In an environment where capital is scarce and development timelines are long and expensive, companies need to use their capital wisely to win – and continue winning. Instead of a steady stream of acquisitions, companies want to invest more in deals with potential to deliver bigger rewards. While companies arguably need to be doing more to invest in the right new technologies and innovations, the portfolio optimization underway suggests medtechs are trying to identify must-win areas and invest with a longer-term strategic mindset.
2. Non-imaging diagnostics
Diagnostics are the pathways that offer medtechs direct access to the patient-consumer – and the field is booming. At 11% revenue growth, non-imaging diagnostics companies outpaced the broader industry. In contrast revenue growth for therapeutic devices grew only 6%. These strong revenue figures were reflected in the high interest VC start-ups showed in the space. Diagnostic start-ups such as Thrive Earlier Detection, Click Diagnostics and uBiome were among the biggest funding rounds of 2018.
Much of the attention remains on the lucrative genomics subsector of non-imaging diagnostics. In 2019, the advance of genomics toward mass-market availability continued, thanks to Illumina's announcement that it had reached an agreement to acquire Pacific Biosciences for US$1.2 billion in November 2018.
3. Digital health
A string of new approvals continue to validate the possibilities of digital health technologies. In October 2018, the FDA approved the first augmented reality (AR) system for surgical training, the OpenSight system built on collaboration between Novarad and Microsoft HoloLens. At the same time, the agency approved a steady stream of AI algorithms over the past year. AI is a significant driver of decentralized care.
Diabetes is still the therapeutic area that sets the pace for the digital health market. In the last year, we’ve seen the market success of Dexcom and Tandem’s interoperable system illustrating that it isn’t devices alone but interoperable, patient-centered networks of devices and data analytics that capture market share.
4. Progressive providers and payers
Other companies in the health care ecosystem seem to be rethinking the business model. Consider Mercy, which has pursued the idea of a bedless hospital based on remote monitoring, predictive analytics and integrated clinician teams. Other leading providers and payers are working to integrate data, too.
Building a viable long-term model for health care data may require companies to embrace an open data architecture that can incorporate core elements such as electronic health records without being constrained by legacy products. Payers, too, continue to try and reinvent the business model, with UnitedHealthcare and Aetna, for example, pursuing value-based approaches.
While these trends are all significant for the future of medtech’s business model, the challenge for companies is to identify what steps they can take now to prepare themselves for the emergence of a more data-driven, digital era in health care.