Pulse of the Industry:

medical technology
report 2023
Accelerating medtech’s digital opportunity
CONTENTS

The year in review: accelerating medtech’s digital opportunity 04

EY perspective
Digitalization in medtech: the unfinished revolution 14

Guest perspective
How AI can transform medtech and deliver precision health care 16

EY perspective
Medtech’s critical role in keeping people healthier at home longer 19

EY perspective
Building on breakthroughs: generative AI’s opportunities and lessons for medtech 22

Guest perspective
How AI is going to revolutionize imaging 25

EY perspective
How medtech can build resilient supply chains for the future 29

EY perspective
Tapping into new markets: how to enter China’s medical device industry 32

Guest perspective
The key to operating successfully in China: integrating into the local ecosystem 35

02 | Pulse of the Industry 2023

Databook 38
Financial performance 39

Financing 43

M&A 47

Data exhibit index 51

Acknowledgments 52

Defining medical technology 53

03 | Pulse of the Industry 2023

The year in review:
accelerating medtech’s
digital opportunity

04 | Pulse of the Industry 2023

 Accelerating medtech’s digital opportunity

The 17th annual edition of our Pulse of the Industry medical

technology report finds the industry in a state of flux. In recent
years, the medical technology (medtech) industry has performed
very strongly, driven by the COVID-19 pandemic and the
associated need for new non-imaging diagnostics and research-
related equipment.
In last year’s report, we celebrated the industry’s surge of public company revenue to more
than a half trillion US dollars, as well as a third consecutive year of double-digit R&D growth.
However, we also noted early indications of more challenging conditions ahead, signaled by a
muted M&A market and decreasing public market valuations for companies in the sector, as
well as a 30% decline in overall industry financing. This financing slump included the
disappearance of special-purpose acquisition company (SPAC) deals; a sharp decline in initial
public offerings (IPOs), which were down 99% in total value; and venture capital (VC), which
saw a 21% drop in funding.

One year later, the head winds that were becoming evident have further intensified.
Geopolitical upheaval, slow commercial and supply chain disruption recovery, a shifting
regulatory environment, and stubborn global inflation all have contributed to the uncertainty
affecting the industry. Adding to these factors, questions are emerging around how the rise
of GLP-1 (glucagon-like peptide1) therapies might impact aspects of the sector over the
longer term. However, the aging global population and the associated rise in the number of
underserved chronic disease patients provide strong fundamentals for long-term growth.
Moreover, the acceleration of digitalization across the industry with new advances in the
power of data analytics (most notably demonstrated by the rise of artificial intelligence (AI),
including the breakthrough generative AI models in 2023) opens new possibilities for the
industry’s future.

The convergence of these technological advances with a heightened demand for personalized,
flexible approaches to care forms the basis for a new vision of health care for the future, which
we have termed the intelligent health ecosystem (IHE), a concept that we’ll explore further in
this report. But ultimately, amid the shifting forces affecting the industry and the challenges
and opportunities they offer, medtech has undergone a year of reset, with its performance
largely returning to pre-pandemic norms. This reset leaves medtech with key strategic
questions to answer.

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 Accelerating medtech’s digital opportunity

1. How can medtech restore its growth trajectory?

Total revenue for medtech reached US$573 billion in 2022, as growth fell from a post-
pandemic high of 16% in 2021 to just 3.5% in 2022, the lowest level since 2015. This slowing
trend continued into the first half of 2023, with commercial leader (public pure-play medtechs
with at least US$500 million in annual revenue) revenues decline of 1.1% growth compared
to the previous year. This continuation of 2022’s pattern suggests that the industry’s strong
performance in 2021 could be an outlier — ­­ a onetime post-COVID-19 correction rather than a
return to the trajectory of the period from 2000 to 2007, when medtech averaged 15% annual
revenue growth rather than the 5% average seen from 2008 to 2020.

Figure 1
Macro challenges for the global economy

Pressure points Key events and disruptions Implications

Price cuts
Pandemic aftereffects Focus on self-sufficiency Looming innovation gap
Geopolitical risks
Tightening monetary policy

Shifting geopolitical influence Less cash availability Margin pressures

Rising costs
Evolving technology infrastructure
Recession
Macroeconomic volatility Virtual health care professional (HCP)
Supply chain disruptions
interactions
Energy security imperative
Shipment delays Changing customer
Regulatory complexity
Inflation expectations

Figure 2
US and European medtech public company revenues, 2013–22
US commercial leaders EU commercial leaders Other US public companies Other EU public companies
Number of commercial leaders
600 80
Number of commercial leaders

450 70
Revenue (US$b)

300 60

150 50

0 40
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source: EY analysis and Capital IQ. Commercial leaders are companies with revenues at or above US$500 million.
Other companies include figures for conglomerates.

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 Accelerating medtech’s digital opportunity

2. What can the industry do to increase its attractiveness to investors, particularly in a

period of continued uncertainty?

Medtech’s public valuations have fallen in parallel with the sector’s top-line growth. Stock prices
for medtech, as with broader indexes, peaked toward the end of 2021. But by midyear 2022,
roughly half of the stock price gains the industry made during the pandemic had been wiped
out. As of the end of July 2023, growth had flatlined and medtech valuations were just 22%
higher than they were in January 2020, in line with the broader indexes. In parallel with this
reset, medtech trading multiples also fell back from a pandemic-era peak of 16.3x in September
2021 to 7.3x by the end of H1 2023 (for context, the 10-year average trading multiple for
the industry was 8.4x). And according to one recent report, medtech is trading at the lowest
sentiment levels seen since the financial crisis in 2008 and 2009.1

Figure 3
US and European medtech market capitalization relative to leading indexes, 2020–H1 2023
EY medtech commercial leaders EY medtech emerging leaders Rock Health Digital Health Public Company Index
Big pharma Nasdaq Biotech Index Composite broader indexes*

180%

160%

140%

120%

100%

80%

60%

40%

20%

0%

-20%

-40%

01-Jan-20 01-Apr-20 01-Jul-20 01-Oct-20 01-Jan-21 01-Apr-21 01-Jul-21 01-Oct-21 01-Jan-22 01-Apr-22 01-Jul-22 01-Jan-23 01-Apr-23 01-Jul-23

Source: EY analysis and Capital IQ.

Chart includes companies that were active on 30 December 2022.
*Composite broader indexes refers to the daily average of leading US and European indexes: Russell 3000, Dow Jones Industrial Average, NYSE, S&P 500, CAC-40, DAX and FTSE 100.

1. “JPMorgan says time to buy MedTech based on past,” MSN website, https://www.msn.com/en-us/money/markets/jpmorgan-says-time-to-buy-medtech-based-on-past/ar-AA1fWQGc,
29 August 2023.

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 Accelerating medtech’s digital opportunity

3. How can medtech effectively invest in activities that will drive strategic growth?

In 2022, medtechs rewarded their investors with substantial cash returns to shareholders in
the form of dividends and buybacks. The US$27.8 billion returned to shareholders represents
the highest level of returns since we began publishing Pulse of the Industry. At the same time,
medtech’s investment in growth-oriented activities looked less secure in 2022. Though the
industry’s R&D investment reached a record US$24.7 billion, this represented a dip in the three-
year uptick in the industry’s R&D spending growth, which reached an all-time high in 2021 but
reverted to historical norms in 2022. M&A expenditure, on the other hand, fell 44%, a steep
decline in investment in inorganic growth.

Figure 4

US and European medtech commercial leaders spending trend, 2010–22

Cash returned to shareholders R&D expenses M&A expenses Cash returned to shareholders as a percentage of R&D and M&A

100 75%

60%

Cash returned to stakeholders as a

80

percentage of R&D and M&A

Revenue (US$b)

60 45%

40 30%

20 15%

0 0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source: Capital IQ, cㅁㅊ ompany financial statement data and EY analysis.

08 | Pulse of the Industry 2023

 Accelerating medtech’s digital opportunity

4. How can medtech enable healthy ongoing investment in the broader innovation
ecosystem?

From the onset of the pandemic up through the third quarter of 2023, medtech was the
beneficiary of an investment spree driven by COVID-19 across the entire health care
ecosystem. As the crisis eased and relative normalcy returned, investment in medtech
displayed its traditional cyclical pattern, with generalist investors retreating from the sector
while rising inflation and other macroeconomic factors hindered growth for many companies.
This shift was reflected in a marked tightening in industry financing in 2022.

Though total medtech financing rose 9% to US$32.8 billion last year, this activity largely
derived from a 71% jump in industry debt, which rose to US$19 billion, and unlike in previous
years, the largest debt offerings did not fund acquisitions, but rather went to repay and
refinance existing debt, working capital, stock buybacks and other capital expenditures. Equity
financing fell 27% to US$13.8 billion, its deepest point in seven years. This drop reflects a 21%
fall in venture financing to its lowest levels since the period from 2015 to 2016, with only 106
venture rounds of US$5 million or higher executed in the 12 months preceding June 2023. In
addition, the industry witnessed a near-total disappearance of the IPO market. This fundraising
hit will impact the industry’s broader ecosystem of smaller medtechs, which drive innovation
but are reliant on financing from the industry’s leaders or from external investors to support
their R&D activities.

Figure 5

Equity capital raised in the US and Europe by period, Q3 2019–Q2 2023

Venture IPO Follow-on and other

12

10

8
US$m

0
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 2023 2023

Source: EY analysis, BMO Capital Markets, Dow Jones VentureSource and Capital IQ.
Private investments in public equity (PIPEs) included in “follow-on and other.”

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 Accelerating medtech’s digital opportunity

As financing levels dip, these companies will feel pressure to make an exit via acquisition.
However, as noted, M&A in the sector also fell in 2022, with the negative trend continuing
into 2023. In the 12-month period ending 30 June 2023, deal values were down 44%, and only
the US$16.6 billion Johnson & Johnson acquisition of Abiomed kept values from hitting a 10-
year low.2

Figure 6

M&A in the US and Europe by year, H2 2005–H1 2023

US commercial leaders EU commercial leaders Number of deals

120 300

100 250
Total deal value (US$b)

Number of deals
80 200

60 150

40 100

20 50

0 0
6

3
00

00

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un

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Ju
–J

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–
05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22
20

20

20

20

20

20

20

20

20

20

20

20

20

20

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20
ly

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Source: EY analysis, Capital IQ and Thomson ONE.

Chart includes deals with value disclosed (medtech deal where either acquirer or target is located in the US or Europe).

As the medtech industry seeks to answer the aforementioned questions, it should consider
its approach in light of the broader changes that are affecting health care and the life
sciences sector, bringing the possibility of transformative innovation for the industry in the
near future. Rapidly evolving technologies, increasingly sophisticated consumer demand for
more personalized and convenient health care, pressure to change payment models due to
aging populations, and a rise in chronic disease incidence are all long-term trends that have
unavoidable and significant implications for the industry and will ultimately lead health leaders
to rethink how care should be delivered in the future. Our vision for the future direction of life

2. “Johnson & Johnson Completes Acquisition of Abiomed,” Johnson & Johnson website, https:www. jnj.com/johnson-johnson-completes-acquisition-of-abiomed, 22 December 2022.

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 Accelerating medtech’s digital opportunity

sciences is the technology-driven reinvention of the sector, which we call the intelligent health
ecosystem (IHE). The IHE is a blueprint for a smart, connected, personalized, patient-centered
health care model for the future. Within this new model, health care will be:

• Built on ecosystem-wide collaboration and frictionless data sharing between parties

• Delivered by a seamless integration of virtual and digital care channels

• Enabled by the convergence of new technologies and data, and capable of delivering value for
all stakeholders

Figure 7

The intelligent health ecosystem of tomorrow

Analog care Digitized care Connected care Intelligent health

ecosystem
Legacy health care models, Moving from paper-based Increased interoperability
with care delivered through to electronic records, with between systems, allowing for Integrated, personalized,
traditional institutional development of data policies, better linkage of digital data patient-centered care model,
channels. principles and governance sets to drive better outcomes. combining virtual and physical
and pockets of digitized care, AI-optimized decision-
innovation. making and seamless data
sharing.
Trends Trends Trends
Economic pressure, consumer Interoperability, workforce AI and other Fourth Industrial
demand and aging populations shortages, empowered Revolution technologies, risk
with growing chronic disease super-consumers drive sharing/reward, ecosystem-
burdens drive transition from transition from digitized to linking platform business
analog to digitized care. connected care. models drive transition from
digitized to intelligent health
ecosystem.

Figure 8

Smart devices will become just one component in care delivery within an intelligent health
ecosystem: orthopedic devices example

Analog care Digitized care Connected care Intelligent health

ecosystem

Example Example Example Example

Traditional orthopedic care Patient receives smart Patient’s recovery is assisted Digital twin simulation enables
delivered in hospital with orthopedic implant, with by digitally delivered home delivery of personalized
sporadic outpatient follow- embedded sensors that coaching and personalized interactive rehabilitation
up and limited guidance for capture personalized assistants, using smart therapy delivered via AI and
patient. diagnostic data and stream to implant data for better real-time smart implant data.
care team. guidance.

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 Accelerating medtech’s digital opportunity

The rise of these new technologies in the medtech industry is widely reported, with big data,
artificial intelligence (AI), cloud computing, sensors, virtual and extended reality systems, and
fifth-generation broadband all recognized as future drivers for the industry. Amid a generally
slow year for the industry, the pace of innovation for these cutting-edge technologies continued
to accelerate. One example of this growth was in the applications of AI in the sector, with at
least 91 new algorithms gaining FDA approval in the first 10 months of 2022, making an
immediate impact in the diagnostics and imaging diagnostics markets. And while venture
financing dropped during this period, some new innovations were attracting capital, including
Alphabet’s Verily Life Sciences, which raised an additional US$1 billion in September 2022
to support its efforts in real-world evidence generation and health care data platforms.3 In
addition, the cardiac diagnostic developer HeartFlow attracted US$215 million for AI-powered
software that maps the coronary arteries and any potential blockages through a 3D CT scan.

Figure 9

FDA approvals for AI algorithms, 2007–October 2022

250
For the first 127 FDA-approved AI 384 AIs approved
time, FDA algorithms in this decade since 2017
approves more
than 1 AI
200 algorithm in
12 months

150

100

50

0
2007–08 2009–10 2011–12 2013–14 2015–16 2017–18 2019–20 2021–Q1 2022

July 2022 July 2022 June 2022

Viz.ai wins approval for algorithm Verily receives approval for Zio EarliTec Diagnostics wins FDA
to automatically detect subdural Watch and ZEUS System, an end- approval for an AI system to help
hemorrhage. to-end solution for identifying and diagnose autism spectrum disorders
monitoring atrial fibrillation. in children aged 16–30 months.

Source: FDA.
Database last updated on 5 October 2022

3. “Alphabet’s Verily raises $1 bln in funding round,” Reuters website, https://www.reuters.com/technology/alphabets-verily-raises-1-bln-funding-round-2022-09-09/, 9 September 2022.

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 Accelerating medtech’s digital opportunity

Innovations like these — a few examples among many across the medtech ecosystem — bring the
prospect of new breakthroughs and new approaches to care in the sector, driven by advances
in data and technology. Medtechs need to continue to embrace these innovations, seeing
them not as potential bolt-ons to existing offerings, but instead as keys to unlock a bolder
strategic vision. Within the IHE, these rising technologies will ultimately converge, forming
a smart infrastructure for care delivery anytime and anywhere, beyond legacy institutional
care channels. As medtechs seek to adapt to this changing operating environment, they must
evaluate and redesign their business models on an ongoing basis, as explained in a recent EY
article, “Redesigning operating models to drive life sciences excellence.”

In this report, we explore the drivers that are pushing the industry away from its current norms
toward a qualitatively different future approach, evaluating the challenges and opportunities
the sector will face as it attempts to bridge the gap from the present to the IHE. In particular,
we will take a deep dive into the following opportunities and challenges:

• The rise of digitalization across the value chain and the opportunities it unlocks for medtechs

• The emergence of powerful new technological modalities, focusing on generative AI (GenAI)

and its implications for the industry (including the potential administrative and other
operational efficiencies the technology could help deliver)

• The opportunities to use digital technologies and data to improve supply chains and other
business functions

• The changing nature of customer demands with a growing emphasis on ambulatory care and
other care delivery outside the traditional institutional channels

• The complex geopolitical situation, particularly the challenges in China, one of medtech’s
key markets and a geography in which a fast-evolving operational landscape is driving the
industry’s push to rethink its operations and processes

As always, the report also includes several guest perspectives from medtech leaders on a host
of top-of-mind subjects. First, we’ll hear from GE HealthCare and Siemens Healthineers on how
digitalization, including AI, is creating significant shifts in health care. And last, we spoke with
Johnson & Johnson MedTech about the opportunities and challenges for medtechs in China.

13 | Pulse of the Industry 2023

EY PERSPECTIVE

Digitalization in medtech:
the unfinished revolution
The digitalization of the medical device industry has progressed
over the past five decades, since the first use of computers at the
beginning of the 1970s. As usage of digital technology has risen,
from the personal computer revolution of the 1980s to the rise of
smartphones, cloud computing and AI in the 21st century, medical
devices have increasingly incorporated digital technology and
algorithms as standard components, with large language models and
AI playing an increasingly major role.

14 | Pulse of the Industry 2023

EY PERSPECTIVE

Figure 10

A potential intelligent health ecosystem of tomorrow will go beyond simply being digitalized and

1 2 3 4
connected, becoming a truly smart system

Analog care Digitized care Connected care Intelligent health

• Stand-alone — used on • Integrated sensors in • Home sensor that analyzes ecosystem
demand device monitor use and can air quality and weather data • Bioelectronic implants
“report” • Signals to use inhaler to • Detects neurological trigger
“prevent” an asthma attack in cell response
• Prevents inflammation and
thus an asthma attack

However, the lack of digital standards and interoperability is the promise of the intelligent health ecosystem (IHE),
across health care systems has limited the potential impact our vision for the future of care delivery with a better and
of medtech’s accelerating digitalization. At present, we more personalized, tech-enabled and data-driven health
effectively have a legacy analog health care system with experience. In the context of the IHE, smart devices would
pockets of digitalization, particularly in areas such as not work in isolation but instead would become part of
imaging diagnostics, where the use of digital technologies a seamless network, enabling comprehensive, real-time
and AI analytics is well established. In the therapeutic detection, prediction and intervention.
device field, medtechs are developing ever-smarter
For instance, in this future state, a smart inhaler would
devices, such as closed-loop insulin management systems
become an integrated component in an IHE that would also
for diabetics, AI-assisted surgical robotic platforms and
bring together sensors that track both environmental and
wearable biosensors. However, these devices are often
personal data to monitor respiratory risk to the patient and
siloed within a complex ecosystem in that they can capture
trigger timely action. Ultimately, in a closed loop system,
and transmit data, but the broader systems (human and
this action may be delivered without need for manual
technological) needed to receive the data and convert it
intervention from the patient, with implanted bioelectronic
into valuable interventions are still often disconnected.
sensors that detect signals of inflammation and disarming
Consider digitally enhanced devices such as smart inhalers neurological triggers.
or smart implants. Smart inhalers capture user data
Similarly, a smart implant would become just one facet of
and can stream it to physicians to monitor, among other
an IHE-delivered solution in which sensors in the implant
things, the status of a patient’s respiratory condition and
offer continuous diagnostic monitoring to be fed to care
the effectiveness with which they use their inhaler. Yet,
teams in a way that can be easily embedded in workflows.
studying and using this data requires additional time and
These outputs can be used to provide personalized
attention from already overstretched clinicians.
coaching to the patient. Ultimately, the patient data can
Similar limitations may affect smart implants. The first be used to create a digital twin, offering better all-around
smart knee implant reached the market in 2021, and, as management to the patient.
with smart inhalers, it can capture patient data and share it
Creating the IHE will require better alignment and
with clinicians. Yet, clinicians will need to be persuaded of
collaboration between stakeholders to jointly realize the
the potential value of this data to improve clinical outcomes.
potential value of this more connected, powerful and far-
The challenge that health care faces is not a shortage reaching ecosystem and to address technical challenges
of data: Today, billions of gigabytes of health data are such as the need for systemwide cybersecurity measures
generated each year, with medical devices contributing to enable interoperability and secure data sharing. Still, the
to the expanding mass of data around each individual opportunities of collaborating on this vision are immense;
patient. As such, the health industry needs to build a in the environment of the IHE, the digitalization of medtech
broader ecosystem that can connect, combine and use can finally unfold its true potential to deliver personalized
this data to deliver better personalized care. This approach care outcomes and experiences.

15 | Pulse of the Industry 2023

GUEST PERSPECTIVE SIEMENS HEALTHINEERS

How AI can transform medtech

and deliver precision health care

Elisabeth Staudinger
Member of the Managing Board, Siemens Healthineers

16 | Pulse of the Industry 2023

GUEST PERSPECTIVE SIEMENS HEALTHINEERS

Every person has the right to health care, and where

one lives shouldn’t determine how well or how long
they live. Digitalization brings timely care much closer
to people who live in remote areas where medical
professionals are few and far between.

Ernst & Young LLP (EY US): How is digitalization EY US: In what ways does Siemens Healthineers
changing the face of medical technology and use digital technology to improve diagnosis and
health care? treatment?
Elisabeth Staudinger (ES): Rising costs, a shortage ES: It starts with seemingly simple things like helping
of medical professionals and an increase in non- to position a patient correctly for an imaging scan. An
communicable diseases are among today’s greatest health MRI normally takes about 20 minutes and is noisy and
challenges in a world where more than half the population uncomfortable for the patient. With AI-based algorithms,
still lacks access to quality health care. Digitalization has this time can be cut to about five minutes without
the power to help us overcome these challenges and compromising diagnostic quality. Something that simple
make health care more accessible, affordable and precise. can hugely improve both the patient’s experience and the
operational workflow.
Every person has the right to health care, and where one
lives shouldn’t determine how well or how long they live. Siemens Healthineers has deep experience in interpreting
Digitalization brings timely care much closer to people imaging data and applying AI to improve diagnostic speed
who live in remote areas where medical professionals are and quality. We have a whole suite of applications that can
few and far between. save radiologists time and reduce error. If, for example,
radiologists are looking for lung nodules on a chest X-ray,
Artificial intelligence (AI) and machine learning (ML) in
then AI can read those images quickly and accurately.
particular will transform health care. AI is already being
This AI-augmented precision applies to treatment as well
used to support remote patient monitoring, simplify
as diagnosis. In cancer treatment, for instance, more
imaging, and help medical staff make better decisions
than half of patients will receive radiation therapy to
around diagnosis and treatment. In addition, technology
destroy malignant tissue. The goal is to target the linear
can expand the capacity of individual clinicians to
accelerator precisely to conserve healthy tissue. But this
treat more patients. For example, one radiologist can
approach requires medical physicists to perform complex
operate three or four different MRI scanners at once,
manual tasks to determine exactly where the tumor is,
and one clinician who focuses on ischemic strokes can
and there are not enough of these specialists to manage
concurrently treat multiple patients in different locations.
the number of cancer patients we have today. Moreover,
Scaling medicine in this manner, and linking patients when the patient comes in for treatment, other factors
and health care professionals in new ways, can bring may compromise accuracy — they may have gained or lost
quality care to more patients at a lower cost. Siemens weight, for example. Digital and AI tools can help medical
Healthineers has a strong legacy in this field. We have physicists by outlining the tumor tissue and providing
been implementing digitalization and AI for over 20 years, measurements, delineations and 3D modeling to help
and these are major focus areas for us. focus the high-energy beam correctly.

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GUEST PERSPECTIVE SIEMENS HEALTHINEERS

EY US: What are the opportunities and EY US: Which companies do you work with as
challenges around the data you collect? you develop your offerings?
ES: Over time, we have built a pool of around 1.5 billion ES: We have a very strong in-house footprint with big
images, which we annotate and feed to Sherlock, our software teams in the United States, Asia and Europe.
supercomputer based in Princeton, New Jersey, to When we use images to feed our supercomputer’s
train algorithms to interpret imagery. Of course, there algorithms, we need to process and annotate those
are many relevant data sources besides imaging that images. However, we also have a network of collaborators
we analyze, from heart-rate information to blood tests spanning the globe in that we work very closely with
and genetic information. At Siemens Healthineers, we clinicians and hospitals who know their patients’ needs
are fascinated by the possibilities of digital twinning, best, defining requirements and testing algorithms for
integrating all the data sources around a patient to model effectiveness.
a digital representation of the individual. This technology
Many other companies work on AI in imaging, and we
would assist us in simulating precision medicine by
will also team up with those companies as needed.
defining the best treatment, predicting risk factors, and
One challenge for smaller AI players is their limited
delivering health coaching to monitor and support a
distribution mechanisms. They may be able to build an
patient who is going through therapy. This digital-twin
interesting use case for an algorithm, but it needs to fit
concept is a vision that drives our work. It is challenging,
seamlessly into the workflow to provide practical support
but we can move toward making it a reality if we keep
to busy clinicians. So these smaller companies need
the ultimate goal in mind: a fairer, more efficient, better-
bigger partners, and if a company has a good solution —
performing health care system for everyone, everywhere.
perhaps in an area we have yet to focus on in-house — we
Protecting patient data in health care is extremely can be that bigger partner. We can integrate their solution
important. Some hospitals favor on-premises solutions into our platforms and make their algorithms available.
where the data is kept within the boundaries of the It is this close collaboration that enables us to bring our
organization. Others use cloud-based solutions where solutions to more and more patients and achieve our goal
elaborate mechanisms can be implemented for data of improving the accessibility, affordability, quality and
protection. Cybersecurity is of the utmost importance precision of health care for everyone, everywhere.
to Siemens Healthineers, and we continually strive to
improve our security and data privacy.

18 | Pulse of the Industry 2023

EY PERSPECTIVE

Medtech’s critical role in keeping

people healthier at home longer
Health care is already evolving away from its traditional
roots in brick-and-mortar sites to a model of hybrid
care delivered continuously with digital tools.

19 | Pulse of the Industry 2023

EY PERSPECTIVE

COVID-19 and the regulatory response aimed at helping gaps, with one pilot scheme in Western Australia, for
manage the pandemic drove a surge in telehealth access example, indicating that inpatient telehealth delivered via
and hospital-at-home programs, with the US Centers for virtual ward rounds in the absence of available general
Medicare & Medicaid Services (CMS) permitting hospitals to practitioners enabled 87% of patients to be monitored
apply for waivers for home treatment of acutely ill patients without need for transfer.5 In Alberta, Canada, virtual
(over 280 hospitals in 37 US states had joined the program care has expanded access to a dispersed population with
by the end of May 2023).4 The US government’s omnibus limited direct access. And in the US, a trial at Mass
bill of January 2023 extended the waiver flexibility to General Brigham suggested that home-delivered care
the end of 2024, but as the pandemic crisis is behind us, could cut the cost of an episode of care by 38%.6 We
we should not look for a return to the less flexible legacy explore other recent experiences with hybrid care models
models of care delivery. On the contrary, as the intelligent schemes and the evidence of effectiveness they have
health ecosystem begins to emerge, this transition to generated in a recent Ernst & Young LLP article,
flexible care will accelerate, and medtechs will need to “How virtual and in-person care merge for a healthier,
adapt to the change in care channels. sustainable future.”

A growing base of evidence supports this shift toward For medtechs, the challenge is to learn how to adapt their
hybrid care models that integrate in-person, home-based operations to help these evolving care models gain scale.
and virtual care, allowing patients and providers to They also need to approach design with the consumer and
seamlessly flex between these modes of care. The shift clinician in mind. One study from the Netherlands noted
will require a rethinking of workplace roles, redesigned that up to 32% of care could be shifted to the home but
payment incentives and the growth of concepts such as that this would require an investment in medical devices
digital command centers where clinicians can monitor key that can deliver remote monitoring and care.7 Many leading
biometric data, care coordination and hospital at home. medtechs are already investing significantly in remote care,
a market projected to grow with a 20% compound annual
Data suggests that if these challenges can be met, the
growth rate from 2022 to 2030.8 In addition to developing
transition to hybrid care will reduce costs and improve
these technologies, medtechs must seek to partner with a
outcomes while freeing up both hospital beds and
wider range of stakeholders, including health organizations,
staff — a key need as health systems attempt to serve an
retailers, governments and community organizations, to
aging, increasingly chronically ill population with a reduced
help new hybrid care models achieve scale.
pool of health workers. Remote care can help close these

4. “Minute Insight: Inbound Health Now Offers Post-Surgical Hospital Care At Patients’ Homes,” Medtech Insight website, https://medtech.pharmaintelligence.informa.com/MT147960/
Minute-Insight-Inbound-Health-Now-Offers-Post-Surgical-Hospital-Care-At-Patients-Homes, 31 May 2023.
5. “Snapshot: WACHS Command Centre,” Government of Western Australia website, https://wacountry.health.wa.gov.au/~/media/WACHS/Documents/Services/Command-Centre/Command_
Centre_snapshot_v2.pdf, 28 August 2023.
6. “Hospital-Level Care at Home for Acutely Ill Adults: A Randomized Controlled Trial,” National Institutes of Health website, https://pubmed.ncbi.nlm.nih.gov/31842232/, 17 December
2019.
7. “Budget impact analysis of providing hospital inpatient care at home virtually, starting with two specific surgical patient groups,” BMJ Open website, https://bmjopen.bmj.com/
content/12/8/e051833, 1 August 2022.
8. “Remote Patient Monitoring Market size worth $ 166.52 Billion, Globally, by 2030 at 20% CAGR: Verified Market Research®,” PR Newswire website, https://www.prnewswire.co.uk/news-
releases/remote-patient-monitoring-market-size-worth--166-52-billion-globally-by-2030-at-20-cagr-verified-market-research-301872847.html, 10 July 2023.

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EY PERSPECTIVE

But teaming in this way means proving to the ecosystem In addition, medtechs should seek to bring their
that medtechs are an essential partner in improving innovations directly to patients. Direct-to-consumer (DTC)
care outcomes and the experience of both clinicians and devices are a growing market, with the FDA permitting,
consumers. By improving data fluidity in the ecosystem, for example, over-the-counter sale of hearing aids in
medtechs can play an indispensable role in enabling value- 2022. This market opening will potentially admit a range
based care models. Personalized care can only happen if of new entrants from big tech players to retailers, while
informed by a full range of data that reflects the realities widening customer choice and driving down costs. But
of how people live. Being a full partner in the health as medtechs move closer to patients, human-centered
ecosystem can help medtechs better design their products designed is critical to consumer adoption, as is making
for both the consumer and the clinician. sure the technology is available, actually installed and used
correctly in the home. Expanded broadband access is also
Medtechs will also need to work closely with the
critical for engaging rural and disadvantaged communities.
ambulatory surgical centers (ASCs) that have grown rapidly
in recent years, enabling many procedures (especially in Another major area of DTC focus is the home diagnostics
the orthopedics field) to move toward outpatient settings. market, which gained significant traction during the
The Ambulatory Surgery Center Association claims that pandemic. Large medtechs, including Abbott, Becton
operations delivered in this manner are up to 45% less Dickinson, Labcorp and Siemens Healthineers, are all
expensive than hospital admissions due to the lower active in the in-home diagnostics space, with offerings
overhead costs.9 ranging from COVID-19, flu and RSV diagnostics to cancer,
fertility and diabetes testing. Moreover, Quest Diagnostics
has stated that DTC testing will become a US$2 billion
breakout business by 2025,10 helping medtechs move
closer to patients and away from the constrictions of
traditional care delivery models.

With the greater depth of individualized patient knowledge

generated through remote monitoring apps, wearables
and other sensors that are driving the rise of hybrid
care models, the opportunities to improve care rise
exponentially. A far more proactive, data-driven, user-
friendly and personalized care management model,
stratified according to consumer preferences and lifestyle
and health options, now has the chance to emerge. Serving
patients from primary care through to post-surgery, this
improved care model will aim to keep the patient healthier
at home for longer, avoiding the need for patients to move
to higher-cost emergency departments while also delaying
disease progression. Ultimately, this journey will lead to
the intelligent health ecosystem: a future in which health
technology becomes omnipresent and ambient, wrapping
the patient in a moving cloud of care that constantly
analyzes and refines itself to deliver better outcomes and a
better health experience.

9. “The ASC Cost Differential,” Ambulatory Surgery Center Association website, https://www.ascassociation.org/advancingsurgicalcare/reducinghealthcarecosts/
paymentdisparitiesbetweenascsandhopds, August 2016.
10. “Quest eyes $2B DTC testing potential to capitalize on ‘breakout’ consumer growth,” MedTech Dive website, https://www.medtechdive.com/news/quest-eyes-2b-dtc-testing-potential-to-
capitalize-on-breakout-consumer-g/596609/, 12 March 2021.

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EY PERSPECTIVE

Building on breakthroughs:
generative AI’s opportunities and
lessons for medtech
The breakout success of generative AI in 2023 is a signal of how
dramatically new disruptive technologies can gain importance and
how rapidly companies may need to adapt. Capable of creating text,
images, and other media based on analysis of high volumes of training
data, generative AI came to prominence this year with the mainstream
impact of various large language models (LLMs). Medtechs, like
companies in every sector, have found themselves grappling with the
implications and opportunities of these new technologies.

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EY PERSPECTIVE

Across the health care space, one of the immediate These regulatory and operational applications will be
applications of generative AI is its ability to automate identified and implemented within medtech companies,
aspects of content creation. For health care providers, this as with other health and life science players, since the
primarily represents an opportunity to generate clinical potential risks are low once quality assurance has been
documentation around clinician-patient interactions established. Assuming the source of the data is finite
without the direct input of the clinician. Combining an and the GenAI tool follows a trusted governance model,
LLM with conversational and ambient AI would allow the possible benefits of this approach are extensive,
clinicians and patients to converse as usual while the particularly at a time when companies in the sector are
clinical notes are generated. The same acceleration of wrestling with staffing shortfalls and other workforce
content generation has implications across the operational challenges such as physician burnout in the wake of the
workflow of the entire health ecosystem. The rigorous extraordinary demands imposed by the pandemic crisis.
regulatory frameworks present in the sector represent a Another major area of adoption for generative AI in
significant demand in terms of paperwork and bureaucracy, medtech will surely come in commercial operations. For
including across tax, legal and other critical functions. example, the technology’s ability to tailor the technical
These administrative processes have traditionally required language for physician or a patient will help streamline
major commitments of time and human input, but medical communications. There are also efficiencies to
optimized generative AI models that can expedite this be created by using AI learning models to fit patients for
operational burden will free up time and energies for orthopedics, for example.
reinvestment into more value-additive activities.

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EY PERSPECTIVE

In addition to operational optimization, generative AI The broader lesson of the generative AI excitement in
will also be useful in the hospital setting. These frontline 2023 is that as innovation accelerates, we can expect new
applications in health care delivery could include, tools and technologies to break into a market that already
for example, using LLMs to generate clinical reports, boasts a high level of maturity and potential use cases. To
treatment plans, and guidance or advice to patients. seize the opportunities these new technologies present and
Potentially, generative AI in this context could also expand integrate them rapidly into their own evolving intelligent
the current role of digital triage, which today is usually health ecosystem offerings, medtechs need to maintain an
carried out by simple algorithms. But when built around agile mindset and operational approach. Companies that
human conversational interactions with a generative AI tool do so will be well positioned to build long-term value.
that can produce complex and sophisticated responses to
patient inputs, these algorithms could provide significant
diagnostic and analytical functionality. Through this
application, generative AI platforms could take on a more
demanding, value-additive role themselves, yet because
the associated risks are higher, companies will need to
develop policies and procedures related to governance, risk
and legal.

The same challenge will affect frontline medtech

applications of the technology. For example, generative
AI models can theoretically be used to develop novel
medical device designs. Given specified inputs, a 3D
generative AI model also could create a range of possible
design prototypes, perhaps including personalization in
accordance with the specific inputs the model receives.
Designers could then refine or reiterate these models. In
some respects, this approach to medical device design
would represent the next generation of generative design,
a technology for 3D modeling based on cloud computing
with AI elements.

Above all, it will be critical for medtechs to understand

generative AI in context: It will not be a stand-alone
solution to business challenges but will rather form part of
the suite of digital tools the industry can leverage. Within
this portfolio of offerings will be significant convergence
and crossover. Generative AI may contribute to the
effectiveness of other digital offerings, writing and refining
better software for medical devices and generating novel
training data sets to improve radiology algorithms or other
machine learning models and other applications.

24 | Pulse of the Industry 2023

GUEST PERSPECTIVE GE HEALTHCARE

How AI is going to
revolutionize imaging

Parminder Bhatia
Chief AI Officer, GE HealthCare

25 | Pulse of the Industry 2023

GUEST PERSPECTIVE GE HEALTHCARE

While generative AI is a budding technology, GE EY US: Tell us about GE HealthCare’s history

HealthCare has been using artificial intelligence and with AI and how that has evolved over time.
machine learning (AI/ML) in its medical device products
Parminder Bhatia (PB): I’ve been following GE
for more than a decade. The recent GE spinoff company
HealthCare for a long time, and my decision to join them
has become a pioneer in emerging health technologies,
recently was driven by their dedication to innovative
leading the way for innovative forms of medical imaging
advancement. GE HealthCare utilizes machine learning
that create efficiencies for both patients and providers.
to help enhance diagnosis and streamline radiology
We recently sat down with a key hire for GE HealthCare,
workflows.
new Chief AI Officer Parminder Bhatia, to discuss how the
technology has evolved and what lessons he brought from GE HealthCare has more than 58 AI-enabled device
his former employer, Amazon. authorizations from the FDA. Our SonoCNS product, for
example, cuts ultrasound fetal brain exam keystrokes by
80%. And our new Sonic DL offers MRI scans up to 12
times faster than traditional methods, allowing cardiac
imaging in just one heartbeat. Additionally, AIR™ Recon
DL, a deep-learning MRI technology, boosts quality, care
GE HealthCare has efficiency and the radiologist’s workflow. Not only does
it reduce scan time by nearly half through automation
more than 58 AI-enabled without compromising on image quality, but it has also
device authorizations served over an estimated 10 million patients since
we introduced the technology in 2020, early in the
from the FDA. pandemic. These innovations exemplify GE HealthCare’s
decade-long commitment to progress. It’s a continuous
process that keeps going.

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GUEST PERSPECTIVE GE HEALTHCARE

EY US: Over the last several months, generative But our ambitions don’t stop there. We’re challenging
AI has become a hot topic. Has GE HealthCare the status quo by developing AI solutions that are not
started thinking about how it can use generative limited to specific anatomies or imaging techniques.
We are also working toward models that can be applied
AI or large language models?
across a range of diagnostics modalities, such as CT
PB: Yes, definitely. GE HealthCare recognizes the scans, MRIs and ultrasounds. This broad-spectrum
transformative potential of generative AI and large approach was underscored by our recent achievement:
foundational models and is taking active steps to a 510(k) clearance for an innovative automatic MRI slice
harness their capabilities. My previous tenure at Amazon placement for workflow efficiency model designed for
equipped me with valuable insights and experience, MR brain scanning, AIRx™. Similarly, we aim to develop
as I spearheaded the company’s HealthAI initiative. AI capabilities that address multiple anatomies at once,
This initiative saw the birth of trailblazing services like rather than just one. After achieving a 510(k) clearance
Comprehend Medical, which stands out as a premier for an auto-segmentation model that covers 40 organ
health care-specific natural language processing parts in CT, our goal now is to create models that are
(NLP) tool on the cloud. After that, I spent three years versatile enough for CT, MRI and ultrasound data.
working on foundational models and generative AI Our heavy investment in this direction is anticipated
technologies. So I joined GE HealthCare to bring these to significantly boost growth in AI applications for
two competencies together. workflow, optimization and decision support.
Since my move to GE HealthCare, we’ve set our sights As we deepen our investments in AI, our key areas
on a broader horizon. We’re driven by a mission to of focus include honing operational efficiency and
revolutionize health care interfaces by integrating pioneering advancements in service automation. We’re
voice, text and the latest in AI visualizations. This acutely aware of the post-sales lifecycle of our products,
approach isn’t just about technological novelty; it’s also and we’re dedicated to offering unmatched support
about creating user-centric tools that aim to redefine to our clients following device deployment. Through
how medical professionals interact with and leverage a fusion of automation and AI-driven tools, we aim to
technology, improve their efficiencies and, ultimately, set new industry benchmarks in customer service and
improve patient experience and outcome. operational excellence.

27 | Pulse of the Industry 2023

GUEST PERSPECTIVE GE HEALTHCARE

EY US: What are your thoughts on the

importance of AI explainability, and how is GE
HealthCare building that into its products?
PB: AI explainability is a cornerstone of responsible
AI, and at GE HealthCare, we prioritize making our
AI models transparent and understandable. The
surge in popularity of generative and foundational
models, especially within health care, stems from their
proficiency in multimodal settings. Imagine an AI system
that can interpret an image and, in parallel, articulate
its findings in clear, human-like language. This capability
not only helps users understand the results; it also aids
in refining the model itself. For example, generative
AI can distill complex medical reports, presenting
summaries tailored to different audiences: from patients
to clinicians and radiologists. The same data can yield
varied interpretations, making the information more
accessible and relevant to the user, be it the radiologist,
surgeon or patient.

However, explainability is merely one aspect of our

commitment to responsible AI. Interoperability,
defined as the ability to interpret and function across
various platforms and settings, is vital, especially in
EY US: Where do you see GE HealthCare addressing data privacy concerns. Bias minimization,
taking its work with these emerging health another integral aspect, ensures our AI models
technologies? are fair and unbiased. Last, we believe in rigorous,
multisite validation. This thorough vetting, conducted
PB: At GE HealthCare, our D-3 precision strategy over numerous locations, is essential before any of
focuses on integrating smarter devices, a disease- our technologies are deemed ready for real-world
specific approach and digital solutions to address applications. At GE HealthCare, we have a legacy of
workflow inefficiencies and enhance care quality. We aim medical device innovation whereby we always have had
to develop scalable technology that can tackle a wide to show our work and explain how our products are built
range of diseases using digital prowess. Generative and via our quality and regulatory frameworks. We are in an
foundational models are vital here, as they could allow advantageous position to leverage that legacy to ensure
us to quickly adapt to different diseases for screening, supported and responsible AI.
early detection, progression and even pinpointing
noninvasive biomarkers with minimal training (zero-
shot or few-shot setting). Envision a future where we
can swiftly create digital tools following a new drug’s
approval, optimizing the entire disease management
workflow within weeks. That’s our direction.

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EY PERSPECTIVE

How medtech can build resilient

supply chains for the future
For medtech, supply chain has emerged as a priority operational concern,
with companies increasingly recognizing the need to better deploy digital
technologies and data-driven insights to increase their operational efficiency
and resilience while improving working capital levels.

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EY PERSPECTIVE

The global pandemic shone a spotlight on supply chain For medtechs, negotiating these and other emerging
risk exposures, causing high-demand volatility as demand operational challenges will mean investing strategically
surged for certain key product lines (e.g., ventilators, in greater supply chain resilience, defined by these five
personal protective equipment, diagnostics) and plunged criteria:
for other goods, with elective surgeries deferred or
• Reliability: the degree to which a supply chain yields
canceled. As the pandemic has eased, further operational
consistent performance and quality
challenges have emerged, including rising equipment and
labor costs driven by soaring inflation and interest rates, • Time to innovate: the time it takes to bring a new
port congestion and other shipping challenges; increased product to market, factoring in the regulatory approvals
energy costs in the wake of geopolitical uncertainty in for the manufacturing system
Eastern Europe; and multiple other disruptions. • Agility: the supply chain’s reaction speed to changes in
Key issues for industry supply chains today include the market, in demand mix or in regulation
securing access to labor, raw materials (including alloys • Risk exposure: the degree to which a supply chain is
and metals) and key components such as semiconductor exposed to existing or new risks
chips, which have witnessed a significant increase in lead
times since 2020. Sterilization of equipment is another • Efficiency: the financial impact considering capital and
ongoing concern, with a spate of lawsuits and updates operating expenditures as well as remnant cost
to the National Emission Standards for Hazardous Air
Pollutants (NESHAP) pressuring companies to reduce use
of ethylene oxide (a recognized human carcinogen that is
increasingly linked to adverse health outcomes).

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EY PERSPECTIVE

There is no off-the-shelf model for companies to improve Beyond enhanced collaboration, greater emphasis on
resilience across all these dimensions. We can expect manufacturing location is also set to play a key role in
to see greater traction for strategies such as building how medtechs plan their supply chain strategies. While
better supply chain visibility, enabled by digital upstream supply chains in the life sciences, as in other industries,
and downstream monitoring of dynamics within the have become increasingly globalized in recent decades,
supplier base and customer base. Technology platforms we may now be witnessing a countertrend toward more
are already emerging to drive these strategies forward. localization, with governments placing greater strategic
Approaches such as this augmented supply chain emphasis on self-reliance at a national or regional level.
visibility will go hand in hand with more proactive supply Some degree of unwinding is likely to take place in regard
chain planning, better definition of manufacturing and to medtech supply chains. The end state, however, is likely
distribution capacity, and improved supplier collaboration. to be not full localization but rather the emergence of a
Tighter integration of operations between medtechs variety of hybrid models, balanced across local, regional
and their key suppliers, including sharing information on and global sites to enable greater resilience.
forecasts and projected risk exposures, may become an
As they work with governments to establish priorities and
increasingly critical part of how the supply chain system
parameters for future supply chain planning, medtechs
works.
will also need to weigh other factors in their efforts to
identify preferred manufacturing sites. These factors will
include:

• Negotiating and de-risking local complexities, such as

regional conflicts and instability and data restrictions
within certain markets

• Evaluating the financial stability within different

geographies as global macroeconomic volatility
continues

• Assessing sustainability, regulation and carbon footprint

in different geographies

• Determining the relative availability of talent, with

companies needing access to key skills and expertise
in the regions where they intend to focus their
manufacturing strategies

• Building an energy strategy that can secure supply,

including assessing energy independence within certain
countries

Medtechs will continue to develop their strategies

for securing and improving supply chain operations
in multiple directions. In every case, a key factor will
be ensuring that companies build their approach and
decision-making processes on a higher quality and
quantity of data, as they seek the optimal approach to
construct robust medtech supply chains for the future.

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EY PERSPECTIVE

Tapping into new markets: how to

enter China’s medical device industry
With a population approaching 1.5 billion people, China and its
vast market bring undeniable allure for just about every sector.
For companies in the health care space, a confluence of factors
is making the Chinese market a must.

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EY PERSPECTIVE

China’s aging population, increased affluence and greater solutions, the state has created regulation to influence
access to health care due to rapid urbanization mean those markets. For example, in August, China’s State
there are millions of potential new patients for companies Council adopted work plans to promote high-quality
across the health ecosystem. It is a market that is growing development of locally manufactured pharmaceutical and
faster than other already mature health care markets, and medical equipment.
for many of the big players in the medical device space,
In addition, volume-based procurement (VBP) kicked off
it is the number two market behind the US. The medical
in 2018 for pharmaceuticals and 2020 for high-value
device market in China, worth US$46 billion in 2022, is
medical devices. Through this approach, China seeks to
expected to grow by 8.6% to more than US$70 billion
lower medical costs within the Chinese health care system
by 2027.11 But tapping into this growth is not easy, and
by promising large volume procurement to the company
selling in China requires a different savvy than entering
that can offer the lowest price.
some of the more established markets.
From 2018 to 2022, China implemented seven rounds of
Commercialization plans that have worked for decades
national volume-based procurement (NVBP) that reduced
in markets such as the US and Europe are not suited
the prices of 294 formulations of multiple drugs by an
to the regulatory environment that characterizes the
average of over 50%. While pharmaceutical players have
Chinese health care market, prompting medical device
other options for selling their products, medical device
manufacturers to explore new strategies for accessing the
companies could be excluded from the market if they
more than 1 billion consumers in the country and often
don’t have access to hospital channels. In 2020, the
requiring companies to be in China, for China.
NVBP list included coronary stents, and it has since been
Conquering the challenges expanded to include other devices, including hip and knee
implants, surgical staplers, and intraocular lenses, among
The first step to accessing the Chinese market is others. According to the National Healthcare Security
understanding the country’s complex regulatory system Administration in September 2022, centralized VBP for
and the leadership approach that is the driving force orthopedic and spinal consumables is expected to reduce
behind that regulation. prices on average by 84% for selected products.
China’s publicly announced economic plans over the The program has dramatically curbed the cost of medical
last several years, including the Made in China 2025 devices to the Chinese health care system, but it has
plan, have put a strong emphasis on bolstering the also allowed for greater penetration into the market as
country’s internal know-how in areas of technology, patients get greater access to once costly procedures.
including medtech. Announced in 2015, the state’s plan
for its future highlights the importance of domestic In a boon to multinational companies, China has also
manufacturing in key technological areas, elevating increased the number of medical device products on
medical technology to crucial status. This has geared its National Encouraged List, which encourages foreign
the market toward homegrown Chinese companies, investment in the manufacturing of certain products
while organizations that import goods can expect to face or technologies. These additions included AI-enabled
increased examination and approval. The 2022 revision medical aid equipment, high-end radiotherapy and
of China’s Law on the Progress of Science and Technology surgical equipment, rehabilitation equipment, and
also created further financial incentives for domestic wearable health devices.
companies. While regulation and pricing are certainly challenges for
To achieve the aims laid out in the Made in China 2025 multinational companies that are seeking to compete in
plan around being a leader in areas such as robotics, China, they aren’t insurmountable.
big data, artificial intelligence and digital health care

11. “Asia-Pacific (APAC) Medical Devices Industry Outlook 2023,” Frost & Sullivan website, https://store.frost.com/asia-pacific-apac-medical-devices-industry-outlook-2023.html, 18 April 2023.

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Crafting the right strategy

For any medical device company that’s looking to enter 4. Pursue local manufacturing or joint ventures. Local
the Chinese market, leadership will have to find the manufacturing and joint ventures provide foreign
strategy that best fits the organization’s operational multinationals with greater access to the Chinese
structure and needs. There is no one-size-fits-all market, allowing them some of the same privileges as
approach, but here are several strategies to consider: homegrown domestic Chinese companies and avoiding
many of the delays associated with importation. In
1. Optimize costs. Lowering supply chain and
these instances, it is imperative that the workforce
manufacturing costs can allow a company to better
consists of local talent who can understand the
compete during the VBP process, which typically
regulatory system in China and may have stronger
awards the contract to the manufacturer that can offer
relationships with local officials. Daily interactions with
the most cost savings. These contracts guarantee
local government are fundamental around influencing
volume and allow companies to forgo the marketing
decisions, forecasting policy trends, and lowering
and commercialization costs typically associated with
strategic and operational risks.
a launch.
5. Invest in local companies. One way to quickly develop
2. Focus on innovative devices. The VBP lists focus
a local presence is to buy a majority stake in a publicly
on high-value products that are older and typically
traded company listed on the Hong Kong Stock
readily available or generic in other mature markets.
Exchange. This strategy has the benefits of providing
It is still possible for multinational companies to sell
local executive talent as well as a locally based sales
unique medical device products at higher prices,
network. It also provides cross-selling capabilities for
and innovation is less likely to be undercut by local
both companies.
suppliers. Innovative products also garner a fast-
track approval status under China’s medical device 6. Consider best practices for interaction with local
classification system, allowing these products to get to government. Companies should consider Foreign
market more quickly. Corrupt Practices Act (FCPA) risks when interacting
with other governments and government employees,
3. Leverage technology licensing. While this strategy
in addition to assessing local regulations and
allows multinational companies to gain a rapid
regulatory trends when entering and expanding in
foothold for a product in China, it can also present
a market. In China, hospital employees, and even
challenges due to the transfer of intellectual property.
doctors, are considered government employees.
IP risk can be mitigated by limiting China to more
The Chinese government recently stepped up an
mature technology. Short of out-licensing technology,
antibribery campaign focused on doctors who receive
some companies have found success by creating local
bribes and the companies that offer them.
iterations of products vs. outright innovation.
Entering the Chinese market likely means using some
combination of these strategies, and challenges will
remain once a company gains access. Further, companies
should be cognizant of intellectual property and
cybersecurity issues during strategy implementation.

34 | Pulse of the Industry 2023

GUEST PERSPECTIVE JOHNSON & JOHNSON MEDTECH

The key to operating successfully

in China: integrating into the
local ecosystem

Tim Schmid
Company Group Chairman,
Johnson & Johnson MedTech, Asia Pacific

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GUEST PERSPECTIVE JOHNSON & JOHNSON MEDTECH

While entering the China market presents many China’s insatiable demand for digital health, coupled with
challenges and complexities, keeping some companies on its ability to adopt it swiftly, has been further accelerated
the sidelines, the opportunity to impact patients’ lives is by the COVID-19 pandemic. For instance, there are now
enormous. As one of the first multinational health care more than 100 local companies developing surgical
companies to enter China, Johnson & Johnson MedTech12 robotics and planning products, covering all five major
has been dedicated to the market, underscoring our subsegments in orthopedics, laparoscopy, neurology
commitment to serving this region. We have amplified our and dental. In 2022 alone, there were at least 15 local
commercial, manufacturing and innovation capabilities surgical robotics and planning products approved by
to cater to the current and future needs of the Chinese China’s National Medical Products Administration (NMPA),
population. While we initially focused on lifting and compared to less than five each year previously.
shifting existing sales and marketing strategies from
To tap into this innovation engine as Johnson & Johnson,
other markets to China, we soon recognized the need
we have been deliberately integrating ourselves into
for a distinct approach. We also understood that to
the local ecosystem and focusing more on creating
succeed in China, immersing in the local ecosystem was
partnerships. Chinese biotech and medtech companies
not an option but a necessity. This approach essentially
are becoming increasingly attractive partners across both
meant harnessing local talent; collaborating closely
our Innovative Medicine and MedTech sectors. Within
with local stakeholders; and forming partnerships with
medtech, we explore various commercial models with
domestic companies around R&D, manufacturing and
our strategic partners and determine whether there’s
commercialization.
further potential to evolve these relationships into
China’s earlier reputation for producing low-quality deeper partnerships. Committed to advancing health care
or copycat products is outdated. Today, the country innovation, we are continually on the lookout for partners
is making leaps in innovation, including in medical whose unique capabilities complement our strengths and
technology. Matching, if not surpassing, global who also share a commitment to building trust through
benchmarks, China’s domestic R&D investments often integrity and compliance.
eclipse those of international giants. Local players are
emerging with comparable quality and technology in
multiple categories, especially in the digital realm, such as
AI-assisted diagnostics and surgical robotics.

12. Johnson & Johnson MedTech refers to the business conducted by Johnson & Johnson Medical (Shanghai) Co. Ltd. in China.

36 | Pulse of the Industry 2023

GUEST PERSPECTIVE JOHNSON & JOHNSON MEDTECH

Translating global efforts into

commercial success in China
China stands out as a uniquely intricate marketplace
that demands a deep understanding of and adherence
to local market dynamics and regulations. In China,
technical superiority does not always translate into
commercial success. Successful navigation requires
technical differentiation coupled with price sensitivity
and a strong clinical presence, something achieved only
through a grounded, hands-on approach. Additionally,
investments in funding and resources need to align
with the nuances of local market conditions and flex
accordingly.

The landscape in China is continuing to rapidly evolve,

especially as local companies set their sights on global
ambitions. While not without complexities, China’s
potential matches few markets today for multinational
medtech companies. Put simply, the next China is China.

Prioritizing the development of

local talent
We recognize that success in China requires a strong
focus on building clinical advocacy with health care
professionals and partnering with multiple stakeholders
to help accelerate the high-quality development of
China’s health care system. However, the key to this
collaboration lies in local talent.

Language, cultural barriers and highly dynamic market

conditions can challenge foreign talent to engage
meaningfully within China. We’ve made strategic
investments in identifying, developing and nurturing
top talent through a robust process, starting with
recruitment from graduate programs. Despite facing
heightened competition for talent from local companies,
we provide a desirable opportunity for candidates
who are interested in global careers. Our multiple
development programs offer new MBA recruits exciting
roles and a chance to work in various regions around the
globe before returning to China.

37 | Pulse of the Industry 2023

DATABOOK

38 | Pulse of the Industry 2023

 Financial performance
Figure 1

Medical technology at a glance (US$b)

2022 2021 Change % change

Public data company

Total revenue $573.4 $554.0 $19.4 3.5%

Conglomerates $240.9 $238.7 $2.2 0.9%

Pure-play companies $332.5 $315.3 $17.2 5.5%

Commercial leaders $309.4 $292.3 $17.2 5.9%

Emerging leaders $23.1 $23.0 $0.1 0.3%

R&D expense $29.8 $27.6 $2.2 7.8%

SG&A expense $107.1 $100.0 $7.0 7.0%

Net income $14.3 $39.5 $(25.3) (63.9%)

Market capitalization $1,572.8 $2,184.6 $(611.8) (28.0%)

Number of employees 1,129,800 1,066,500 63,300 5.9%

Number of public companies 454 453 1 0.2%

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

• Total market capitalization for the sector decreased 28% to nearly US$1.6 trillion, as the sector saw declines in growth
and faced macro head winds that kept deal activity low.

• Overall, 58% of pure-play medtechs grew their top line, down from 80% in 2021.

• Commercial leaders’ revenue was up nearly 6% in 2022, but this same group saw a year-over-year decline of 1.1%
from the first half of 2023 compared to the first half of 2022.

• While 64% of conglomerates experienced top-line growth, overall revenue growth within this group fell just short of 1%.

• Net income dropped nearly 64% to just US$14.3 billion in 2022, which was largely due to accounting-related charges
and not actual operational losses.

• Just 58% of companies added headcount vs. 77% the year before.

39 | Pulse of the Industry 2023

 Databook: Financial performance

Figure 2

Annual revenue and R&D growth of public medtechs

After reaching its highest level since the financial crisis, revenue growth fell to its lowest levels in years.
Revenue R&D
30% 30%

24% 24%
Revenue growth rate

R&D growth rate

18% 18%

12% 12%

6% 6%

0% 0%
-3% -3%
00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22
20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20
Source: EY analysis, Capital IQ and company financial statement data.
Note: Medtronic has not reported its FY19 results yet; 9M results included currently.

• Total 2022 revenue growth was down from a high of 16% in 2021. The 3.5% seen in 2022 tracked more closely with
the historical average of 6% seen prior to the recent outlying years.

• Most medtechs continued to invest in future innovation as total R&D spend increased nearly 8% in 2022, albeit down
from the 12% increase seen in 2021. Only 57% of medtechs increased their R&D investment, compared with 71% the
year prior.

Figure 3

US and European revenue growth by product group: pure-plays

Percentage change in revenue Percentage change in number of companies
12% 4%
Percentage change in revenue

number of companies
Percentage change in
9% 2%

6% 0%

3% -2%

0% -4%
Imaging Non-imaging diagnostics Research and other equipment Therapeutic devices (total)
Source: EY analysis, Capital IQ and company financial statement data.
Data from public pure-play medtechs only.

• Only one product segment — research and other equipment — grew by double digits in 2022, compared with more than
20% growth in three out of the four segments in 2021.

• Research and other equipment increased 10% to US$78.2 billion, well below the 23% increase seen in 2021.

• Non-imaging diagnostics, last year’s growth leader, grew only 4% to US$26.9 billion in 2022, a far cry from the
industry-leading 26% seen the year prior.

• Meanwhile, therapeutic devices jumped more than 4% to US$200.1 billion (down from 11%), while imaging was also up
about 4% to US$25.3 billion (compared with 6% in 2021).

40 | Pulse of the Industry 2023

 Databook: Financial performance

Figure 4

Change in US and European therapeutic device companies’ revenue and net

income by disease category: pure-plays

Revenue Net income Percentage change in revenue Percentage change in net income

3 60%

2 45%

1 30%

0 15%
(US$b)

-1 0%

-2 -15%

-3 -30%

-4 -45%

-5 -60%

Sources: Capital IQ, company financial statement data and EY analysis.

Data shown for pure-play companies only.

• Orthopedic had the largest revenue growth of nearly US$1.8 billion (21%) to US$35 billion, followed by ophthalmic
with US$901 million (10%) to US$13.1 billion and cardiovascular/vascular with US$706 million (8%) to US$22 billion:

• While Stryker was responsible for much of growth in the orthopedic space, several companies, including North
Carolina-based Bioventus, also experienced growth. Bioventus grew 19% to US$512 million primarily due to
acquisitions and volume growth within its Surgical Solutions business.

• Among ophthalmic players, two of the largest companies drove the growth in the segment: Alcon (+5% to
US$8.7 billion), led by its surgical business, and Cooper Companies (+13% to US$3.3 billion), led by its contact
lens business.

• Boston Scientific increased its top line by 7% (to US$12.7 billion) to secure the largest dollar increase in the
cardiovascular/vascular segment. Shockwave Medical had another massive year, gaining 107% to US$490 million,
largely due to the increased sales of its coronary and peripheral catheters.

• Within dental, Align Technology grew by more than 60% due to increases in clear aligner volume and the number of
iTero intraoral scanners. Dentsply Sirona jumped 27% and Straumann grew 38% — both recovering from pandemic-
related drops in elective procedures.

• From a net income perspective, therapeutic device companies were down 36% to US$13.6 billion, which comes on
the heels of a 98% increase in 2021. However, just as accounting-related charges helped fuel growth last year, they
provided head winds in 2022.

41 | Pulse of the Industry 2023

 Databook: Financial performance

Figure 5

US FDA medical device approvals (2013–23)

Number of PMAs Number of 510(k) clearances
3,500 50

45
3,000
40
Number of 510(k) clearances

2,500 35

Number of PMAs
30
2,000
25
1,500
20

1,000 15

10
500
5

0 0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*

*Data for 510(k) clearances and PMA approvals are through June 2023.
Source: FDA website.

• In 2022, there were nearly 3,200 510(k) clearances in the US — the highest figure the industry has seen since 2017.
However, 2022 saw just 22 pre-market approvals (PMAs), the lowest since 2013.

• As we noted in the 2021 edition of Pulse, the FDA’s Center for Devices and Radiological Health (CDRH) was
overwhelmed by a huge increase in regulatory actions fueled by the pandemic (such as emergency use authorizations
for COVID-19 tests). The backlog may have been one of the reasons for lower PMAs in 2022. However, 2023 is on
track to reach the highest PMA levels since 2017, with 20 approvals seen through the first half of the year.

42 | Pulse of the Industry 2023

 Financing
Figure 6

Capital raised in the US and Europe by year (US$m)

Venture IPO Follow-on and other Debt
60

50

40
US$

30

20

10

0
July 2012– July 2013– July 2014– July 2015– July 2016– July 2017– July 2018– July 2019– July 2020– July 2021– July 2022–
June 2013 June 2014 June 2015 June 2016 June 2017 June 2018 June 2019 June 2020 June 2021 June 2022 June 2023

Source: EY analysis, BMO Capital Markets, Dow Jones VentureSource and Capital IQ.
Numbers may appear to be inconsistent because of rounding. PIPEs included in “follow-on and other.”

• Overall, medtech financing grew to a total of US$32.8 billion in the 12-month period ending 30 June 2023
(2022/23), a 9% increase over the previous period and the first overall uptick in three years.

• Driving most of this past year’s growth was a 71% increase in the amount of debt issued, which reached US$19 billion.
Of that total, roughly 44% of it (US$8.3 billion) was due to the January 2023 spinout of GE HealthCare from General
Electric (GE). However, GE HealthCare did not receive any proceeds from the offering, with all of the proceeds going
back to GE.

• Unlike previous years, the largest debt offerings in 2022 were used not to fund acquisitions, but rather to repay and
refinance existing debt, working capital, stock buybacks and other capital expenditures.

• Just US$13.8 billion of equity was raised in the 2022/23 period, the lowest total in seven years and 56% below the
US$31.6 billion raised just two years prior.

• On the positive side, total value raised via follow-on public offerings increased 19% year-over-year to US$7 billion;
however, like the debt figures, GE’s spin of its health care business artificially boosted follow-on capital as GE
HealthCare sold 25 million shares of common stock for a total of nearly US$2 billion. Once again, GE was the
beneficiary of this transaction.

• On the negative side, venture capital and IPOs were down 21% and 99%, respectively.

• In all, just four companies went public during 2022/23, raising an anemic US$40 million. The warning signs were
first seen in the second half of the previous period (2021 and 2022), when just nine IPOs brought in US$84 million.
These figures stand out starkly against the 39 IPOs that raised US$4.4 billion the previous year and the even more
impressive 43 IPOs that garnered US$7.3 billion during the 2020/21 period.

43 | Pulse of the Industry 2023

 Databook: Financing

Figure 7

US and European early-stage VC rounds above US$5m

Number of early-stage VC rounds above US$5m Percentage of VC investment going to early-stage medtechs

200 25%

Percentage of VC investment going to early-

160 20%
Number of early-stage VC rounds

stage medtechs
120 15%

80 10%

40 5%

0 0%
July 2014– July 2015– July 2016– July 2017– July 2018– July 2019– July 2020– July 2021– July 2022–
June 2015 June 2016 June 2017 June 2018 June 2019 June 2020 June 2021 June 2022 June 2023

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

Early-stage rounds are seed-, first- and second-round VC investments.

• Just US$6.7 billion of venture capital was raised in 2022/23, the lowest figure seen since 2015 and 2016. Of that
total, 34% (US$2.3 billion) came from early-stage rounds, which is in line with previous years.

• There were only 106 venture rounds of US$5 million or more in 2022/23, the lowest amount in eight years.

• Figures show that while investors were willing to invest in innovative, private companies, they continued to gravitate
toward medtechs that are further along their development cycle.

44 | Pulse of the Industry 2023

 Databook: Financing

Figure 8

Top venture rounds, July 2022–June 2023

Company Region Product type (disease) Gross amount raised Quarter Round type
(US$m)
Verily Life Sciences US – Northern California Other 1,000 Q3 2022 Late stage
Equashield US – New York Other 300 Q4 2022 Early stage
HeartFlow US – Northern California Therapeutic devices (cardiovascular/vascular) 215 Q2 2023 Late stage
Therabody US – Southern California Therapeutic devices (orthopedic) 165 Q3 2022 Late stage
Distalmotion Switzerland Therapeutic devices (non-disease specific) 150 Q2 2023 Late stage
HistoSonics US – Minnesota Therapeutic devices (oncology) 85 Q4 2022 Late stage
Osler Diagnostics UK Therapeutic devices (non-imaging diagnosis) 85 Q4 2022 Late stage
Augmedics US – Illinois Therapeutic devices (orthopedic) 83 Q2 2023 Late stage
SetPoint Medical US – Southern California Therapeutic devices (neurology) 80 Q1 2023 Late stage
Synchron US – New York Therapeutic devices (neurology) 75 Q4 2022 Late stage
Alleviant Medical US – Texas Therapeutic devices (cardiovascular/vascular) 75 Q1 2023 Late stage
Medical Microinstruments Italy Therapeutic devices (non-disease specific) 75 Q3 2022 Early stage
MicroTransponder US – Texas Therapeutic devices (neurology) 73 Q3 2022 Late stage
Cognito Therapeutics US – Massachusetts Therapeutic devices (neurology) 73 Q1 2023 Early stage
Presidio Medical US – Northern California Therapeutic devices (neurology) 72 Q2 2023 Late stage
Resolve Biosciences Germany Research and other equipment 71 Q4 2022 Early stage

Source: EY analysis, BMO Capital Markets, Dow Jones VentureSource and Capital IQ.

• The majority of the largest venture rounds went to late-stage companies.

• After many years of non-imaging diagnostic companies attracting the biggest investment, 2022/23 saw investors
gravitating toward medtechs that are focused on the development and production of therapeutic devices.

• The year’s largest venture round went to Alphabet’s Verily Life Sciences for US$1 billion in September 2022. This
latest round brings the company’s total investment to US$3.5 billion (see table above). Verily’s current portfolio
includes care solutions for sleep apnea and miniaturized continuous glucose monitors for diabetes. Verily has said the
funds may also be used to invest in strategic partnerships and potential acquisitions.

• After reversing course on a SPAC deal last year, cardiac diagnostic developer HeartFlow picked up US$215 million
to capitalize on a recent FDA clearance for AI-powered software that maps out the heart’s coronary arteries and any
potential blockages through a 3D CT scan.

• Therabody, maker of the Theragun massage device, raised US$165 million to help invest in digital content and
acquisitions. The company also announced eight new products, including smart goggles to help relieve facial tension
and headaches, as well as a new mini Theragun.

• Switzerland-based Distalmotion, whose Dexter robot has been used in Europe for daily procedures in gynecology,
urology and general surgery, collected US$150 million in 2022. The latest proceeds will help bring the system to the
US market, where it will face FDA approval, the company said in its announcement.

• In all, five of the top 15 funding rounds went to companies with a focus on neurological conditions, including SetPoint
Medical, which raised US$80 million for its nerve stimulation technology that treats autoimmune disease, as well
as US$75 million for Synchron’s catheter-delivered Stentrode BCI implant, which taps into blood vessels to capture
signals from the brain.

45 | Pulse of the Industry 2023

 Databook: Financing

Figure 9

US and European IPOs, July 2022–June 2023

Company Ticker Region Product type (disease) Gross raised (US$m) Quarter

Monogram Orthopaedics MGRM US – Texas Therapeutic devices (orthopedic) 17 Q2 2023

Nexalin Technology NXL US – Texas Therapeutic devices (neurology) 10 Q3 2022

Innovative Eyewear LUCY US – Florida Therapeutic devices (ophthalmic) 7 Q3 2022

Oncosem ONCSM Turkey Research and other equipment 6 Q1 2023

Source: EY analysis, BMO Capital Markets, Dow Jones VentureSource and Capital IQ.

• Just US$40 million was raised via IPO in 2022 and 2023, down from US$4.4 billion the year before and
US$7.3 billion two years prior.

• Monogram Orthopaedics develops customized orthopedic implants using state-of-the-art 3D printing and robotics
technology, coupled with advanced preoperative imaging. The company went public via a Regulation A+ IPO, a
type of offering created under the US JOBS Act to give small companies better access to capital.

• Europe’s largest and only IPO went to Turkey’s Oncosem, which focuses on the production of consumables, medical
devices, diagnostic products and protective equipment.

• While not a traditional IPO, there was one additional public company to emerge in early January 2023 when the
long-anticipated spin-out of GE HealthCare took place. The legacy parent company, General Electric, distributed
about 80% of outstanding shares of its health care business to GE shareholders and retained a 20% stake in the
firm. GE HealthCare generates about $18 billion in revenue per year, and its core business focuses on imaging,
ultrasound, patient care solutions and pharmaceutical diagnostics.

46 | Pulse of the Industry 2023

 M&A
Figure 10

M&A in the US and Europe by year

Mega deals (>US$10b) Other M&A Number of deals

120 300

100 250
Total deal value (US$b)

Number of deals
80 200

60 150

40 100

20 50

0 0
06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

23
20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20
e

ne

ne

ne

ne

ne

ne

ne

ne

ne

ne

ne

e
un

un

un

un

un

un

un
Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju
–J

–J

–J

–J

–J

–J

–J
–

–
05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22
20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20
ly

ly

ly

ly

ly

ly

ly

ly

ly

ly

ly

ly

ly

ly

ly

ly

ly

ly
Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju
Sources: EY analysis, Capital IQ and Thomson ONE
Chart includes deals with value disclosed (medtech deal where either acquirer or target is located in the US or Europe).

• Total deal values plummeted 44% year-over-year to US$44.6 billion in the 12-month period ending 30 June 2023.
This figure is down from US$79.3 billion, which was the third highest total over the past two decades. The
US$44.6 billion in deal value represents the second lowest total in the past decade.

• Omitting the year’s lone megadeal (Johnson & Johnson’s acquisition of Abiomed for US$16.6 billion), the
US$23.5 billion non-megadeal total value for 2022/23 was the lowest in 10 years.

• Falling in line with the decrease in total value, the number of deals also plummeted 37% year-over-year to 161.
The US$277 million average deal size was slightly higher than the 10-year average of US$268 million.

• M&A activity slid as concerns mounted about debt and credit markets and lower valuations. These worries were
compounded by head winds from rising interest rates and continued labor shortages (due to a lack of both workers
and skills). Industry experts are mostly optimistic in their forecasts of a resurgence for the sector as public and private
investors seek to channel their stockpiles of capital back into market.

47 | Pulse of the Industry 2023

 Databook: M&A

Figure 11

Selected M&A (US and Europe), July 2022–June 2023

Acquiring company Location Acquired company Location Value (US$m) Buyer’s deal driver

Johnson & Johnson US – New Jersey Abiomed US – Massachusetts $16,600 Build scale (cardiovascular/vascular)

Advent International/ US – Massachusetts/ Baxter

US – Illinois $4,250 Portfolio expansion
Warburg Pincus New York (BioPharma Solutions)

Globus Medical US – Pennsylvania NuVasive US – Southern California $3,100 Build scale (orthopedic)

Thermo Fisher Build scale (non-imaging

US-Massachusetts The Binding Site UK $2,600
Scientific diagnostics)

Build scale (non-imaging

Werfen, S.A. Spain Immucor US – Georgia $2,000
diagnostics)

SD Biosensor/ Build scale (non-imaging

South Korea Meridian Bioscience US – Ohio $1,530
SJL Partners diagnostics)

Build scale (research and other

Waters US – Massachusetts Wyatt Technology US – Southern California $1,360
equipment)

Cordis US – Florida M.A. Med Alliance Switzerland $1,135 Build scale (cardiovascular/vascular)

Abbott Laboratories US – Illinois Cardiovascular Systems US – Minnesota $890 Build scale (cardiovascular/vascular)

Alcon Switzerland Aerie Pharmaceuticals US – North Carolina $770 Build scale (ophthalmic)

Boston Scientific US – Massachusetts Apollo Endosurgery US – Texas $615 Build scale (gastrointestinal)

Becton Dickinson
STERIS Ireland (surgical instrument US – New Jersey $540 Build scale (surgical)
platform)

Boston Scientific US – Massachusetts Acotec Scientific China $523 Build scale (cardiovascular/vascular)

Build scale (non-imaging

Quest Diagnostics US – New Jersey Haystack Oncology US – Maryland $450
diagnostics)

Orthofix Medical US – Texas SeaSpine US – Southern California $328 Build scale (orthopedic)

Teleflex US – Pennsylvania Standard Bariatrics US – Ohio $300 Product extension (gastrointestinal)

Zimmer Biomet US – Indiana Embody US – Virginia $275 Build scale (orthopedic)

CONMED US – Florida Biorez US – Connecticut $250 Build scale (wound care)

Source: EY analysis, Capital IQ and Thomson ONE.

Chart includes deals with value disclosed (medtech deal where either acquirer or target is located in the US or Europe).

• The year’s top deals gravitated toward both cardiovascular/vascular assets and non-imaging diagnostics.

• In the largest deal of the year, Johnson & Johnson paid US$16.6 billion in November 2022 for Abiomed. Abiomed’s
Impella heart pumps, the smallest in the world, had global revenue totaling US$985 million in fiscal year 2022.
The acquisition adds to Johnson & Johnson’s heart recovery solutions, complementing its Biosense Webster
electrophysiology business. Abiomed’s acquisition comes months after Abbott confirmed that its HeartMate 3 pump
could extend a heart-failure patient’s life by up to five years.

48 | Pulse of the Industry 2023

 Databook: M&A

• Other notable deals included the following:

• Baxter announced its intention to spin off BioPharma Solutions business to private equity firms Advent International
and Warburg Pincus for US$4.3 billion. Proceeds were expected to help reduce company debt, part of which was
incurred during $10.5 billion acquisition of Hillrom that closed at the end of 2021.

• Globus Medical/NuVasive for US$3.1 billion: By annual revenue, the deal combines the world’s No. 7 and No. 8
largest orthopedic device companies.

• Thermo Fisher spent US$2.6 billion for oncology diagnostics maker the Binding Site, which develops a range of tests
and instruments that detect and monitor various cancers and immune system disorders.

• Werfen, a maker of specialized diagnostic instruments, acquired Immucor, a specialist in transfusion and transplant
in vitro diagnostics, from private equity firm TPG.

• Meridian Bioscience was acquired by SD Biosensor (SDB) and SJL Partners (private equity) (both South Korea-based)
for US$1.5 billion. The deal will help with SDB’s entry into the US in vitro diagnostic market.

• Abbott spent US$890 million for artery-cleaning device maker Cardiovascular Systems. It will join Abbott’s existing
portfolio of catheters, stents, imaging systems and other technologies used to remove plaque buildups from blood vessels.

• Boston Scientific made two acquisitions, the first being Apollo Endosurgery for US$615 million. Apollo makes
devices for gastrointestinal surgery, including endoscopic suturing systems and gastric balloons. The second
acquisition of Acotec Scientific for US$523 million includes vascular products such as drug-coated balloons (DCBs),
radiofrequency ablation technologies and thrombus aspiration catheters.

49 | Pulse of the Industry 2023

 Databook: M&A

Figure 12

Milestone payments in US and European medtech M&A

Number of deals with milestones Number of deals with milestones/total number of deals
30 25%

24 20%

Percentage of M&As with

milestone payments
Number of M&As

18 15%

12 10%

6 5%

0 0%
July 2017– July 2018– July 2019– July 2020– July 2021– July 2022–
June 2018 June 2019 June 2020 June 2021 June 2022 June 2023

Source: EY analysis, Capital IQ and Thomson ONE.

Figure 13

Milestone share in US and European medtech M&A

Total value milestones Total value of milestones/total value of all deals with milestones
4 80%
Total deal value (US$b)

3 60%

Share of total value

2 40%

1 20%

0 0%
July 2017– July 2018– July 2019– July 2020– July 2021– July 2022–
June 2018 June 2019 June 2020 June 2021 June 2022 June 2023

Source: EY analysis, Capital IQ and Thomson ONE.

• Just 14 transactions, or 9% of all announced deals, utilized a milestone payment during the period from July 2022 to
June 2023, and both were well below the previous five-year averages of 21 deals and 13%, respectively.

• While the nearly US$2.2 billion of milestone values in 2022 and 2023 were right on target to the previous five-year
average of US$2.2 billion, the share of total value (58%) was significantly higher than the 31% average.

• Of the nearly US$2.2 billion in announced milestones, Cordis’ acquisition of MedAlliance accounted for US$900 million
of that total. The agreement includes an initial investment of US$35 million and US$200 million payment upon closing
in 2023, along with regulatory achievement milestones of up to US$125 million and commercial milestones of up to
US$775 million through 2029.

50 | Pulse of the Industry 2023

Data exhibit index
Accelerating medtech’s digital opportunity
6 Figure 1: Macro challenges for the global economy

6 Figure 2: US and European medtech public company revenues, 2013–22

7 Figure 3: US and European medtech market capitalization relative to leading indexes, 2020–H1 2023

8 Figure 4: US and European medtech commercial leaders spending trends, 2010–22

9 Figure 5: Equity capital raised in the US and Europe by period, Q3 2019–Q2 2023

10 Figure 6: M&A in the US and Europe by year, H2 2005–H1 2023

11 Figure 7: The intelligent health ecosystem of tomorrow

11 Figure 8: Smart devices will become just one component in care delivery within an intelligent health ecosystem:
orthopedic devices example
12 Figure 9: FDA approvals for AI algorithms, 2007–October 2022

15 Figure 10: A potential intelligent health ecosystem of tomorrow will go beyond simply being digitalized and
connected, becoming a truly smart system

Pulse 2022 databook

39 Figure 1: Medical technology at a glance (US$b)

40 Figure 2: Annual revenue and R&D growth of public medtechs

40 Figure 3: US and European revenue growth by product group: pure-plays

41 Figure 4: Change in US and European therapeutic device companies’ revenue and net income by disease
category: pure-plays
42 Figure 5: US FDA medical device approvals (2013–23)

43 Figure 6: Capital raised in the US and Europe by year (US$m)

44 Figure 7: US and European early-stage VC rounds above US $5m

45 Figure 8: Top venture rounds, July 2022–June 2023

46 Figure 9: US and European IPOs, July 2022–June 2023

47 Figure 10: M&A in the US and Europe by year

48 Figure 11: Selected M&A (US and Europe), July 2022–June 2023

50 Figure 12: Milestone payments in US and European medtech M&A

50 Figure 13: Milestone share in US and European medtech M&A

51 | Pulse of the Industry 2023

Ernst & Young LLP

ACKNOWLEDGMENTS
Project leadership
Jim Welch, EY Global Medical Technology Leader, provided the strategic vision for the Pulse report
and brought his years of experience to the analysis of the industry trends.

James Evans, EY Global Health Sciences & Wellness Senior Analyst, was the report’s lead author.
He assisted with the development of the overall storyline and wrote the year in review article, as well
as several EY and guest perspectives.

Lisa LaMotta, EY Global Health Sciences & Wellness Senior Analyst, was the author on several
EY perspectives and the databook, was a key contributor to many of the guest Q&As and offered
editorial support throughout the publication. This year’s report is Lisa’s first time supporting Pulse
of the Industry.

Jason Hillenbach, EY Global Health Sciences & Wellness Knowledge Leader and creator of Pulse
of the Industry, was the report’s managing editor, with direct responsibility for all data and trend
analysis, research, editorial review and the overall quality of this publication.

Shanthi Subramanian, Brand, Marketing & Communications Life Sciences Lead, was the report’s
marketing campaign manager. She managed the overall project and developed and managed the
multi-channel marketing campaign.

We would like to recognize the contributions to the editorial content made by the following EY
professionals and leaders: John Babitt, Matthew Geiger, Mark Ginestro, Maryline Marquet,
Kelsey Mathieu, Kenny O’Neill, Sezin Palmer, Hua Su, Arda Ural, Crystal Yednak and Jay Zhu.

Data analysis
Arpit Jain and Divya Kapoor organized all of the collection, research and analysis of the
report’s data. Ulrike Kappe provided quality control support.

Jason Hillenbach conducted fact-checking and quality review of the publication’s data.

Editorial assistance
Blythe Randolph was the report’s copy editor. Her patience, hard work and attention to
detail were unparalleled.

Design
Soon Ham was the lead designer for this project. This publication would not look the way it
does without his creativity.

Public relations and marketing

Public relations related to the report and its launch was led by Lauren Hare.

52 | Pulse of the Industry 2023

52
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
are defined as companies that design companies that derive a significant part of Conglomerate companies
and manufacture medical technology their revenues from medical technologies.
equipment and supplies and are Although we classify conglomerate United States
headquartered within the United States or medtech divisions by product group • 3M: Health Care
Europe. The definition includes therapeutic (e.g., GE HealthCare into imaging and • Abbott: Diagnostics and
device, diagnostic, drug delivery and Abbott into therapeutic devices), we Medical Devices
analytical/life sciences tools and digital report their results separately from pure- • Agilent Technologies: Life
health companies. It excludes distributors play companies. We take this approach Sciences & Applied Markets
and service providers, such as contract because, excepting revenue results, and Diagnostics & Genomics
research organizations or contract conglomerates do not report full financial • Baxter: Medical Products and
manufacturing organizations. All publicly numbers for their medtech divisions. Therapies, and Healthcare
Systems and Technologies
traded medtech companies are classified
For the purposes of this report, the global • Corning: Life Sciences
as belonging to one of five broad product
data represents combined metrics from • Danaher: Life Sciences
groups:
and Diagnostics
US and European medtech companies;
• General Electric: GE HealthCare
• Imaging: companies that develop Israel’s data is analyzed as part of the
• IDEX: Health & Science
products used to diagnose or monitor European market. Foreign exchange
• Johnson & Johnson: Medical
conditions via imaging technologies, rates converted from local currencies to
Devices & Diagnostics
including products such as MRI US dollars are calculated on a blended
machines, computed tomography and annual rate. Where possible, data is Europe
X-ray imaging equipment, and optical analyzed across a range of dimensions, • Agfa-Gevaert: Agfa HealthCare
biopsy systems including product group (e.g., imaging • Dräger: Medical Devices
or therapeutic device), therapeutic area • DSM: Biomedical
• Non-imaging diagnostics: companies focus (e.g., oncology or cardiovascular), • Eckert & Ziegler: Medical
that develop products used to diagnose company ownership (e.g., public or • EN: Biomedical Group
or monitor conditions via non-imaging private) and revenue thresholds. Our • EssilorLuxottica: Direct to Consumer
technologies, which can include taxonomy sometimes segregates • Fresenius: Fresenius Medical Care
patient monitoring and in vitro testing companies into thinly populated • GN: GN Hearing
equipment categories, making it difficult to provide • Halma: Healthcare
statistically significant results. • Jenoptik: Advanced Photonic
• Research and other equipment:
Solutions
companies that develop equipment As part of its dealmaking evaluation, • Lumibird Group: Quantel Medical
used for research or other purposes, the EY team’s analysis tracks the digital • Merck KGaA: MilliporeSigma
including analytical and life sciences alliances and acquisitions signed by • Philips: Diagnosis & Treatment and
tools, specialized laboratory equipment, leading pure-play and conglomerate Connected Care
and furniture medtechs by therapeutic area, technology • Roche: Roche Diagnostics
capability (e.g., sensors or artificial • Semperit: Sempermed
• Therapeutic devices: companies that
intelligence) and strategic purpose. Direct • Zeiss: Carl Zeiss Meditec
develop products used to treat patients,
investments by medtechs in digital health
including therapeutic medical devices
companies have been excluded from this
and tools
analysis.
• Other: companies that develop products
that do not fit in any of the above
categories; digital health companies
included in this product group

53 | Pulse of the Industry 2023

Our Medtech Consulting team

Jim Welch Arda Ural, PhD John Babitt

EY Global Medtech Leader, Ernst & Young LLP EY Americas Industry Market Leader, Health EY Americas Medtech Transactions Leader,
[email protected] Sciences & Wellness, Ernst & Young LLP Ernst & Young LLP
[email protected] [email protected]

Maryline Marquet Jay Zhu

EY EMEIA Medtech Leader, Ernst & Young AG EY Americas Medtech Commercial Leader,
[email protected] Ernst & Young LLP
[email protected]

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