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Medical device producers in the United States and Europe continue to record impressive, profitable growth, but face challenges, according to the "Pulse Of The Industry: Medical Technology Report 2012", Ernst & Young's annual report on the industry's performance which was presented this week at  AdvaMed 2012.

PlasticsToday Staff

October 5, 2012

2 Min Read
Cost issues may slow medtech growth

Medical device producers in the United States and Europe continue to record impressive, profitable growth, but face challenges, according to the "Pulse Of The Industry: Medical Technology Report 2012", Ernst & Young's annual report on the industry's performance which was presented this week at  AdvaMed 2012.

"The medtech industry continues to show impressive perseverance and resilience in weathering the challenging global economic climate," said Glen Giovannetti, Ernst & Young's Global Life Sciences Leader. "Longer-term, many in the industry will face significant challenges to find sustainability against the headwinds of rising pricing pressures, expanded use of comparative effectiveness, and the ongoing efforts to find new efficiencies in the global health care system. To meet these challenges, companies will need to be as innovative in the development of new business models as they have historically been in product development."

Key findings include:

  • Revenue increases while net income jumps: Revenue for non-conglomerates in the US and Europe was $319.9 billion in 2011, up 6% from the year prior. Net income increased 14% from 2010 to 2011 to a total of $19.9 billion.

  • Fund raising is driven by debt financing. For the 12-month period ended June 30, U.S. and European public medical technology companies raised $27.4 billion, up 26% compared to the previous 12-month period. However, 80% of that capital was in the form of debt by a relatively small number of companies. Funding other than debt dropped 22% compared to the previous period.

  • Venture interest is up. Venture capital investment increased 8% in the year ending June 30, with $4.3 billion raised in the U.S. and Europe.

  • Deal making is still strong. Merger and acquisition (M&A) activity in the year ended June 30, with a total value of $35 billion.

Costs remain a big problem, however.

According to Ernst & Young, the cost of providing healthcare is increasing at an unsustainable rate globally, which is driving efficiency efforts. At the same time, an entirely new class of medical technologies defined in the report as "PI" (patient-empowering and information-leveraging) technologies is emerging. These include smartphone apps, social media platforms, and sensor-enabled smart devices.

"It would be easy for medtech companies to discount the emergence of PI technologies as having little competitive impact on their business but the history of disruptive technologies in other industries shows that they would do so at their own peril," said John Babitt, Ernst & Young's Medtech Leader for the Americas. "Companies that will be leaders in the outcomes-focused industry of tomorrow will be the ones that utilize these technologies to become more patient-centric and payer-savvy, are bold with their investment in new business models, and keenly focused on the question of how they can change the value proposition for the customer."

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