Best practices for the medtech executive management team is to position their company to compete in a value-driven ecosystem and be completely sure they understand who the decision maker is and why they will pay for the technology. Whether the decision maker is the patient, physician, provider, or payer, this process empowers medtech companies in strategy development, including M&A, that precisely meets their needs. In the brave new world of medtech, the creation of value is patient-focused and data-enabled.
Why This Is Important
Global sales in medtech will show impressive growth between 2016 and 2022, especially in in-vitro diagnostics, cardiology, imaging, orthopedics, and ophthalmics (Table 1). Overall, the market is forecasted to grow from $386.8 billion to $521.9 billion in 2022 at a CAGR of 5.1 percent.1
Medtech consolidation has been extraordinary and very different from the strategies seen in our sister industry—pharmaceuticals. The worldwide pharmaceutical industry has stayed fragmented and only the largest companies (Novartis, Pfizer) have achieved a 5 percent share of the USD 1 trillion global market for pharmaceuticals.2 In direct contrast, consolidation in medtech has risen dramatically. In 2016, the top 10 medical device companies commanded 37 percent of the global market (Table 2).1
The Medi-Vantage Perspective
Our clients ask, “How do we make our business model deliver value, and not just a device?” These clients use M&A as one of the many tools they need to establish platforms that drive value for multiple stakeholders. They are using data to adapt their strategies to meet the increasing power of payers, react to new competition, and differentiate their products. We are thrilled to see estimates of R&D spend increase, projected to grow from an estimated $28.2 billion worldwide in 2018 to $33.5 billion in 2022 (Table 3).1
What Is Next for Medtech M&A?
In 2017, we saw, in the aggregate, healthy medtech growth. Expect to see many of the large medtech companies with lower growth in 2017 pursue acquisitions in 2018. As we saw in the Medtronic/Covidien acquisition, more medtech leaders may investigate mega-mergers as a method to protect profitability, maintain competitive advantage, and build scale to confront new supply chain challenges.
Maria Shepherd has more than 20 years of leadership experience in medical device/life-science marketing in small startups and top-tier companies. After her industry career, including her role as vice president of marketing for Oridion Medical where she boosted the company valuation prior to its acquisition by Covidien/Medtronic, director of marketing for Philips Medical, and senior management roles at Boston Scientific Corp., she founded Medi-Vantage. Medi-Vantage provides marketing and business strategy as well as innovation research for the medical device industry. The firm quantitatively and qualitatively sizes and segments opportunities, evaluates new technologies, provides marketing services, and assesses prospective acquisitions. Shepherd has taught marketing and product development courses and is a member of the Aligo Medtech Investment Committee (www.msbiv.com). She can be reached at 855-343-3100, ext. 102, or at email@example.com. Visit her website at www.medi-vantage.com.