What’s on the minds of the world’s top medtech executives? I recently attended AdvaMed’s medtech conference in Toronto to explore that question. The following includes some key takeaways from the event.
Governmental agencies and medtech sector demonstrate a positive working relationship
As someone who works with companies in both the biopharma and medtech industries, I was somewhat surprised, after attending my first AdvaMed conference last year, that the medtech industry and the U.S. Food and Drug Administration seem to have a positive, collaborative working relationship. To that end, within the medical device space, there have been improvements in the role of governmental agencies, most importantly the FDA and the Centers for Medicare and Medicaid Services, which have created the transitional coverage for emerging technologies program. That program every year helps up to five FDA-designated breakthrough devices achieve finalized national coverage determination within six months after FDA market authorization.
Similarly, the FDA has expanded its voluntary total product life cycle advisory program pilot to help spur more rapid development of innovative devices that are critical to public health. In addition, the FDA has been working to reduce review time for 510(k) and pre-market regulatory approval pathways over the past few years for medtech companies. As shown below, the review time for devices approved this year is the fastest since 2020.
Source: RSM US, Evaluate
AI is top of mind, but no one is sure about the correct path forward
The FDA has approved more than 900 artificial intelligence and machine learning-enabled devices. (Fun fact: the first AI/ML-enabled device was approved in 1995 as a cervical cancer screening using image analysis.) The FDA has placed increased focus on ensuring that the data by which algorithms are learning rely on quality models that represent the patient population being treated. There were concerns discussed around the legal and economic landscape of acquiring and using data. While Beth Andrews, chief digital health officer at Dell Technologies, says that 97% of health care data isn’t used, the concept of data aggregation for medtech purposes remains a challenge. In addition, there are numerous legal and privacy concerns around using clinical data.
While AI/ML is one of the hottest topics in the medtech sector, no one party seems to know how to collect, store and use data in a manner that is safe, private, economical and impactful. I would expect this to continue to be a frequently discussed topic in the sector for years to come.
Source: RSM US, FDA
Firms want funding, but markets have not yet opened up
The biggest sources in funding, venture capital and private equity, mergers and acquisitions, and initial public offerings all still fall below historic pre-pandemic trends in the industry. In general, investors noted that exits are now slower, so they have been more selective, but there is still money to be invested in the sector. While deal counts have decreased substantially, according to Pitchbook, the average investment from private equity, venture capital and merger and acquisition firms have all been increasing over the past three years.
Source: RSM US, Pitchbook
Source: RSM US, Pitchbook
Finally, some of the biggest takeaways for companies looking for strategic funding included the following:
- A competent leadership team that continuously wants to learn will make for a more desired investment opportunity. Companies should identify key opinion leaders and the leaders of business units at major medtech companies who can promote the acquisition or licensing of technology.
- Acquiring companies are not just looking at high growth end markets anymore but are looking for stable opportunities where the product line will fit in well with their overall strategy.
- Optimizing a portfolio and focusing on gross margin improvements have been key focuses for the medtech sector over the past several years due to slowing growth.
For more insights related to the medtech sector, check out RSM’s industry outlook.
