Following a boom in large, transformative medtech mega-mergers over the past few years, the landscape for medical device deals calmed down in 2017. Though the total number of deals in 2017 to date remains stagnant, totaling approximately 2,700 deals each year for the past four years, this year has seen a slight rise in capital raisings as the number of mergers and acquisitions continues to decline.
Despite this small uptick in capital raisings, which include equity and debt offerings, private equity, and venture financing, medtech continues to struggle with investment and venture capital compared to many other industries. Large medical device companies and investors alike are increasingly holding out for a secure return on investment before acquiring or financing smaller medical device companies and startups.
Number of medtech deals, 2013-2017
A number of factors are contributing to the stagnant investment scene in medtech. Regulatory approvals are becoming more time-consuming and challenging to acquire, particularly through the FDA, the gatekeeper to the world’s largest medical device market.
However, even a product’s market approval is no longer evidence that it will be successful. As the world’s population ages and requires more involved care, the reimbursement scene is becoming increasingly important. Like regulatory approval, favourable reimbursement is becoming more difficult to obtain. On top of these requirements, a growing focus on long-term patient outcomes and healthcare expenditure means devices must also now demonstrate that they will benefit value-based healthcare initiatives on top of the traditional safety and efficacy requirements.
Due to the restrictive path to market for devices, many larger companies are resorting to strategic acquisitions of small players who have managed to grow their technologies to a stage with positive market potential, rather than simply market approval. However, it is the small players and startups that are most vulnerable to the lack of available funding.
Moving into 2018, players focused on innovating with digital medical devices are more likely to secure investment and funding or be acquired more quickly than those focused on traditional devices, as physicians and patients alike continue to call for modern technologies.