Strong return despite global economic conditions
Emergence of patient-focused technologies hold promise to improve efficiency and disrupt traditional medtech business model innovation. Swiss medtech companies are world class in regards of technical innovation but now need to adapt to evolving customer needs as well as to stronger requirements and regulations in the global health care system.
Zurich/Boston, 2 October 2012 – Publicly traded medtech companies in the US and Europe defied the dampened growth environment of the global economy and turned in another solid performance in 2011, with revenue growth outpacing 2010 rates while delivering a third consecutive year of double-digit net income growth. For 2012, medtech companies in Switzerland are expected to grow by approximately 6 per cent which is significantly higher than the expected overall GDP growth of 1.4 per cent.1 Yet as the industry continues to be challenged to meet the demands of an increasingly outcomes-focused health care system, its members will need to find solutions from new customer-empowering and information-leveraging technologies, which are poised to disrupt the traditional industry business model. These and other findings are highlighted in «Pulse of the industry: medical technology report 2012» (ey.com/pulse2012), EY’s annual report on the industry’s performance released today at the Medtech conference «AdvaMed» 2012 in Boston (USA).
«The medtech industry continues to show impressive perseverance and resilience in weathering the challenging global economic climate», says Heinrich Christen, EY’s Medtech Leader for Europe, Middle East, India and Africa (EMEIA). «Longer-term, many in the industry will face significant challenges to find sustainability against the headwinds of rising pricing pressures, expanded use of comparative effectiveness, and the ongoing efforts to find new efficiencies in the global health care system. To meet these challenges, companies will need to be as innovative in the development of new business models as they have historically been in product development». As Swiss medtech companies are highly export-oriented, especially the current debate in the European Commission on a new EU Regulatory Framework for medical devices might have substantial influence on future product requirements and responsibilities.2
Key industry findings described in «Pulse of the Industry» include:
- Revenue increases while net income jumps: Revenue for non-conglomerates in the US and Europe totaled US$319.9 billion in 2011, a 6 per cent increase from the year prior. Net income increased a healthy 14 per cent from 2010 to 2011 to a total of US$19.9 billion.
- Financings surge, but driven by debt financing: For the 12-month period ended June 30, 2012, US and European public medtech companies raised an impressive US$27.4 billion, an increase of 26 per cent over the prior 12-month period. However, 80 per cent of all capital raised during this time was in the form of debt by a relatively small number of companies, funding other than debt declined by 22 per cent compared to the prior year.
- Venture financing rises slightly: Venture capital investment increased 8 per cent in the year ending June 30, 2012, with US$4.3 billion raised in the U.S. and Europe. Venture funding increased by 11 per cent in the US during this period to US$3.7 billion, while in Europe venture investment was down 5 per cent to US$676 million.
- Deal making remains steady: Merger and acquisition (M&A) activity among US and European medical technology companies remained vibrant in the year ended June 30, 2012, with a total value of US$35 billion. While this figure was well below the levels seen over the last two years, those years were driven by two “megadeals” of more than
Medtech’s new «disruptive» opportunity: the rise of «PI» technologies
The cost of providing healthcare is increasing at an unsustainable rate globally, which has driven the need for medtech companies to demonstrate how their products are improving efficiency and health outcomes. The «Pulse of the industry» report finds that the medtech industry’s role in this outcomes-focused healthcare ecosystem is also being impacted by the emergence of an entirely new class of medical technologies defined in the report as «PI» (patient-empowering and information-leveraging) technologies. These nascent technologies, which include everything from smartphone apps and social media platforms to sensor-enabled smart devices, have the potential to both reinvent health care by providing real-time insights on a patient’s health and disrupt much of the traditional medical technology industry due to their potential to drive tremendous gains in efficiency. Adoption of these technologies also has the potential to provide new sources of revenue for medtech companies and will have significant implications across the traditional medtech business model. In particular, companies will need to establish a compelling value proposition that responds to the needs of consumers and payers in addition to their traditional provider customers and redefine how they create, deliver and capture value. With their high innovativeness, Swiss medtech companies are capable to take over a leading role in adapting new business models and thus to counter falling margins in the traditional medical technology industry.
«It would be easy for medtech companies to discount the emergence of PI technologies as having little competitive impact on their business but the history of disruptive technologies in other industries shows that they would do so at their own peril», says Heinrich Christen. «Companies that will be leaders in the outcomes-focused industry of tomorrow will be the ones that utilize these technologies to become more patient-centric and payer-savvy, are bold with their investment in new business models, and keenly focused on the question of how they can change the value proposition for the customer.» Heinrich Christen also points out that companies need to establish their own sales, training and education organizations in emerging markets. This can prove a major challenge for many SMEs.
1 Source: Swiss Medtech Report 2012, Medtech Switzerland (www.medtech-switzerland.com)
2 Quelle: http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/12/710&format=HTML&aged=0&language=EN&guiLanguage=en
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