As we all know, the medtech industry is constantly evolving to accommodate new technologies and increased access to healthcare solutions. By leveraging innovation, the industry is finding new ways to transform how patients receive treatment, especially in an increasingly digital, customer-centric industry.
A variety of different trends have shaped the industry over the past few years, and a few new trends on the horizon are already beginning to offer a bevy of different opportunities for medtech players big and small. But which of these trends are worth keeping an eye on?
Arda Ural is a partner in Ernst & Young’s Transaction Advisory Services practice in New York, where he focuses on the pharmaceutical, biotechnology, and medical technology sectors. He previously served as senior vice president of marketing and sales for a startup biotechnology company called Eyetech and is the co-author of several whitepapers about bio-pharmaceutical strategy.
As an expert on industry trends, Ural will speak at the MD&M East Medtech Education Hub in New York this summer, where he will discuss the convergence of healthcare and technology, as well as the latest medtech trends.
Ural recently spoke with MD+DI to preview his talk and share a few insights on the industry’s latest trends. He also offers up some advice for some of the smaller players in the industry, in addition to providing a few tips on how to stay competitive in today’s market.
MD+DI: For starters, the medtech industry has taken great strides to evolve and support the convergence of technology and healthcare solutions. Can you talk a little about some of the trends you’re seeing as medtech companies try to adapt to a market that is constantly changing?
Ural: Over the last decade, the medtech industry, like all of healthcare, has been affected by three megatrends that continue to have an impact on today’s business operating environment. First and foremost, the Affordable Care Act (ACA) shifted the focus of healthcare to value and outcomes and away from activity. The ACA also helped add approximately 12 million newly insured people, which expanded the treatment pool for manufacturers. Second, the impact of the massive incentives created by the government (as part of the now long-forgotten stimulus package) to jumpstart a healthcare information technology ecosystem to capture, share, aggregate, and analyze healthcare data. Finally, the emergence of new technologies, such as artificial intelligence, augmented reality, and the Internet of things, and their applications to healthcare-related problems has created a conducive environment for the convergence of healthcare and technology.
These trends helped trigger responses by established technology companies, which placed various bets on healthcare, including exploring joint ventures or adjacent integration opportunities. At the same time, traditional healthcare players were responding by trying to merge vertically to create new business models that would use digital healthcare technologies to advance patient-focused outcomes to reduce costs across a very fragmented ecosystem.
To their credit, many medtech companies have made successful investments in digital technologies. However, many of these investments have yet to move beyond the pilot stage to fully embrace a business model geared to an at-scale and profitable state of convergence between healthcare and digital.
MD+DI: What sort of trends have you observed when it comes to innovation, and what are your thoughts on buying innovation versus building it from the ground up?
Ural: There are many technologies attracting major investment. Wearables are now maturing. augmented reality (AR) is finding room to grow in the operating theaters. Artificial intelligence (AI) is the current new thing and replaced Big Data. Cloud and Big Data are considered to be the baseline technological capabilities everyone is building on.
Robotics and automation are making robotic surgery and telemedicine-enabled surgical interventions a reality. Exoskeletons became an accessible and relevant use case for orthopedics. And 3D bioprinting (i.e., printing organs, bone, and teeth) is yielding promising initial results, though too early for mass-market commercialization. Blockchain has some promising applications in supply chain and electronic medical records.
Finally, the impending next wave of mobile technology or 5G capability will allow for much more efficient and prompt device-to-device communication, thus making the medical Internet of things (mIoT) an operational reality. In the upcoming decade, the medical device industry will be differentiated largely by integrating mIoT features into its product design.
Given the fact that innovation requires a complex, high-paced, and high-risk modality, our expectation is that innovation will primarily be bought and later scaled up after leveraging a larger company’s commercial infrastructure and an installed customer or user base.
MD+DI: How can smaller companies stay competitive in today’s market? What are some trends out there that could end up benefiting some of these smaller players?
Ural: Focusing on disrupting an area of unmet meaningful medical need is a great place to incubate a startup company. We often see founders wish to expand too quickly to simultaneously address various use cases, which can stretch their limited bandwidth too thin. Rapid prototyping and failing quickly will continue to help the innovation process for small players. The industry is attractive to investors, who have poured $23 billion over the last five years into digital health space. Smaller companies are well-positioned with their technologies to be acquired and/or scaled up quickly. We should all keep in mind that this is intrinsically a high-risk/high-reward business.
MD+DI: What are some new technology applications or next-gen medical devices that could have a significant impact on how healthcare will be delivered in the next five to 10 years?
Ural: Artificial intelligence, augmented reality, and the medical Internet of Things (or device-to-device communication) have some room to run, as does robotics and blockchain. We are at the verge of an inflection point when it comes to innovation in medtech. We believe patients and innovators will reap the benefits of this digital health wave in the years to come.
As a balancing act, we also see massive attention being paid to cybersecurity. This is obviously a threat to the business environment but offers opportunities for companies to develop countermeasures that can safeguard patient data and operational reliability for medtech companies.
MD+DI: Can you talk a little about capital allocation and some of the investment trends you’re seeing that could influence the medtech market in the coming years?
Ural: The implications of the recently enacted U.S. tax reform are still being sorted out several months later. Also, the capital markets are cautious, as geo-political uncertainties continue to persist. The result of this topsy-turvy six months is evident in EYs’ 18th edition of our Capital Confidence Barometer (CCB). U.S. deal intentions are healthier, back up above 50%—but nowhere near the highs of 18 months ago, when some three-quarters of companies told us they planned to pursue a deal. At the same time, however, fully two-thirds of our CCB respondents say portfolio transformation—including both buying and selling of assets—is the most prominent topic on their boardroom agenda. And competition for assets is expected to continue. Of the 66% of respondents who have canceled a deal in the last year, more than two-thirds cited issues with competition or valuations. Additionally, well over half of our U.S. respondents cited acquiring talent as the main strategic driver for M&A.
MD+DI: Finally, in a broad sense, where do you think some of the biggest opportunities will come from when it comes to innovation and design? Which players do you think will have the biggest impact on the market as these trends play out over the next five to 10 years?
Ural: We see a bright future overall for medtech innovation. Since medtech innovation by definition involves a tangible device, many of the trends already noted may have an easier time finding a home in medtech, compared with pharmaceutical or biotechnology assets.
Having tried product-focused point solutions, medtech executives should consider platform strategies that would embed their digitally-enabled therapeutic solutions into today’s value-driven ecosystem.
Companies that succeed will be those that can figure out the convergence of healthcare and technology at scale, and these are two very different and unique areas to develop an expertise in.