Uncategorized

Will tighter credit slow medical technology innovation?

Medical technology is one of the most innovative sectors in the U.S. economy. The market is fueled by aging populations, expanding chronic conditions, and a forecasted growth in demand for companion diagnostics to use in concert with personalized, targeted therapies.

In its detailed update, Pulse of the industry: US medical technology report 2008, Ernst & Young describes the industry, its opportunities and challenges.

In summary: U.S. med-tech still leads the world, but the larger economy could compromise both the U.S. lead in the sector as well as health innovations.

Who are the medical technology companies? They include medical device, diagnostic, drug delivery and analytical/life science tool companies. In 2008, there are 301 such companies, which fell by 12 in the past year. Within the 301 are 14 conglomerates: 3M, Abbott, Agilent, Allergan, Baxter, BMS: ConvaTec and Medical Imaging, Cardinal Health, Danaher, GE Healthcare, Hospira, Johnson & Johnson,Kimberly–Clark, Pall, and Teleflex Medical.

As shown in the chart above, there are five segments in the sector, the largest of which is therapeutic — companies that develop products to treat patients. Other segments include diagnostic imaging and diagnostic non-imaging, research equipment (e.g., tools like lab equipment), and finally those that do ‘other’ things.

Therapeutic devices comprise over one-half of med tech, and 57% of industry revenues. Within therapeutic med tech, by far the largest therapeutic category is cardiovascular/vascular, with 42 of the 158 companies in the space. Other major categories are orthopedic, hematology/renal, aesthetics, oncology, and products that cover multiple conditions.

E&Y reports that med tech industry innovation cycles have been shortening, and consolidation/M&A/acquisitions have been busy. New entrants are in the space, especially private equity funds. VC and public equity, too, have supported the med tech market.

Jane’s Hot Points: Medical technology provides advanced jobs that pay 49% more per worker than the average manufacturing job, according to Advamed, the industry’s advocacy group.

While the industry drivers such as an aging population and expanding chronic conditions continue to be the ‘things we know we know’ in forecasting this market, the thing we know we don’t know is how the severely contracted credit markets will play out for this sector.

VCs have continued to fund these innovative companies in 2008. However, public equity has dried up. How will the med tech sector remain innovative, globally competitive, and continue to create the sort of ‘good jobs’ that they provide in the larger U.S. economy. After the day with the largest single drop in the Dow — a loss of $1 trillion to investors-at-large — there is cause for concern.

Livongo’s Post Ad Banner 728*90

4
Leave a Reply

4 Comment threads
0 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
4 Comment authors
Melissa WardChris WoodheadrbarDeron S. Recent comment authors
newest oldest most voted
Melissa Ward
Guest
Melissa Ward

I would like to find out information about the home care agency services and how this economy right now is affecting this industry. Where do you think it is going?

Chris Woodhead
Guest
Chris Woodhead

By Chris Woodhead, Cincom Systems
Healthcare cannot be imune from the ills of the global financial system and this must inevitable have an impact on the resources available for innovation and development. Improvements in the management of the revenue cycle, bad debts and write offs could have a major impact on the financial stability of the sector. The amount written off could provide free healthcare for over 25m Americans…………

rbar
Guest
rbar

I skimmed over the report that was linked to, and did not find anything supporting the summary/claim: “U.S. med-tech still leads the world”. Is there anything I missed? Now, even if the US med-tech industry does lead the world, one should ask: by what parameters? If it is just by (profit or research) Dollars or number of patents, that may be misleading. What really would count is the number of useful true innovations. It might very well be that the US is the leader here, but reading medical journals, I am surprised how much technology comes from Europe. In the… Read more »

Deron S.
Guest

We have seen quite a bit of innovation in healthcare in our lifetime. Is it possible that it has caused an unhealthy preoccupation for some in the industry? We will always need innovation, but we have to be careful to not let it distract us from getting the basics right. I’m not sure a break in the frenetic pace of healthcare innovation is a bad thing. We have system problems that we cannot innovate our way out of. I’d like to see our healthcare system refocus its vast resources on solving some of the nagging problems that we face.