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1、In an unceasingly complex environment,how can MedTech adapt to thrive?Pulse of the MedTech Industry Report 2024ContentsTo our clients and friends3The year in review The MedTech landscape in 20244EY perspectiveTaking on the top-line challenge:Where can MedTech go to find growth?14Guest perspectiveBos

2、ton Scientifics growth playbook:M&A,R&D and global market execution18EY perspectiveMedTech manufacturers struggle for profitability as input costs rise21Guest perspectiveHow J&J MedTech balances organic growth with strategic acquisitions24EY perspective Turning MedTechs commercial challenges into tr

3、ue growth opportunities27EY perspective The rise of AI is shifting the MedTech landscape and where its going31Guest perspectiveThe role of AI in MedTechs future:a deep dive with AdvaMed35EY perspective Seizing the moment:MedTechs opportunity to enter consumer health39Databook42Financial performance4

4、3Financing46Merger and acquisition(M&A)52Data exhibit index54Acknowledgments5502Pulse of the MedTech Industry Report 2024Arda Ural,PhD EY Americas Life Sciences Sector Leader Ernst&Young LLPTo our clients and friendsJohn Babitt EY Americas MedTech Transactions Leader Ernst&Young LLPJim Welch EY Glob

5、al MedTech Leader Ernst&Young LLPThe 18th annual Pulse of the MedTech Industry Report finds the medical technology(MedTech)industry still progressing and growing but,increasingly,walking a narrow path between converging top-line and bottom-line pressures.MedTech recorded its sixth successive year of

6、 unbroken top-line growth and is now a US$587 billion industry.It continues to innovate,with 2023 showing a record number of FDA product authorizations,both pre-market approvals(PMAs)and 510(k)approvals,and the new products reaching the market include highly differentiated launches in areas such as

7、cardiovascular.Moreover,MedTech continues to push toward new frontiers,as ongoing breakthroughs in artificial intelligence(AI)hold the possibility of making devices smarter,smaller and more personalized.Despite this continued push outward on the boundaries of innovation,the industry is struggling wi

8、th fundamentals.Some of the spaces fastest-growing companies saw their valuations plunge on the back of disappointing second-quarter earnings in summer 2024,and even the strongest MedTech companies struggle with increased input costs,reimbursement challenges and a shifting sales environment.As the w

9、orst of the pandemic fades further in the rearview mirror,so do the sales surge and investor excitement that drove MedTech during the public health emergency.Companies in the diagnostics and the research and laboratory equipment segments have experienced a marked slowdown after the pandemic uptick,w

10、hile other MedTechs are wrestling with issues including slower-than-anticipated uptake of new products and procedures in hospitals and continued challenges to reimbursement rates.The cost of MedTech inputs from energy to raw materials to labor has risen,while inflation and broader financial volatili

11、ty have left companies exposed to increasing selling,general and administrative(SG&A)expenses.The net effect is downward pressure on profit margins in addition to the increasing challenge of sustaining revenue growth.These pressures pose a particular challenge for the smaller companies in the sector

12、,which are also battling for venture capital(VC)amid historically low numbers of funding rounds,an anemic initial public offering(IPO)market and limited M&A activity.These factors together leave the smaller MedTechs the“emerging leader”class of companies with annual revenues of less than US$500 mill

13、ion increasingly unable either to access public markets or seek an exit via M&A.More than half of the companies in this class have less than two years of cash on hand,representing a threat to the industrys innovation ecosystem.To get back on track,companies will need to optimize their portfolios to

14、focus on high-growth therapeutic areas and technologies,seeking the right mix of organic and inorganic investments to tap the potential of industry innovation.They will also need to focus on the efficiency of their operating models and optimize costs to restore marginal growth.Part of this challenge

15、 will be refining commercial and go-to-market strategies to improve engagement with the industrys stakeholders and drive greater market penetration.Growth and profitability arent out of sight for MedTech,but adapting to thrive through a series of transformational changes might be required to achieve

16、 it.Despite a turbulent environment,we remain confident in the MedTech industrys resilience and creativity.Innovation is the lifeblood of the industry and health care continues to adopt and adapt to new technologies and changing needs of MedTech companies most important customers.the patients they s

17、erve every day.It is this shared mission and willingness to employ innovative ideas that will propel the success of MedTech products,companies and the industry into the future.03Pulse of the MedTech Industry Report 2024The year in reviewThe MedTech landscape in 202404Pulse of the MedTech Industry Re

18、port 2024Figure 1The MedTech industry in 2024 faces mounting challenges as it seeks to regain its growth trajectory.While the industry chalked up another year of growth in 2023,with revenues rising to US$587.6 billion,the 3.8%annual growth rate was the sectors lowest since 2017.20222023H1 2024202220

19、23 change%changePublic data companyTotal revenue$566.0$587.6$291.0$21.7 3.8%Conglomerates$215.3$192.3$87.4 -$23.0-10.7%Pure-play companies$350.7$395.3$203.6$44.6 12.7%Commercial leaders$327.7$374.4$194.0$46.7 14.3%Emerging leaders$23.0$20.9$9.6-$2.1-9.1%R&D expense$33.2$34.4$16.6$1.1 3.4%SG&A expens

20、e$112.7$127.2$65.5$14.5 12.8%Net income$12.5$25.8$7.5$13.3 106.1%Market capitalization$1,572.8$1,716.2$1,746.7$143.4 9.1%Number of employees1,206,9871,241,347-$34,359.2 2.8%Number of public companies455433418-22-4.8%MedTech financial performance 2023,overview Source:EY analysis,Capital IQ and compan

21、y financial statement data.Numbers may appear to be inconsistent due to rounding.Data shown for US and European public companies.The industrys performance in the first half of 2024 underlined the increasing struggle to achieve growth in the current operating environment one punctuated by reimburseme

22、nt challenges,slowing procedure volumes and tighter hospital budgets.While some MedTechs reported strong growth in the first quarter of the year,the second quarter of 2024 turned into a chastening experience for several industry players as they missed on earnings expectations and received immediate

23、negative market feedback(see Figure 2),tempering the optimism felt at the start of the year.The industrys performance in the first half of 2024 underlined the increasing struggle to achieve growth in the current operating environment.05Pulse of the MedTech Industry Report 2024Figure 2Figure 3MedTech

24、 stock valuations vs.S&P 500,2024 year to date(YTD)Biggest therapeutic device market cap growth stories,30 June 201930 June 2024-50%10%20%30%-10%-30%-40%0%-20%01-Jan-2401-Feb-2401-Mar-2401-Apr-2401-May-2401-Jun-2401-Jul-24EY US commercial leadersEY EU commercial leadersEY US emerging leadersEY EU em

25、erging leadersS&P 500This list included companies such as Dexcom and Edwards Lifesciences,which have among the strongest growth stories in the therapeutic devices segment in recent years(see Figure 3).CompanyMarket cap as of 30 June 2024Market cap as of 30 June 2019US$changeCAGR 2019-H1 2024Intuitiv

26、e Surgical 157,791 54,693 103,098 21%Stryker 129,618 58,654 70,964 16%Boston Scientific 113,219 48,904 64,315 16%DexCom 45,089 10,644 34,446 30%IDEXX Laboratories 40,237 16,041 24,195 18%Edwards Lifesciences 55,662 32,020 23,642 11%Siemens Healthineers 64,320 41,832 22,488 8%Alcon 44,136 27,822 16,3

27、14 11%ResMed 28,117 16,226 11,890 11%Straumann Holding 19,749 9,932 9,817 13%Source:EY analysis,Capital IQ and company financial statement data.Source:EY analysis,Capital IQ and company financial statement data.Data is arranged in descending order on the basis of change in market cap(column“US$chang

28、e”).06Pulse of the MedTech Industry Report 2024Figure 4Pure-play MedTech SG&A and revenue annual growth rates(AGRs)and net income,201923 Source:EY analysis,Capital IQ and company financial statement data.In their Q2 2024 reporting,MedTechs singled out various challenges:Dexcom cited the issues assoc

29、iated with sales force realignment,reimbursement factors and a reported reduction in revenue per customer as a result of rebate eligibility and channel mix;while Johnson&Johnson highlighted pressures in the Chinese market,where government efforts to deploy volume-based procurement(VBP)models have im

30、pacted the companys MedTech revenue.The broader implication for MedTech is that a challenging operating environment has resulted in a headwind for growth while input costs continue to increase,putting further pressures on profitability.From raw materials to labor expenses,energy,shipping and other s

31、upply chain overheads,MedTech today is operating in a higher-cost environment compared to the period before the COVID-19 pandemic.While industry revenues recorded 3.8%growth in 2023,sales,general and administrative(SG&A)expenses rose by 12.8%.Looking back to MedTechs position at the end of 2019 when

32、 the world was on the brink of the pandemic,industry revenues have grown with a compound annual growth rate(CAGR)of 8.3%in the four-year period to the end of 2023.Over the same period,however,SG&A also climbed year over year with a CAGR of 9.8%,while net income for pure-play companies declined,with

33、a negative 2.4%CAGR for the 201923 period.Annual revenue growth has struggled to keep pace with SG&A growth over this period,contributing to uneven income growth(see Figure 4).Revenue AGR(%)SG&A AGR(%)Net income(US$b)20%15%5%25%10%0040302050 102019202120202022AGR(%)Net income(US$b)20231.“DexCom(DXCM

34、)Q2 2024 Earnings Call Transcript,”The Motley Fool website,July 25,2024,https:/ broader implication for MedTech is that a challenging operating environment resulted in a headwind on growth while input costs continue to increase,putting further pressures on profitability.07Pulse of the MedTech Indust

35、ry Report 20242.“MedTech firms have cut more than 14,000 jobs in the past 18 months,”MedTech Dive website,https:/www.MedT 17,2024.The dearth of IPOs in recent years and consolidation have impacted the number of public companies and employment numbers across the sector.The number of pure-play public

36、MedTech companies fell 4%to 433,the lowest since 2019.Excluding companies operating in the research and laboratory equipment segment,which is somewhat independent of the therapeutic,diagnostics and imaging segments in terms of business environment,the industry ended the year with 350 public companie

37、s,fewer than the 355 it had in 2019.This is due to a combination of factors.For instance,there have been fewer companies going public since the start of 2022,and many smaller companies had to close their doors due to lack of funding options.Though total employee numbers grew by 3%,this was a marked

38、slowdown from the 12%CAGR of the 201822 period.Number of employees AGRNumber of public companies15%25%10%20%5%0%4104304204604504402019202120202022Number of employees AGR(%)Number of public companies2023Figure 5Number of pure-play public MedTech companies and employees AGR(%),201923 Source:EY analysi

39、s,Capital IQ and company financial statement data.Layoffs within the sector have been widely reported in the industry news,with estimates of 14,000 jobs cut between January 2023 and July 2024 as MedTechs restructure,close sites and seek other cost savings.2 The impact of these cuts has landed dispro

40、portionately on the diagnostics sector.Diagnostics companies have been hit particularly hard by the backslide after the pandemic drove a dramatic spike in demand for home tests and similar products.The ongoing COVID-19 hangover can arguably be cited for many of the challenges the industry now faces.

41、Examples of these challenges include the fading of both the extraordinary and distorted patterns of demand for certain products and procedures,as well as a drop in investor interest in MedTech after a valuation surge and a wave of IPOs after the height of the pandemic in 2020.To some extent,a consol

42、idation and retrenchment within the sector was the inevitable sequel to the unusual highs of the pandemic,and the growth challenges of 2023 and 2024 should be seen in this wider context.08Pulse of the MedTech Industry Report 20243.“2023 Annual Report,Center for Devices and Radiological Health,”FDA w

43、ebsite,https:/www.fda.gov/media/175479/download?attachment.Figure 6Number of FDA PMA and 510(k)approvals,201324 YTD Source:FDA website.Data for 510(k)clearances are updated till June 2024 and PMA approvals are till April 2024One reason to be positive about the industrys underlying fundamentals is th

44、e healthy pace of new product approvals,particularly in the artificial intelligence(AI)space(see our deep dive on the topic later in the report).The FDAs Center for Devices and Radiological Health noted in its annual report that in 2023 it authorized the highest number of novel devices in its more t

45、han 40-year history(excluding emergency use authorizations).3 The number of 510(k)approvals rose for the fourth consecutive year to reach a record 3,325,while pre-market approvals(PMAs)soared 77%as review and approval timelines recovered from any lingering bureaucratic backlog following the public h

46、ealth emergency(see Figure 6).Number of 510(k)clearancesNumber of PMA approvals2,0003,0003,5001,5005002,5001,000003010402050201920142013202120162020201520222017202320182024*MedTech is a research and development(R&D)-driven industry,and the rate of new innovations reaching the market particularly in

47、areas such as structural heart,renal denervation and robotics is an extremely positive sign.Yet,recent earnings reports indicate that converting innovation into revenue growth has become more challenging due to the growing complexity of novel products(with associated training and education burdens,a

48、s noted in Edwards Q2 earnings call)and the increased emphasis on demonstrating cost effectiveness and clinical superiority.At the same time,profitability is exceedingly hard to achieve for many companies in the sector after accounting for the high costs of doing business.In short,MedTech cannot be

49、complacent about a return to growth and profitability,particularly in the wake of the negative growth stories emerging in the first half of 2024.The industry will need to take action to rebuild revenue and margin growth.Enabling the innovation ecosystem to remain robust will be one of the key challe

50、nges.The FDA announced that,in 2023,it had authorized the highest number of novel devices on record.Number of 510(k)clearancesNumber of PMA approvals09Pulse of the MedTech Industry Report 2024Emerging leaders facing financial headwinds in 2024 While the struggles of MedTechs commercial leaders that

51、is,companies solely focused on MedTech and commanding annual revenues of US$500 million or more may attract headlines,the operating environment for companies at the other end of the scale is even more challenging in 2024.The contraction and consolidation within the market is hitting the industrys sm

52、aller players harder.While commercial leaders overall recorded 14.3%top-line growth in 2023,the emerging leaders(those with annual revenues below US$500 million)experienced a 9.1%revenue decline.These companies are also grappling with an unforgiving and constrained financing environment.In the 12-mo

53、nth period that ended in June 2024,total industry financing fell to an eight-year low of US$27.5 billion.All financing streams were down compared to the previous five-year average investment.While venture capital investment ticked up 5%to US$7.0 billion,it remained 11.3%lower than the average total

54、for the previous five years.Similarly,the IPO market made a slight return in the first half of 2024 after five quarters of almost no activity(a subsidiary of the German supplier SCHOTT AG that makes pre-filled syringes went public in 2023).Two companies made their public debut so far in 2024:Fractyl

55、 Health raised US$110 million and Tempus AI raised US$411 million.Both companies were trading below their IPO price at the end of the first half of this year.Source:EY analysis,BMO Capital Markets,Dow Jones VentureSource and Capital IQ.Numbers may appear to be inconsistent because of rounding.PIPEs

56、included in“follow-on and other.”6050403020100US$bIPOVentureFollow-on and otherDebtJuly 2012June 2013July 2016June 2017July 2014 June 2015July 2018June 2019July 2020June 2021July 2013June 2014July 2017June 2018July 2015June 2016July 2019June 2020July 2021June 2022July 2022June 2023July 2023June 2024

57、Figure 7Capital raised in the US and Europe by year,July 2012June 2024 10Pulse of the MedTech Industry Report 2024Limited revenue growth and limited access to capital markets together represent an increased challenge for the emerging leaders that traditionally drive MedTech innovation.As such,their

58、financial position has deteriorated since the high point of 2021.At the end of 2021,52%of MedTechs(excluding the commercial leaders group)had over three years worth of cash available.At the end of 2023,that figure had fallen to 37%,with 55%of MedTechs now holding less than two years cash reserves an

59、d 40%with under one year remaining.For these cash-strapped companies,the best bet is to seek an exit via acquisition.Yet,the emerging leaders confront another major challenge in the M&A market:Dealmaking activity has been extremely limited in recent quarters.The 99 M&A deals completed during the per

60、iod from July 2023 to June 2024 were the lowest annual total in 15 years.The most recent previous 12-month period in which MedTech dealmaking slipped below triple figures this century was during the global financial crisis,when 90 deals were completed between July 2008 and June 2009.US-EU20232022202

61、120202019More than 3 years37%40%52%52%44%23 years of cash8%9%11%8%9%12 years of cash15%17%19%18%14%Less than 1 year of cash40%34%18%22%32%Figure 8Figure 9EY MedTech Survival Index,201923 (excludes commercial leaders)MedTech M&A,July 2006June 2024 Source:EY analysis,Capital IQ and company financial s

62、tatement data.Chart shows percentage of MedTech companies with each level of cash.Numbers may appear inconsistent because of rounding.Sources:EY analysis,Capital IQ and Thomson One.Chart includes deals with value disclosed(MedTech deal where either acquirer or target is located in the US or Europe).

63、Mega deals(US$10b)Other M&ANumber of deals050100150200250300350120100806040200Total deal value(US$b)Number of dealsJuly 2009June 2010July 2007June 2008July 2011June 2012July 2016June 2017July 2014June 2015July 2013June 2014July 2019June 2020July 2006June 2007July 2010June 2011July 2018June 2019July

64、2008June 2009July 2012June 2013July 2017June 2018July 2015June 2016July 2020June 2021July 2021June 2022July 2022June 2023July 2023June 202411Pulse of the MedTech Industry Report 2024Figure 10M&A activity by quarter,Q1 2023Q2 2024 2015525100030104050607020Q1 2023Q2 2023Q3 2023Q4 2023Q1 2024Q2 2024Dea

65、l value(US$b)Number of dealsJNJ/Shockwave:US$13.1bOther M&AMegadeals(US$10)Number of dealsThe 42%drop in deal volume in the 12 months preceding the end of June 2024 was,however,accompanied by an 18%increase in deal value,which hit US$57.7 billion.The disconnect between volume and value reflects the

66、years pattern of few,but relatively large deals.Overall,the average deal size was the third largest in the past decade.Johnson&Johnsons US$13.1 billion takeout of Shockwave Medical accounted for 23%of the annual total M&A investment on its own,and the top five deals together represented 51%of the ov

67、erall spend.The recent trend toward fewer,bigger deals has become more pronounced quarter by quarter since the beginning of 2023.Even though the MedTech industry held US$466 billion in dealmaking firepower at the end of June 2024,and commercial leaders have proven they are willing to pay high premiu

68、ms for specific assets,the low background level of M&A activity increases the challenges for smaller companies that are seeking a financially sustainable future.Sources:EY analysis,Capital IQ and Thomson One.Chart includes deals with value disclosed(MedTech deal where either acquirer or target is lo

69、cated in the US or Europe).12Pulse of the MedTech Industry Report 2024MedTech companies increasing caution on acquisitions reflects the growth pressures that industry leaders are facing.Rather than continuing to expand and diversify their product lines,some of the sectors biggest players have aimed

70、to streamline their business and concentrate their portfolios in high-growth areas.As a result,divestments have become a major theme of industry dealmaking in the 202324 period.For instance,Danaher continued to remake itself with a focus on life sciences and diagnostics by spinning out its water tes

71、ting and product identification operations as Veralto;4 Baxter sold its pharmaceutical solutions business to Warburg Pincus and other private equity(PE)buyers for US$4.3 billion in 2023 and announced the sale of its kidney care unit,rebranded as Vantive,to Carlyle Group for US$3.8 billion in mid-202

72、4.MedTechs will continue their attempt to pivot to high-growth opportunities;at the same time,they must protect the innovation ecosystem,as smaller companies struggle with limited financial power and acquisitions.Through alliances,accelerators,incubators and other partnership models,the industry nee

73、ds to continue to support and nurture grassroots innovation across the sector.Private equity and other investment buyers are also on track to play an expanded role in supporting innovation,offering financing and exit opportunities to emerging leaders and facilitating carve-outs as industry leaders c

74、ontinue to target high-growth segments.Getting back to growth In the rest of this report,we examine in more detail the strategies MedTechs are pursuing to rebuild growth and return to profitability,including:The search for high-growth opportunities:What strategic investments and business model optim

75、ization initiatives should MedTechs pursue to gain competitive advantage as they divest from lower-performing business units?Cost optimization:With input costs still high,what specific cost containment measures and profit margin recovery strategies should MedTechs commercial leaders prioritize,and h

76、ow can smaller companies remain financially viable?Commercial:How can MedTechs adapt their commercial models to overcome recent market challenges and leverage their go-to-market strategies to extract the most value from their innovations?AI:As AI technologies gain momentum in MedTech,what strategic

77、investments and integrations are necessary for companies to harness them for significant growth and competitive advantage?Consumerization:Amid the rise of consumer engagement in health technology,how should MedTechs approach the direct-to-consumer market to capitalize on this growing trend and conne

78、ct with a broader consumer base?4.“3 MedTech spinoffs that reshaped the industry in 2023,and what to expect next,”MedTech Dive website,November 29,2023,https:/www.MedT of the MedTech Industry Report 2024EY PERSPECTIVETaking on the top-line challenge:Where can MedTech go to find growth?In February 20

79、24,Elon Musks Neuralink announced its successful first installation of a brain-computer interface in a human patient.5 Proclaimed by Musk as pursuing the goal of“a closer symbiosis between human intelligence and digital intelligence,”Neuralink highlighted the radical frontier of possibilities for Me

80、dTech innovation and captured the years biggest VC funding round in the industry.5.“Musk Says First Neuralink Patient Received Implant in Brain,”Bloomberg website,January 29,2024,https:/ of the MedTech Industry Report 2024EY PERSPECTIVEInnovation in MedTech does not usually command headlines so dram

81、atically,nor does it typically claim to offer this level of game-changing disruption.However,the industrys steady drumbeat of R&D success was on display throughout 2023,as evidenced in the record number of PMA and 510(k)product approvals during the year(see Year in Review).While many MedTech product

82、s are not highly differentiated,the industry has successfully converted incremental innovation into steady growth over the past decade,achieving at least 4%revenue growth in each of the past eight years.But,as noted in our Year in Review section,MedTechs innovation-to-growth business model has becom

83、e less bankable during the 202324 period.Effectively,MedTechs have two levers for accelerating growth:R&D spending and M&A/partnering investment.Unfortunately,recent months have been largely quiet on the dealmaking front(see Year in Review),while 2023 also saw a dip in R&D spending growth.Figure 11S

84、ource:EY analysis,Capital IQ and company financial statement data.Growth in pure-play MedTech revenues and R&D growth rate,200023Revenue growth rate(%)R&D growth rate(%)200020042014200220122022200620162009201920012011202120052015200820182003201320232007201720102020-5%0%5%15%10%20%25%30%-5%0%5%15%10%

85、20%25%RevenueR&DPost-financial crisisPre-financial crisisAnalysis of capital allocation strategies shows that the industrys big players are returning significant cash to shareholders in the form of dividends and share buybacks:US$23.9 billion in 2023,the second-highest level recorded in Pulse(behind

86、 only 2022).Of the total capital allocation to R&D,M&A and cash back to shareholders,growth investments in R&D and M&A made up 63%,the third-lowest total in the past 10 years.This low return on investment may become an increasingly critical challenge.For MedTech,growth is no longer a given.Instead,i

87、t is a problem that needs to be solved.15Pulse of the MedTech Industry Report 2024EY PERSPECTIVESolving the growth problem Some MedTechs are successfully addressing the mix of organic and inorganic growth needed to drive growth;our guest perspective from Joe Fitzgerald,Executive Vice President and G

88、roup President,Cardiology,Boston Scientific,highlights the business approach the company has taken to remain among the industrys high-growth standouts.As Joe told us,“Consistently growing faster than your peers requires not only a strong internal pipeline but also a very aggressive external investme

89、nt attitude”;in Boston Scientifics case,external investment has allowed the company to pivot to higher-growth therapeutic areas.In a highly diversified MedTech landscape,finding high-growth spaces can be challenging,but it is clearly achievable in certain niches,including neurotechnology,urology and

90、 digital surgery.The cardiovascular therapeutic area,led by Johnson&Johnson,has undoubtedly been the biggest focus of growth investment.Concerns that popular GLP-1 medications for the treatment of obesity would impact sales in this space have largely abated.Johnson&Johnsons acquisitions of coronary

91、artery disease specialist Shockwave,and Abiomed,centered on coronary artery disease and heart failure,mean that since the last quarter of 2022,it has invested over US$30 billion in the cardiovascular space.Figure 12Pure-play MedTech capital allocation,2014-2023Source:EY analysis,Capital IQ,company f

92、inancial statement data.Cash returned to shareholdersR&D expensesM&A expensesGrowth investment(R&D and M&A)as percentage of capital allocationInvestment(US$b)Growth investment(R&D and M&A)as percentage of capital allocation0%15%30%45%60%90%75%120100806040200201920172015201420202018201620212022202316

93、Pulse of the MedTech Industry Report 2024EY PERSPECTIVEGetting smaller to grow faster and other opportunities in convenient connected careBeyond specific therapeutic areas,there are clear trends the industry can identify in its pursuit of high-growth spaces,including the focus on minimally invasive

94、treatment modalities,miniaturization of devices,and monitoring and connected care approaches.Minimally invasive treatment modalities One of the major points of differentiation for Shockwave was the companys development of a minimally invasive alternative to angioplasty as a treatment for coronary ar

95、terial plaque.Several of the key funding rounds during the 202324 period attack this challenge:among the years top funding rounds were CMR Surgical,developer of the Versius platform for minimally invasive surgeries;Axon Therapies,developing new minimally invasive procedures for heart surgery;and Isr

96、aels Insightec,pursuing breakthroughs in“incisionless”surgery.Miniaturization of devices Supporting the move toward minimally invasive procedures is the trend that sees devices getting smaller.Virtual Incision won approval for the first miniaturized robotic surgery system in February 2024,6 while Me

97、dical Microinstruments,which focuses on microsurgery and supermicrosurgery,was among the biggest funding rounds.Beyond surgery,the trend continues with Tandem Diabetes Care rolling out its miniaturized Mobi insulin pump,7 Motif Neurotech winning funding for a miniature neurostimulator,8 and July 202

98、4 seeing Magenta Medical win funding9 for the smallest heart pump yet developed.Monitoring and connected care The potential for connected care was underscored by one of the biggest M&A moves of recent years,Baxters US$10.5 billion play for HillRom in 2021.In June 2024,Becton Dickinson announced a US

99、$4.2 billion deal for Edwards Critical Care business unit,acquiring new 6.“Virtual Incision Receives FDA Authorization for the MIRA Surgical System as the First Miniaturized Robotic-Assisted Surgery Device,”Business Wire website,February 24,2024,https:/ kicks off wider US launch of miniaturized Mobi

100、 insulin pump,”Fierce Biotech website,February 13,2024,https:/ Neurotech Raises$18.75 Million in Series A Financing to Advance Implantable Device for Treatment-Resistant Depression,”Business Wire website,January 24,2024,https:/ Medical raises$105M for worlds smallest heart pump,”Mass Device website,

101、July 23,2024,https:/ in advanced patient monitoring and connected care with AI algorithms enabling real-time monitoring of cardiovascular patients in hospital.Closer monitoring and connected care of patients in the home and hospital settings are still a pathway to growth.These products and players h

102、ave in common a growing emphasis on smaller,smarter devices that can get closer to patients less obtrusively and make care more comfortable,connected and convenient.As such,these developments stand at the intersection of two important trends within MedTech:the increasing use of AI and advanced analy

103、tics to increase the personalization and precision of interventions,and the growing emphasis on devices being user friendly and providing a better user experience both for clinicians and,increasingly,for the patients who are the end users.The growing importance of AI and consumerization within MedTe

104、ch is examined in more detail elsewhere in this report.MedTechs that have grasped the implications of both these trends are well positioned to leverage AI and other digital technologies alongside the focus on user experience to differentiate themselves and lock in market growth and leadership.A clea

105、r illustration of this trend is Intuitive Surgical.The company achieved and maintained industry-leading growth as the first mover in the robotic surgical field,but subsequently while evolving its product portfolio it has also moved beyond the product to achieve significant differentiation from the w

106、ider ecosystem it has built around its platform,including services,training and digital layers.While MedTechs need to find the right mix of M&A and R&D to optimize their product portfolios for growth,ultimately they also need to recognize the differentiation potential of AI,analytics,data and better

107、 user experience if they are to sustain high growth rates into the future.17Pulse of the MedTech Industry Report 2024GUEST PERSPECTIVEJoe FitzgeraldExecutive Vice President and Group President,CardiologyBoston ScientificBoston Scientifics growth playbook:M&A,R&D and global market execution18Pulse of

108、 the MedTech Industry Report 2024GUEST PERSPECTIVEA longtime veteran of Boston Scientific,Joe Fitzgerald has held a variety of roles in the cardiovascular and neurovascular businesses within the MedTech firm.He currently oversees the development and commercialization of Boston Scientifics cardiology

109、 therapies.He sat down with the authors of the report to talk about commercial operations and how the company has become a global leader.Ernst&Young LLP(EY US):What key strategic moves has Boston Scientific made to put it in the strong position it holds in the market in 2024?Fitzgerald:In 2012,Bosto

110、n Scientific was a US$7 billion company with almost half of our revenue that year coming from stents and cardiac rhythm management(CRM),two markets with very low single-digit growth at best.Unsurprisingly,we focused on changing that.We diversified,and through focused investments in R&D;selling,gener

111、al and administrative(SG&A)expenses;M&A and venture capital(VC),we have grown substantially faster than our competition.To do this we invested in products like the WATCHMANTM Left Atrial Appendage Closure Device and franchises like Percutaneous Coronary Imaging&Guidance(PCIG).Over a 10-year period w

112、e also invested for leadership in the electrophysiology(EP)space and we built our investment profile through our MedSurg segment in endoscopy and urology,which had very attractive end markets.Our approach to category leadership and innovation is to strategize globally and execute locally.Most of the

113、 product innovation emanates from our largely US-based divisions,but many decisions are decentralized to local leaders,who nonetheless keep a strong connection back to us here in the US.We have specific go-to-market models for Asia and Europe,Middle East and Africa,but they are closely aligned with

114、our global divisional strategy.Our eight operating units are mostly in markets with 7%8%underlying unit growth,and as a culture,we expect our leaders to put together a strategy that will deliver above market growth.Delivering on that goal doesnt happen by chance;it means not only taking advantage of

115、 product and procedure innovations,but also innovating locally on commercial models and customizing our go-to-market approach.Over the past two decades,weve built up a pre-eminent supply chain team to support every aspect of our global launch strategies.The supply chain needs to deliver whatever vol

116、umes the business demands,with the flexibility to scale that up.For example,when we bought the FARAPULSE Pulsed Field Ablation(PFA)System,we began working two and a half years prior to approval to ensure that,upon launch,we could support any possible demand signal.We work across forecasting,componen

117、t supply and manufacturing capacity,and we deliver strong results.Boston Scientific is among the top tier of large-cap MedTech companies,and we have stated our intention to become the pre-eminent top performer.To achieve that goal,we need to continue the journey weve been on investing in attractive

118、markets and growing faster than the market.But we also need to find non-linear growth engines,the WATCHMANTM device being one historical example.19Pulse of the MedTech Industry Report 2024GUEST PERSPECTIVEEY US:How do you strike the capital allocation balance between organic innovation and external

119、opportunities?Fitzgerald:Consistently growing faster than your peers requires not only a strong internal pipeline but also a very aggressive external investment attitude.Integrating successfully is vital when spending your cashflow on acquisitions rather than paying dividends or buying back stock.Be

120、ginning around 2011,we started to operationalize exactly whats in our playbook:how we integrate everything from operations to mid-flight clinical trials,R&D,supply chain,the global SAP platform,the finance platform and the marketing group.Weve done around 35 deals over the past decade,and each time,

121、we take our learnings,tweak the model and improve it.When you find a company that is a hand-and-glove fit with your organizations culture,youve got dynamite on your hands.Our acquisition of Baylis Medical Company Inc.was an example of this phenomenon and a tremendous deal for us.We made strategic in

122、tegration moves as there were areas where we quickly integrated fully,but others where we didnt want to disrupt what was already working well within Baylis.There were a number of products within Baylis that were already approved,with a salesforce in both Europe and the United States.We were careful

123、about the initial commercial integration,and at the end of the first year,we challenged ourselves to find synergies,leveraging our larger salesforce to beat prior expectations,reduce sales costs and increase EBITDA drop-through.To that end,we experimented,piloted and optimized commercial integration

124、 within 12 months of the acquisition.EY US:Youve explored direct-to-consumer(DTC)channels for products like WATCHMAN.What qualities make a viable DTC program?Fitzgerald:The ideal DTC market is a chronic disease state that is large and reachable.For that reason,weve targeted areas such as spinal cord

125、 stimulation,atrial fibrillation or AFib(via WATCHMAN)and erectile dysfunction.Here,you have patients who have been suffering for years rather than months.They have tried other therapies and they are looking for a way to fix or better manage their disease.There are now multiple ways to go direct to

126、the patient through social media and search engine optimization.Some of these concepts have existed for 20 years,but the new algorithms have put us light years ahead of where we were when they were first introduced.I would emphasize that its equally important to educate the referring physician so th

127、eyre aware of your product as an option.EY US:What other trends within MedTech influence your strategic thinking?Fitzgerald:Our end markets are growing 7%8%,with an aging population and many other factors boosting consumer demand.Therefore,within 10 years,there could be twice the number of procedure

128、s done today yet you rarely see a system or a group with a plan to double the capacity of their catheterization lab,endoscopy unit,support staff labs and so on.Ultimately,that disconnect could constrain growth,and companies should consider alternative sites of service and service technologies.Think

129、45-minute coronary interventional procedures rather than seven-hour ventricular tachycardia ablation.Approaches that can improve safety and efficacy while bending the curve on replicability,duplicability and minimizing complexity will be key.Thats where our FARAPULSE PFA System has really disrupted

130、the AFib market by offering an alternative that is faster and safer,enabling more procedures per lab,per day.We hear so much from the provider side about workflow management as a major goal,and this is one of the areas where we are focusing our innovation.This guest perspective has been edited for l

131、ength and clarity.20Pulse of the MedTech Industry Report 2024EY PERSPECTIVEMedTech manufacturers struggle for profitability as input costs riseAfter decades of strong growth,unprecedented disruption in the form of inflation,supply issues,labor costs,and manufacturing shifts,medical device manufactur

132、ers need to find new ways to create value.Even as technology helps drive innovation,companies must build sustainable discipline in creating efficiencies and optimize their SG&A costs,while shifting to new commercial models.21Pulse of the MedTech Industry Report 2024EY PERSPECTIVERevenueNet incomePer

133、centage change in revenuePercentage change in net incomeSources:EY analysis,Capital IQ and company financial statement data.Data shown for pure-play companies only.0%-1-3-6-5-840%110%20%30%050%2-2-4-760%3(US$b)OphthalmicFigure 13Change in US and European therapeutic device companies revenue and net

134、income by disease category:pure-playsCardiovascular/vascularOrthopedicEar,nose and throatRespiratoryAll othersRevenues for the MedTech industry have been rising at a fairly steady pace for the last few years,yet net income has been weak and varied.The gap between the top and bottom lines has been ca

135、vernous 2023 industry revenues came in at US$587.6 billion,while net income was only US$24.3 billion,or just 4.41%.In 2023,profits nearly doubled year over year,but the US$12.5 billion the industry claimed in 2022 was a five-year low.Gains in 2023 were still 9%below the pre-pandemic totals in 2019.E

136、ven though margins were starting to look a little better in the first half of 2024,the industry still has a long way to go to show profitability that matches its levels of innovation.Input costs are eating up profitabilityWhile R&D expenses have remained between 5%and 6%of total revenues for the sec

137、tor for the last five years(coming in at US$33.2 billion for 2023),SG&A expenses ate up 22%of revenues in 2023,clocking in at US$127.2 billion(up 12.8%year over year).The COVID-19 pandemic played a major role in how the industry got here.When the world effectively shut down in 2020,medical device co

138、mpanies in many areas saw their revenues largely come to a halt.Procedure volumes:Elective procedures came to a standstill in 2020.While procedure volumes have recovered and remain elevated due to the aging populations around the world,costs many exacerbated by the pandemic have also remained elevat

139、ed.Supply chain woes:Like most other sectors,the MedTech space was hit with supply chain issues that prompted new thinking about supply chain visibility and efficiency.The most critical supply chain issues have been resolved over the last three years,but medical device supply chains look fundamental

140、ly different today than they did at the start of 2020.Companies in the space have had to rethink not only where they are getting their raw materials but also how they are moving parts around the world.22Pulse of the MedTech Industry Report 2024EY PERSPECTIVE Global inflation:2022 was a particularly

141、hard year for the sector as globally high inflation weighed heavily on margins.As inflation has started to recede somewhat in the US,the cost of capital has come down.Raw materials costs:The cost of materials has gone up significantly,buoyed by continued supply problems,geopolitical disruptions to k

142、ey supplies,and inflation itself.This has impacted both medical device manufacturers,but also the contract manufacturing organizations(CMOs)that many rely on,which have been passing their own costs down to manufacturers.Labor:Over the last five years,weve seen an increase in the cost of labor due to

143、 both inflation and movements around the world to pay workers more.For instance,changes to the Federal Labor Law in Mexico have increased labor costs by as much as 40%in the country.Medical device companies are also facing a shortage of highly skilled talent.While many of these issues are macro forc

144、es that impact companies across industries,MedTech is particularly sensitive to some of these factors.For instance,copper and electrical components are both commodities that are currently up in price.Much like their pharmaceutical counterparts,MedTech manufacturers are experiencing a paradigm shift

145、related to expenses.Traditionally,both sectors have benefited from robust profit margins,allowing them to devote less scrutiny to financial expenditures.Strategies for cost optimization and efficiencyAddressing the cost challenge requires a strategic reassessment of company operations and a focused

146、review of existing portfolios.MedTech firms must streamline their business models to concentrate on core areas of impact.Subsequently,it is essential to restructure operations both regionally and at the organizational level,and to recruit new talent with the skillset needed to implement innovative s

147、trategies.Improving profitability for the industry means embracing technology.Digital supply chain solutions are already helping many companies in the space gain greater end-to-end visibility into their complex network of suppliers,while also giving companies greater resiliency by helping them prepa

148、re for business disruptions from the multitude of unplanned risks that companies face,everything from global pandemics to civil unrest to data security to natural disasters.AI-powered tools and cloud-based solutions are giving companies the flexibility to create intelligent manufacturing schedules t

149、hat fluctuate based on changes in demand in the market.These tools build in the redundancies necessary to spot manufacturing errors before they become costly.They also enable real-time port monitoring and notify manufacturers of constantly shifting tax and trade regulations.The shift in supply chain

150、s has been accompanied by a shift in manufacturing.The pandemic exposed weaknesses in manufacturing and has also propagated changes to federal regulations.Many countries,particularly the US,are pushing protectionist agendas that require life sciences companies to move manufacturing onshore or to pol

151、icy-friendly countries.Reshaping the strategic architecture of supply and manufacturing operations requires careful consideration:many countries outside of China are offering incentives to manufacturers to attract investment.As the threat of climate change continues to accelerate,companies need to c

152、onsider the added costs related to extreme weather,including damage to manufacturing facilities,downtime caused by power outages and delays due to weather.One major pure-play MedTech company began shifting its freight from air to ocean to save costs and reduce carbon emissions.Expect to see commodit

153、y and energy costs stabilize as interest rates are reduced.The MedTech industry stands at a crossroads,where innovation must meet efficiency to thrive in an evolving economic landscape.By leveraging technology and reimagining their operational strategies,companies can overcome the hurdles of today a

154、nd pave the way for a more profitable and sustainable future.23Pulse of the MedTech Industry Report 2024GUEST PERSPECTIVEJennifer KozakVice President,Business Development,MedTechJohnson&JohnsonHow J&J MedTech balances organic growth with strategic acquisitions24Pulse of the MedTech Industry Report 2

155、024GUEST PERSPECTIVEAfter nearly 30 years with the MedTech division at Johnson&Johnson(J&J),Jennifer Kozak has seen the sector evolve as it has executed its strategy to become a global MedTech leader.The authors of the report sat down with Kozak to discuss the companys recent acquisitions and the ro

156、le that M&A plays in executing on that strategy.EY US:Johnson&Johnson has evolved as an organization over the past 10 years,and you have been able to observe it all.For example,there was a strategic decision to divest some well-known businesses including Ortho-Clinical Diagnostics and Cordis.Tell us

157、 a little about what drove those decisions and the long-term rationale.Kozak:For J&J MedTech,our focus and strategy have continued to center on strengthening our current market-leading business units as well as shifting our portfolio into higher-growth market segments that offer an opportunity to ad

158、dress unmet patient needs.M&A has always been an important part of that effort,and we take a very strategic and thoughtful approach to it.For instance,in the last five years,weve invested over$30 billion in M&A in high-growth market segments such as robotics,cardiovascular and heart recovery.We also

159、 have a very rigorous portfolio management process,looking at how we allocate our resources to drive growth and strengthen our competitiveness.As we routinely assess our portfolio,we sometimes identify opportunities for our businesses to succeed elsewhere.Our portfolio optimization process is based

160、on two dimensions.One is the attractiveness of the market,and the other is our position within that market.EY US:Inorganic growth has been a key part of J&J MedTechs growth strategy.How do you manage capital allocation between internal and external requirements?Kozak:We are employing both organic an

161、d inorganic innovation as we continue to shift our portfolio into high-growth markets.Its that combination that is propelling us forward.We take a well-defined and well-disciplined approach to capital allocation,agnostic to size and business.For us,its all about finding the best science and technolo

162、gy that will help advance our ability to solve significant unmet needs in surgery,orthopedics,cardiovascular,and eye health.M&A has been and will continue to be a critical component,but in fact organic investment is probably the most important piece of our capital allocation strategy.The benefit of

163、our scale,financial discipline,and the strength of our balance sheet allows us to pursue multiple capital allocation priorities at the same time and we are ready to pursue the right opportunity at the right time.M&A has always been an important part of that effort,and we take a very strategic and th

164、oughtful approach to it.Jennifer Kozak Vice President,Business Development,MedTechJohnson&Johnson“Pulse of the MedTech Industry Report 202425GUEST PERSPECTIVEEY US:You recently acquired Abiomed and Shockwave.Tell us a bit about your thinking on these transactions,including the integration approach t

165、hat has contributed to what you think will make these opportunities a success?Kozak:Cardiovascular intervention is one of the largest and fastest-growing disease areas in MedTech.It has significant unmet patient need.Both acquisitions accelerated our ongoing effort to shift into high-growth markets

166、where we feel we have the capabilities that add value and where we can have a leadership position.Abiomed was the first to market and is a leader in heart pump technology in the treatment of heart failure and coronary artery disease.Its portfolio today addresses a large patient population and is con

167、tinuing to expand into new areas such as acute decompensated heart failure and long-term,chronic heart failure with strong innovation and clinical data.The addition of Shockwave enhances our business position in two of the most innovative and fastest-growing segments in cardiovascular:coronary arter

168、y disease and peripheral artery disease.Shockwave is a leader in the space with tremendous growth potential.Both companies nicely complement our established global leadership position in electrophysiology.EY US:You have also gone early with transactions like the Laminar acquisition.How have you conv

169、inced stakeholders about the long-term growth prospects vs.the clinical risk of taking on an early technology?Kozak:Whether its early or late,we always start with our strategy and the impact that we can have on patients.If its earlier stage,we need to have confidence that we have the right capabilit

170、ies to be successful.With respect to Laminar,we are very committed to elevating the standards of care in electrophysiology and for patients with atrial fibrillation(AFib).Laminar is focused on eliminating the left atrial appendage for patients in nonvalvular AFib to prevent strokes,and has a differe

171、ntiated approach compared with other products that are either on the market today or in development.Our recent acquisitions really demonstrate our commitment to patients and to innovation.Were tackling some of health cares biggest challenges by investing in the right technology and innovationorganic

172、ally and inorganicallyto improve patients lives.This guest perspective has been edited for length and clarity.26Pulse of the MedTech Industry Report 2024EY PERSPECTIVETurning MedTechs commercial challenges into true growth opportunitiesThe challenges MedTechs have experienced during the 202324 perio

173、d have placed more emphasis than ever before on the need for companies to develop successful commercial models.Optimizing go-to-market tactics has become a key part of the growth strategy.27Pulse of the MedTech Industry Report 2024EY PERSPECTIVE10.“Philips results hub,”Philips website,July 29,2024,h

174、ttps:/ HealthCare reports second quarter 2024 financial results,”GE HealthCare website,July 31,2024,https:/ Second Quarter 2024 Earnings Call and Webcast,”Johnson&Johnson website,July 17,2024,https:/ Joe Fitzgerald,Boston Scientifics Executive Vice President and Group President of Cardiology,told us

175、(see guest perspective in this report),companies cannot use a one-size-fits-all approach for different products and markets:“We expect our leaders to put together a strategy to deliver above-market growth.Delivering on that goal doesnt happen by chance;it means not only taking advantage of product a

176、nd procedure innovations,but also innovating locally on commercial models and customizing our go-to-market approach.”As Fitzgerald explains,Boston Scientific combined locally adapted commercial engagement strategies with forecasting-driven supply chain flexibility as part of an end-to-end approach t

177、o boosting demand and delivering sales volumes.The need for local tactics has been demonstrated in 202324 by the Chinese governments reshaping of the domestic reimbursement landscape and the impact this has had on top-line MedTech growth.Imaging giants Philips and GE HealthCare have both been affect

178、ed by Chinese market challenges,with Philips citing the impact of the government regulation on approval times in China,10 while GE reports headwinds from Chinas anti-corruption drive and delayed government stimulus.11 The fact that specific market factors within the Chinese business landscape have h

179、it earnings demonstrates the need for commercial models that are adapted to anticipate and meet these local challenges.Weve seen this type of scenario elsewhere as well.The shift to post-acute sites of care is also driving changes in selling models.These sites are often smaller entities with financi

180、al constraints that require financial solutions and targeted marketing,as well as sales rep allocation.Some product categories no longer require the traditional sales model that utilizes a large number of sales reps.Instead,many product categories are now driven by group purchasing organizations(GPO

181、s)and distributors,resulting in the need for a segmented sales strategy that differs by product segment and customer segment.For example,for product categories that are largely influenced by GPOs and distributors,the investments should be shifted toward managing those large relationships and hospita

182、l procurement vs.asking sales reps to call on health care providers(HCPs)who have little influence.Johnson&Johnsons Q2 2024 reporting also noted the impact of Chinas value-based procurement(VBP)model on decreased revenues.12 While value-based controls on pricing remain a factor only in specific geog

183、raphies for now,these commercial models ultimately contain opportunities as well as obstacles for MedTech.The industry has already begun to utilize commercial models that more closely tie sales to the value a product provides,emphasizing both economic and clinical value.For instance,a company that m

184、anufactures cardiac pacemakers could offer a pricing model where the initial cost of the device is lower but includes a performance-based component where additional payments are made if the pacemaker leads to improved patient health metrics(such as reduced hospital readmission rates or better manage

185、ment of heart rhythm disorders during a specific period of time).This approach aligns the interests of HCPs,patients and the device company with achieving better health outcomes,and it may help drive uptake at a time when companies are looking for new approaches to bolster growth.Johnson&Johnsons Q2

186、 2024 reporting also noted the impact of Chinas value-based procurement(VBP)model on decreased revenues.28Pulse of the MedTech Industry Report 2024EY PERSPECTIVE13.“Investor Relations,”Edwards Lifesciences website,July 24,2024,https:/ Relations,”Dexcom website,July 25,2024,https:/ HealthCare Second

187、Quarter 2024 Earnings Conference Call,”GE Healthcare website,July 31,2024,https:/ 2024 Abbott Earnings Conference Call,”Abbott Laboratories website,July 18,2024,https:/ 2024 Medtronic plc Earnings Conference Call 5/23/2024,”Medtronic website,May 23,2024,https:/ Surgical website,July 18,2024,https:/

188、commercial strength into a compelling growth strategySimilarly,other factors limiting the commercial performance of MedTech companies at the midpoint of 2024 may in reality offer opportunities to rethink the commercial model and pivot toward new ways of going to market that can unlock new benefits.F

189、or example,Edwards noted that the implementation of new programs has been slower than anticipated due to the workload burden on health care providers.Yet,as the company emphasized in its earnings call,through closer engagement with providers,MedTechs can help providers overcome these roadblocks.“The

190、re are certainly things we can do to help.We can do a lot of imaging workups and take some of the load off the team.We can do device prep.We can come in with our benchmark program and teach them efficiencies.”13 Engagement should become an increasing strength for the industry in its interactions wit

191、h providers,with digital and omnichannel marketing tools helping companies build more seamless and personalized communications strategies.Leveraging the reams of data they have at their disposal,alongside customer relationship management(CRM)systems and analytics,MedTechs are increasingly well place

192、d to expand and optimize their communications with providers to improve the process of bringing products to market and to patients.Though still ramping up its realigned sales force,Dexcom emphasized during its Q2 earnings call that once the business transition is complete as its sales force continue

193、s to drive efficiency,the commercial function will be a critical driver of future growth rather than an operational obstacle to overcome:“We feel that our expanded US sales force positions us very well to reignite our growth opportunity now and well into the future.”14 Sales force restructurings are

194、 often complicated tasks that require careful planning and precision in execution.Other MedTechs are similarly emphasizing the strength of their commercial teams as a positive differentiator and one of the keys to building and maintaining growth.In Q2 alone,leading companies asserted the following:G

195、E HealthCare noted the importance of product but emphasized that the growth opportunity will also come from the strength of the commercial function:“Weve talked about the team itself,the talent upgrades that we put in place,the new sales disciplines and processes.”15 Abbott emphasized the importance

196、 of its sales force and manufacturing capacity to driving uptake of its TriClip franchise and stressed that“our opportunity here is to continue to expand the sales force and go to newer accounts,”16 while Medtronic also highlighted its program of“recruiting the best sales reps”as a key future growth

197、 driver.17 Intuitive Surgical stressed the personalized and targeted nature of its commercial effort on the“measured rollout”of its new da Vinci 5 robotic surgery system,stating“weve really focused the sales force on looking to place da Vinci 5 for incremental capacity for our customers vs.the trade

198、-in cycle.”1829Pulse of the MedTech Industry Report 2024EY PERSPECTIVEIn short,the MedTech industry recognizes that better commercial execution is going to be integral to building(or rebuilding)the top line,securing successful launches and penetrating high-growth markets.The potential for commercial

199、 innovation is increasing as new AI-powered tools allow MedTechs to build agile cross-functional teams that can respond to fluctuations in supply and demand in near real time,while also tracking inventory levels.This new level of transparency into operations enables sales organizations to respond to

200、 customer needs more quickly and with agility.Meanwhile,linking the commercial organization more closely to team members in other areas of the business and R&D will allow companies to shape their commercial structure to evolve more organically.These powered-up commercial models will give companies m

201、ore scope to address future challenges,including helping to shape future regulation around new technologies.Regulatory compliance and risk management will also be key focus areas as MedTechs pursue the consumer opportunity by bringing products directly to consumer,as Dexcom and Abbott are doing with

202、 continuous glucose monitors(CGMs)for the first time in the US market in mid-2024.MedTechs will need to engage with regulators as they build sustainability and social responsibility into their commercial strategies,recognizing that these qualities can drive differentiation and positive brand percept

203、ion.As the MedTech industry continues to evolve,companies that can effectively transform their commercial operations to leverage these strategies will likely emerge as the frontrunners in a competitive and rapidly changing marketplace.30Pulse of the MedTech Industry Report 2024EY PERSPECTIVEThe rise

204、 of AI is shifting the MedTech landscape and where its goingThe World Economic Forum,noting that“AI”was the top word of 2023,attributed the huge uptick in interest across all sectors to“the meteoric rise of generative AI software ChatGPT.”19 For MedTech it was also a breakthrough year for AI.19.“Gue

205、ss the 2023 word of the year,according to Collins Dictionary,”World Economic Forum website,https:/www.weforum.org/agenda/2023/11/ai-word-of-the-year/,November 13,2023.31Pulse of the MedTech Industry Report 2024EY PERSPECTIVEEmerging applicationsRadiology accounts for about 76%of all marketed AI mode

206、ls,according to the FDAs analysis.In 2023,however,we saw these use cases expand to cover new ground.The 2023 crop of FDA approvals saw the agency approve AI devices and algorithms in a record 11 categories,with 45 approvals outside the radiology segment(more than double the previous year).The lists

207、of approved algorithms for 202324 demonstrate the diverse range of analytics now reaching the market,including:Momentum Healths Momentum Spine,for quantifying postural asymmetries,22 is the first product recognized by the FDA recognizes as a“physical medicine”approval.CLEW Medicals latest approval i

208、s for its algorithm that predicts the risk of patient.23 The simplest measure of AIs growing traction in the industry is the FDAs published list of approved algorithms and devices incorporating AI technologies.In 2023,the list swelled to record levels,with a 43%year-on-year increase in approvals.20T

209、he AI products reaching the MedTech market are not large language models like ChatGPT.Instead,they are relatively traditional AI applications.Back in 1995,the FDA approved the first product it recognized as utilizing AI.In the past decade,the number of approvals has grown steadily.21 This rise has b

210、een driven primarily by the widening uptake of AI in radiology,where algorithms have can interpret digital imaging data with high reliability.200150502501000080604020100201720152019202120146201820161820202022Number of FDA approvalsRadiology(%of total approvals)20232024*Number of approvalsRadiology(%

211、of total approvals)Source:EY analysis,FDA data.*2024 data complete to August 7,2024.6268012964111155221107Figure 14FDA approvals of AI-enabled medical devices,20142024 YTD20.“Artificial Intelligence and Machine Learning(AI/ML)-Enabled Medical Devices,”FDA website,August 7,2024,https:/www.fda.gov/med

212、ical-devices/software-medical-device-samd/artificial-intelligence-and-machine-learning-aiml-enabled-medical-devices.21.Ibid.22.“Momentum Health receives FDA 510(k)Clearance for Momentum Spine Mobile App,”Momentum Health website,April 3,2024,https:/momentum.health/article/fda-clearance.23.“CLEW Medic

213、al Secures FDA Clearance for Second-Generation AI Models,”Business Wire website,May 13,2024,https:/ of the MedTech Industry Report 2024EY PERSPECTIVE SigTuples AI100 with Shonit is a tool that allows remote and semi-automated analysis of digital pathology imagery.24 Beacon Biosignals wearable headba

214、nd interprets EEG brain data to measure sleep quality.25 Ortomas OTS AI platform optimizes orthopedic surgical planning,delivery and patient follow-up,one of a handful of new approvals in AI orthopedic solutions.26 While the range of products winning approval is highly eclectic,broad themes in marke

215、ted AI include:Established and incrementally expanding usage in radiology and imagery analysis Performing patient monitoring and assessment via software in hospitals Assisting and supplementing all aspects of surgery and the patient journey through surgeryFigure 15Non-radiology FDA approvals of AI-e

216、nabled medical devices,20142024 YTDSource:EY analysis,FDA data.*2024 data complete to August 7,2024.Delivering non-imaging diagnostic data through wearables Augmenting therapeutic devices,including implants and insulin pumpsIn each of these areas,AI can offer expanded data capture and functionality,

217、potentially helping MedTechs differentiate and enhance their product and service offerings and achieve and sustain stronger top-line growth.AI,including generative AI,can also deliver operational efficiencies in supply chain visibility and predictability,acceleration or full automation of regulatory

218、 and other governance processes,and multiple other processes and functions where MedTechs are currently experiencing cost and capacity pressures.Johnson&Johnson,for example,called out the potential of AI to“improve the MedTech profitability profile”in a 2024 earnings call.272040305010020172015201920

219、212014201820162020202220232024*AnesthesiologyGastroenterology-urologyMicrobiologyPathologyCardiovascularGeneral and plastic surgeryNeurologyDentalHematologyOphthalmicClinical chemistryGeneral hospitalObstetrics and GynecologyEar,nose and throatImmunologyPhysical medicineOrthopedic24.“SigTuples AI100

220、 with Shonit receives US FDA 510(k)clearance,”BioSpectrum website,October 3,2023,https:/ Biosignals Receives FDA Clearance for AI-Assisted Sleep Monitoring Device Dreem 3S,”Beacon Biosignals website,September 13,2023,https:/beacon.bio/press-releases/beacon-biosignals-receives-fda-clearance-for-ai-as

221、sisted-sleep-monitoring-device-dreem-3-s/.26.“Ortoma receives FDA 510(k)clearance for OTS Hip in the US,”Ortoma website,March 13,2024,https:/ Fourth Quarter 2023 Earnings Call and Webcast,”Johnson&Johnson website,January 23,2024,https:/ of the MedTech Industry Report 2024EY PERSPECTIVEIndustry conso

222、lidationWhile AI in MedTech is a rapidly expanding field,it also remains a fairly fragmented area.Certain companies predominate among the FDAs list of AI approvals,with radiology specialists Canon Medical Systems,Aidoc Medical and Zebra Medical all boasting multiple approvals,while the imaging giant

223、s Siemens Healthineers,Philips and GE HealthCare collectively have 141 approved products,over 16%of all AI FDA approvals.28 There has been little consolidation in the sector,however,despite a series of minor deals,including Lunits US$194 million acquisition of Volpara in December 2023,Samsung Mediso

224、ns US$92 million takeout of AI fetal monitoring specialist Sonio and GE HealthCares US$40.5 million deal for Intelligent Ultrasounds AI arm in July 2024.29 The acceleration of AI into the heart of the MedTech business model may be further driven by the series of deals Nvidia struck with various MedT

225、echs,including collaborations with Medtronic,announced in 2023,30 and with Johnson&Johnson and GE HealthCare in 2024.As of the latest estimates,the MedTech industry is expected to invest upward of$10 billion annually into AI technologies by 2025,reflecting the massive commitment within the sector.Th

226、e regulatory challenge aheadAs AI continues to advance,the need for robust and adaptive regulatory frameworks has become critical to fostering innovation while promoting patient safety and maintaining public trust.In June 2024,four US senators flagged the need for standard reimbursement policies for

227、 AI use in CMS,31 a move supported by AdvaMed.32 The FDA has proposed a framework controlling how devices containing AI can be modified33 and intends to publish new documentation on AI governance by the end of 2024.Meanwhile,the European Unions AI Act has entered law,34 and in April 2024,the UK Medi

228、cines&Healthcare products Regulatory Agency(MHRA)published a policy paper on future regulation of AI,35 with each of these regulators also recognizing the need for international standards.FDA Commissioner Robert Califf noted in January36 that the FDA needs to assume a guiding role in the adoption of

229、 AI,“when it involves patient safety,or theres significant risk.”37 But he also acknowledged the scale of the challenge as the field continues to accelerate,saying that“wed have to hire three or four times as many people to take on whats coming.”Short of deploying AI itself to cover this human resou

230、rce shortfall in AI regulatory capacity,the industry and its stakeholders will need to find better and more collaborative ways of working to keep innovation moving.MedTechs seeking growth by maximizing value from AI ultimately need a regulatory regime that can support and undergird innovation in the

231、 sector while also driving safety and compliance.28.“Artificial Intelligence and Machine Learning(AI/ML)-Enabled Medical Devices,”FDA website,August 7,2024,https:/www.fda.gov/medical-devices/software-medical-device-samd/artificial-intelligence-and-machine-learning-aiml-enabled-medical-devices.29.“Me

232、dTech firm Intelligent Ultrasound in 40.5m deal to sell clinical AI arm to GE HealthCare,”Business Live website,July 18,2024,https:/www.business-live.co.uk/technology/MedTech-firm-intelligent-ultrasound-in405m-29567586.30.“Medtronic and NVIDIA Collaborate to Build AI Platform for Medical Devices,”NV

233、IDIA website,March 21,2023,https:/ to CMS on ABHS,”US Senate website,June 10,2024,https:/www.heinrich.senate.gov/imo/media/doc/letter_to_cms_on_abhs.pdf.32.“AdvaMed Applauds Bipartisan Senate Letter Urging CMS to Establish a Reimbursement Pathway for AI-Enabled Medical Devices,”AdvaMed website,June

234、13,2024,https:/www.advamed.org/industry-updates/news/advamed-applauds-bipartisan-senate-letter-urging-cms-to-establish-a-reimbursement-pathway-for-ai-enabled-medical-devices/.33.“Marketing Submission Recommendations for a Predetermined Change Control Plan for Artificial Intelligence/Machine Learning

235、(AI/ML)-Enabled Device Software Functions,”FDA website,April 2023,https:/www.fda.gov/regulatory-information/search-fda-guidance-documents/marketing-submission-recommendations-predetermined-change-control-plan-artificial.34.“AI Act enters into force,”European Commission website,August 1,2024,https:/c

236、ommission.europa.eu/news/ai-act-enters-force-2024-08-01_en.35.“Impact of AI on the regulation of medical products,”UK Government website,April 30,2024,https:/www.gov.uk/government/publications/impact-of-ai-on-the-regulation-of-medical-products.36.“Califf backs increased LDT oversight despite industr

237、y opposition,”MedTech Dive website,February 1,2024,https:/www.MedT Webinar with FDA Commissioner Dr.Robert Califf.”Figure 16FDA approvals of AI-enabled medical devices by therapeutic focus,2023AnesthesiologyGastroenterology-urologyMicrobiologyRadiologyCardiovascularNeurologyHematologyOphthalmicClini

238、cal chemistryEar,nose and throatPhysical medicineOrthopedicSource:EY analysis,FDA data.34Pulse of the MedTech Industry Report 2024GUEST PERSPECTIVEShaye MandleExecutive Director AdvaMed Digital Health TechThe role of AI in MedTechs future:a deep dive with AdvaMed35Pulse of the MedTech Industry Repor

239、t 2024GUEST PERSPECTIVEEstablished in October 2023,the AdvaMed Digital Health Tech division has the task of educating policymakers,regulators,providers and health consumers about the rapidly shifting impact of data and digital medical technologies in health care.The authors of this report sat down w

240、ith Shaye Mandle,the executive director of the division,to discover how the digital health landscape has been evolving since its inception.EY US:Tell us about the rise of digital health within the MedTech space and a bit about the new Digital Health Tech division within AdvaMed.What are your priorit

241、ies,and how do you see your groups role in shaping the ecosystem?Mandle:The Digital Health Tech division at AdvaMed has existed formally now for a little less than a year.The plans for this division were created by the AdvaMed board several years ago after it assessed the landscape and recognized no

242、t only that digital health and related technologies were going to be driving their businesses,but also that the players engaged in health care would continue to shift.The board created the membership category and the division to enable companies that were playing in the health tech space,but not nec

243、essarily purely in the MedTech space,to be a part of the conversation about how we prioritize things.Today,we have a board of 23 people.It includes members from both tech companies and MedTech companies.Weve organized our division around three key priorities.One is the evolution of artificial intell

244、igence(AI)technologies,looking at how theyre developed and regulated.Second is a focus on data access,data utilization and privacy.Our members have talked a lot about data access and utilization agreements with their customers,specifically providers.There seems to be an absence of consistency and tr

245、ust in the partnerships between medical and digital health companies and providers.Our third category is reimbursement,looking at how we reimburse for digital health technologies,as well as emerging technologies enabled by AI and machine learning(ML).As we look toward our October 2024 board meeting,

246、AdvaMed will be issuing some key principles related to how we see AI developing and what we know will require an evolution of the regulatory environment to fully take advantage of these technologies for patients.I believe these principles will serve as a precursor to conversations with FDA about the

247、 regulatory environment going forward.EY US:As you look to the next board meeting,what are some of the key messages that you believe resonate most with regulators,health care providers and even patients?Mandle:With regulators,especially the FDA,I think were completely aligned on the idea that the cu

248、rrent regulatory framework is sufficient and actually works quite well for the AI/ML technologies that are in the market today.The FDA now has the authority to work with companies on a predetermined change control plan(PCCP),which would appear to give companies an opportunity to articulate anticipat

249、ed change in a predetermined manner.If were going to get to a place where we have truly personalized medicine and put AI in a position to really have an impact,were going to need to be thinking about what that regulatory framework looks like.We see companies that are hesitant to make big investments

250、 in areas such as generative AI(GenAI)or frontier and foundation models,in part because there isnt a clear regulatory pathway for how we use them and there isnt a clear reimbursement pathway.We continue to have conversations both on the Hill and with CMS to advocate for a clear pathway for these eme

251、rging technologies.36Pulse of the MedTech Industry Report 2024GUEST PERSPECTIVEEY US:With all of that in mind,how do you see AI within MedTech evolving over the next five years?Are we going to see more of a status quo until some of those pathways are determined,or have innovations such as GenAI chan

252、ged the trajectory?What do you expect going forward?Mandle:GenAI has changed the conversation completely.Interest coming from the Hill and the Biden administrations executive order on AI is not just focused on health care,and that interest cuts across the entire economy and every sector.While we are

253、 the MedTech organization,it would be ideal if we could be the go-to for all answers relative to AI and health care.It would improve our leadership position,but it also would enable the MedTech industry to help drive the narrative and the conversation.Companies that have approved AI/ML products are

254、continuing to invest heavily in improving them,enhancing their diagnostics capabilities and improving outcomes.Well continue to see better and better diagnostics,in particular in relation to breast cancer screenings and other key areas.Those products will continue to improve,and they will save lives

255、.I would never suggest that our companies are going to be static.Absolutely not.The question is,can we take bigger leaps?Its going to be a process.The FDA is going to have to get comfortable with how were collecting data,whether data collection is happening in real time,what the learning algorithms

256、look like and what point in that process would be appropriate for patients to interact with a product.I think thats the big unanswered question.Everyones thinking about it.FDAs thinking about it.EY US:How does AdvaMed think about and define responsible AI within the context of MedTech?Are there diff

257、erent considerations for the pure-tech companies that are now in your membership sphere?Mandle:Obviously today,FDA regulations are helping to define responsible AI based on capabilities and perceived challenges and opportunities to improve patients lives.The FDA needs to have a risk-based platform a

258、round these technologies.Cybersecurity is always a component.Privacy is always a component.I would say the FDAs primary focus today around responsible AI tends to be mitigation of unwanted bias.There are elements of transparency.MedTechs have been very good at demonstrating to the FDA how AI models

259、have been built and how they are being utilized.On the tech side,the company leaders who are engaged with AdvaMed on the digital health tech board are leading health for their respective organizations.For example,while several large and established tech companies are not explicitly entering the medi

260、cal devices market themselves,these organizations have teamed with partners and courted customers across the MedTech ecosystem.Others have developed health consumer products and see health from a very different perspective.What Ive learned in working with these notable tech companies is that its jus

261、t as risky to put them into one category as it is to think of Medtronic,GE HealthCare,Abbott and Boston Scientific as monolithic organizations.Their strategies can vary;their customer bases may differ;their investment choices are not always aligned;and the extent to which their initiatives resemble

262、those seen across the MedTech industry can also diverge.37Pulse of the MedTech Industry Report 2024GUEST PERSPECTIVEIm sure there was concern initially when this membership was created.I believe that,at the time,people thought big tech was going to take over health care,and I think the MedTech indus

263、try was interested in seeing what the tech companies were thinking.The big tech companies wanted to learn more about how health care functions,in particular devices.I dont see that dramatic conflict today.Eight years ago,they wanted to learn from each other,and today there is great collaboration.The

264、 other thing were seeing is that individual leaders move among these sectors.There are a few examples of this movement,including GE HealthCares chief technology officer,Taha Kass-Hout,Medtronics chief innovation officer,Ken Washington,and our board member from Verily was at Medtronic for 15 years.So

265、,there is an interesting camaraderie.Each of these companies teams increasingly include leaders who have had experiences in both the big tech and MedTech categories.EY US:One of the items that your technology committee is working on is around being the leader in MedTech messaging on AI digital healt

266、h.What is the messaging for the future of the MedTech industry?Mandle:So today,we look to articulate the benefits of the current state of AI.We make sure that our AI and our current company products are not getting swept up in new regulations that are unnecessary.A perfect example:were in every stat

267、e dealing with legislative bills that are focused on protecting consumer privacy,and the targets include health care,but also financial services,social media and other areas.We have very successfully articulated that the FDA regulatory process protects privacy and that the regulation of AI,in health

268、 care,works today to protect the privacy of patients.Today,the messaging is,“Were doing it right,and heres how were doing it here are the benefits to patients.”And its not just AI;its digital health,remote patient monitoring and telehealth during the pandemic.We can point to all kinds of products an

269、d services that really are improving patients lives.Thats our main messaging focus today.This guest perspective has been edited for length and clarity.38Pulse of the MedTech Industry Report 2024EY PERSPECTIVESeizing the moment:MedTechs opportunity to enter consumer healthThe landscape of medical tec

270、hnology is undergoing a transformative shift,one that is being driven by the vast amounts of data being constantly produced and consumers interest in having greater control over their health outcomes through that data.39Pulse of the MedTech Industry Report 2024EY PERSPECTIVEA new brand of consumer d

271、riven MedTech is evolving.This burgeoning domain is being propelled forward by the twin engines of personalization and self-care,which are rapidly reshaping how individuals engage with their health and wellness.The concept of personalization in health care is not new,but its implementation has reach

272、ed unprecedented levels,thanks to the proliferation of consumer health devices.From wearable fitness trackers to sophisticated health monitoring systems,the array of devices available to the average consumer is vast and growing.These powerful tools enable individuals to take charge of their health,o

273、ften in real time.This consumerization brings with it a focus on user-friendly interfaces,personalized feedback and seamless integration into daily life.For MedTech companies,which have typically sold to doctors and hospital systems,direct-to-consumer offerings hold the promise of a new revenue stre

274、am,but they also come with a host of new challenges that are outside the scope of traditional medical device companies.This intersection of consumer goods and medical devices requires MedTech manufacturers to explore consumer behaviors and develop an understanding of new sales channels.Untapped pote

275、ntialWhile wearables have been around for the better part of a decade and have been integrated into many consumers lives,our ravenous appetite for data about our health has driven some consumers to go beyond the typical consumer products category and seek out devices that were not designed for direc

276、t-to-consumer consumption.For instance,there is a growing market driven by hyper-conscious health care consumers for continuous glucose monitors(CGMs)and similar devices.These consumers are not diabetic and are not seeking these tools at the advice of a health care provider.Instead,some are athletes

277、 or“gym rats”looking for greater insight into how their diet impacts performance,while others are looking to be proactive about their health and avoid diseases like diabetes before they become a problem.According to the 14th edition of the EY Future Consumer Index,conducted in April 2024,37%of consu

278、mers are willing to pay extra for products that promote health and wellness.Meanwhile,24%said they are willing to share their private data to receive personalized health recommendations.“Consumer products need to meet and exceed peoples needs and wants And thats why Abbotts Libre makes sense as a co

279、nsumer product because we designed it to meet the needs of people with diabetes simple,easy,affordable from the very beginning.To keep developing this market,we have to keep listening to their needs.We know people want a small,discreet sensor,so we built the worlds smallest sensor.We know people wan

280、t longer wear time,so we increased the wear time to 15 days.We know people want to communicate directly with us,so we built systems to answer their questions directly online and in social.All of these are critical as we continue to build out the consumer diabetes space,”said Chris Scoggins,senior vi

281、ce president,commercial operations and marketing for Abbotts diabetes care business,which makes CGM devices like the Freestyle Libre.According to the 14th edition of the EY Future Consumer Index,conducted in April 2024,37%of consumers are willing to pay extra for products that promote health and wel

282、lness.40Pulse of the MedTech Industry Report 2024EY PERSPECTIVE38.“Levels$38M Series A driven by member and community alignment to solve metabolic health crisis,”Levels website,https:/ 10,2023.39.“Levels Investor Update-July 2023 Recap,”Notion website,https:/levelshealth.notion.site/August-2023-Leve

283、ls-Investor-Update-July-2023-Recap-291daca2145a46b6a0cb074076c4700b,August 2023.40.“Smart ring maker Ultrahuman has its eye on Ouras crown,”TechCrunch website,https:/ 20,2024.These hyper-conscious health care consumers are often going through third-party providers to gain access to traditional medic

284、al devices.While CGMs are over-the-counter products in some parts of the world,they require a prescription in the US.Third-party app developers are linking up with telehealth providers to get the devices in the hands of healthy consumers.These consumers then pay for the device out-of-pocket,bypassin

285、g insurance involvement.Beyond the ease of device acquisition,the third-party developers offer user-friendly,insights-based interfaces to deliver the data and typically offer the convenience of syncing seamlessly with other technology or wearables,allowing consumers the convenience of getting their

286、health data all in one place.These developers are attracting the attention of investors as well.In April 2022,one such company,Levels,raised$38 million in its Series A.38 The company,founded in 2019,reported bringing in$1.7 million in monthly revenue in July 2023,and was valued at$300 million at the

287、 time of its Series A.39 Another company,Ultrahuman,secured$35 million in a Series B round in the first quarter of 2024.40 How can traditional MedTechs capture this valueFor medical device manufacturers,the direct-to-consumer route is going to require a new set of commercial skills.Organizations wil

288、l need to think about what appeals to the healthy consumer and how it can engage with these consumers(who wont be in the traditional hospital setting or even at other points of care).Medical device companies have an opportunity to work with(or acquire)third-party app developers to make the data rece

289、ived from their CGMs and other devices into actionable,easy-to-interpret insights for consumers.The market is particularly ripe for apps and devices that help with weight management as evidenced by the success of GLP-1 drugs that help patients reduce weight.Medical device manufacturers could capital

290、ize on the popularity of pharmaceutical weight reduction solutions by offering devices and apps that help patients with weight management and food choices in conjunction with GLP-1 drugs.MedTechs will have to take a page out of the consumer sector handbook and think about consumer segmentation,as we

291、ll as how to reach the luxury consumer that can afford medical devices out-of-pocket.This will likely mean entering the new realm of consumer advertising,which has a different tone and regulatory requirements than outreach to physicians.The potential for growth in this sector is immense,as evidenced

292、 by the willingness of consumers to invest in health and wellness products and the success of companies that have already tapped into this demand.MedTech companies that can successfully navigate this new terrain will not only benefit from a new revenue stream but also contribute to a healthier,more

293、informed society.As we look to the future,it is clear that the integration of consumer goods and medical devices will continue to evolve,driven by technology,innovation,and the ever-growing desire of individuals to take control of their health outcomes.MedTech companies that are agile and consumer-c

294、entric will lead the charge in this transformative era,improving lives and shaping the future of health care.41Pulse of the MedTech Industry Report 2024Databook42Pulse of the MedTech Industry Report 2024US and European MedTech public company revenues,201323Figure 1 The number of commercial leaders i

295、n MedTech rose to 80 in 2024,with these companies accounting for a record 64%of industry revenues.Commercial leader revenue climbed 13%,while aggregate revenues for all other MedTechs fell by 10%as smaller companies and conglomerates alike struggled for growth.The biggest growth came in the EU comme

296、rcial leaders,boosted by the emergence of the biggest new commercial leaders,iVision Tech of Italy and SCHOTT Pharma.The EU commercial leader increased its revenues by 15%,compared to 11%for US commercial leaders.In part,the strong performance from the EU segment is a remnant of iVisions US$11.4 bil

297、lion in 2023 revenues being incorporated into the EU total after the private Italian ophthalmology company listed itself on Euronext Growth Milan,a division of the pan-European Euronext stock exchange that focuses on small and medium-sized enterprises,in August 2023.EY analysis,Capital IQ and compan

298、y financial statement data.Commercial leaders are companies with revenues at or above US$500 million.Other companies include figures for conglomerates.US commercial leadersEU commercial leadersOther US public companiesOther EU public companiesNumber of non-conglomerate commercial leadersRevenue(US$b

299、)Number of commercial leaders556065757070060050030040010020002019201720152013201420202018201620222023202180Financial performance The commercial leader group was also joined by Orthofix,Inspire,Medacta and Guardant,all of which passed the US$500 million mark in 2023 revenues.Shockwave reached the sam

300、e milestone but was acquired outright by Johnson&Johnson in 2024,and the conglomerate Jenoptik also reached the half-billion revenue point this year.Dropping out of the list were Maravai,affected by waning post-COVID demand for Nucleic Acid Production offerings;Nuvasive acquired by Globus Medical du

301、ring the year;Invacare,which completed financial restructuring and divested its assets in 2023;and Invitae,which also hit financial difficulties and Labcorp acquired its assets in August 2024.43Pulse of the MedTech Industry Report 2024Financial performanceFigure 2 The imaging segment led industry gr

302、owth,with the three leaders,Siemens,Philips and GE HealthCare,all among the top 10 companies in terms of absolute revenue growth in 2023.Strong demand,high technological differentiation with the increasing incorporation of AI and other digital tools,and widening access to mobile imaging devices were

303、 all cited among the reasons for the segments robust 2023 performance.The therapeutic device segment saw a 12%increase in pure-play revenue.This growth was led by strong performances from Stryker,Boston,Essilor and Fresenius,all of which added over US$1 billion in year-on-year revenue growth.US and

304、European revenue growth by product group:pure-playsPercentage change in revenuePercentage change in number of companiesSource:EY analysis,Capital IQ and company financial statement data.Data from public pure-play MedTechs only.0%-10%ImagingNon-imaging diagnosticsResearch and other equipmentTherapeut

305、ic devices(total)0%20%10%10%30%20%60%50%40%30%40%70%50%80%60%90%100%Percentage change in revenuePercentage change in number of companies The non-imaging diagnostics segment and the research and other equipment segment were both hit by post-COVID-19 headwinds,with the latter particularly hard-hit.The

306、 segments leading players,Thermo Fisher Scientific and Danaher,both reported significant pandemic-related headwinds as the segment contracted 5%;the non-imaging diagnostics segment was near-static,recording 1%overall growth.44Pulse of the MedTech Industry Report 2024Financial performanceUS and Europ

307、ean MedTech market capitalization relative to leading indexesFigure 3 Total market capitalization for the pure-play industry grew 9%in 2023 after seeing valuations dramatically correct downwards in 2022,with 28%wiped off aggregate market cap.However,MedTech commercial leaders have continued to under

308、perform the broader composite indexes since summer 2024,with emerging leader valuations also sinking in mid-2024,amid disappointing Q2 reporting for some of MedTechs high-profile companies,as noted in the Year in Review section.Source:EY analysis and Capital IQ.Chart includes companies that were act

309、ive on 30 December 2022.*Composite broader indexes refers to the daily average of leading US and European indexes:Russell 3000,Dow Jones Industrial Average,NYSE,S&P 500,CAC-40,DAX and FTSE 100.EY MedTech commercial leadersEY MedTech emerging leadersRock Health Digital Health Public Company IndexNasd

310、aq Biotech IndexComposite broader indexes*-50%200%0%50%150%100%01-Jan-2001-Jan-2101-Jan-2201-Jul-2001-Jul-2101-Apr-2001-Apr-2101-Apr-2201-Jul-2201-Jan-2301-Jan-2401-Apr-2301-Apr-2401-Jul-2301-Jul-2401-Oct-2001-Oct-2145Pulse of the MedTech Industry Report 2024FinancingCapital raised in the US and Eur

311、ope by year(US$m)Figure 4 MedTechs financing total for the period from July 2023 to June 2024 fell 16%compared with the previous 12-month period and reached a total of under half the financing MedTech generated in its peak year in the 201920 period,when the industry raised US$57 billion.The IPO mark

312、et enjoyed a resurgence,albeit from an extremely low baseline,and venture investment increased by 5%.However,follow-on financing fell 15%and was down 32%compared to the five-year average.Debt financing dropped 29%compared to the previous year and 23%compared to the five-year average.With 49%of this

313、fundraising coming from debt offerings,the amount of capital investment going to smaller innovative companies was relatively low,a factor that will add to the pressure on MedTechs innovation ecosystem as discussed in the Year in Review section.TypeJul 2012-Jun 2013Jul 2013-Jun 2014Jul 2014-Jun 2015J

314、ul 2015-Jun 2016Jul 2016-Jun 2017Jul 2017-Jun 2018Jul 2018-Jun 2019Jul 2019-Jun 2020Jul 2020-Jun 2021Jul 2021-Jun 2022Jul 2022-Jun 2023Jul 2023-Jun 2024Venture$4,369$4,989$5,804$6,548$8,479$8,623$8,482$6,733$9,155$8,563$6,723$7,031 IPO$226$1,465$2,298$684$2,560$6,513$5,161$3,193$7,322$4,443$40$1,057

315、 Follow-on and other$4,267$2,024$2,476$2,720$8,796$6,059$4,419$11,717$15,154$5,899$7,029$6,008 Debt$25,024$22,311$41,984$12,375$25,367$16,087$10,018$35,313$11,199$11,144$19,006$13,432 TOTAL$33,885$30,789$52,562$22,326$45,203$37,282$28,081$56,957$42,830$30,048$32,798$27,528 Source:EY analysis,BMO Cap

316、ital Markets,Dow Jones VentureSource and Capital IQ.Numbers may appear to be inconsistent because of rounding.Private investments in public equity(PIPEs)included in“follow-on and other.”46Pulse of the MedTech Industry Report 2024FinancingInnovation capital raised in the US and Europe by yearFigure 5

317、 The challenge to innovation funding is highlighted by a decrease in innovation capital,or the amount of investment going to MedTechs that are not in the commercial leader group,dropping 6%to a nine-year low of US$12.0 billion.In all,innovation capital only represented 44%of the financing raised by

318、MedTech over the 12-month period.At the height of investor interest in MedTech during the COVID-19 crisis,innovation capital represented 67%of MedTech financing,hitting US$28.5 billion in the 12 months between July 2020 and June 2021;the total for 2024 is only 42%of this figure.Commercial leaders,wh

319、ich have captured an average of 47%of MedTech financing over the previous five years,took 56%of the total fundraising investment in the 202324 period,further evidence that the environment is becoming more challenging for smaller companies.Source:EY analysis,BMO Capital Markets,Dow Jones VentureSourc

320、e,Capital IQ.Innovation capital is capital raised by companies with revenues of less than US$500 million.6050403020100US$bCommercial leadersInnovation capitalJuly 2016June 2017July 2018June 2019July 2020June 2021July 2022June 203July 2017June 2018July 2015June 2016July 2019June 2020July 2021June 202

321、2July 2023June 202447Pulse of the MedTech Industry Report 2024FinancingUS and European early-stage VC rounds above US$5mFigure 6Source:EY analysis,Dow Jones VentureSource,Capital IQ.Early-stage rounds are seed-,first-and second-round VC investments.Early-stage VC investment(US$b)Number of early-stag

322、e VC rounds1098432165700300100400700200500800600900July 2016June 2017July 2014June 2015July 2018June 2019July 2020June 2021July 2017June 2018July 2015June 2016July 2019June 2020July 2021June 2022July 2022June 2023July 2023June 2024Early-stage VC investment(US$b)Number of early-stage VC rounds Anothe

323、r concerning metric for the industrys innovators is the decline in the number of venture capital(VC)investment rounds.The number of rounds has fallen year on year from a high of 833 in the period from July 2020 to June 2021 to 440 rounds in the 12 months ending June 30,2024,a 34%drop compared to the

324、 previous year.Despite this huge drop in the number of completed VC rounds,the total amount raised actually increased compared to the previous year,hitting US$7.0 billion.Further,it is only 11%lower than the 10-year annual average total for VC raised.By comparison,the previous 10-year average annual

325、 number of venture funding rounds was 741,with the tally for 202324 down by 41%compared to that average.The data shows a slight uptick in the number of early-stage venture rounds,with early-stage companies capturing 27%of all funding rounds(compared to a 10-year average of 17%).However,in context of

326、 the low overall numbers of VC rounds,this statistic may be misleading.48Pulse of the MedTech Industry Report 2024FinancingSource:EY analysis,Dow Jones VentureSource,Capital IQ.Amount of European IPO(US$b)Amount of US IPO(US$b)Number of US IPONumber of European IPO84321657001552010253035July 2016Jun

327、e 2017July 2014June 2015July 2013June 2014July 2012June 2013July 2018June 2019July 2020June 2021July 2017June 2018July 2015June 2016July 2019June 2020July 2021June 2022July 2022June 2023July 2023June 2024Amount of IPO(US$b)Number of IPO The recovery of the IPO market in the 12 months to June 2024 wa

328、s largely driven by a single strong quarter(Q3 2023).SCHOTT Pharma recorded by far the biggest IPO in the US and European MedTech markets,with the subsidiary of the German supplier SCHOTT AG and manufacturer of drug delivery systems raising US$856 million when it listed on the Frankfurt-based SDAX i

329、ndex in December 2023.Americas biggest MedTech IPO of the July 2023 to June 2024 period was Allurion,which went public in August 2023 via a merger with special purpose acquisition company(SPAC)Compute Health Acquisition Corp.The deal,which raised US$100 million,is notable not only for marking the re

330、turn of SPAC deals to the MedTech space,but also for highlighting the companys focus on consumer-friendly weight loss,combining its AI-powered Allurion Virtual Care Suite with an ingestible,procedure-free Allurion Balloon gastric inflatable weight loss solution.California-based AOTI also took an unc

331、onventional path to going public,by choosing to list on the London-based Alternative Investment Market(AIM).The company is focused on wound care,with its lead product delivering topical oxygen to diabetic foot ulcers.The US$45 million AOTI raised via IPO,while modest on the scale of MedTech IPOs in

332、past years,was nonetheless the largest new listing on the London AIM since 2022 and far larger than any MedTech IPO executed in the previous 12-month period.US and European IPOFigure 749Pulse of the MedTech Industry Report 2024Figure 9Figure 8Top US venture rounds,July 2023June 2024RankCompanyRegion

333、Product type(disease)Gross raised(US$m)QuarterRound typeAnnouncement Date1Neuralink Corp.Northern CaliforniaTherapeutic devices(Neurology)323 Q3 2023Late stage8/1/232Medical Microinstruments,Inc.FloridaTherapeutic devices(Non-disease-specific)110 Q1 2024Late stage2/21/243RefleXion Medical,Inc.Southern CaliforniaTherapeutic devices(Oncology)105 Q4 2023Late stage11/15/234Beta Bionics,Inc.Southern Ca