Ey Pulse Medical Technology Report

Pulse of the industry:
Medical technology
report 2020
ey.com/lifesciences
To EY clients and friends
As EY teams began the planning for the 14th annual Pulse of
the industry report in late fall 2019, little did we imagine how
different this year would be for all of us. EY teams initial plan
was to take stock of the industry, focusing this edition on the
roughly 10-year period following the financial crisis and how
the fundamentals of the industry have evolved over that time
frame. As with the previous 13 editions, the basis for comparison
always starts in the quantitative realm. Leading with valuations,
transactions, capital allocation and investments has always been
the basis for our perspective on the industry.
As we publish this report in fall 2020, the story is much more about medtech as a
community, not an industry. While we still look to metrics and comparisons for insight, the
community aspects of our existence are where we find not only insight, but inspiration.
Confronted with the advance of this major pandemic, medtech has stepped up to the clinical
front line and played a critical role in the attempts to defuse the crisis. From mass-producing
ventilators, sterilizing equipment, face masks and other protective personal equipment, to
inventing and distributing the rapidly expanding range of diagnostic tests now reaching the
market, the industry has achieved an incredible amount in the first half of 2020. Medtech’s
work has saved lives, allowed medical facilities to keep running, enabled patients to be
treated in hospitals or at home, and overall made it possible for normal operations to be
maintained, while simultaneously also helping health systems, governments and the general
public wage a global health battle on a scale not previously seen this century.
In August 2020, Ernst & Young Global Limited co-hosted two CEO panels with our colleagues
at AdvaMed, and the first question to the group was, “what are you most proud of over
the last six months?” The groups spoke passionately about the innovation, collaboration
and determination that have characterized medtech’s response to COVID-19 pandemic.
It was clear that this community is truly connected by a universal sense of purpose in the
extraordinary care shown for patients, clinicians and employees. It is also evident that helping
to solve this crisis as a community has provided an opportunity to accelerate much needed
and lasting change across the industry.
2 | Pulse of the industry: Medical technology report 2020

So, today, our perspective is centered on the 10 years between two crises, with the second
one yet unresolved. As the ongoing high valuations for medtech in 2020 show, investors
continue to recognize the importance of medtech. The industry demonstrated its resilience
over the decade of steady growth and solid valuations, and even though 2020 looks to
have delivered a negative (though possibly very transient) financial blow to some sectors of
the industry, other areas, such as the diagnostics segment, have surged over the past few
months. Moreover, this most recent crisis will help illuminate the way to a brighter future for
the industry, by demonstrating the need to futureproof business models, strengthen supply
chains and ecosystem relationships, and accelerate the progress of digital technology and
data. The COVID-19 pandemic has shown us that we can accelerate progress in all of these
areas and that by delivering innovation through the use of data and digital technology, we
will secure the future of this industry, and our community.
We firmly believe that individuals and groups show their true colors under pressure, and
medtech has risen to the challenge of the pandemic, demonstrating its medical, economic
and societal value, and showing why it is an essential industry for the whole world. In closing,
I’d like to take the time to express a strong vote of confidence toward the industry for the vital
role it has played in the efforts to contain COVID-19 pandemic, both in the United States and
across the globe.
In this, the 14th annual Pulse of the industry report, we attempt to take stock of an
extraordinary year for the medtech industry and for the rest of the world.
Jim Welch
EY Global Medical Technology Leader
Pulse of the industry: Medical technology report 2020 | 3

Contents
06 The year in review
08 A new decade, new disruption — and a new dawn?

Where medtech stands in the Now
20 Opportunities from the crisis: where medtech is

heading in the Next and Beyond
36 Guest perspectives
Scott Whitaker, CEO & President, AdvaMed
Dr. Andre Chow, Vice President and General Manager Digital Surgery, Medtronic
Dr. Jean Nehme, Vice President of Business Development & Strategic
Partnerships, Digital Surgery, Medtronic
Mark Benson, Vice President, Medical Devices Supply Chain, Johnson & Johnson
Nicholas Galakatos, Global Head of Life Sciences, Blackstone
Aloha McBride, EY Global Health Leader
48 Databook
68 Scope of this report
70 Acknowledgments
72 Contacts
Connect with us!

Twitter: @EY_Health
ey.com/lifesciences

The year
in review

In 2019, total US and European
medtech revenues grew 6.3%, slightly
6.3% less than the 6.7% recorded in 2018.

However, during the first half of 2020,
revenues of US commercial leaders and
-5.0%
(2019) conglomerates declined 5.0%, as many (H1 2020)
medtechs were negatively impacted by
the COVID-19 pandemic.
11.5%
B
 ut the industry returned
a record US$19.6b to
shareholders in 2019.
US$19.6b
R
 &D spending in 2019 grew 11.5% (compared with
an increase of 8.1% last year), marking a return
to the double-digit rates common in the industry
before the 2007–08 financial crisis.
F
 inancing levels more than doubled from
US$57.1b
July 2019 to June 2020 compared with the
previous 12 months — with over 40% resulting
from debt financing.
US$3.2b 22%
Medtechs garnered US$3.2b in IPO A
 fter three straight years of record
values — the third highest on record — investment, venture capital funding
however, just 3 deals represented 5% fell 22%, with Q2 2020 being
of the total, and the number of deals particularly anemic.
(14) was the lowest in a decade.
US$40.5b 41%
Total M&A deal values plunged 60% The total value of non-megadeals (those
from US$67.6b the year before to under US$10b) dropped 41%, while
US$27.1b, partially reflecting the loss average deal value across the industry
of the year’s largest announced deal. shrank from US$463m in the prior
12-month period to US$167m.

A new decade,
new disruption —
and a new dawn?
Where medtech
stands in the Now

It’s too early to assess the ultimate effect of COVID-19 on
the medtech industry. Throughout this report, we have
considered some of the early signs around changes the
pandemic is currently bringing to the industry’s business
models, supply chain operations, regulatory regime,
and embrace of digital and data-led transformation.
First, however, we will take stock of the key metrics for
medtech: the industry’s financial performance, financing
situation and M&A activity. The activity seen in these
metrics across 2019 and into 2020 gives us perspective
on the state of the industry before and during the current
crisis, and it provides us with a basis to assess medtech’s
prospects after the pandemic is past.
Between the financial crisis and the pandemic:

medtech’s years of steady growth
Throughout the 2010s, the medtech industry maintained its solid financial
performance year after year. While the financial crisis of 2007 and 2008 was
a heavy blow to medtech and many other industries, the following decade
witnessed a medtech resurgence due to strong fundamentals and investors’ high
confidence in the sector (see Figure 1). Though annual growth in revenues had
yet to recapture the heights of the early years of the 21st century, 2019 saw the
industry earn one more year of respectable single-figure growth (6.3%).
In another encouraging sign, medtech’s 2019 R&D investment grew by 11.5%

compared to 8.1% in 2018, marking a return to the double-digit R&D growth rates
regularly recorded before the financial crisis. For an industry driven by research,
this is a positive sign, suggesting confidence in medtech’s ability to keep creating
innovative and profitable new products.

Figure 1. Medtech 2000–19
Pre-financial crisis Post-financial crisis
30% 24%
25% 20%
16%
Annual R&D spending growth (%)

20%
Annual revenue growth (%)
15% 12%
10% 8%
5% 4%
0% 0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
-5%
Revenue R&D
Source: EY, company reports.
Then came COVID-19. Among companies focused on elective surgeries resume and surgeons advise
procedures, the impact has been higher, patients to undergo procedures sooner
Though we don’t have full-year 2020 as patients have stayed away from rather than later with the future course
financial data to assess the impact of hospitals where COVID-19 dominated of the pandemic still unpredictable.
the pandemic (and the socioeconomic clinical priorities in the second quarter
chaos it has brought in its wake) on of 2020. By contrast, companies Beyond this, COVID-19 has brought
medtech, we can already recognize focused on diagnostics saw toplines significant opportunities, as well as
that the industry’s financials in 2020 rise significantly with the heightened challenges, in medtech. The industry
will look nothing like 2019 or any other demand the pandemic brought (see has been at the forefront of efforts
year over the previous decade. Figure 2). to fight the outbreak (see Figure 3),
raising its profile and consolidating
An analysis of Q1 and Q2 2020 However, the immediate financial its reputation as a good partner
financial reporting indicates that effects, good or bad, are only half of and “a must-have industry,” as one
roughly two-thirds of US commercial the story unfolding in 2020. While participant described it at the first
leaders (pure-play medtech companies COVID-19 has hit revenue growth, there Ernst & Young LLP/AdvaMed medtech
with more than US$500 million in are signs that the industry may rebound CEO roundtable in August 2020.
annual revenue) and conglomerates rapidly in the second half of the year. As this roundtable series revealed
have experienced an aggregate Some early data suggests a “V-shaped” (see Insights from the first and second
revenue decline of 5%. However, recovery in the elective space, as Ernst & Young LLP/AdvaMed medtech
this figure conceals wide variations. CEO roundtable below), medtech
has adapted creatively during the

Figure 2. COVID-19 impact on US medtechs* during the first half of 2020
Aggregate revenue decline is 5%.

2/3 of medtechs report revenue drop in H1 2020.
7 of the top 10 companies by revenues report H1 2020 downturns vs. H1 2019.
Eight companies, primarily … but diagnostic companies

focused on elective procedures, surged, accounting for four
saw revenues fall by 15% or of the six biggest revenue
more ... increases:
Envista Holdings: -34% Exact Sciences: +70%

Dentsply Sirona: -30% Quidel: +47%
Zimmer Biomet: -24% Dexcom: +39%
NuVasive: -18% Masimo: +24%
Source: EY and public company filings.

*Includes US-based commercial leaders and conglomerates.

Figure 3. Selected examples of medtech’s role in the COVID-19 response
As of August 2020, there

were 448 COVID-19-related
diagnostics launched in market or 232 were focused on viral
in development; 219 were from in-vitro diagnostics; 148 were
US manufacturers; 187 from antibody in-vitro diagnostics.
Europe.
There were 219 FDA-cleared 452 partnerships have been

COVID-19 tests; identified — the vast majority There are 734 drugs and
were driven by biopharmas vaccines in development (544
155 focused on diagnostic — (270), but medtechs did have drugs and 190 vaccines).
molecular PCR tests; 39 focused 56 — mostly focused on digital,
on serology. diagnostic testing development, Among these vaccines, 152 are
scaling manufacturing and preclinical; only 8 are in Phase III.
telemedicine and virtual care.
crisis, strengthening its relationships Is medtech in a position to ride out Medtech valuations rise
with its customers and accelerating the disruptions of 2020 and regain or
the progress of its next-generation even surpass its performance across
again in 2020
technologies into clinics and homes. the 2010s? Examining the industry’s
When we look at medtech’s key
most recent financial performance,
metrics in 2020 to date, one
Medtech’s response to the events of financing and M&A data gives us a
reassuring measure stands out:
2020 has important implications in at mostly affirmative answer — though not
investor confidence. Though medtech’s
least four major areas: business model without some underlying causes for
valuations fell along with the broader
evolution; supply chain resilience; concern, too.
market (bottoming out in late March
regulatory relationships; and the
2020), they recovered strongly in the
accelerated advancement of digital
“
subsequent months (see Figure 4). By
technologies that can capture, analyze
the end of August 2020, medtech’s
and use data. The impact of COVID-19
... a key driver of valuations were up 50% compared to
in each of these areas is explored
January 2019; much stronger than the
further later in this report. medtech’s high valuations rebound for broader composite indices
First, however, we turn our focus to the
was the non-imaging such as the New York Stock Exchange
industry’s fundamentals, as shown in diagnostics segment ... (NYSE) and the S&P 500 (up 15%
the data for 2019 and 2020 to date. and 40%, respectively, over the
same period).

Figure 4. Medtech’s valuations resurgent in Q2 and Q3 2020
US and European medtech market capitalization relative to leading indices
EY medtech commercial leaders EY medtech noncommercial leaders

Rock Health Digital Health Public Company Index Big pharma
NASDAQ Biotechnology Index Composite broader indices*
70%
60%
50%
40%
30%
20%
10%
-10%
-20%
-30%
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug
2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2020 2020 2020 2020 2020 2020 2020 2020
Though digital health companies imaging diagnostics segment, which Revenues: diagnostics on
rebounded even more strongly (up saw valuations rise 116% between
65%, likely due to investor excitement January 2019 and August 2020, more
the front line
over enhanced use of virtual health than twice as much as for any other
The high levels of waste in health
and other remote technologies during segment. In part, this reflects the
care spending are a matter of record,
the COVID-19 pandemic), medtech’s urgent need for new diagnostic tools
and the inefficiency (in terms of
commercial and noncommercial leaders to combat COVID-19: For instance,
cost) and ineffectiveness (in clinical
both comfortably outperformed big Quidel, saw its overall valuation jump
terms) of treating patients with a
pharmaceutical companies (which 331% between January 1, 2019 and
“one-size-fits-all” approach are widely
saw valuations rise 18% compared to June 30, 2020, partially aided by the
acknowledged. Recognition of these
January 2018) and biotech companies U.S. Food and Drug Administration’s
facts has increasingly prompted calls
(up 40%). This highlights the perceived (FDA) emergency use authorization
for a more personalized approach
reliability of medtech as an investment, (EUA) approval for its Sofia® SARS
to medical treatment. Of necessity,
free from the controversies over Antigen FIA rapid point-of-care test for
diagnostic tools are at the heart of this
pricing, for example, that generate COVID-19 in early June 2020.
new approach, since they offer means
political head winds for big pharma. Yet the strong performance of
to build a detailed and individualized
diagnostics predates the pandemic and
understanding of patient health and
When we dig deeper into these reveals an important underlying trend
numbers, it is clear that a key driver of within medtech.
medtech’s high valuations was the non-

Figure 5. Non-imaging diagnostics at the forefront in 2019
Non-imaging diagnostics led all product categories in revenue growth
Change in revenue Change in number of companies in segment
16% 2%
Percentage change in number of companies

Percentage change in revenue
12% 0%
8% -2%
4% -4%
0% -6%
Imaging Non-imaging Research and other Therapeutic devices
diagnostics equipment
Source: EY, Capital IQ and company financial statement data.

Data shown for pure-play companies only.
illness. In recent years, this vital role As we saw in the analysis of valuations, having even stronger incentives to
for diagnostics has been reflected in the non-imaging diagnostics segment avoid in-person attendance at clinics
the performance of this segment of the is booming in 2020, with COVID-19- where possible.
medtech market. related diagnostics needed in bulk on
the clinical front line. Yet COVID-19 Whether non-imaging diagnostics, and
In 2019, the non-imaging diagnostics could act as a growth driver for non- the broader medtech sector, can sustain
segment recorded 12.2% revenue imaging diagnostics in the longer term this revenue growth in the longer term
growth (see Figure 5). This would make as well. To take one example of the depends on the sector’s ability to keep
diagnostics the strongest performer 2019 performance of non-imaging innovating and bringing new products
in medtech, with therapeutic devices, diagnostics, Exact Sciences’ revenue to the market. This, in turn, depends
the next strongest, recording only surged 93% to US$876 million as use on medtech’s underlying financing.
7.7% growth. However, when Novartis’ of its Cologuard at-home colon cancer Here, the impact of COVID-19 is evident
spinoff of Alcon as a stand-alone tests doubled to 1.7 million. This in 2020.
company is accounted for (causing illustrates the growing demand both for
a large shift of revenue from the precision medicine and for individuals
conglomerates category into pure-play to be able to obtain a diagnosis
therapeutics), the therapeutic devices without attending a hospital or clinic.
segment’s growth rate climbs to 12.5% This demand will be amplified by the
for the year. situation in 2020, with individuals now

Figure 6. Medtech funding surges, but cheap capital and debt financing are the main cause
Capital raised in the US and Europe by year
Venture IPO Follow-on and other Debt
60
50
40
US$b
30
20
10
0
July 2010– July 2011– July 2012– July 2013– July 2014– July 2015– July 2016– July 2017– July 2018– July 2019–
June 2011 June 2012 June 2013 June 2014 June 2015 June 2016 June 2017 June 2018 June 2019 June 2020
Source: EY, BMO Capital Markets, Dow Jones VentureSource and Capital IQ.
Numbers may appear to be inconsistent because of rounding. Private investments in public equity included in “follow-on and other.”
Financing: major players represents either companies drawing The IPO and venture capital (VC)
into their credit reserves to allay fundraising channels saw less activity
load up on debt as financial concerns arising from the than debt and follow-on financing over
startups face uncertainty pandemic, or companies raising the same 12-month period, which
more financing to increase investment presents a challenging landscape for
Medtech’s financing levels more than in innovation. early-stage companies reliant on these
doubled to a record US$57.1 billion in financing options. Josh Makower,
the 12-month period from July 2019 However, it is clear that both debt and MD, a general partner with venture
to June 2020, compared with the follow-on fundraising (which constituted capital firm NEA, told us that while
previous 12 months (see Figure 6). roughly another US$11.8 billion – 23% “companies whose work can proceed
Over 40% of this dramatic growth was of the period funding total) was driven without being impacted by the state
a result of US$35.6 billion of public by medtech’s bigger players, rather of elective surgeries are seeing good
debt financing, fueled by historically than the smaller companies that form valuations and good financings,” others
low interest rates. In fact, a record 18 a key component of the industry’s R&D “will experience a higher challenge in
companies raised US$500 million or engine. Overall “innovation capital” obtaining capital right now and may
more, with Thermo Fisher Scientific (money raised by the industry’s need to rely on insider’s capital to
alone accounting for US$9.2 billion noncommercial leaders) slid to extend runway, or they may face down-
of the total. As yet, it is unclear to US$18.4 billion, accounting for only rounds or valuation resets if they must
what extent this rise in debt financing 32% of total funding (down from the raise externally.”
previous 10-year average of 47%).

Figure 7. Medtech IPOs were down again
US and European medical technology IPOs by period

Capital raised Number of IPOs
7.5 50
44
6 40
Capital raised in IPOs (US$b)
34
32 34
Number of IPOs
4.5 30
28
26
3.0 20 21 20
15 15 16 16 14
1.5 10
8
5
0.0 0
July 2005–
July 2006–
July 2007–
July 2008–
July 2009–
July 2010–
July 2011–
July 2012–
July 2013–
July 2014–
July 2015–
July 2016–
July 2017–
July 2018–
July 2019–
June 2006
June 2007
June 2008
June 2009
June 2010
June 2011
June 2012
June 2013
June 2014
June 2015
June 2016
June 2017
June 2018
June 2019
June 2020
Source: EY, Capital IQ, BioCentury and Dow Jones VentureSource.

While the US$3.2 billion total for IPOs In the meantime, after three straight went to UK-based CMR Surgical Limited,
was the third highest on record, just 3 years of record VC investment, the which makes the next-generation
deals constituted roughly 85% of that total for the most recent 12-month Versius surgical robotics system.
volume, and the number of deals (14) period fell by 22%, with Q2 2020 being Surgical robotics have been a standout
was the lowest in a decade (see Figure particularly painful — presumably in the therapeutic devices segment
7). The biggest IPO illustrates the trend reflecting the impact of the pandemic. in recent years, with market leaders
toward virtual health: SmileDirectClub Moreover, early-stage companies Medtronic and Johnson & Johnson
raised almost US$1.4 billion through its secured a smaller proportion of the both investing in multibillion-dollar
September 2019 IPO. SmileDirectClub total in this period (43%) than in the acquisitions in this maturing technology
has developed a “teledentistry” model previous 12-month period (52%) space (see the guest perspective from
in which consumers can use an at- (see Databook), suggesting possible Dr. Jean Nehme and Dr. Andre Chow,
home kit to make an impression of their challenges in funding early innovation. cofounders of Digital Surgery, which
teeth and then receive custom aligners Medtronic acquired in 2020).
without going to an orthodontist. The It’s notable that non-imaging
“
COVID-19 pandemic is now accelerating diagnostics, once again, have been
the demand for these types of business a major target for venture activity.
models. Yet most of the IPO volume The biggest US VC round saw ... after three straight years
in the 12-month period considered Northern California-based Karius raise
US$165 million for its Karius Test blood
of record VC investment,
here was concentrated in Q3 2019,
before COVID-19 had an impact. IPO testing technology platform, which the total for the most
activity fell precipitously in the first two combines genomics and AI to spot trace recent 12-month period
quarters of 2020. DNA marking the presence of infectious
pathogens. The top VC round overall
fell by 22% ...

M&A: will the pendulum more milestone payments (a strategy Leader; “if we as an industry get some
these companies frequently employed sense of normalcy into the fall, the high
swing back in 2021? during the aftermath of the 2007 and level of available capital could trigger an
The disruptive impact of the COVID-19 2008 financial crisis). M&A acceleration,” he continued.
outbreak is particularly evident in
the industry’s M&A performance, There are signs, however, that the This is one of the areas to watch
with M&A expenditures from July big medtech players may instead be over the coming year in medtech.
2019 to June 2020 plunging 60% contemplating a surge of acquisitions in The industry has retained investor
to US$27.1 billion compared to the the near future. A buyer’s market may confidence as reflected in its valuations
previous 12-month period (see Figure be developing as smaller, and perhaps and shows early signs of a rebounding
8). An already-low total deal value was even midsize, companies question from the COVID-19-related revenue
further reduced when Thermo Fisher whether they can survive the economic hit, with the non-imaging diagnostics
Scientific was rebuffed on its proposed uncertainty triggered by the COVID-19 segment in particular thriving. There
US$12.5 billion acquisition of Qiagen pandemic. Meanwhile, as noted, large are more mixed signals in the financing
in August 2020. Focused on molecular medtech companies have recapitalized and M&A data, suggesting the current
diagnostics, including in infectious through debt and follow-on offerings, uncertainty about the future.
disease, Qiagen saw its operating and now have substantial M&A Yet, as discussed throughout this
income jump 84% in the first six months firepower. “The industry anticipates report, there are also substantial
of 2020 due to the impact of COVID-19, an accelerated growth cycle, with reasons for medtech to be positive
leaving its shareholders reluctant companies valued at US$30 million about the future – with COVID-19’s
to accept Thermo Fisher Scientific’s to US$40 million becoming targets,” long-term impact not constraining the
enhanced offer. suggests John Babitt, EY Americas industry, but potentially driving growth
Strategy and Transactions Medtech and transformation.
The next-biggest deal – Stryker’s
US$5.4 billion proposed acquisition of
orthopedic company Wright Medical
– is under regulatory review in the US
and the UK as of September 2020.
However, the impact on M&A is not
confined to the fall in such “megadeals”
(those worth over US$10 billion): the
total value of non-megadeals has also
dropped 41%, while the average deal
value across the industry shrank to
US$167 million (from US$463 million
in the previous year).
The slowdown in M&A, IPOs and

VC funding raises concerns that
a major source of innovation will
disproportionately impact startups
and small companies that are reliant
on this capital. To sustain the cycle of
innovation, larger medtech companies
may need to consider other approaches,
such as partnerships, incubators and

Figure 8. Total deal values decline in 2019–20
M&As in the US and Europe by year

Megadeals (>US$10b) Other M&As
60 200
176 deals
163 deals
48 160
146 deals
Total deal value (US$b)
134 deals
Number of deals
36 120
101 deals
24 80
12 40
0 0
July 2015–June 2016 July 2016–June 2017 July 2017–June 2018 July 2018–June 2019 July 2019–June 2020
Source: EY, Capital IQ, Thomson ONE.

Opportunities
from the crisis:
where medtech
is heading in the
Next and Beyond

We now turn our focus to the evolution
medtech is undergoing in 2020. This
evolution is not solely a result of the
COVID-19 crisis; on the contrary,
the underlying drivers for medtech’s
transformation have been increasingly
evident in recent years, and have been
explored in recent editions of this report.
The rise of connected devices is drawing
medtech into the internet of things
and opening up new opportunities for
data-driven improvements in clinical
outcomes; growing cost constraints on
health care systems; establishing the
impetus for providers to assist medtech
in reshaping its business models and
ecosystem relationships; and seeing
patient-consumers’ increasing demands
for a more customer-centered health care
experience. These drivers of change were
all recognized by the medtech industry
prior to 2020.

However, COVID-19 has increased Changing business models 58% of them increasing it by over 50%.
the urgency for medtech to respond “It was always going to happen in five
to these drivers and to accelerate its By the end of the 1950s, the years, but instead it happened in five
transformation. The challenge of the technology for virtual health services months,” one participant told the first
COVID-19 pandemic has highlighted already existed: two-way interactive EY/AdvaMed medtech CEO roundtable,
the room for improvement in medtech’s video and voice contact, piloted by on 4 August 2020 (see Insights from
business models, supply chain NASA to monitor astronauts’ vital signs, the first EY/AdvaMed medtech CEO
systems, regulatory relationships, and was already allowing communication roundtable below).
deployment of digital and data tools. between the Norfolk State Hospital
The industry now has the chance to and the Nebraska Psychiatric Institute The lesson here is that technologies can
address these limitations and place in Omaha, 112 miles away. And yet, exist for years before external events
itself in a better position to thrive in the six decades later, at the beginning of trigger the wholesale shift toward
next and the beyond. 2020, 80% of physicians in the US were business models that can capitalize on
not using virtual health in their patient those technologies. For virtual health,
First, we consider the impact the interactions (see Figure 9). it was the COVID-19 pandemic that
pandemic has had on business models, pulled the trigger. One of the leaders in
and how medtech can capitalize on And six months after that? Ninety-five virtual health, Teladoc Health, reported
this change. percent of physicians had increased that in Q2 2020, its appointment
their use of virtual technology, with volume had grown over 200% compared
to Q2 2019.1 Within a week of this
Figure 9. The rise of telehealth
Before COVID-19, However,
of physicians did not utilize

virtual technology (i.e., of physicians said that
80% telehealth) to interact with
patients. 48%
up to 25% of patient
interactions could be better
handled virtually.
Since COVID-19,
of physicians
95%
have increased
feel patient communication
their virtual
technology is properly
58%
of physicians technology usage.
suited to complete patient
interactions and feel
58%
of those
have
increased 50%.
there is proper training to
leverage digital tools for
usage by patient interaction.
Source: EY survey data.

“
I think the shift to online commerce and remote video
interactions will have a long-lasting impact that will
change how we think about future opportunities.
deployment of limited capital resources
(see Defining the four business models
for the future). The disease manager
business model, as we describe it, is
Josh Makower, MD focused on remote care for chronic
General Partner, NEA diseases. As we’ve seen in 2020,
the need for this kind of care at a
distance has suddenly become more
earnings call, Teladoc announced it in this environment,” NEA’s Josh relevant than ever before, with patients
would acquire digital health platform Makower told us. “I think the shift to increasingly unwilling to seek care via
company Livongo for US$18.5 billion online commerce and remote video bricks-and-mortar traditional channels.
in a potentially transformative deal for interactions will have a long-lasting Particularly with the rise of diagnostics
the remote care sector (see The digital impact that will change how we think and the integration of diagnostics with
opportunity). Suddenly, the movement about future opportunities.” remote care delivery (consider the way
toward virtualized, remote-operated continuous glucose monitors are now
business models for medical care is We previously outlined the future “closing the loop” with smart insulin
accelerating. “Companies with direct-to- business model approaches we believe delivery devices to become complete
consumer or digital business models, or medtech companies will need to adopt diagnostic-therapeutic systems),
those with necessary essential services to futureproof operations against medtech is already at the forefront of
or products, are gaining momentum disruption and to enable effective delivering this new remote care model.
Figure 10. Four business models for the future
As stakeholders respond to evolving customer demands, their total market value will shift in ways that
depend on their chosen business models.
Customer High-dollar value

understanding and Disease Lifestyle
capture
relationships manager manager
How is value created?
Efficient operations Efficient

and supply chain producer
Low-dollar value
capture
Highly innovative
products and Breakthrough
services innovator
Wealthy Institutional health Mass market

individuals care systems consumers
Who demands value?

Source: EY, Brian D. Smith, The Future of Pharma (Gower Publishing Ltd, 2011).
1
Teladoc Health’s Financial Info: 2Q20 Earnings Release, 29 July 2020 (https://s21.q4cdn.com/672268105/files/doc_financials/2020/q2/EPR-Q2-2020-0729-pdf.pdf).

Lifestyle managers, too, can offer Yet not all business model change 2020; a first-in-class tool for reducing
care at a distance. Here, once again, is based on virtualization of care, pathogens in the bloodstream, even
the disruption of 2020 has shown and the business models that deliver before identification of the pathogen.3
the urgency for remote care models. remote care are not the only tools to
Worldwide, populations face the be highlighted by the events of 2020. Finally, efficient producers, too, have
challenges of maintaining mental and As new health challenges emerge, new never been as vital as in 2020, with
physical health while being cut off from breakthrough innovations are needed health systems worldwide needing
normal routines. In recognition of this, to address them: in 2020, medtech commodity equipment, from protective
the FDA lowered barriers to bringing players have aimed not only to rapidly personal equipment (PPE), ventilators
behavioral therapy devices to market design, redesign or retrofit devices that and diagnostics to many other
in April 2020, with the aim of heading can help with COVID-19 management, hospital basics, at scale and at speed.
off a potential mental health crisis.2 but also to bring forward innovative Efficient producers with robust and
This could be the moment for lifestyle offerings that can address the crisis. For agile systems for manufacturing and
managers to prove their value. one recent example, consider ExThera distribution have been at the forefront
Medical’s Seraph 100 Microbind Affinity of medtech’s efforts to mitigate the
Blood Filter, an EU-approved device disruptions caused by the pandemic.
that received its FDA EUA in August Not least among these disruptions has
been its impact on global supply chains.
Defining the four business models for the future

1. Breakthrough innovator: Developer/provider of best-in-class products and services that command high prices and are
primarily paid for by traditional health insurance. Innovative technologies such as Abbott’s MitraClip “toolbox” for structural
heart repair, or Intuitive Surgical’s da Vinci platform (and other cutting-edge robotic surgery platforms) illustrate the scope of
this business model.
2. Disease manager: Developer/provider of products and solutions that manage chronic conditions in a more personalized
way, with a focus on customer experience, convenience and maximum adherence. Companies such as Dexcom, which are
building interoperable disease management systems for diabetes patients (combining tools such as infusion pumps, smart pens,
continuous glucose monitoring systems and apps to offer the most convenient, effective all-around care), illustrate how this
business model can best offer personalized chronic disease management.
3. Lifestyle manager: Developer/provider of products and services aimed at overall health and wellness maintenance and
disease prevention, marketed directly to the consumer. Technologies such as the Apple Watch Series 4, which contains an
integrated ECG monitor, and the ever-growing number of apps focused on aspects of health maintenance and wellness — from
diet to exercise, blood-pressure monitoring, mindfulness and well-being — address this growing need.
4. Efficient producer: Developer/provider of lower-cost commodity products and services that offer the same outcomes as
more expensive alternatives, with an emphasis on a high-volume, low-margin revenue model. In other sectors, companies such
as Amazon and UPS have revolutionized distribution – medtech awaits this kind of transformation with regard to margin.
Each of these four business models has demonstrated its essential role in the medtech ecosystem during the COVID-19 crisis.
Now, medtech companies need to be more proactive and focus on the business model that can secure value for them in the long
term. As 2020 shows, the future can arrive more suddenly than expected.
2
FDA. Enforcement Policy for Digital Health Devices For Treating Psychiatric Disorders During the Coronavirus Disease 2019 (COVID-19) Public Health Emergency. April 2020. https://www.fda.gov/
media/136939/download.
3
See ExThera website (http://www.extheramedical.com/seraph-100). The study supporting the device’s potential efficacy in related to COVID-19 was published in August 2020: SW Olson, et al. Treatment
for Severe Coronavirus Disease 2019 With the Seraph-100 Microbind Affinity Blood Filter. Crit Care Explor. August 2020; 2(8): e0180. doi: 10.1097/CCE.0000000000000180.

Supply chain This intervention from the federal Yet the medtech industry has mounted
government underscored the chaos its own creative response to supply
transformation that threatened supply chain operations chain disruption, without seeking
as the COVID-19 pandemic spread in the localization of supply. One
President Trump’s “Buy American”
the early months of the year. Back in prime example is the VentConnect
executive order of August 2020,
February 2020, concerns were focused platform, launched by AdvaMed and its
pertaining to essential medicines,
on the risk to medtech supply chains members in May 2020 and intended
medical devices and their components,
with significant reliance on Chinese to link medtech firms with component
and PPE, was the latest in a succession
manufacturers. FDA Commissioner suppliers to enable and accelerate
of moves by the administration to try
Stephen Hahn noted that the agency access to components needed for
to secure the medical supply chain. On
recognizes 63 manufacturers “which production and distribution. In
14 August, the FDA for the first time
represent 72 facilities in China that August, AdvaMed expanded the
posted a list of medical devices at risk
produce essential medical devices.”5 platform (now rebranded the
of shortage or limited supply, under
Even at this stage, a backlash against MedDeviceNetwork) to cover devices
new powers granted to the agency to
the globalization of supply chains, and beyond the immediate COVID-19
help relieve device shortages associated
a drive to “onshore” manufacturing was context, including “patient monitors,
with a public health emergency (to be
evident in political rhetoric. dialysis machines and diagnostic tests,
revoked when the COVID-19 emergency
among other equipment.”6
is over.)
Figure 11. Timeline of US supply chain policy developments since COVID-19 outbreak
August 6: President Trump signs “Buy

August
American” executive order encouraging
manufacture of selected drugs and medical
devices within the US, and loosening regulations
claimed to disadvantage domestic producers. July
August 3: AdvaMed expands VentConnect into the MedDeviceNetwork,
aiming to support production of diagnostic tests, dialysis equipment
and patient monitors as well as ventilators.
June
May 6: Sec. 506J added to the Federal Food, Drug, and Cosmetic Act, giving FDA
powers to help prevent or mitigate device shortages “during, or in advance of, a
April 4: Aerospace Industries Association, AdvaMed and Google public health emergency.”
announce VentConnect portal allowing ventilator component
suppliers and manufacturers to share information.
May
April 2: President Trump expands Defense

Production Act to enable domestic
manufacturers to acquire resources
needed to build ventilators. April
March 20–25: Multiple manufacturing deals between March 28: FDA publishes
medtech and other companies, including Ventec Life guidance on 3D printing
Systems and General Motors, GE Healthcare, 3M and of ventilators.
Ford, and Medtronic and Tesla.
March
March 22: FDA waives enforcement
and inspection requirements
to allow companies to begin
manufacturing ventilators.
Source: EY, Informa.
4
Nicholas Florko, “Trump orders government to buy certain drugs solely from U.S. factories, setting up major shakeup for industry.” STAT News, 6 August 2020. https://www.statnews.com/2020/08/06/
trump-to-order-government-to-buy-certain-drugs-solely-from-u-s-factories-setting-up-major-shakeup-for-industry/.
5
FDA, Coronavirus (COVID-19) Supply Chain Update. February 2020. https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-supply-chain-update.
6
Sue Darcey, AdvaMed Expands VentConnect Platform To Bolster Medtech Supply Chain. Medtech Insight, 3 August 2020. https://medtech.pharmaintelligence.informa.com/MT142521/AdvaMed-Expands-
VentConnect-Platform-To-Bolster-Medtech-Supply-Chain.

The expansion of this platform solution In particular, participants said that the In short, once the COVID-19 pandemic
beyond the challenges of the pandemic tremendous ramping up of demand in has been managed, supply chain
underlines the fact that the supply 2020 has demonstrated to medtech challenges will remain. As business
chain issues for medtech didn’t begin companies that they are scaled for models change, new supply chain
in 2020. Industry insiders have in efficiency, not redundancy. They problems also will arise. Consider the
the past noted the inefficiencies have depended on a relatively small rise of remote care, as discussed in
associated with supply intermediaries and shared base of suppliers, often the Changing business models section.
and inflexible legacy systems, in concentrated in low-cost geographies. If care moves toward an “anytime,
addition to the lack of transparency With shutdowns restricting the ability of anywhere” model, how can medtech
for regulators and companies alike. some of these suppliers to export (and companies shift their supply chains to
Concerns around supply chain visibility with diversified suppliers being classified accommodate this change?
and efficiency were already at the as nonessential by some governments,
forefront of industry discussions, with thus losing their special exemptions to Moreover, as medical devices become
companies considering the wider use continue operating during the crisis), ever smarter and more reliant on
of analytics to address these issues, medtech companies have been hit by software and data, this will increase
reduce costs and better meet their shortages, which have impacted the the need for medtech companies
customers’ changing demands. Along areas of raw materials and low-tech to take a broader product life cycle
with supply-side changes caused by basic items, from swabs and pipettes approach to their devices. “As the
shifts in commercial models, these to O-rings and screws (by contrast, the manufacturer, once the device is placed
topics had become an important part of roundtable agreed, major components in the hospital, I have little visibility
the conversation long before this year’s have been much less problematic to into it,” one participant told the 2020
pandemic disruption. source during the disruption). One EY trusted medical device ecosystem
medtech CEO noted that in the future, roundtable. Yet manufacturers retain
Moreover, nationalistic criticism of the industry will “have to figure out ultimate responsibility over the
globalized operating models also how we can do that better, maybe in a continued security and “cyber hygiene”
preceded the pandemic, and these virtual environment” – perhaps this will of these legacy products that remain
tensions look set to continue no matter entail using digital technology and data in the market. As more and more
how COVID-19 plays out from this to track how much scale redundancy medical devices connect to the internet
point. Medtech companies are obliged suppliers have and whether they can of things, these issues will become
to assume a disrupted global political pivot toward greater production. In the ever more relevant, with supply chain
environment for the foreseeable future. longer term, the industry will need to management needing to extend beyond
accommodate the ongoing reality of product launch into the post-market
The challenges of building transparency travel restrictions between countries phase. Addressing these emerging
and resiliency into supply chain and even between US states, as our issues will involve working closely
operations are now firmly front of roundtable revealed: “a new wave of with regulatory bodies to create a new
mind for the industry following 2020’s complications is coming to travel, and we paradigm for regulating devices. This
upheaval, and these issues were need to redefine the [standard operating is another area where progress has
discussed in the second EY/AdvaMed procedures].” The industry also may been made in 2020 as a result of the
medtech CEO roundtable. Participants need to bring some manufacturing pressures of the COVID-19 crisis.
noted that even aside from the political capacity back to the US or Europe, to
pressures (which have necessitated safeguard the supply base.
constant two-way discussion between
“
companies’ supply chain and
government affairs units), the crisis has
highlighted existing limitations of the If care moves toward an “anytime, anywhere”
supply chain model.
model, how can medtech companies shift their
supply chains to accommodate this change?

A revolution in regulation The loosening of regulatory conventions the Medical Device Regulation – which
goes beyond EUAs, with the beginning will require high standards of quality
Whatever the lasting commercial of the pandemic prompting the and safety for medical devices being
impact of the pandemic, we can FDA to ease its policy controlling produced in or supplied into Europe –
see already that it has transformed X-ray, ultrasound and MRI imaging for a year.9
regulatory norms. In the US, concern systems and software; for example,
over product supply has not only led in April 2020, while issuing guidance The crisis in this respect represents an
to increased policymaker involvement relaxing restrictions on fetal and opportunity for the medtech industry.
in the supply chain (see Supply chain maternal monitoring devices, allowing Participants in our medtech CEO
transformation), but also significantly manufacturers to modify these devices roundtable (see Insights from the first
cut in the barriers to market entry, so they can be used at home.7 This drop EY/AdvaMed medtech CEO roundtable)
with the FDA authorizing over 250 in regulatory stringency is not confined lauded the “extraordinary response”
emergency use authorizations (EUAs) to the US, with Canada allowing the from FDA reviewers, “moving at warp
since February 2020 (see Figure 12). import of drugs and devices that speed” to help get new devices to market
These EUAs cover many products, aren’t strictly compliant with its own in 2020. It’s not only new products
including in vitro diagnostics and other regulatory norms during the crisis.8 that have been accelerated into the
tests, personal protective equipment Meanwhile, across the Atlantic, the EU medtech space, but also new entrants.
and ventilators, and equipment that can has deferred the implementation of Multiple companies from outside the
be repurposed as ventilators.
7
Shawn M. Schmitt, “Guidance: FDA Will Look Other Way If Manufacturers Modify Imaging Systems To Fight COVID-19.” Medtech Insight, 27 April 2020. https://medtech.pharmaintelligence.informa.com/
MT126652/Guidance-FDA-Will-Look-Other-Way-If-Manufacturers-Modify-Imaging-Systems-To-Fight-COVID19.
FDA, “Enforcement Policy for Imaging Systems During the Coronavirus Disease 2019 (COVID-19) Public Health Emergency.” April 2020. https://medtech.pharmaintelligence.informa.com/-/media/
supporting-documents/medtech-insight/2020/04/fda-imaging-systems-enforcement-policy-guidance.pdf?la=en&hash=43F02625F949FE7552D084FB149D915780917E73.
FDA, “Enforcement Policy for Non-Invasive Fetal and Maternal Monitoring Devices Used to Support Patient Monitoring During the Coronavirus Disease 2019 (COVID-19) Public Health Emergency.” April
2020. https://medtech.pharmaintelligence.informa.com/-/media/supporting-documents/medtech-insight/2020/04/fda-fetal-monitoring-enforcement-policy-guidance.pdf?la=en&hash=87B57341D501BA
1F8E9D75713A605F35C66F6D91.
8
Vibha Sharma, “Canada Allows Exceptional Drug, Device Imports To Tackle COVID-19 Shortages.” Medtech Insight, 8 April 2020. https://medtech.pharmaintelligence.informa.com/MT126552/Canada-
Allows-Exceptional-Drug-Device-Imports-To-Tackle-COVID19-Shortages.
9
Maria Rachal, “EU regulators propose 1-year MDR delay,” MedtechDive, March 2020.

sector came together with medtech In short, the opportunities of this companies as viable partners to bring
companies to meet the demand for vital situation go beyond the chance to software and analytics into the market.
equipment, with General Motors teaming produce and sell more products relevant Digital and data transformation have
up with Ventec Life Systems to build to COVID-19. More broadly, the crisis received a shot in the arm in 2020 (see
ventilators, Ford Motor Co. announcing appears to have fostered an attitude of The digital opportunity). With the buy-in
manufacturing partnerships with GE collaboration and cooperation within of regulators, medtech is well-placed to
Healthcare and 3M, and Medtronic the medtech sector, and between the continue this transformation and usher
working closely with Tesla to increase its industry and its stakeholders. The in a new era of digital, data-driven
production capacity. receptive attitude of the FDA and other smart devices that can potentially
regulatory bodies offers great scope transform the industry.
Collaboration within the sector has for the industry to shape the dialogue
“
also been facilitated by the regulators’ about how it is regulated in future.
permissive attitude in 2020, with the
U.S. Department of Justice and the Partnership is going to become an ever- The crisis appears to
Federal Trade Commission confirming more vital part of that conversation.
have fostered an attitude
that medical device suppliers can Consider the FDA’s proposed approach
collaborate during the crisis without to managing AI, which would see the of collaboration and
risking violation of antitrust laws, agency moving away from regulating cooperation within the
sharing capacity and expertise individual products toward a broader
medtech sector, and
as needed.10 and more continuous assessment of
between the industry and
its stakeholders.
Figure 12. Emergency use authorizations

Ventilators and other medical devices
80 Personal protective equipment and related devices
High-complexity molecular-based laboratory developed tests

70
In-vitro diagnostic products
60
50
Number of EUAs
40
30
20
10
February March April May June July August
Source: EY, FDA.
10
Elizabeth Orr, “DOJ: Medical Supply Firms Can Collaborate During COVID-19 Crisis.” Medtech Insight, 8 April 2020. https://medtech.pharmaintelligence.informa.com/MT126553/DOJ-Medical-Supply-
Firms-Can-Collaborate-During-COVID19-Crisis.

The digital opportunity regulatory adaptation has happened many companies have hesitated to make
during the COVID-19 crisis (see A significant investments into building the
While the medtech industry has always revolution in regulation); now, we need digital capabilities needed to access and
been built on clinical data, the digital to see that adaptation continue, to use the ever-expanding wealth of real-
world evolving around us offers far accommodate the use of data in ways world data.
broader, richer sources of data. From that can transform health care.
environmental data to lifestyle data and It may be that the events of 2020 will
real-time data on biological processes There is also the challenge of consumer conclusively demonstrate to medtech
captured inside and outside the body, willingness to share their data. Data and the broader life sciences industry
we are living through a proliferation of privacy has presented an obstacle in that digital acceleration is needed.
data that has the potential to transform the past, but the EY Future Consumer Digital technologies are key to enabling
health care. Stakeholders acknowledge Index survey, performed in April 2020, the move toward remote care models
this. They also recognize that the suggests that 56% of consumers would for chronic disease and for health
challenge now is not a lack of data, make their personal data available if it maintenance, and as such have been
but a lack of data integration: the data helped to monitor and track an infection the focus of rapidly rising demand
being generated is trapped in silos, and cluster, potentially opening an avenue during the pandemic. While medtech
there are multiple challenges to joining for new business models. valuations have performed more
it together. strongly than most other life sciences
Yet perhaps the biggest obstacle to data- sectors (see Medtech valuations rise
In part, these challenges are driven transformation of the medtech again in 2020), digital health has been
technical, and the rapid progress of business model has been the industry’s even more favored by investors, with
technology makes it likely that they own reluctance to embrace change. the Rock Health Digital Health Public
will be overcome. Other challenges While medical devices increasingly Index rising 65% between January
are regulatory. We have seen how fast incorporate software and connectivity, 2019 and August 2020.
Figure 13. Why consumers will share data
To help with disease prevention 56%
To help the environment 45%
To help benefit people in my community 42%
To help with problems such as crime 37%
To increase transparency 35%
To reduce waste 34%
To reward me for sharing 31%
To increase convenience 28%
To help companies operate more effectively 27%
To tailor goods and services to their needs 26%
None of these 14%
Source: EY Future Consumer Index.

Figure 14. Recent digital health acquisitions
Acquired Acquirer
Livongo US$18.5b (2020) Teladoc
CareFusion US$12b (2015) Becton Dickinson
Medidata Solutions US$5.8b (2019) Dassault Systèmes
Auris Health US$5.8b (2019) Johnson & Johnson
Athenahealth US$5.7b (2019) Veritas Capital
Dicerna Pharmaceuticals US$3.7b (2018) Eli Lilly
Fitbit US$2.1b (2019) Google
Flatiron Health US$1.9b (2018) Roche
Mazor Robotics US$1.3b (2018) Medtronic
Corindus Vascular Robotics US$1.1b (2019) Siemens Healthineers
Source: EY, Rock Health Digital Health Public Company Index and company reports.

Indeed, the year 2020 witnessed the August 2020 also saw another The final obstacle to embracing
largest M&A investment yet made in indication that major medtech this transformation may lie within
the digital health space (announced in companies may be ready to place the culture of medtech companies
August, it fell outside the time period their own big bets on digital health themselves, which are used to viewing
used in our M&A data in this report) capabilities, with Siemens Healthineers data as a proprietorial asset to be
when Teladoc Health announced that announcing its US$16.4 billion deal to protected rather than a resource that
it will buy Livongo for US$18.5 billion. acquire Varian Medical. While coverage can gain value from being shared.
The move prompted Forbes to write of this deal has focused primarily on However, the COVID-19 crisis has
that an “unprecedented event in digital Siemens’ bid to add radiation therapy allowed companies to work together
health history has taken place.”11 The expertise to its oncology solutions, without risking antitrust infringements
deal is a potentially transformative Varian also offers a suite of relevant (see A revolution in regulation); and as
move, creating a health tech giant and digital capabilities. As one BTIG analyst participants in our CEO roundtable told
a new high benchmark for the valuation noted, Varian’s business in recent us, being a trusted partner has become
of digital health. years “has shifted considerably” more important than ever in the past
toward software, and “adding Varian’s year (see Insights from the first EY/
Livongo provides technologies to help capabilities and products will allow AdvaMed medtech CEO roundtable).
people manage chronic conditions [Siemens] to address the issue of Greater collaboration – with competitors
such as diabetes, and through this fragmented cancer care by enabling as well as customers – built on data
acquisition, they will be available across earlier diagnosis and precise, targeted can open future growth possibilities
the 175 countries in which Teladoc therapies powered by artificial for medtech that will still be unfolding
Health is already active (instead of intelligence.”12 The deal therefore long after the COVID-19 crisis is in the
only in the US). It’s also notable that offers further suggestions of a sharp rearview mirror.
these two digital players have taken the acceleration of investment into digital
initiative to create their new platform capabilities for medtech. These digital
for themselves, rather than being capabilities will be key to unlocking the
united under a traditional medtech power of data to transform medtech
giant or Silicon Valley behemoth. and the broader health care ecosystem.
11
Chase Feiger, M.D. “Say Hello To The Largest Virtual Care Company: Telavongo, The $38 Billion Merger Between Teladoc And Livongo.” Forbes. 5 August 2020.
12
Marie Thibault, BTIG, cited in Omar Ford, “Siemens to Acquire Varian in One of the Largest Deals During the Pandemic.” Medical Device and Diagnostic Industry, 3 August 2020, https://www.mddionline.
com/business/siemens-acquire-varian-one-largest-deals-during-pandemic.

“
We’ve got technology that can
change the world … people
need our tech more than ever.

“This is an opportunity to solidify that
partnership we all talk about.
Insights from the first EY/AdvaMed medtech CEO roundtable
“None of us were trained to run However, the pandemic has of course Participants also affirmed that if 2020
companies from our dining room brought significant challenges as well offers medtech the chance to build its
tables, but now we’ve been doing it as opportunities. On the personnel side, partnerships, the industry already has
for 21 weeks,” observed one of the companies have had to balance keeping the technologies (such as AI and remote
participants at the first EY/AdvaMed employees safe while also continuing to management tools) to address the
medtech CEO roundtable, on 4 August recruit and to validate that employees current crisis: “we’ve got technology
2020. As the senior leaders (many are performing with company that can change the world … people
of whom represent members of operations inevitably disrupted. On need our tech more than ever.” The
AdvaMed’s Accel program for smaller the financial security side, smaller pace at which this technology is being
medtech companies) attending the medtech companies in general have adopted has accelerated in 2020: “it
roundtable confirmed, the COVID-19 had to do “what entrepreneurs do was always going to happen in five
crisis has caused serious disruption best: plan for uncertainty,” with the years, but instead it happened in
to the industry – but also opened market sometimes standing still and five months.”
significant opportunities. at other times speeding out of control.
The effort to survive and thrive during Yet while participants estimated that
One pre-revenue-stage medtech the ongoing uncertainty have shown, the direct impact of COVID-19 will
company, for example, adapted according to one participant, that endure for the next three to five years,
successfully when the COVID-19 “culture is everything ... Culture kept pivoting too far into the needs of the
pandemic brought a halt to its pivotal us together.” immediate crisis carries its own risks,
clinical trial in March 2020. “We with one participant warning that there
rolled with the situation optimistically, If medtech’s strong culture can help is “a better chance than not you’re
and were fortunate that the timing bring it through the crisis, then going to flame out” by following this
was good for our remote monitoring potentially it can also help the industry’s approach. Instead, the participants
diagnostic,” reflected a representative customers, presently still reeling from agreed, medtech companies need to be
from this company, who explained that the pandemic. Participants argued that “driving with one foot on each pedal,
by requesting a broader indication for medtech companies can best seize the the gas and the brake” so that they
its product and working with the FDA, it opportunities of this pivotal moment maintain the strength of their core
succeeded in filing a 510(k) application by strengthening relationships with business model, while simultaneously
ahead of schedule. If approved as their ecosystem partners: “this is an seizing the opportunities of this
expected, the company will effectively opportunity to solidify that partnership moment for the industry.
be commercializing one year in advance we all talk about; this is the chance
of its expectations. Success stories like to make it real. We’ll be talking about
this have been enabled by ingenuity on 2020 for years. ‘What was your
the part of companies but also, it should experience? How did they do by you?’”
be noted, by the flexibility of regulators.

“Companies that scramble back to how
things used to be are going to be the losers.
Insights from the second EY/AdvaMed medtech CEO roundtable
On 26 August 2020, the EY the collective effort they have made However, unanswered questions remain
and AdvaMed teams convened alongside their stakeholders to battle about just how fundamentally the
representatives from some of the the effects of COVID-19, they also industry’s business models will change
medtech industry’s leading players – but emphasized the scale of the challenges in the longer term. The temptation will
one consistent theme in their discussion remaining. The wake of the pandemic be to try to restore the status quo ante
was that the events of 2020 had already will bring new obstacles, from the as soon as possible, but this could be a
brought these companies together increased financial burden on hospitals big error. As one participant put it, the
as never before. Medtech, which one and health care systems now obliged to “conventional way of thinking is a big
participant described as “on the front “clean and sterilize like never before,” to obstacle for us as an industry.” Or, as
lines from the absolute beginning” of the cumulative health impact on patients another asserted more baldly, “post-
the COVID-19 outbreak, mounted a joint deterred from attending elective, but COVID-19, companies that scramble
response to the virus. They continued nevertheless urgent, surgeries by the back to how things used to be are going
by noting that competitors who aggressive public health messaging to be the losers.”
would usually “fight tooth and nail for urging those with chronic diseases to
contracts” came together in a “unified avoid hospitals and clinics. This is because customer interactions
effort” to supply the PPE, ventilators and and customer expectations have also
diagnostics the US and the wider world Digital technologies offer remote care shifted as a result of the crisis and the
as the pandemic spread. options that can help “to massively ways health care has adapted to it:
accelerate the utilization of medicine “the days of going in and expecting
Pandemic pressure has also brought and our interaction with customers,” customers to give us a couple of hours
the industry closer to its stakeholders, and participants again noted the rapidity are over,” this participant argued. Short,
participants agreed, with one adding with which the industry has adopted focused, often virtual conversations
that a shift in attitudes is evident on the digital approaches in 2020. While the may increasingly become the norm,
customer side: if, for example, IT staff level of digital adoption achieved during allowing clinicians to focus more on
in hospitals prior to COVID-19 “weren’t the peak months of the crisis may not patients rather than spending time with
confrontational exactly, now there is real be sustained, participants agreed that medtech representatives. The companies
receptivity; the speed is so different.” there will be no mass rollback: “patient that grasp these necessary shifts to
Another participant called out the interaction with health care systems is standard operating procedures and focus
“remarkable” evolution of the industry’s going to change, too; that’s going to on becoming their customers’ trusted
relationship with the FDA in recent stay, and it’s going to be a more efficient partners can gain significant advantages
years, emphasizing the regulator’s role system long term.” Companies have in trust and access in the future.
in enabling the industry’s response to indeed become more efficient through
the COVID-19 pandemic. the use of virtual operations. Whereas
a year ago, “inviting a customer to a
Yet while the industry’s representatives virtual demo would have been insulting,”
asserted their justifiable pride in now companies are doing just this every
their companies, their employees and day, one participant pointed out.

“
Companies have indeed
become more efficient
through the use of
virtual operations.

GUEST PERSPECTIVE
The full impact of the COVID-19 pandemic on patients

and the health care system has yet to unfold, but from the
vantage point of the medical technology industry, the effort
to alleviate that impact has been clear and consistent. It’s
been centered on speed, innovation and resilience in the
name of saving lives. From the earliest days of the pandemic,
AdvaMed member companies have poured every resource
into combating the coronavirus and delivering exceptional
care. As a result, patients and providers are better equipped
than ever to fight back.
Scott Whitaker
Production of personal protective equipment (PPE) is
President and CEO topping 100% capacity. One AdvaMed member company
AdvaMed aims to quadruple global output of N95 respirator masks to
2 billion per year by December 2020, and triple production
for the US market to more than 95 million per month.
Ventilator production has been just as impressive.

Manufacturing power in the US has increased more than
tenfold, with 10,000 ventilators coming off the line each
week (compared to 700 per week before the pandemic).
The trend continues with the growth of diagnostic testing

capabilities. In May, diagnostics innovators were shipping
around 600,000 molecular tests per day, and by mid-
Mobilizing medtech September leading IVD companies were shipping 1.5 million
tests per day. In all, since March, diagnostics innovators have
to combat COVID-19 shipped more than 200 million COVID-19 tests — molecular,
NGS, serology/antibody and antigen — to the hospitals,
and protect public

health clinics and community testing sites that need them.
And we expect the ramp up of point-of-care antigen tests to
continue, anticipating more than 100 million antigen tests,
health per month, to be shipped nationwide by the end of fall 2020.
These numbers speak for themselves. Medtech mobilized

with historic speed. We are so proud of this industry,
and we’re grateful at AdvaMed to have played a role in
helping our industry to save and improve lives throughout
this pandemic.
As AdvaMed members were busy producing PPE, we at

AdvaMed worked to open global supply chains, eliminate
tariffs and lift export limits, so that product could reach its
destination as quickly and efficiently as possible.
36 | Pulse of the industry: Medical technology report 2020 — Guest perspective

As AdvaMed members were ramping up ventilator production, Specifically, HHS has maintained the public health emergency
AdvaMed, along with Google and the Aerospace Industry status, which removes major regulatory and access barriers
Association and other partners, launched a crucial online and expedites the manufacture and distribution of medical
platform – VentConnect – to link ventilator manufacturers technologies. FDA has worked tirelessly to review and issue
with component suppliers in partnerships to help scale the emergency use authorizations for diagnostic tests, ventilators,
creation and distribution of the devices. We later expanded PPE, infusion pumps, remote and wearable monitoring
the platform – now known as MedDeviceNetwork – to include devices, and more. CMS has issued temporary waivers and
other critical medtech. notices of enforcement discretion that have been essential to
expanding telehealth and outpatient services along with other
Then, as diagnostic companies raced to develop diagnostic aspects of COVID-19 response and patient care.
tests, AdvaMed and AdvaMedDx stood up a comprehensive,
national COVID-19 Diagnostic Supply Registry to support These are just a few examples among hundreds. Along
state and federal efforts to better understand the state of with our member companies, we continue to assess how
test manufacturing. the pandemic has driven changes in health care policy and
health care delivery at a pace that would have been hard to
imagine even six months ago. How can we keep that pace
From production drives to policy measures
up? How can we spur it along even further? Each year, we
Throughout the crisis, we have continued to drive policy look to the EY Pulse of the industry report to help shed
measures in support of the broader medical technology light on the developments and trends that are shaping the
community: most importantly, securing economic relief medical technology field and advancing patient care. That
for companies struggling under the disruption of so-called insight has never been more important; we’re in a strong
elective procedures and other care not related to COVID-19. position to harness our unique circumstances and drive new,
The Coronavirus Aid, Relief, and Economic Security Act (also transformative business and health care models that center
known as the CARES Act) included federal funding for small on innovative medical technologies. As I’m writing this, we still
and midsize medical technology companies and federal grants don’t have a clear idea of when this pandemic will end or when
for providers to cover expenses and lost revenue. With that we can all return to normal – or even what normal might look
aid secured, we pivoted to the source of the problem: in like on the other side. But the passion and dedication I have
collaboration with other leading health care associations, we seen from the medtech industry over the past several months
released “Re-entry Guidance for Health Care Facilities and makes me confident we will get there together and emerge
Medical Device Representatives” to help hospitals and other stronger than ever.
health care centers return to surgery safely and responsibly.
“
All of this work was accomplished hand in glove with Congress
and the Trump administration. We worked closely with the
Department of Health and Human Services (HHS), Food We are so proud of this industry,
and Drug Administration (FDA) and Centers for Medicare & and we’re grateful at AdvaMed to
Medicaid Services (CMS), among other relevant agencies,
have played a role in helping our
to support flexible policies for pandemic response and to
encourage the transitional and long-term continuation of industry to save and improve lives
those policies. This will enable us to improve patient access to throughout this pandemic.
medical technology even after the current crisis has passed.
Pulse of the industry: Medical technology report 2020 — Guest perspective | 37

GUEST PERSPECTIVE
Mapping the art

of surgery, on a
global scale
Dr. Andre Chow Surgery is seen by many as an art. Yet we look at it as an

algorithmic, step-by-step process.
Vice President and General Manager,
That perspective — plus our aspiration to take surgical training
Digital Surgery
to the next level and reduce surgical variability — puts us at
Medtronic the center of the next big frontier in surgery. That is, the
application of data and analytics in one of the most cost-
intensive areas of a hospital: the operating room (OR).
Before we go any further, it’s important to understand why we

do what we do. And why it’s important to patients, clinicians,
hospitals and health care as a whole. Only then can we fully
appreciate the role data and analytics can and must play in the
inevitable, exciting future of surgery. And the incredible value it
can bring.
Focused on solving big problems

We’re grounded by our fundamental belief that every patient
everywhere deserves access to quality surgical care.
Sadly, this is not the case today.
Studies show that as many as 5 billion people lack access to

Dr. Jean Nehme basic surgical treatment — mostly in underdeveloped countries.1
Even in highly developed countries like the United States or our
Vice President of Business Development & home, the United Kingdom, surgical care varies greatly.2–3
Strategic Partnerships, Digital Surgery
Medtronic

There’s broad recognition of this reality across all health care The Touch Surgery™ app may accelerate surgical proficiency.4
stakeholders, from medical societies and clinicians to payors
and patients. Indeed, we’ve all either asked or been asked: who It’s also helping in our new reality with COVID-19, as many
is the best surgeon for my case? hospital systems restructure operations. There are great
advantages in having mobile-based tools that can support
The thinking behind this question is that a surgeon with the surgeons on procedures in a simple, straightforward way.
most experience is the best choice. That may be generally
true. But that kind of experience can take 20 or more years to
Training computers and shaping the
develop, and even then we must still contend with the inherent
variability of surgery.
future of surgery
With our surgical map rapidly gaining traction — today the
We wondered: is it possible to harness surgeons’ collective Touch Surgery™ app is used by more than 300,000
experience and expertise, and use it to accelerate and optimize surgeons — we were compelled to take things to the next level.
surgical training and potentially reduce variability? To further our work to reduce surgical variability.
The answer is yes. We began to use our surgical map to train computers, and
suddenly we were on the cutting edge in surgical robotics. And
the question became: what do we train the computer to do?
You cannot improve what you cannot measure
Surgical training methods tend to be very siloed and incredibly We came back to our focus — to create digital solutions that can
variable. Surgeons can learn how to do the same operation solve problems that contribute to surgical variability — and the
a different way every day, even within the same hospital. answers became clear.
There were also no tools allowing a surgeon to review their
performance, like an elite athlete would review a game tape. In all of this, we cannot lose sight of the importance of
simplicity. After all, the true potential of any technology is only
Realizing you cannot improve what you cannot measure, we fully realized when it is easy to use.
first aimed to create a standardized way to share knowledge
among different surgeons, by codifying the surgical process. With that principle in mind, we set out to solve another problem
for surgeons: making it easier to record, store, share and
In doing so, we had moved from the pure training space into analyze surgical videos.
the surgical analytics space. We had built a 4D map structure
around surgical data, codifying the steps of the surgical We took a cumbersome process and essentially made it
procedure into three spatial dimensions, plus time. This map effortless. A smart computer for the OR, the DS1 records
offered an instructional algorithm for training surgeons. surgical videos from an endoscope and stores them on the
cloud, providing surgeons and hospitals secure access on
This robust library of surgical training simulations and surgical mobile phones or computers.
videos lives in the Touch Surgery™ mobile app, an academically
accredited mobile training platform for surgery.

GUEST PERSPECTIVE
What’s novel and critically important is that the DS1 uses The bigger picture
artificial intelligence to automatically anonymize any footage
If we can properly track a patient through their entire surgical
that could potentially include protected health information.
journey from diagnosis to discharge — with data — we’ll
understand all the levers we can pull to improve outcomes
Add to that ability to generate analytics from the case — made
and efficiency.
possible by our Touch Surgery™ Enterprise software — and you
have a powerful tool at your fingertips.
That will be one of the big keys to value-based models. And it
has applications far beyond the OR. Indeed, we believe data
The robot is just the beginning and analytics has the potential to optimize the patient care
continuum across all areas of care and care settings.
Now that we’re part of the Surgical Robotics operating
unit at Medtronic, we’re incredibly excited to integrate data
That’s one of the many reasons we’re incredibly excited to be
and analytics into our robotic-assisted surgery platform
part of Medtronic, to partner with teams across the business
in development.
and have an even greater impact on health care globally.
The robot provides an interface between surgeons and patients,
Here’s another big one: trust.
with software that can augment the actions and decisions that
a surgeon takes during an operation. While the opportunities
As with any technology that is integrated into patient
seem limitless within robotics, it’s important to note that data
care — whether used to treat the patient or not — there is a
and analytics has applications in laparoscopic surgery today.
sacred trust that must be earned, nurtured and protected.
And Medtronic is a leader in that space.
We consider it both a great privilege and responsibility, and
we take it seriously.
Now, at the intersection of surgical data, artificial intelligence,
visualization and robotics, we’re blazing new trails for this next
Medtronic doesn’t just share that perspective; it’s codified into
big frontier in surgery, working to develop a robust pipeline
the organizational DNA, through its Mission. And, we’d argue,
of data and analytics solutions that will integrate with our
that’s why it’s the world’s leading medical technology, services
robotic-assisted surgery platform and be available for use in
and solutions company; because we have great people that
laparoscopic surgery, too.
make great products for a great purpose — to alleviate pain,
restore health and extend life — and never lose sight of that.
Ultimately, our vision is that data-based surgery can reduce
variability and produce positive outcomes, predictably — for
Now, when you add pioneering data and analytics solutions
more patients around the world.
and capabilities to a medical technology portfolio built over 60
years, the possibilities seem even greater. And we couldn’t be
more excited about that.
1
Meara JG, Greenberg SLM. The Lancet Commission on Global Surgery Global surgery 2030: evidence and solutions for achieving health, welfare and economic development.
Surg. 2015;157(5):834–835. doi: 10.1016/j.surg.2015.02.009.
2
Birkmeyer JD, Finks JF, O’Reilly A, et al. Surgical skill and complication rates after bariatric surgery. N Engl J Med. 2013;369(15):1434–1442. doi: 10.1056/
NEJMsa1300625.
3
Ibrahim AM, Ghaferi AA, Thumma JR, Dimick JB. Variation in outcomes at bariatric surgery centers of excellence. JAMA Surg. 2017;152(7):629–636. doi: 10.1001/
jamasurg.2017.0542.
4
Swathikan Chidambaram, Simon Erridge, Daniel Leff, Sanjay Purkayastha. A randomized controlled trial of skills transfer: from touch surgery to laparoscopic cholecystectomy.
J Surg. Res. 2019;234:217–223. doi: 10.1016/j.jss.2018.09.042.

GUEST PERSPECTIVE
At Johnson & Johnson, we have demonstrated resilience

in maintaining business continuity throughout the global
COVID-19 pandemic. Past challenges, such as Hurricane
Maria in 2017, have taught us about the kinds of teamwork,
capabilities and resource infrastructure needed to anticipate,
mitigate and overcome potential major disruptions to our
medical devices supply chain. There have been significant
challenges in 2020, such as the high volatility in supply and
demand planning due to fluctuations in elective surgeries.
Mark Benson However, by sticking with proven, clearly defined sales
and operations planning and financial processes, we have
Vice President, Medical Devices managed to keep our programs on track: around 85% of our
Supply Chain new product innovations, for example, have seen no delays
Johnson & Johnson of any kind. We continued to meet dynamic customer and
patient needs with high-quality products and services, while
safeguarding the health and safety of our employees.
Throughout the crisis, we’ve stayed true to our Credo, which

places the highest emphasis on protecting our people. Our
efforts to protect our workforce went beyond validating that
they had PPE and maintaining exemplary safety standards in
our facilities, to offering complimentary telehealth and access
to mental well-being training and webinars, among many
other measures. In Juarez, Mexico, for example, we rolled out
Resiliency in an additional private health insurance plan to our employees.
times of crisis We have also been able to assist in the wider societal effort
to combat the pandemic. Amid early concern about potential
ventilator shortages, one company approached us with the
IP and design for a product that splits airflow, allowing a
ventilator to provide air to two or more patients at a time.
Through collaboration with Prisma Health and Jabil, we were
able to leverage the 3D manufacturing technology, which
moved us from concept to launch in about 10 days. It was
incredible to see what we were able to deliver.

Innovating the supply chain Future opportunities to evolve
Johnson & Johnson is in a unique position, with our businesses the business model
diversified across pharmaceuticals and consumer health as Ultimately, we need to keep our focus on the unmet needs
well as medical devices. Thus, our supply chain strategy was and the transformational innovation that can really improve
coordinated across the enterprise, enabling us to meet the outcomes. We need to identify the newer technologies that
challenges we faced this year. As one aspect of this strategy, can truly make a difference. But to get the maximum value,
we repurposed a project team to focus on maintaining business we don’t just need the technologies; we also need to pursue
continuity and establishing the reliability of our supplier base. supply chain innovation and business model innovation, and
put all of these pieces together.
We recognize that the near future will bring further
macroeconomic and geopolitical pressures, and we may, The robotics and digital surgery space is a perfect example.
for example, need to include more stockpiling or more local- We’ve invested heavily in that space, but it isn’t just a question
sourcing (or dual-sourcing) elements in our supply chain of putting the right equipment out there. You have to build
planning in order to meet local governments’ needs. Fortunately, a strong and credible support infrastructure around the
by learning the lessons of 2020, we are also managing to equipment. Take our VELYS Digital Surgery system, which will
accelerate our supply chain agenda in certain key areas. be a platform of connected technologies intended to elevate
the orthopedic surgery experience. Yes, the robotic-assisted
We see significant opportunities in data and digital solution is important, but the intelligent system will include
technologies, and the past year has allowed us to speed up technology that spans the entire care continuum and relies on
the advance in these fields. For example, our salesforce did data and learning to inform operative decisions before, during
an incredible job at connecting with hospitals and supporting and after surgery. Therefore, we have an opportunity to offer
them, which has brought us closer to customer data an enhanced customer and patient solution, linking it back to
around procedures and surgeries. This has really helped us the supply chain, with the data and the predictive analytics
strengthen our partnerships with hospitals, understand what that help plan each step of the surgical approach. If you can
they need and what is happening in the market, and improve join these pieces together, it becomes almost a new business
our demand planning. model, offering a wide breadth of possibilities to innovate how
you support the doctors and the patients in the surgeries.
We’ve also accelerated our touchless supply chain concept,
which focuses on understanding which procedures are There are many elements to bring together, but we have shown
scheduled and verifying that we send in the appropriate in the past year that our core processes are strong enough to
products for the specific procedure and the specific patient. meet these challenges. By continuing to enable collaboration
With orthopedic surgery, for example, you need to send in across the enterprise, aligning on our approach to investments
a huge range of instruments. By identifying exactly what is and trade-offs, mobilizing the organization to “fail forward” and
needed, we can slim down that inventory, improve efficiency maintaining our focus on new market opportunities, we are
and speed up surgery. confident we can continue to deliver for our customers long
after the disruptions of 2020 are in the past.
Our touchless supply chain concept involves working out how
to apply technology and digital enablement across the supply
chain. We’re accelerating investment in these areas, because
doing the right thing for the customer in the long term means
getting our supply chain operations right.

GUEST PERSPECTIVE
At Blackstone Life Sciences (Blackstone), we remain

committed to helping bring novel medical devices and
therapies to patients in need of new innovations and
treatments. The fundamental problem that we’re trying to
solve in the life sciences is there are many more products in
late-stage development than there is capital available to
fund them.
The late-stage development of a product is the most

Nicholas Galakatos expensive phase of development, with average costs ranging
from US$100 million to over US$500 million. Private capital
Global Head of Life Sciences is playing a critical role by helping advance and develop
products and medicines that otherwise may not have been
Blackstone
adequately funded.
Partnering to drive innovation in chronic

disease treatments
There is a high demand for new therapies and products in
areas such as oncology and cardiovascular disease, two of
the leading causes of death in the United States and in the
world. With innovation continuing at a rapid pace, and the
cost of product development growing, there are many more
innovative products in need of funding than there is
Funding life-saving available capital.
medtech innovation New innovations such as genomics, gene therapies, RNA

interference (RNAi) therapeutics and big data will impact
this investment landscape. For example, companies such
as Alnylam and Novartis are pioneering new, innovative
medicines like inclisiran, an innovative, twice-a-year,
subcutaneously injected RNAi therapeutic. If approved,
inclisiran is expected to help patients lower LDL cholesterol,
which is a major risk factor for cardiovascular disease, the
single biggest global cause of mortality.

More broadly, however, the US and global population is Point-of-care and low-cost home diagnostics are enabling the
aging, so that megatrend will have an increasing impact on trend toward remote delivery of care, as patients can generate
our world, the medical technology industry and the overall their own high-quality diagnostic data (ranging from blood
investment landscape. As people continue to take a more pressure readings to saliva tests) without visiting a physical
active role in their care, as well as the care of loved ones, office. Greater patient fluency with data, including patient-
medical technologies that enable simplicity and greater ease generated statistics (ranging from data generated by medical
of use — while providing better outcomes for patients — will be devices to genetic data captured via increasingly widespread
compelling areas of development. genetic testing), is also an important factor. Patients continue
to take an active role in monitoring their health minute by
Our partnership with Medtronic (announced in June 2020), minute through implantable and wearable devices. This data
for example, was conceived to enable the development of should result in better outcomes for patients and greater
important diabetes products that otherwise may not have understanding of the pathophysiology of human disease.
been funded. The strategic imperatives of this collaboration
reflect Blackstone’s previous experience with the many Of course, we continue to see consumer habits redefining
pharmaceutical and biotechnology companies with whom health care practices: the expectation is that medical
we partnered during the past decade. We expect that this technology should increasingly integrate seamlessly with
strategic partnership model will flourish in medtech, and our mobile devices to provide faster detection, better-quality data
pioneering deal with Medtronic will be replicated to bring more and improved long-term outcomes. We see an expanded role
important products to the patients who need them. for medical technology in all aspects of the trends accelerated
by the COVID-19 pandemic.
The rise of remote health care during the

COVID-19 pandemic, and the opportunities
for medtech
The COVID-19 pandemic has reshaped many long-term
considerations in health care, including where care is
provided, who is providing it and what role medical technology
plays. Better implantable devices that last longer and require
“Private capital is playing a critical
role by helping advance and
develop products and medicines
fewer follow-up visits will be increasingly important, as will
diagnostics and monitoring technologies that provide greater that otherwise may not have
accuracy and real-time data for patients and caregivers. been adequately funded.
Patients are also participating more in managing their
health care through an increasing number of distributed
platforms. Telemedicine and online platforms are gaining
momentum as many individuals prefer the ease and privacy of
these modalities.

GUEST PERSPECTIVE
The future of health is changing rapidly as health systems

move beyond digital, beyond connected, to embracing an
intelligent, smart health ecosystem.
EY teams see that technology-enabled innovation is

accelerating and is giving rise to the care models of
tomorrow — many of which are imaginable today. Technologies
that enable, automate and engage consumers differently
make possible a suite of new health solutions around
Aloha McBride well-being, remote care, smart homes and communities.
Health care is shifting to bring care to the patient, rather
EY Global Health Leader than the patient to care, and this applies whether the person
is at home, in the hospital or anywhere in between.
Interconnecting people, the environment and infrastructure

as a unified intelligent, data optimized system of care is the
point where health becomes smart. This opens up a realm of
possibilities as health heads into the space where the virtual
and the physical worlds converge. Moreover, as integrated
care platforms incorporate social determinant, sensor and
wearable data along with patient health information into
algorithms, a personalized, smart care experience is possible.
This is an important shift, because in the wider environment
the world is fast becoming smart — smart cities, cars,
Accelerating the utilities and homes leverage the internet of things, data and
intelligent connected systems to enable economic, social and
hyperconnected environmental sustainability.
Smarter health systems create extensive and integrated
smart health system ecosystems that support improvements in consumer and

workforce experiences, better care outcomes and greater
by seamlessly access to health care services. Health systems can increase

productivity and efficiency, provide better care to more people
integrating physical
and eventually proactively manage population health.
and virtual care

As we discuss in our newly released research paper, across • Telehealth and telemedicine, triage tools and symptom
the globe, COVID-19 has exposed health systems’ reliance checkers are key to the rearrangement of the production
on in-person care delivery. The pandemic has driven the function of health care. Self-management of disease,
health industry to the tipping point of digital transformation. a dynamic connected ecosystem for safer medication
In meeting an immediate need due to COVID-19 by rapidly management, and nudging consumer and physician
standing up digital services, the health industry has in fact behavior change all address some of the root causes of
created the foundations of a digital and smart system. The low consumer engagement, adherence to treatment and
lessons learned from the COVID-19 pandemic make the workflow challenges.
transition to smart a more urgent priority than it may have
• AI and natural language processing analytics will
been, even just a short time ago.
support the sheer volume and complexity of heterogeneous
health data that is central to the new integrated data
One silver lining of the pandemic is that around the world,
environment.
health systems have taken a significant step toward delivering
a more integrated, seamless and smarter health care It is abundantly clear that the future of health is smart and
experience. It has challenged preconceived notions of how that advances in smart technology, smart algorithms and
health care needs to be delivered and has eliminated existing smarter care models will shape the way that care is delivered
barriers to digital health adoption. Health systems and and experienced. This new frontier enables us to deliver the
physicians have learned how to successfully deliver remote right insights to the right people at the right time. And this
care, and they intend to do so in the future as an integral leads to smarter, better informed and more cost-effective care
part of their service mix. Consumers have seen firsthand how for providers and consumers.
health technologies can simplify, enhance and personalize
their care experiences, and they will increasingly demand such
care in the future.
The medtech industry has a significant role to play as

health care becomes further decentralized and virtual care
consolidates as a core service in a digital-first delivery model.
“It is abundantly clear that the
future of health is smart and
that advances in smart
• Smart, pervasive health systems arise through a distributed
network of hyperconnected interoperable devices and technology, smart algorithms
technologies — wearables, mobile monitoring, human and smarter care models will
activity recognition and non-contact monitoring of chronic shape the way that care is
health conditions are but a few areas of strength.
delivered and experienced.

Databook
48 | Pulse of the industry 2020——Databook

industry 2020 Databook
Pulse of the industry 2020 — Databook | 49
50 | Pulse of the industry: Medical technology report 2020 — Databook
Financial performance
Medical technology at a glance
(US$b, data for pure-play companies except where indicated)
Public company data 2019 2018 Change % change
Revenues $429.8 $404.3 $25.5 6%
• Conglomerates $167.6 $165.9 $1.6 1%
• Pure-play companies $262.2 $238.4 $23.9 10%
• Commercial leaders $243.5 $220.8 $22.7 10%
• Noncommercial leaders $18.7 $17.6 $1.2 7%
R&D expense $21.2 $19.0 $2.2 12%
Net income $28.5 $20.5 $8.0 39%
Market capitalization $1,399.4 $1,045.2 $354.2 34%
Number of employees 912,300 838,900 73,400 9%
Number of public companies 440 441 (1) -0.2%

Numbers may appear to be inconsistent due to rounding.
Data shown for US and European public companies.
Market capitalization data is shown for 31 December 2019 and 31 December 2018.
• Overall industry revenue growth slightly dropped to 6.3% in • Across the industry, cumulative bottom lines grew even
2019 from 6.7% in 2019. Across all pure-play companies, bigger in 2019 compared to 2018 (39% vs. 28%).
revenues were up 10.0% (vs. 9.1% the previous year). US$5.9 billion of this US$8 billion increase in net income
came from just three companies (Boston Scientific, Zimmer
• Conglomerates’ revenue growth dropped from 3.3% to
Biomet and Bio-Rad) – and was mostly driven by accounting
1.0% between 2018 and 2019. This was largely the result
charges, credits and other adjustments (similar to 2018). In
of Novartis spinning out its Alcon division, and the largest
all, 61% of commercial leaders and 47% of noncommercial
conglomerate (and third-largest player overall), Johnson
leaders saw improved profits.
& Johnson’s Medical Devices & Diagnostics business,
experiencing a 3.8% decrease in sales to US$26.0 billion. • The 11.5% growth in R&D surpassed 8.1% the previous
year, with 59% of companies increasing R&D investment
• Noncommercial leaders saw 6.6% growth, up from 3.7% the
(including 73% of commercial leaders).
previous year, but only 65% of these companies overall grew
their top line. • The industry increased its employee headcount by
8.7%, after a 6.5% drop the previous year, with 76% of
• As in previous years, commercial leaders were at the
noncommercial leaders and 85% of commercial leaders
forefront, with revenue growth at 10.3% (up marginally from
adding or maintaining employee numbers.
9.6% the prior year). In all, 91% of commercial leaders grew
their top lines in 2019 — 10 of them by more than 15%.
Pulse of the industry: Medical technology report 2020 — Databook | 51

Commercial leaders welcomed five new additions
US and EU medtech public company revenues
US commercial leaders EU commercial leaders Number of commercial leaders
Other US public companies Other EU public companies
500 70
400 66
Number of commercial leaders

Revenue (US$b)
300 62
200 58
100 54
0 50
2013 2014 2015 2016 2017 2018 2019
Source: EY and Capital IQ.

Commercial leaders are companies with revenues >= US$500m.
• U
 S public medtech companies accounted for 62% of the • Envista Holdings: Dental spinout from Danaher, with
industry’s total size, with revenues rising 8.1% (their fourth revenues of US$2.8 billion
consecutive year of growth) to US$266.3 billion, in spite of
• Alcon: US$7.5 billion-revenue ophthalmic spinout
a cumulative 1.6% foreign exchange rates negative impact
from Novartis
across the 10 largest pure-plays.
• SmileDirectClub: Staged medtech’s largest IPO in 2019
• European public companies recorded a 3.6% revenue rise, to
and commands US$750 million in revenues
US$163.5 billion.
• Penumbra: Neurovascular devices player that crossed the
• Overall, pure-play commercial leaders continue to account
commercial leader threshold with 23% organic growth,
for a majority (56%) of total industry revenue. The
bringing its annual revenues to US$547 million.
cumulative revenues for the commercial leaders grew 56%
between 2013 and 2019, compared to 12% growth for all • Natus Medical: Disappeared from the group as its
other companies. revenues fell below US$500 million
• There were 68 commercial leaders in 2019, with five

additions since 2018, including:
• Exact Sciences: Grew its revenues 93% (to US$876 million),

largely as a result of doubling the use of its Pfizer-partnered
Cologuard at-home colon cancer tests to 1.7 million

Dexcom and ResMed joined the list of biggest market movers
Top 10 changes in pure-play market capitalizations, H2 2015–H1 2020 (US$b)
Market cap as of Market cap as of Market

Company CAGR
30 June 2020 1 July 2015 cap change
Thermo Fisher Scientific 143.1 52.1 91.0 22%
Intuitive Surgical 66.4 17.9 48.5 30%
Becton Dickinson and Company 70.8 30.0 40.8 19%
Stryker 67.6 36.4 31.3 13%
Dexcom 37.4 6.3 31.1 43%
Edwards Lifesciences 42.8 15.4 27.4 23%
Boston Scientific 50.0 23.9 26.2 16%
Illumina 54.4 31.8 22.6 11%
IDEXX Laboratories 28.0 5.9 22.1 37%
ResMed 27.8 7.8 20.0 29%

CAGR = compound annual growth rate.
• Thermo Fisher Scientific saw the largest five-year increase Dexcom, which has seen its market cap hit US$37.4 billion.
in its public valuation, driven largely by a series of Dexcom’s G6 continuous glucose monitoring system has
acquisitions (including Patheon in 2017 and FEI in 2016) driven its stock sevenfold higher in the roughly two years
to bolster its strong organic growth; however, its planned since its launch.
acquisition of Qiagen, announced in March 2020, fell
• IDEXX Laboratories, which offers a broad range of animal
through this year. Becton Dickinson (which acquired C.R.
health diagnostic and information technology-based
Bard in 2017) is the only other company among the biggest
products and services, also joins the biggest movers. IDEXX
market-cap movers to have boosted its valuation primarily
is one of many diagnostics firms soaring in value: Quidel, for
through M&A.
example, has seen its stock rise 331% with the FDA issuing
• Stryker has largely grown through smaller acquisitions and an EUA for its Lyra SARS-CoV-2 Assay rapid point-of-care
organic means; its proposed US$5.4 billion acquisition of test two days after the World Health Organization officially
fellow orthopedic company, Wright Medical (announced in declared COVID-19 a pandemic.
November 2019, but still awaiting regulatory approval) will
• In all, diagnostic company valuations have risen
be its largest deal in at least the past decade.
116% between January 2019 and August 2020, far
• Companies joining the list of biggest movers include outperforming the other segments of the medtech industry:
ResMed, a San Diego-based provider of cloud-connectable research and other equipment valuations rose by 67%,
devices treating respiratory conditions, including sleep therapeutic devices by 40% and imaging by 13%.
apnea and chronic obstructive pulmonary disease, and

Medtech outperformed the broader indices
US and European medtech market capitalization relative to leading indices
EY medtech commercial leaders EY medtech noncommercial leaders

Rock Health Digital Health Public Company Index Big pharma
NASDAQ Biotechnology Index Composite broader indices*
70%
60%
50%
40%
30%
20%
10%
-10%
-20%
-30%
Jan Feb Mar Apr May June July Aug Sep Oct Nov
2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019
Source: EY and Capital IQ.

Charts include companies that were active on 22 March 2020.
*Composite broader indices refers to the daily average of leading US and European indices: Russell 3000, Dow Jones Industrial Average,
NYSE, S&P 500, CAC -40, DAX and FTSE 100.

v Dec Jan Feb Mar Apr May June July Aug
9 2019 2020 2020 2020 2020 2020 2020 2020 2020

Capital allocation
Cash returned to shareholders rises once again
M&A expenses R&D expenses
Cash returned to shareholders Cash returned to shareholders as a % of (R&D + M&A)
100 75%
80 60%
Cash returned to shareholders

60 45%
US$b
40 30%
20 15%
0 0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
• While R&D spending rose to a 10-year high of • Of the 10 largest medtechs, 8 offered stock buybacks or
US$17.8 billion (compared to the previous 10-year paid dividends. Market leader Medtronic returned
average of US$11.4 billion) in 2019, commercial US$4.2 billion, compared to US$2.4 billion invested in R&D,
leaders increased the percentage of their cash returned with second-ranked Thermo Fisher Scientific returning
to stakeholders for the second year in a row. US$1.8 billion (and spending US$1.0 billion on R&D).
However, 6 of the other top 10 companies did spend more
• Stock buybacks and dividends equaled 51% of the total
on R&D than they returned to shareholders.
invested in growth activities (i.e., for every US$2 spent
on R&D or M&A, more than US$1 was returned to
shareholders) over the period. Though the US$19.6 billion
going back to shareholders was a record, it was roughly in
line with the previous 10-year average of 48%.

New device approvals
U.S. Food and Drug Administration medical device approvals
Number of 501(k) clearances Forecasted number of 501(k) clearances for H2 2020

Number of PMA approvals Forecasted number of PMA approvals for H2 2020
3,500 50
2,800 40
Number of 510(k) clearances
Number of PMA approvals

2,100 30
1,400 20
700 10
0 0
2013 2014 2015 2016 2017 2018 2019 2020*
*Data through June 2020 for 510 (k) clearances and approvals.
Source: EY, Dow Jones VentureSource and Capital IQ.
• At the end of the first half of 2020, the industry was on • If the industry maintains this rate in 2020, this will indicate
course to achieve approximately the same number of pre- that the FDA’s reviewing processes have not been negatively
market approvals and 510(k) clearances as in 2019. affected by the pandemic (concerns were raised about
whether stretched regulatory capacity could cause delays
• Both pre-market approvals and 510(k) figures have shown
this year).
only slight (negative) change between 2018 and 2020,
suggesting a stable level of innovation and new product • It should also be noted that the figures do not take account
launches within the industry. of the large number of emergency use authorizations
issued by the regulator in 2020 to address urgent
COVID-19-related needs (see Figure 12 in the report and
accompanying discussion).

COVID-19 negatively impacted early-stage VC funding
US and European early-stage VC rounds >US$5m
Number of early-stage rounds Percentage of VC investment going to early-stage medtechs
Percentage of VC investment going to early-stage medtechs

200 55%
160 44%
Number of early-stage rounds
120 33%
80 22%
40 11%
0 0%
July 2012– July 2013– July 2014– July 2015– July 2016– July 2017– July 2018– July 2019–
June 2013 June 2014 June 2015 June 2016 June 2017 June 2018 June 2019 June 2020
Source: EY, Dow Jones VentureSource and Capital IQ.

Early-stage rounds are seed-, first- and second-round VC investments.
• T
 he US$6.6 billion raised in VC financing was the lowest • Just 43% of all VC dollars (US$2.9 billion) went toward
since 2015 and 2016, following three consecutive years early-stage companies, down from US$4.4 billion (52% of
of record VC investment. A slowdown in VC funding was the total) the previous year.
evident in Q2 2020 – as of now, it remains to be seen if
this is a transient impact of COVID-19 or a more durable
downturn resulting from the pandemic.

Digital platform and diagnostic companies were among top venture targets
Top US and European venture rounds, July 2019–June 2020
Gross raised
Company Region Product type (disease) Quarter Round type
(US$m)
Therapeutic devices (non-

CMR Surgical United Kingdom 240 Q3 2019 Late stage
disease-specific)
Karius US - Northern California Non-imaging diagnostics 165 Q1 2020 Early stage
Freenome US - Northern California Non-imaging diagnostics 160 Q3 2019 Early stage
INSIGHTEC Israel Therapeutic devices (multiple) 150 Q1 2020 Late stage
Therapeutic devices
Element Science US - Northern California 146 Q1 2020 Late stage
(cardiovascular/vascular)
Outset Medical US - Northern California Therapeutic devices (renal) 125 Q1 2020 Late stage
Vayyar Imaging Israel Therapeutic devices (ophthalmic) 109 Q4 2019 Late stage
RefleXion Medical US - Northern California Therapeutic devices (oncology) 100 Q2 2020 Late stage
GenapSys US - Northern California Research and other equipment 90 Q4 2019 Late stage
Laboratory for
US - Southern California Non-imaging diagnostics 86 Q4 2019 Early stage
Advanced Medicine
Sonendo US - Southern California Therapeutic devices (dental) 85 Q1 2020 Late stage
Imperative Care US - Northern California Therapeutic devices (neurology) 85 Q4 2019 Late stage
Rodenstock Germany Therapeutic devices (ophthalmic) 84 Q2 2020 Early stage
Pulmonx US - Northern California Therapeutic devices (respiratory) 83 Q2 2020 Late stage
Zap Surgical
US - Northern California Therapeutic devices (oncology) 81 Q1 2020 Early stage
Systems
Therapeutic devices
Impulse Dynamics US - New Jersey 80 Q4 2019 Late stage

• CMR Surgical, which won a CE mark for its Versius surgical • Freenome, also combining blood testing and machine
robotic system in March 2020, achieved European learning (in this case, with the aim of early cancer
medtech’s largest-ever private financing round, and the detection), recorded the third-largest round, with backers
largest of the July 2019 to June 2020 period overall. The including Google Ventures, Verily Life Science and oncology
investment attention on CMR Surgical follows the significant pharma leader Roche. Laboratory for Advanced Medicine,
M&A activity in the surgical robotic space last year. another AI/blood-test company targeting early cancer
detection, was also among the top 10 funding rounds.
• Non-imaging diagnostic companies were also prominent
among the biggest funding rounds. Karius, which uses AI • The emphasis on new digital platforms and diagnostics saw
and genomics to identify traces of infectious pathogen therapeutic devices taking a back seat. Nevertheless, Israel’s
DNA in blood samples, raised US$165 million. Vision Fund Insightec generated US$150 million for its ultrasound
2, Japanese conglomerate Softbank’s second technology- system for treating Parkinson’s disease essential tremor,
focused VC megafund, was the leading backer. and Element Science’s cardioverter defibrillator technology
was also prominent, with Google again investing.

The top three IPOs accounted for 85% of all funding
US and European IPOs, July 2019–June 2020
Gross raised
Company Ticker Region Product type (disease) Quarter
(US$m)
SmileDirectClub SDC US - Tennessee Therapeutic devices (dental) 1,346 Q3 2019
Envista Holdings NVST US - Southern California Therapeutic devices (dental) 677 Q3 2019
GVS GVS Italy Therapeutic devices (respiratory) 642 Q2 2020
Therapeutic devices
Inari Medical NARI US - Southern California 179 Q2 2020
InMode INMD Israel Therapeutic devices (aesthetics) 77 Q3 2019
Castle Biosciences CSTL US - Texas Non-imaging diagnostics 74 Q3 2019
Exagen XGN US - Southern California Non-imaging diagnostics 58 Q3 2019
TELA Bio TELA US - Pennsylvania Therapeutic devices (wound care) 52 Q4 2019
Optomed OPTOMED Finland Imaging 35 Q4 2019
Inspecs Group SPEC United Kingdom Therapeutic devices (ophthalmic) 29 Q1 2020
Imricor Medical Therapeutic devices

IMR US - Minnesota 8 Q3 2019
Systems (cardiovascular/vascular)
Qlife Holding AB QLIFE Sweden Non-imaging diagnostics 5 Q1 2020
Monivent AB MONI Sweden Therapeutic devices (respiratory) 2 Q1 2020
Carbiotix AB CRBX Sweden Non-imaging diagnostics 1 Q4 2019
Source: EY, BMO Capital Markets and Capital IQ.
• T
 he total of 14 IPOs between July 2019 and June 2020 was • Alongside GVS, which manufactures biohazard masks
the lowest in any 12-month period since the 2009 to 2010 and filter components for ventilators and has thrived
period; the cumulative total raised, US$3.2 billion, was during the pandemic, the dental companies accounted for
lower than the previous two years’ totals, but still well above US$2.7 billion of the IPO total. Only two IPOs were
any other year since before the financial crisis. executed in Q2 2020, with GVS’ maneuver so far an
exception in the market.
• The 14 IPOs were equally divided between the US and Europe.
However, the seven US IPOs generated US$2.4 billion, • Yet again, non-imaging diagnostic companies were
compared to US$792 million for the seven European offers. prominent in this area of the market, with four going public.
Among these were Castle Biosciences, which manufactures
• The two largest IPOs were executed by dental companies,
the DecisionDx test for personalized genomic information in
SmileDirectClub and Envista Holdings. SmileDirectClub,
an oncology (melanoma) setting.
which generated 42% of the year’s IPO total itself, is
focused on disrupting the traditional dental industry with
its teledentistry offering, while Envista is a Danaher spinout
that already holds a significant share in the implants,
orthodontics and digital imaging markets.

California was once again the epicenter of medtech funding
Capital raised by leading US and European regions excluding debt, July 2019–June 2020
4
Massachusetts Northern California
Total equity capital raised (US$b)
Southern California
2
Pennsylvania
1
Israel
New York
France UK
Sweden
Switzerland
0
0 0.5 1.0 1.5 2.0 2.5
Venture capital raised (US$b)
Size of each circle shows relative number of financings per region.

• T
 he US remains dominant within venture funding, • W
 ithin the US, California dominated in terms of both
generating 71% of the total VC fundraising. This compares equity capital raised (US$5.7 billion), and VC raised
to a US share of 88% (US$50.4 billion) in total non-debt (US$2.6 billion). Northern California accounted for
medtech financing, with the US providing 94% of the debt US$3.0 billion of the equity and was also the leading
financing, 85% of the follow-on financing and 75% of source of VC financing, with US$1.8 billion raised;
the IPO dollars. Southern California, generating US$755 million, was
the second-largest VC financing source.
• E
 urope contributed US$6.8 billion in total toward medtech
financing in the past year. Israeli medtech companies • M
 assachusetts-based medtech companies raised the biggest
generated an impressive overall US$622 million in VC equity total (US$3.3 billion), but only the fifth-largest VC
financing, while UK-based companies brought in total (US$416 million).
US$456 million in VC and US$639 million in total.

Stryker was active in the market for transactions
Select US and European M&As, July 2019–June 2020
Acquiring Acquired Value

Location Location Buyer’s deal driver
company company (US$m)
Wright Medical
Stryker US - Michigan Netherlands 5,400 Build scale (orthopedic)
Group
Build scale (non-
Exact Sciences US - Wisconsin Genomic Health US - California 2,800
imaging diagnostics)
Baring Private
Hong Kong Lumenis Israel 1,200 Diversification (aesthetics)
Equity Asia
Build scale (research and
Agilent Technologies US - California BioTek Instruments US - Vermont 1,170
other equipment)
Siemens Medical Corindus Vascular
US - Pennsylvania US - Massachusetts 1,100 Diversification (robotics)
Solutions USA Robotics
Roper Technologies Build scale (research and
AMETEK US - Pennsylvania US - California 925
(Gatan division) other equipment)
Cantel Medical US - New Jersey Hu-Friedy US - Illinois 775 Build scale (dental)
Danaher (FortéBio
US - District Build scale (research and
Sartorius Germany and SoloHill 750
of Columbia other equipment)
businesses)
Recipharm Holdings UK Consort Medical UK 652 Build scale (respiratory)
Altaris Capital 3M (Kindeva
US - New York US - Minnesota 650 Diversification (drug delivery)
Partners Drug Delivery)
Zambon Italy Breath Therapeutics Germany 559 Build scale (respiratory)
Laborie Medical
Canada Clinical Innovations US - Utah 525 Build scale (women’s health)
Technologies
Mobius Imaging/
Stryker US - Michigan US - Massachusetts 500 Build scale (imaging/robotics)
GYS Tech
Glaukos US - California Avedro US - Massachusetts 500 Build scale (ophthalmic)
Progenics
Lantheus Holdings US - Massachusetts US - New York 500 Diversification (biopharma)
Pharmaceuticals
Source: EY, Capital IQ and Thomson ONE.

• While the total number of announced M&As over • Non-imaging diagnostics plays were, again, at the forefront
US$10 million jumped 12% in the July 2019 to June 2020 in the M&A space. Exact Sciences’ acquisition of Genomic
period compared to the previous 12 months (163 deals vs. Health (which closed in November 2019) will allow it to
146), every other indicator slid significantly, with the total combine its colorectal cancer testing with Genomic Health’s
value of M&A activity dropping from US$67.6 billion to Oncotype DX gene expression tests, adding scope and scale,
US$27.1 billion, and average deal size down 49% from with the combined company operating in 90 countries.
US$463 million to US$167 million.
• The value of M&A also fell sharply in the second half of
• The total could slump further if the Stryker acquisition of the year compared to the first half, suggesting a negative
Wright Medical fails to close; the deal was announced in impact from the COVID-19 pandemic, which is partly
November 2019, but as of late August 2020 it remains disguised in the full-year figures. In the second half of 2019,
pending and faces regulatory issues in the UK (where medtech closed 69 M&A deals worth US$22.2 billion. In
concerns linger about the fact that the deal will give Stryker the first half of 2020, the number of deals was down
90% of the total ankle replacement prostheses market). slightly at 65, but the value of the deals fell precipitously,
to US$5.1 billion.
• Stryker was the most active among the top medtech
companies, with three acquisitions (two among the year’s • Nevertheless, the first week of August 2020 saw two
highest-value deals). The Wright deal will place Stryker megadeals announced, perhaps signaling a reversal of
among the market leaders in implants for the treatment of this trend. Teladoc Health acquired Livongo (see The
bone fractures as well as joint replacements. Meanwhile, digital opportunity for more discussion), while Siemens
its acquisition of Mobius Imaging and its sister company, Healthineers moved deeper into oncology by taking out
GYS Tech, doubles down on the early US$1.68 billion bet radiotherapy hardware and software developer Varian
Stryker put on the robotic surgical market when it acquired Medical Systems for US$16.4 billion. This raises the
Mako Surgical in 2013. prospect that the industry may now be ready to deploy
some of its debt-financed firepower in more aggressive
• By contrast, many traditional acquirers, such as Abbott,
M&A deals.
Becton Dickinson, GE and Johnson & Johnson, made
no significant M&A deals, and Medtronic made a single • Siemens’ 2019 acquisition of Corindus Vascular Robotics’
acquisition for US$30 million (AV Medical). This reflects the minimally invasive platform for vascular therapeutics is
fact that the traditional, therapeutic device market presently also notable, with robotic systems among the few areas of
seems less dynamic than other medtech segments. therapeutic devices still perceived as representing major
market opportunities (witness also Stryker’s deal with
Mobius and CMR Surgical’s financing performance in the
top venture rounds).

The use of milestone payments slightly decreased
Milestone payments in US and European medtech M&As
Number of deals with milestones Percentage of M&As with milestone payments
40 24%
Percentage of M&As with milestone payments

22%
19%
30 18%
Number of M&As
20 13% 12%
9% 10%
10 6%
34 12 22 19 16
0 0%
Milestone share in US and European medtech M&As
Total value of milestones Share of total value
4 40%
38%
35% 36%
3 30% 30%
Total deal value (US$b)
Share of total value
2
21%
20%
1 10%
1.0 1.2 2.0 3.7 0.9

0 0%

• Just 10% of M&A deals (16 in total) involved milestone • Only the Stryker and Mobius Imaging deal (with an upfront
payments, down from 13% in the previous 12 months and US$370 million supplemented by US$130 million in
22% the year before that. The total value of deals with milestones), and Atricure’s acquisition of SentrelHEART
milestones dropped to US$910 million, down 75% compared (US$40 million upfront and US$260 million in milestones)
to the previous year. witnessed milestone agreements worth over US$100 million.

Scope of
this report

Defining medical technology
In this report, unless otherwise noted, In addition to product groups, this report
medical technology (medtech) companies tracks the performance of conglomerate Conglomerate companies
are defined as companies that design companies that derive a significant part of
and manufacture medical technology their revenues from medical technologies. United States
equipment and supplies and are Although we classify conglomerate • 3M: Health Care
headquartered within the United States or medtech divisions by product group (e.g., • Abbott: Diagnostics and
Europe. The definition includes therapeutic GE Healthcare into “Imaging” and Abbott Medical Devices
device, diagnostic, drug delivery and into “Therapeutic devices”), we report • Agilent Technologies: Life
analytical/life sciences tools and digital their results separately from pure-play Sciences & Applied Markets
health companies. The definition excludes companies. This is because, excepting and Diagnostics & Genomics
distributors and service providers, such revenue results, conglomerates do not • Baxter: Renal Care, Medication
Delivery, Advanced Surgery
as contract research organizations or report full financial numbers for their
and Acute Therapies
contract manufacturing organizations. All medtech divisions.
• Corning: Life Sciences
publicly traded medtech companies are
For the purposes of this report, the global • Danaher: Life Sciences
classified as belonging to one of five broad and Diagnostics
product groups: data represent combined metrics from
• General Electric: GE Healthcare
US and European medtech companies;
• IDEXX: Health & Science
• Imaging: companies developing Israel’s data are analyzed as part of the
• Johnson & Johnson: Medical
products used to diagnose or monitor European market. Foreign exchange
Devices & Diagnostics
conditions via imaging technologies, rates converted from local currencies to
including products such as MRI US dollars are calculated on a blended Europe
machines, computed tomography and annual rate. Where possible, data are • Agfa-Gevaert: Agfa HealthCare
X-ray imaging equipment, and optical analyzed across a range of dimensions • Allergan: Medical Devices
biopsy systems including product group (e.g., “imaging” • Zeiss: Carl Zeiss Meditec
or “therapeutic device”), therapeutic • DSM: Medical
• Non-imaging diagnostics: companies area focus (e.g., “oncology” or • Dräger: Medical
developing products used to diagnose “cardiovascular”), company ownership • Eckert & Ziegler: Medizintechnik
or monitor conditions via non-imaging (e.g., public or private) and revenue • Fresenius: Medical Devices
technologies, which can include patient thresholds. Our taxonomy sometimes • GN Store Nord: ReSound
monitoring and in-vitro testing equipment segregates companies into thinly • Halma: Medical
populated categories, making it difficult to • Jenoptik: Medical Technology
• Research and other equipment:
provide statistically significant results. • Merck KGaA: MilliporeSigma
companies developing equipment
• Royal Philips: Philips Healthcare
used for research or other purposes, As part of the dealmaking evaluation, • Lumibird Group: Quantel Medical
including analytical and life sciences the EY team’s analysis tracks the digital • Roche: Roche Diagnostics
tools, specialized laboratory equipment alliances and acquisitions signed by • Sanofi: Genzyme Biosurgery
and furniture leading pureplay and conglomerate • Semperit: Sempermed
medtechs by therapeutic area, technology • Smiths Group: Smiths Medical
• Therapeutic devices: companies
capability (e.g., sensors or artificial
developing products used to treat
intelligence) and strategic purpose.
patients, including therapeutic medical
Direct investments by medtechs in digital
devices, tools or
health companies have been excluded
• Other: companies developing products from this analysis.
that do not fit in any of the above
categories; digital health companies are
categorized in this product group

Acknowledgments

Project leadership Data analysis
James Evans, EY Global Health Sciences Rishivar Mukherjee collected, organized
& Wellness Senior Analyst, served as and analyzed the research included in
managing editor responsible for content this year’s report. He was assisted by
development, including the co-creation of Tanya Mehra.
the report’s articles and data analysis.
Ehren Meditz, Ernst & Young LLP Editing assistance

Senior Editor–Writer, coauthored the main
Blythe Randolph copy edited and
article, “A new decade, new disruption — and
proofread the publication. Her patience,
a new dawn? Where medtech stands in
hard work and attention to detail were
the Now.”
unparalleled.
Jason Hillenbach, EY Global Health
Sciences & Wellness Knowledge Leader, led
the analysis of industry trends, developed Design
the data book and provided project Soon Ham served as lead designer for this
management over the entire report. project — his first time supporting Pulse.
This publication would not have
the same look and feel without his
James and Jason would like to recognize exceptional creativity.
James Welch, EY Global Medical Technology
Leader; John Babitt, EY Global Medical
Technology Strategy and Transactions PR and marketing
Leader; Arda Ural, EY Americas Health
Sciences & Wellness Leader; and Pamela
Heidi Osmundsen and Christa Sullivan
led the marketing and public
Spence, EY Global Health Sciences &
relations efforts.
Wellness Leader, for their strategic guidance
and editorial contributions.

Contact us
EY Global Health Sciences & Wellness Leader Pamela Spence [email protected] +44 207 951 3523
EY Global Medical Technology Leader James Welch [email protected] +1 312 879 3827
EY Global Medical Technology Strategy and Transactions Leader John Babitt [email protected] +1 612 371 6704
EY Americas Health Sciences & Wellness Leader Arda Ural [email protected] +1 212 773 8409
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United Kingdom London Dan Mathews [email protected] +44 20 7197 9375
Susan Thomas [email protected] +44 20 7951 3753
United States Boston Kevin Casey [email protected] +1 617 585 1817
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Chicago James Welch [email protected] +1 312 879 3827
Houston Carole Faig [email protected] +1 713 750 1535
Minneapolis William Miller [email protected] +1 612 371 6984
New York/New Jersey Ambar Boodhoo [email protected] +1 212 773 9567
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San Francisco Bay Area Rich Ramko [email protected] +1 650 802 4518

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08 A new decade, new disruption — and a new dawn?

20 Opportunities from the crisis: where medtech is

Nicholas Galakatos, Global Head of Life Sciences, Blackstone

Aloha McBride, EY Global Health Leader

68 Scope of this report

Connect with us!

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6.3% less than the 6.7% recorded in 2018.

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Between the financial crisis and the pandemic:

In another encouraging sign, medtech’s 2019 R&D investment grew by 11.5%

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Pre-financial crisis Post-financial crisis

Annual R&D spending growth (%)

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Aggregate revenue decline is 5%.

Eight companies, primarily … but diagnostic companies

Envista Holdings: -34% Exact Sciences: +70%

Source: EY and public company filings.

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As of August 2020, there

There were 219 FDA-cleared 452 partnerships have been

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US and European medtech market capitalization relative to leading indices

EY medtech commercial leaders EY medtech noncommercial leaders

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Non-imaging diagnostics led all product categories in revenue growth

Change in revenue Change in number of companies in segment

Percentage change in number of companies

Source: EY, Capital IQ and company financial statement data.

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Capital raised in the US and Europe by year

Venture IPO Follow-on and other Debt

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US and European medical technology IPOs by period

Source: EY, Capital IQ, BioCentury and Dow Jones VentureSource.

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The slowdown in M&A, IPOs and

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M&As in the US and Europe by year

Source: EY, Capital IQ, Thomson ONE.

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Figure 9. The rise of telehealth

Before COVID-19, However,

of physicians did not utilize

Source: EY survey data.

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Figure 10. Four business models for the future

Customer High-dollar value

Efficient operations Efficient

Wealthy Institutional health Mass market