AI has potential scope to improve a number of areas from remote monitoring to diagnosis to complex surgery. For instance, next-generation robotic surgical platforms from Verb Surgical and Versius are incorporating AI so that systems can learn to optimize their performance.
Meanwhile, an important bellwether was the FDA’s April 2018 approval of IDx’s proprietary algorithm IDx-DR, the first ever tool to diagnose a disease, diabetic retinopathy, without the need for any additional human interpretation. Supporting the higher level of evidence required, this was also the first algorithm to be approved based on a prospective clinical trial.
However, as important as AI is, there is also a great deal of breathless prose about the technology. Companies in the space need to be careful not to overpromise and under-deliver on their capabilities. In addition, to get full value from the technology, more flexible regulatory processes that promote the continuous improvements required for software will be critical.
Diagnostics drive industry growth
Beyond AI, in 2017-18 it became apparent that non-imaging diagnostics are another potential driver of the medtech industry’s future value. In the digital era of medtech, wearables that funnel data directly to the cloud decouple the acquisition of medical data from traditional office visits to care providers. (An added bonus: built-in AI analytics, mean these data become highly meaningful and actionable in real time.)
Key metrics from 2017-18 underscore how important non-imaging diagnostics are to the medtech industry’ future performance. The segment’s valuation increased 82% between January 2017 and June 2018. Meanwhile, non-imaging diagnostic companies accumulated 38% of the US$14.4 billion venture dollars invested in medtech between 2016 and 2018. Over the course of 2017-18, twenty-three percent of the 2017-18 total M&A spend was dedicated to the acquisition of diagnostic assets. That is a considerable jump from the 9% 5-year average observed from 2013-17.
At the same time, therapeutic devices’ share of medtech’s total M&A spend fell from a five-year average of 77% to only 53% in 2017-18. This suggests that even though traditional therapeutic devices are still the mainstay of the market, acquirers recognize that these products in isolation no longer have the same value-creating potential they once did. To create more value in the future, therapeutic devices will have to continue to focus on building the data capture and analysis capabilities that are already altering medtech’s non-imaging diagnostics and imaging segments.
Questions for medtech companies to consider:
- How will medtechs use diagnostics and AI-driven analytics to achieve better therapeutic outcomes for their customers?
- How will medtechs use data to deepen their relationships with consumers and providers?
- As connectivity becomes standard, what steps are medtechs taking to secure their devices – and patient data?