2024年醫(yī)療科技行業(yè)動(dòng)向報(bào)告

Inanunceasingly

complexenvironment,howcanMedTech

adapttothrive?

PulseoftheMedTechIndustryReport2024

Contents

Toourclientsandfriends3

Theyearinreview

TheMedTechlandscapein20244

EYperspective

Takingonthetop-linechallenge:WherecanMedTechgotofindgrowth?14

Guestperspective

BostonScientific’sgrowthplaybook:M&A,R&Dandglobalmarketexecution18

EYperspective

MedTechmanufacturersstruggleforprofitabilityasinputcostsrise21

Guestperspective

HowJ&JMedTechbalancesorganicgrowthwithstrategicacquisitions24

EYperspective

TurningMedTech’scommercialchallengesintotruegrowthopportunities27

EYperspective

TheriseofAIisshiftingtheMedTechlandscapeandwhereit’sgoing31

Guestperspective

TheroleofAIinMedTech’sfuture:adeepdivewithAdvaMed35

EYperspective

Seizingthemoment:MedTech’sopportunitytoenterconsumerhealth39

Databook42

Financialperformance43

Financing46

Mergerandacquisition(M&A)52

Dataexhibitindex54

Acknowledgments55

PulseoftheMedTechIndustryReport202402

Toourclientsandfriends

The18thannualPulseoftheMedTechIndustryReportfindsthemedical

technology(MedTech)industrystillprogressingandgrowing—but,

increasingly,walkinganarrowpathbetweenconvergingtop-lineand

bottom-linepressures.

MedTechrecordeditssixthsuccessiveyearofunbroken

top-linegrowthandisnowaUS$587billionindustry.

Itcontinuestoinnovate,with2023showingarecord

numberofFDAproductauthorizations,bothpre-market

approvals(PMAs)and510(k)approvals,andthenew

productsreachingthemarketincludehighlydifferentiatedlaunchesinareassuchascardiovascular.Moreover,

MedTechcontinuestopushtowardnewfrontiers,as

ongoingbreakthroughsinartificialintelligence(AI)holdthepossibilityofmakingdevicessmarter,smallerand

morepersonalized.

Despitethiscontinuedpushoutwardontheboundariesofinnovation,theindustryisstrugglingwithfundamentals.Someofthespace’sfastest-growingcompaniessaw

theirvaluationsplungeonthebackofdisappointing

second-quarterearningsinsummer2024,andeventhestrongestMedTechcompaniesstrugglewithincreased

inputcosts,reimbursementchallengesandashiftingsalesenvironment.

Astheworstofthepandemicfadesfurtherintherearviewmirror,sodothesalessurgeandinvestorexcitement

thatdroveMedTechduringthepublichealthemergency.Companiesinthediagnosticsandtheresearchand

laboratoryequipmentsegmentshaveexperiencedamarkedslowdownafterthepandemicuptick,whileotherMedTechsarewrestlingwithissuesincludingslower-than-anticipateduptakeofnewproductsandproceduresinhospitalsand

continuedchallengestoreimbursementrates.

ThecostofMedTechinputs—fromenergytorawmaterialstolabor—hasrisen,whileinflationandbroaderfinancial

volatilityhaveleftcompaniesexposedtoincreasingselling,generalandadministrative(SG&A)expenses.Thenet

effectisdownwardpressureonprofitmarginsinadditiontotheincreasingchallengeofsustainingrevenuegrowth.

Thesepressuresposeaparticularchallengeforthe

smallercompaniesinthesector,whicharealsobattlingforventurecapital(VC)amidhistoricallylownumbers

offundingrounds,ananemicinitialpublicoffering(IPO)marketandlimitedM&Aactivity.ThesefactorstogetherleavethesmallerMedTechs—the“emergingleader”

classofcompanieswithannualrevenuesoflessthan

US$500million—increasinglyunableeithertoaccesspublicmarketsorseekanexitviaM&A.Morethanhalfofthecompaniesinthisclasshavelessthantwoyearsofcashonhand,representingathreattotheindustry’sinnovationecosystem.

Togetbackontrack,companieswillneedtooptimizetheirportfoliostofocusonhigh-growththerapeuticareasand

technologies,seekingtherightmixoforganicandinorganicinvestmentstotapthepotentialofindustryinnovation.

Theywillalsoneedtofocusontheefficiencyoftheir

operatingmodelsandoptimizecoststorestoremarginalgrowth.Partofthischallengewillberefiningcommercialandgo-to-marketstrategiestoimproveengagementwiththeindustry’sstakeholdersanddrivegreatermarket

penetration.Growthandprofitabilityaren’toutofsight

forMedTech,butadaptingtothrivethroughaseriesof

transformationalchangesmightberequiredtoachieveit.

Despiteaturbulentenvironment,weremainconfidentintheMedTechindustry’sresilienceandcreativity.

Innovationisthelifebloodoftheindustryandhealthcarecontinuestoadoptandadapttonewtechnologiesand

changingneedsofMedTechcompanies’mostimportantcustomers...thepatientstheyserveeveryday.Itisthissharedmissionandwillingnesstoemployinnovative

ideasthatwillpropelthesuccessofMedTechproducts,companiesandtheindustryintothefuture.

JimWelch

EYGlobalMedTechLeaderErnst&YoungLLP

JohnBabitt

EYAmericasMedTechTransactionsLeaderErnst&YoungLLP

ArdaUral,PhD

EYAmericasLifeSciencesSectorLeaderErnst&YoungLLP

PulseoftheMedTechIndustryReport202403

Theyearinreview

TheMedTechlandscapein2024

PulseoftheMedTechIndustryReport202404

TheMedTechindustryin2024facesmountingchallengesasitseeksto

regainitsgrowthtrajectory.Whiletheindustrychalkedupanotheryearofgrowthin2023,withrevenuesrisingtoUS$587.6billion,the3.8%annualgrowthratewasthesector’slowestsince2017.

Figure1

MedTechfinancialperformance2023,overview

%change

2022–2023change

20222023H12024

Publicdatacompany

Totalrevenue

$566.0

$587.6

$291.0

$21.7

3.8%

Conglomerates

$215.3

$192.3

$87.4

-$23.0

-10.7%

Pure-playcompanies

$350.7

$395.3

$203.6

$44.6

12.7%

Commercialleaders

$327.7

$374.4

$194.0

$46.7

14.3%

Emergingleaders

$23.0

$20.9

$9.6

-$2.1

-9.1%

R&Dexpense

$33.2

$34.4

$16.6

$1.1

3.4%

SG&Aexpense

$112.7

$127.2

$65.5

$14.5

12.8%

Netincome

$12.5

$25.8

$7.5

$13.3

106.1%

Marketcapitalization

$1,572.8

$1,716.2

$1,746.7

$143.4

9.1%

Numberofemployees

1,206,987

1,241,347

-

$34,359.2

2.8%

Numberofpubliccompanies455433418-22-4.8%

Source:EYanalysis,CapitalIQandcompanyfinancialstatementdata.

Numbersmayappeartobeinconsistentduetorounding.DatashownforUSandEuropeanpubliccompanies.

Theindustry’sperformanceinthefirsthalfof2024underlinedtheincreasing

struggletoachievegrowthinthecurrentoperatingenvironment—one

Theindustry’s

performanceinthefirsthalfof2024underlinedtheincreasingstruggletoachievegrowthin

thecurrentoperatingenvironment.

punctuatedbyreimbursementchallenges,slowingprocedurevolumesandtighterhospitalbudgets.WhilesomeMedTechsreportedstronggrowth

inthefirstquarteroftheyear,thesecondquarterof2024turnedintoa

chasteningexperienceforseveralindustryplayersastheymissedonearningsexpectationsandreceivedimmediatenegativemarketfeedback(seeFigure2),temperingtheoptimismfeltatthestartoftheyear.

PulseoftheMedTechIndustryReport202405

Figure2

30%

20%

10%

0%

-10%

-20%

-30%

-40%

-50%

MedTechstockvaluationsvs.S&P500,2024yeartodate(YTD)

01-Jan-2401-Feb-2401-Mar-2401-Apr-2401-May-2401-Jun-2401-Jul-24

EYEUcommercialleaders

S&P500

EYUSemergingleaders

EYUScommercialleadersEYEUemergingleaders

Source:EYanalysis,CapitalIQandcompanyfinancialstatementdata.

ThislistincludedcompaniessuchasDexcomandEdwardsLifesciences,

whichhaveamongthestrongestgrowthstoriesinthetherapeuticdevicessegmentinrecentyears(seeFigure3).

Figure3

Biggesttherapeuticdevicemarketcapgrowthstories,30June2019–30June2024

Company

Marketcapasof

30June2024

Marketcapasof

30June2019

US$change

CAGR2019-H12024

IntuitiveSurgical

157,791

54,693

103,098

21%

Stryker

129,618

58,654

70,964

16%

BostonScientific

113,219

48,904

64,315

16%

DexCom

45,089

10,644

34,446

30%

IDEXXLaboratories

40,237

16,041

24,195

18%

EdwardsLifesciences

55,662

32,020

23,642

11%

SiemensHealthineers

64,320

41,832

22,488

8%

Alcon

44,136

27,822

16,314

11%

ResMed

28,117

16,226

11,890

11%

StraumannHolding

19,749

9,932

9,817

13%

Source:EYanalysis,CapitalIQandcompanyfinancialstatementdata.

Dataisarrangedindescendingorderonthebasisofchangeinmarketcap(column“US$change”).

PulseoftheMedTechIndustryReport202406

IntheirQ22024reporting,MedTechssingledoutvariouschallenges:Dexcomcitedtheissuesassociatedwithsalesforcerealignment,reimbursement

factorsandareportedreductioninrevenuepercustomerasaresultofrebateeligibilityandchannelmix;whileJohnson&Johnsonhighlightedpressures

intheChinesemarket,wheregovernmenteffortstodeployvolume-based

procurement(VBP)modelshaveimpactedthecompany’sMedTechrevenue.

ThebroaderimplicationforMedTechisthatachallengingoperating

environmenthasresultedinaheadwindforgrowthwhileinputcostscontinuetoincrease,puttingfurtherpressuresonprofitability.Fromrawmaterialsto

laborexpenses,energy,shippingandothersupplychainoverheads,MedTechtodayisoperatinginahigher-costenvironmentcomparedtotheperiodbeforetheCOVID-19pandemic.Whileindustryrevenuesrecorded3.8%growthin

2023,sales,generalandadministrative(SG&A)expensesroseby12.8%.

LookingbacktoMedTech’spositionattheendof2019whentheworldwas

onthebrinkofthepandemic,industryrevenueshavegrownwithacompoundannualgrowthrate(CAGR)of8.3%inthefour-yearperiodtotheendof2023.Overthesameperiod,however,SG&AalsoclimbedyearoveryearwithaCAGRof9.8%,whilenetincomeforpure-playcompaniesdeclined,withanegative

Thebroaderimplication

forMedTechisthata

challengingoperating

2.4%CAGRforthe2019–23period.AnnualrevenuegrowthhasstruggledtokeeppacewithSG&Agrowthoverthisperiod,contributingtounevenincomegrowth(seeFigure4).

Figure4

environmentresultedin

aheadwindongrowth

Pure-playMedTechSG&Aandrevenueannualgrowthrates(AGRs)andnetincome,2019–23

whileinputcostscontinuetoincrease,putting

AGR(%)

Netincome(US$b)

SG&AAGR(%)RevenueAGR(%)——Netincome(US$b)

50

25%

20%

40

15%

30

10%

20

5%

10

0

0

furtherpressuresonprofitability.

20192020202120222023

Source:EYanalysis,CapitalIQandcompanyfinancialstatementdata.

1.“DexCom(DXCM)Q22024EarningsCallTranscript,”TheMotleyFoolwebsite,July25,2024,

/

earnings/call-transcripts/2024/07/25/dexcom-dxcm-q2-2024-earnings-call-transcript/.

PulseoftheMedTechIndustryReport202407

ThedearthofIPOsinrecentyearsandconsolidationhaveimpactedthe

numberofpubliccompaniesandemploymentnumbersacrossthesector.Thenumberofpure-playpublicMedTechcompaniesfell4%to433,thelowest

since2019.Excludingcompaniesoperatingintheresearchandlaboratory

equipmentsegment,whichissomewhatindependentofthetherapeutic,

diagnosticsandimagingsegmentsintermsofbusinessenvironment,the

industryendedtheyearwith350publiccompanies,fewerthanthe355it

hadin2019.Thisisduetoacombinationoffactors.Forinstance,therehavebeenfewercompaniesgoingpublicsincethestartof2022,andmanysmallercompanieshadtoclosetheirdoorsduetolackoffundingoptions.Though

totalemployeenumbersgrewby3%,thiswasamarkedslowdownfromthe12%CAGRofthe2018–22period.

Figure5

Numberofpure-playpublicMedTechcompaniesandemployeesAGR(%),2019–23

NumberofemployeesAGRNumberofpubliccompanies

NumberofemployeesAGR(%)

25%

20%

15%

10%

5%

0%

20192020202120222023

460

450

440

430

420

410

Numberofpubliccompanies

Source:EYanalysis,CapitalIQandcompanyfinancialstatementdata.

Layoffswithinthesectorhavebeenwidelyreportedintheindustrynews,

withestimatesof14,000jobscutbetweenJanuary2023andJuly2024as

MedTechsrestructure,closesitesandseekothercostsavings.2Theimpactofthesecutshaslandeddisproportionatelyonthediagnosticssector.Diagnosticscompanieshavebeenhitparticularlyhardbythebackslideafterthepandemicdroveadramaticspikeindemandforhometestsandsimilarproducts.The

ongoingCOVID-19hangovercanarguablybecitedformanyofthechallengestheindustrynowfaces.Examplesofthesechallengesincludethefadingof

boththeextraordinaryanddistortedpatternsofdemandforcertainproductsandprocedures,aswellasadropininvestorinterestinMedTechaftera

valuationsurgeandawaveofIPOsaftertheheightofthepandemicin2020.Tosomeextent,aconsolidationandretrenchmentwithinthesectorwas

theinevitablesequeltotheunusualhighsofthepandemic,andthegrowthchallengesof2023and2024shouldbeseeninthiswidercontext.

2.“MedTechfirmshavecutmorethan14,000jobsinthepast18months,”MedTechDivewebsite,

https://www.MedT/news/

medical-device-layoffs-tracker/720928/,July17,2024.

PulseoftheMedTechIndustryReport202408

TheFDAannounced

that,in2023,ithad

authorizedthehighestnumberofnoveldevicesonrecord.

Onereasontobepositiveabouttheindustry’sunderlyingfundamentalsisthehealthypaceofnewproductapprovals,particularlyintheartificialintelligence(AI)space(seeourdeepdiveonthetopiclaterinthereport).TheFDA’sCenterforDevicesandRadiologicalHealthnotedinitsannualreportthatin2023

itauthorizedthehighestnumberofnoveldevicesinitsmorethan40-year

history(excludingemergencyuseauthorizations).3Thenumberof510(k)

approvalsroseforthefourthconsecutiveyeartoreacharecord3,325,whilepre-marketapprovals(PMAs)soared77%asreviewandapprovaltimelines

recoveredfromanylingeringbureaucraticbacklogfollowingthepublichealthemergency(seeFigure6).

Figure6

NumberofFDAPMAand510(k)approvals,2013–24YTD

NumberofPMAapprovals

50

40

30

20

10

0

Numberof510(k)clearancesNumberofPMAapprovals

Numberof510(k)clearances

3,500

3,000

2,500

2,000

1,500

1,000

500

0

201320142015

201620172018

20192020202120222023

2024*

Source:FDAwebsite.

Datafor510(k)clearancesareupdatedtillJune2024andPMAapprovalsaretillApril2024

MedTechisaresearchanddevelopment(R&D)-drivenindustry,andthe

rateofnewinnovationsreachingthemarket—particularlyinareassuchas

structuralheart,renaldenervationandrobotics—isanextremelypositive

sign.Yet,recentearningsreportsindicatethatconvertinginnovationinto

revenuegrowthhasbecomemorechallengingduetothegrowingcomplexityofnovelproducts(withassociatedtrainingandeducationburdens,asnoted

inEdwards’Q2earningscall)andtheincreasedemphasisondemonstrating

costeffectivenessandclinicalsuperiority.Atthesametime,profitabilityis

exceedinglyhardtoachieveformanycompaniesinthesectorafteraccountingforthehighcostsofdoingbusiness.

Inshort,MedTechcannotbecomplacentaboutareturntogrowthand

profitability,particularlyinthewakeofthenegativegrowthstoriesemerginginthefirsthalfof2024.Theindustrywillneedtotakeactiontorebuildrevenueandmargingrowth.Enablingtheinnovationecosystemtoremainrobustwillbeoneofthekeychallenges.

3.“2023AnnualReport,CenterforDevicesandRadiologicalHealth,”FDAwebsite,

/media/175479/

download?attachment.

PulseoftheMedTechIndustryReport202409

PulseoftheMedTechIndustryReport202410

Emergingleadersfacingfinancialheadwinds

in2024

WhilethestrugglesofMedTech’scommercialleaders—thatis,companiessolelyfocusedonMedTechandcommandingannualrevenuesofUS$500millionormore—mayattractheadlines,theoperatingenvironmentforcompaniesat

theotherendofthescaleisevenmorechallengingin

2024.Thecontractionandconsolidationwithinthemarketishittingtheindustry’ssmallerplayersharder.While

commercialleadersoverallrecorded14.3%top-line

growthin2023,theemergingleaders(thosewith

annualrevenuesbelowUS$500million)experienceda9.1%revenuedecline.

Thesecompaniesarealsograpplingwithanunforgiving

andconstrainedfinancingenvironment.Inthe12-month

periodthatendedinJune2024,totalindustryfinancing

felltoaneight-yearlowofUS$27.5billion.Allfinancing

streamsweredowncomparedtothepreviousfive-year

averageinvestment.Whileventurecapitalinvestment

tickedup5%toUS$7.0billion,itremained11.3%lower

thantheaveragetotalforthepreviousfiveyears.Similarly,theIPOmarketmadeaslightreturninthefirsthalfof

2024afterfivequartersofalmostnoactivity(asubsidiaryoftheGermansupplierSCHOTTAGthatmakespre-filledsyringeswentpublicin2023).Twocompaniesmadetheirpublicdebutsofarin2024:FractylHealthraisedUS$110millionandTempusAIraisedUS$411million.Both

companiesweretradingbelowtheirIPOpriceattheendofthefirsthalfofthisyear.

Figure7

CapitalraisedintheUSandEuropebyyear,July2012–June2024

VentureIPOFollow-onandotherDebt

60

50

40

US$b

30

20

10

0

July2012–July2013–July2014–July2015–July2016–July2017–July2018–July2019–July2020–July2021–July2022–July2023–

June2013June2014June2015June2016June2017June2018June2019June2020June2021June2022June2023June2024

Source:EYanalysis,BMOCapitalMarkets,DowJonesVentureSourceandCapitalIQ.

Numbersmayappeartobeinconsistentbecauseofrounding.PIPEsincludedin“follow-onandother.”

PulseoftheMedTechIndustryReport202411

Limitedrevenuegrowthandlimitedaccesstocapital

marketstogetherrepresentanincreasedchallengefortheemergingleadersthattraditionallydriveMedTech

innovation.Assuch,theirfinancialpositionhas

deterioratedsincethehighpointof2021.Attheendof

2021,52%ofMedTechs(excludingthecommercialleadersgroup)hadoverthreeyears’worthofcashavailable.At

theendof2023,thatfigurehadfallento37%,with55%ofMedTechsnowholdinglessthantwoyears’cashreservesand40%withunderoneyearremaining.

Forthesecash-strappedcompanies,thebestbetistoseekanexitviaacquisition.Yet,theemergingleadersconfrontanothermajorchallengeintheM&Amarket:Dealmaking

activityhasbeenextremelylimitedinrecentquarters.The99M&AdealscompletedduringtheperiodfromJuly2023toJune2024werethelowestannualtotalin15years.Themostrecentprevious12-monthperiodinwhichMedTech

dealmakingslippedbelowtriplefiguresthiscenturywasduringtheglobalfinancialcrisis,when90dealswere

completedbetweenJuly2008andJune2009.

Figure8

EYMedTechSurvivalIndex,2019–23(excludescommercialleaders)

US-EU

2023

2022

2021

2020

2019

Morethan

3years

37%

40%

52%

52%

44%

2–3yearsofcash

8%

9%

11%

8%

9%

1–2yearsofcash

15%

17%

19%

18%

14%

Lessthan1yearofcash

40%

34%

18%

22%

32%

Source:EYanalysis,CapitalIQandcompanyfinancialstatementdata.

ChartshowspercentageofMedTechcompanieswitheachlevelofcash.Numbersmayappearinconsistentbecauseofrounding.

Figure9

MedTechM&A,July2006–June2024

Megadeals(>US$10b)OtherM&ANumberofdeals

120

100

Totaldealvalue(US$b)

80

60

40

20

0

350

300

Numberofdeals

250

200

150

100

50

0

Sources:EYanalysis,CapitalIQandThomsonOne.

Chartincludesdealswithvaluedisclosed(MedTechdealwhereeitheracquirerortargetislocatedintheUSorEurope).

PulseoftheMedTechIndustryReport202412

The42%dropindealvolumeinthe12monthspreceding

theendofJune2024was,however,accompaniedbyan

18%increaseindealvalue,whichhitUS$57.7billion.

Thedisconnectbetweenvolumeandvaluereflectsthe

year’spatternoffew,butrelativelylargedeals.Overall,

theaveragedealsizewasthethirdlargestinthepast

decade.Johnson&Johnson’sUS$13.1billiontakeoutof

ShockwaveMedicalaccountedfor23%oftheannualtotal

M&Ainvestmentonitsown,andthetopfivedealstogetherrepresented51%oftheoverallspend.

Therecenttrendtowardfewer,biggerdealshasbecome

morepronouncedquarterbyquartersincethebeginning

of2023.EventhoughtheMedTechindustryheldUS$466billionindealmakingfirepowerattheendofJune2024,

andcommercialleadershaveproventheyarewillingto

payhighpremiumsforspecificassets,thelowbackgroundlevelofM&Aactivityincreasesthechallengesforsmaller

companiesthatareseekingafinanciallysustainablefuture.

Figure10

M&Aactivitybyquarter,Q12023–Q22024

Dealvalue(US$b)

Numberofdeals

25

70

60

20

50

15

40

30

10

20

5

10

0

0

OtherM&AMegadeals(>US$10)Numberofdeals

JNJ/Shockwave:US$13.1b

Q12023Q22023Q32023Q42023Q12024Q22024

Sources:EYanalysis,CapitalIQandThomsonOne.

Chartincludesdealswithvaluedisclosed(MedTechdealwhereeitheracquirerortargetislocatedintheUSorEurope).

PulseoftheMedTechIndustryReport202413

Gettingbacktogrowth

MedTechcompanies’increasingcautiononacquisitions

reflectsthegrowthpressuresthatindustryleadersare

facing.Ratherthancontinuingtoexpandanddiversifytheirproductlines,someofthesector’sbiggestplayershave

aimedtostreamlinetheirbusinessandconcentratetheir

portfoliosinhigh-growthareas.Asaresult,divestments

havebecomeamajorthemeofindustrydealmakingin

the2023–24period.Forinstance,DanahercontinuedtoremakeitselfwithafocusonlifesciencesanddiagnosticsbyspinningoutitswatertestingandproductidentificationoperationsasVeralto;4Baxtersolditspharmaceutical

solutionsbusinesstoWarburgPincusandotherprivate

equity(PE)buyersforUS$4.3billionin2023and

announcedthesaleofitskidneycareunit,rebrandedasVantive,toCarlyleGroupforUS$3.8billioninmid-2024.

MedTechswillcontinuetheirattempttopivottohigh-

growthopportunities;atthesametime,theymustprotecttheinnovationecosystem,assmallercompaniesstrugglewithlimitedfinancialpowerandacquisitions.Through

alliances,accelerators,incubatorsandotherpartnershipmodels,theindustryneedstocontinuetosupportand

nurturegrassrootsinnovationacrossthesector.Privateequityandotherinvestmentbuyersarealsoontracktoplayanexpandedroleinsupportinginnovation,offeringfinancingandexitopportunitiestoemergingleadersandfacilitatingcarve-outsasindustryle