Global medtech industry struggles to sustain growth, putting future innovation at risk

Wednesday 11 November 2015

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Despite a record number of IPOs and a robust mergers and acquisitions (M&A) market, the global medtech industry continues to face tepid growth and a dwindling pool of investors for early-stage companies. These challenges, highlighted in the 2015 edition of EY's annual medical technology industry report, Pulse of the industry, raise important questions about the long-term sustainability of the sector.

Among the key global findings:

  • Revenue for US and European public medtech companies increased just 2% in 2014 to US$341.8b, the second year of low, single-digit, top-line growth
  • Venture capital investment held steady, but the amount of money dedicated to early round investment dropped 19% to less than US$1.3b
  • A robust market for initial public offerings (IPOs) contributed nearly US$2.3b to the annual financing total
  • Sixteen M&A deals announced from July 2014 to June 2015 exceeded the US$1b threshold, double the prior 12-month total

Gamini Martinus, EY's Australian Life Sciences Leader, says the disparity between the ‘haves’ and the ‘have-nots’ in the medtech sector has grown increasingly stark over the last twelve months.

 “Despite the buoyant fundraising and deal-making environment that exists globally, there remains a persistent gap in the type of early-stage venture capital funding required to support an innovative medtech ecosystem,” Martinus explains.

“This lack of funding can be partially attributed to an increasingly uncertain reimbursement climate and the resulting pressure for companies to find new ways to demonstrate the value of their products.”

“This is also consistent with what we are seeing in the Australian market, where the limited pool of funds available is being spread across the entire life sciences sector, including medtech, biotechnology and pharmaceuticals. In this environment, the number of IPOs in the Australian sector as a whole remains limited – with just five deals announced in the last year, raising less than AU$50m,” Martinus says.

“On a positive note though, innovation is still firmly on the local agenda, with the larger medtech companies continuing to invest in R&D to expand their product range and global reach.”

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