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The 17th annual edition of our Pulse of the Industry medical technology report finds the industry in a state of flux. In recent years, the medical technology (medtech) industry has performed very strongly, driven by the COVID-19 pandemic and the associated need for new non-imaging diagnostics and research-related equipment. In last year’s report, we celebrated the industry’s surge of public company revenue to more than a half trillion US dollars, as well as a third consecutive year of double-digit R&D growth. However, we also noted early indications of more challenging conditions ahead, signaled by a muted M&A market and decreasing public market valuations for companies in the sector, as well as a 30% decline in overall industry financing. This financing slump included the disappearance of special-purpose acquisition company (SPAC) deals, a sharp decline in initial public offerings (IPOs), which were down 99% in total value; and venture capital (VC), which saw a 21% drop in funding.
One year later, the head winds that were becoming evident have further intensified. Geopolitical upheaval, slow commercial and supply chain disruption recovery, a shifting regulatory environment and stubborn global inflation all have contributed to the uncertainty affecting the industry. Adding to these factors, questions are emerging around how the rise of GLP-1 (glucagon-like peptide 1) therapies might impact aspects of the sector over the longer term. However, the aging global population and the associated rise in the number of underserved chronic disease patients provide strong fundamentals for long-term growth. Moreover, the acceleration of digitalization across the industry with new advances in the power of data analytics (most notably demonstrated by the rise of artificial intelligence (AI), including the breakthrough generative AI models in 2023) opens new possibilities for the industry’s future.
The convergence of these technological advances with a heightened demand for personalized, flexible approaches to care forms the basis for a new vision of health care for the future, which we have termed the intelligent health ecosystem (IHE), a concept that we’ll explore further in this report. But ultimately, amid the shifting forces affecting the industry and the challenges and opportunities they offer, medtech has undergone a year of reset, with its performance largely returning to pre-pandemic norms. This reset leaves medtech with key strategic questions to answer.
Total revenue for medtech reached US$573 billion in 2022, as growth fell from a post-pandemic high of 16% in 2021 to just 3.5% in 2022, the lowest level since 2015. This slowing trend continued into the first half of 2023, with commercial leader (public pure-play medtechs with at least US$500 million in annual revenue) revenues essentially flat at 0.4% growth compared to the previous year. This continuation of 2022’s pattern suggests that the industry’s strong performance in 2021 could be an outlier; a one-time post-COVID-19 correction rather than a return to the trajectory of the period from 2000 to 2007, when medtech averaged 15% annual revenue growth rather than the 5% average seen from 2008 to 2020.