Global Medtech Industry Growth Continues

October 3, 2012

The emergence of patient-focused technologies is poised to improve efficiency and disrupt traditional medtech business models.

BOSTON /PRNewswire/ -- Publicly traded medtech companies in the U.S. and Europe defied the dampened growth environment of the global economy and turned in another solid performance in 2011, with revenue growth outpacing 2010 rates while delivering a third consecutive year of double-digit net income growth. Yet as the industry continues to be challenged to meet the demands of an increasingly outcomes-focused health care system, its members will need to find solutions from new customer-empowering and information-leveraging technologies, which are poised to disrupt the traditional sector business model. These and other findings are highlighted in Pulse of the industry: medical technology report 2012, the Ernst & Young annual report on the industry's performance released 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 industry findings described in Pulse of the industry include:

  • Revenue increases while net income jumps: Revenue for non-conglomerates in the U.S. and Europe totaled $319.9 billion in 2011, a 6% increase from the year prior. Net income increased a healthy 14% from 2010 to 2011 to a total of $19.9 billion.
  • Financings surge, but driven by debt financing: For the 12-month period ended June 30, 2012, U.S. and European public medtech companies raised an impressive $27.4 billion, an increase of 26% over the previous 12-month period. However, 80% of all capital raised during this time was in the form of debt by a relatively small number of companies, funding other than debt declined by 22% compared to the previous year.
  • Venture financing rises slightly: Venture capital investment increased 8% in the year ending June 30, 2012, with $4.3 billion raised in the U.S. and Europe. Venture funding increased by 11% in the U.S. during this period to $3.7 billion, while in Europe venture investment was down 5% to $676 million.
  • Deal making remains steady: Merger and acquisition activity among U.S. and European medical technology companies remained vibrant in the year ended June 30, 2012, with a total value of $35 billion. While this figure was well below the levels seen over the last two years, those years were driven by two "megadeals" of more than $10 billion.

The Rise of "PI" Technologies
The cost of providing health care is increasing at an unsustainable rate globally, which has driven the need for medtech companies to demonstrate how their products are improving efficiency and health outcomes. The Pulse of the industry report finds that the medtech industry's role in this outcomes-focused healthcare ecosystem is also being impacted by the emergence of an entirely new class of medical technologies defined in the report as patient-empowering and information-leveraging (PI) technologies. These nascent technologies, which include everything from smartphone apps and social media platforms to sensor-enabled smart devices, have the potential to both reinvent health care by providing real-time insights on a patient's health, as well as disrupting much of the traditional medical technology industry due to their potential to drive tremendous gains in efficiency.

Adoption of these technologies also has the potential to provide new sources of revenue for medtech companies and will have significant implications across the traditional medtech business model. In particular, companies will need to establish a compelling value proposition that responds to the needs of consumers and payers in addition to their traditional provider customers and redefine how they create, deliver and capture value.

"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."

Additional data and analysis of medtech industry trends from Pulse of the Industry can be found on the company's Web site.

About Ernst & Young's Global Life Sciences Center
Ernst & Young's Global Life Sciences Center brings together a worldwide team of professionals to help life sciences companies address their challenges at every stage of development. From the emerging biotech or medtech firm to the well-established, global pharmaceutical company, our industry teams bring deep experience in providing assurance, tax, transaction, and advisory services. The center works to anticipate market trends, identify implications, and develop points of view on relevant industry issues. Whether it's forming innovative alliances, improving operations, new regulations, or exploring new markets, we can give you a clear perspective on how to drive value in an increasingly complex, competitive, and risk-driven environment. It's how Ernst & Young makes a difference. For more information, email

About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transactions, and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients, and our wider communities achieve their potential.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Ltd., each of which is a separate legal entity. Ernst & Young Global Ltd., a UK company limited by guarantee, does not provide services to clients. This news release has been issued by EYGM Limited, a member of the global Ernst & Young organization that also does not provide any services to clients.

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