State of the MedTech Industry in 2023

• Focus on Core Business: Focus is primarily on core segments and “doing more with less” and supporting growth across specialty segments and returning value to shareholders, through a capital allocation mix of organic growth, dividends, and opportunistic buybacks. Companies that are sitting on cash or can access capital at better rates will have the opportunity to do more M&A’s as the overall valuations have climbed down significantly. 
• Investment Direction on Internal Alignment: Top companies are planning to embrace digital technologies and pursue cost-cutting strategies, streamlining operations and introducing AI-based tools and systems.
• Core Problem: The problem for the industry was not the top line growth, but the overall margins. The net margins are declining from several decades and with inflation there is sustained pressure on the margins.
• For Distributors and Partners in Key Markets: Inflation has been a major drag leading to material reductions in profitability. The increase in sustained competitive intensity through lean-ness only reduces the ability to adapt to higher input costs, thus increasing operational expenses and reducing margins.
• + Trend: Accelerated chronic disease diagnoses support scale expansion, while innovations in specialty drugs and devices, site-of-care shifts, and technology advancements create inherent opportunity for market expansion.
• + Trend: The aging population is a global demographic trend driving the demand for healthcare products and services. As the population ages, there is an increased need for more precise diagnostics and personalised treatments, these areas are experiencing higher growth rates.
• + Trend: The growing awareness of health and preventive medicine is leading to a greater emphasis on research and development of new drugs and therapies.
• Short-term Risk: Delayed product launches, competitive pressures, and supply chain disruptions are going to continue to eat into the margins and provide headwinds for the overall growth (and more specifically sustainable growth).
• Short-term Risk: Generally, the industry has shown growth, however the growth has slowed down due to ongoing business risk and inflationary pressures adding to the operational expenses throughout the industry, particularly in the developed markets.
• Short-term Risk: The surge in medical-device sales fueled by post-Covid procedures may be at risk of plateauing as postponed surgeries are completed.
• Short-Term Risk: In the immediate term, companies are investing in inflation mitigation and supply chain resilience while, in the longer term, capital is being allocated towards optimising and expanding the strategic product portfolio, accelerating new care-to-home solutions, and cost optimization respectively.
• Medium to Long-Term Risk: Overall across the industry there are high debt levels owing to historic M&A activities and historic operational deficiencies. This is going to increase more pressure on the performance.