EY Report Shows Medtech Growth Amid Industry Challenges

The 18th annual Pulse of the MedTech Report  by Ernst & Young shows that continues to drive growth and innovation even during industry challenges. The global medtech industry continued to face broader macroeconomic forces, causing industry players to walk a narrow path between converging topline and bottom-line pressures. Despite this, ongoing breakthroughs in AI and other emerging growth opportunities like the rise of consumer engagement in health technology keep steady growth and profitability within reach.  
 
“The challenges Medtechs have experienced during 2023 to 2024 have placed more emphasis than ever before on the need for companies to develop successful commercial models,” said Jim Welch, EY Global Medtech Leader. “Not only will a better commercial model execution be integral to building the company’s top line, but it will allow them to build agile cross-functional teams that can respond to demand signals in near real-time. This is especially true when considering the implications of new AI-powered tools across the enterprise.”
 
Pulse of the MedTech Industry outlines the current state of the US and European medtech industry, as expressed in financial performance, spending trends, M&A, R&D, and other measures. In addition, to guest perspectives, the report outlines five key areas that will strengthen the industry’s transformation and position the medtech industry for future success:

1. The search for high-growth opportunities
2. Cost optimization measures
3. Adapting revitalized commercial models
4. Harnessing AI for significant growth and competitive advantage
5. Capitalizing on the direct-to-consumer market

The report also details, the industry’s performance in the first half of 2024 and underlines the increasing struggle to achieve growth in the current operating environment. As a result, medtech companies have been increasingly cautious about acquisitions and are instead prioritizing the streamlining of their portfolios. From July 2023 to June 2024, 99 M&A deals were completed, the lowest annual total in 15 years.
 
“Medtechs face several challenges such as increased input costs, tighter reimbursement, payment pressures from hospital systems and an increasingly complex customer dynamics,” says Arda Ural, PhD, EY Americas Life Sciences Leader. “The lower interest rates will help the capital markets and fund continued innovation. Higher valuations can also trigger a renewed look at the portfolio composition.”
 
Key findings also include:

• In 2023, profits nearly doubled year-over-year but the US$12.5 billion the industry claimed in 2022 was a five-year low.
• While R&D expenses have remained between 5% and 6% of total revenues for the sector for the last five years (coming in at US$33.2 billion for 2023), SG&A expenses ate up 22% of revenues in 2023, clocking in at US$127.2 billion (up 12.8% year over year).
• While commercial leaders overall recorded 14.3% top-line growth in 2023, the emerging leaders (those with annual revenues below US$500 million) experienced a 9.1% revenue decline due to a constrained financing environment.
• In all, innovation capital, the amount of investment going to MedTechs only represented 44% of the financing raised by MedTech over the 12-month period. At the height of investor interest in MedTech during the COVID-19 crisis, innovation capital represented 67% of MedTech financing, hitting US$28.5 billion in the 12 months between July 2020 and June 2021; the total for 2024 is only 42% of this figure.

An EY representative will also be present at the MPO Summit to lead a presentation and discussion about the report.