and reduction in required labor to execute. Medical in practice is non-scalable, however, data gathering can be. And medical is now more obsessed with data than ever before.
Barbella: In your observations/customer dealings, are companies allocating their R&D dollars more into transformational or incremental innovation? What is the reason (or reasons) behind their choice?
McShane: Incremental innovation because it is faster and often a better investment to improve on the new than to re-invent. In uncertain times, people stick closer to what they know. Additionally, by making existing products easier to use, more user friendly, and containing more data gathering capabilities, they can produce better returns in the industry. Only in direct data-gathering like the Internet of things and wearables will you see a more transformational approach.
Barbella: Is there an ideal or best R&D outsourcing strategy that companies should employ when pursuing new innovation? Please explain your answer.
McShane: Yes, R&D should be explored to the best of a company’s capabilities and then outsourced. Even before Covid times everyone needed a firm grasp of their own scope. Building the strength and knowledge base internally is only as good as your most curious R&D team, and once their limit is reached, outsource.
Barbella: When does it make sense—if ever—NOT to outsource medtech R&D?
McShane: When there is not a good partnership available. If a company cannot be found that wants to collaborate on combined efforts then keeping the product/process in-house is a must. It’s better to take longer to get a product to market then it is to break productive partnerships.
Barbella: What benefits do an academic partnership bring to R&D?
McShane: Academic partnerships help bring an idealism and ideation to the business. Typically, academics think and conceptualize what can be done, not necessarily, what makes business sense. That approach can be very fruitful in R&D if the ideation can be harnessed for a product or market.
Barbella: How has virtual interaction benefited medtech R&D? Do you expect it to continue?
McShane: Virtual interaction has replaced in-person meetings during COVID and yes, it will continue. It has helped by providing an alternative to a phone call and provided an opportunity to collaborate while still isolating. However, it hurt camaraderie and collaboration, and the best ideas are not always shared virtually, due to an underlying skepticism of the technology.
Barbella: How will approaches to R&D evolve in the future?
McShane: There will be three major ways:
- Tribal knowledge mining from retiring and exiting employees. In any R&D setting, iterations have been tried in the past, and while there may not have been sufficient technology/resources/etc. at the time, that doesn’t mean they aren’t feasible now. There will be a re-trial effort of old ideas.
- Innovative medical products will involve fewer and fewer people. The internet of things will allow for smaller and smaller businesses to grab market-share.
- There will be a significant push for in-line sterilization.