On February 11, US President Trump signed an executive order to launch the “American AI Program”, a national strategy to guide the development of artificial intelligence technology in the United States. Prior to this, countries such as Canada, China, the European Union, Japan, and the United Kingdom also issued documents to express their emphasis on digital (artificial intelligence). The wave of digitization is surging.
Data will be the engine of future medical device development.
A new wave of digitization will reshape the medical technology industry, and future growth in medical technology will be driven by rapid, large-scale connectivity, consolidation and sharing of data capabilities to create safe solutions that deliver clinical and economic benefits.
Medical device companies must adapt their business models to create systems that go beyond ” product-centric ” definitions and move to ” data-centric ” systems. Some olfactory equipment companies are taking the lead.
Forerunners seize the digital realm
From the beginning of 2014 to the end of June 2018, companies focused on life sciences signed 292 cooperation or acquisition agreements to acquire digital technology. The most common goal is to build the ability to monitor, refine, and access data .
▲ Analysis of M&A data in medical digital field
* Since there are more than one motivation for some digital transactions, the number in the analysis exceeds the total number of transactions in the data set.
Among these transactions, medical technology companies accounted for a quarter (76), including 13 acquisitions .
Because the value of transactions disclosed by companies is small, the overall level of investment is difficult to measure. Overall, medical technology companies are relatively small in this area compared to investments in traditional sources of innovation.
But obviously, some companies with sensitive senses are paying more attention to transactions in the digital medical field.
For example, Philips, Medtronic, Xerox, Siemens Medical and other companies are very active in investing in digital and data-based business models. These investments will, in the future, give these companies greater opportunities to secure their position in the healthcare ecosystem.
Companies implementing these strategies may also find strong synergies between each other in the future.
For example, Philips and Medtronic to establish a business, develop and commercialize a comprehensive and patient data management platform LungGPS. LungGPS, a patient management platform, is designed to simplify the management of patients with pulmonary nodules from identification to diagnosis, treatment and long-term survival.
Most companies have not yet begun digital transformation
In the process of striving to maintain growth, medical technology companies still face fundamental challenges. M&A is a common response. However, even though the importance of digitization is well known, most companies are still not keen on cooperation and mergers and acquisitions in the digital field for various reasons. The sequence of this digital field layout will lead to different trends in the future of major companies.
Value reshaping, the importance of digital strategy
With more and more competitive products in the market, the product-centric growth space has become smaller and smaller in the past few years. Medical equipment companies have relied on cardiovascular stents, knee implants, hip implants and other equipment to achieve revenue growth, but now these devices have matured and the return on next-generation alternatives is declining. For leading companies, traditional product-focused R&D may no longer be sufficient to achieve revenue growth comparable to the current size of these companies.
In fact, to create a sustainable path for future growth, medical device companies must not only manufacture and sell products, but also derive value through the data generated by these devices. The value is not the medical device itself, but the clinical insight and trend analysis generated by these devices.
Most corporate transactions still focus on the therapeutic field
Despite the growing strategic importance of digital technology, medical technology companies are not particularly active in this area.
Some medical device companies may find it difficult to get rid of the current status through innovation and will have to use mergers and acquisitions to promote short-term revenue growth.
▲ July 2013-2018 June US and European M&A statistics
Most of the total transactions in 2017 went to two major transactions: BD’s acquisition of Bard and the merger of Essilor and Luxottica. During the period from July 2017 to June 2018, there were no additional huge transactions worth more than $10 billion. The total transaction volume during this period fell by 56% year-on-year to US$44.1 billion; the transaction totaled 101, down year-on-year. 42% .
More important than these fluctuations is the flow of M&A expenditures.
Data show that during the first half of 2011 to 2018, medical technology business leaders focused on expanding large-scale mergers and acquisitions in the therapeutic field. such as,
Abbott: Focus on mergers in the field of cardiovascular and non-diagnostic imaging (IVD) ;
Essilor: Focus on M&A in the field of ophthalmology ;
Johnson & Johnson: More mergers and acquisitions in the field of orthopedics .
▲The acquisition and divestiture of some medical giants in the first half of 2011-2018
* The value of the acquisition is on the positive y-axis; the value of the asset stripping is shown on the negative y-axis. The data includes the previous acquisitions of the acquired company.
This relatively conservative approach to mergers and acquisitions is not surprising.
Because it is still in the early stages of the digital revolution , many corporate executives may question whether it is sensible to invest a large amount of money in an unconfirmed technology that cannot support the company’s revenue in the short term.
At the same time, before the company invests in digital technologies that drive future growth, these medical device companies must first establish scale in the field of superior treatment. A commercial scale can not only improve the company’s capital efficiency, but also increase product development efficiency by building value-added services and building closer relationships with end users, thereby deepening its products.
For some companies, the first step is to dispose of their non-core assets and business through spin-off or divestiture. Johnson & Johnson was one of the most active companies in the first half of 2017-2018, selling the diabetes business LifeScan and the sterilized products business unit of Ethicon.
The sequence of the digital domain may lead to future differentiation
But even if these integrations are completely rational, they cannot eliminate the need for investment in data-centric functions. In order to create future value, medical technology companies also need to invest in digital capabilities. Because many medical technology companies lack the internal capabilities to develop personalized medical services, they need to acquire these capabilities through mergers and acquisitions. However, in terms of transaction amount and quantity, most medical companies have not yet made digital cooperation an important part of their trading agenda.
In the case that some enterprises pay attention to and layout early, and other enterprises do not pay attention to it, in the future, the capabilities of medical giants in the digital field may be greatly differentiated (but not changed).
In 2019, the three active areas of digital medicine
Digital medicine is defined as encompassing a range of technologies, including: digital devices ( such as wearables and implants ); software applications that provide physician or consumer support; telemedicine infrastructure; and the use of artificial intelligence to support diagnosis and care Managed analytical capabilities and more.
Some of them, such as the use of wearable devices , are a natural extension of traditional medical technology companies.
Others are more novel, such as integrating non-medical data into electronic health records, which will further require medical technicians to consider how to use the data.
Data is so important as an engine for future medical device development. In addition to the medical imaging business that is heavily entangled in the Chinese market, what areas should medical device companies focus on?
In 2018, nearly 120 companies in China engaged in medical digitization, nearly 120 are doing medical imaging business, of which about 100 companies are located in lung nodule imaging products, and the phenomenon of homogenization is serious.
1 Diabetes field – the test site for digital solutions
The field of diabetes is called “the area where the greatest opportunities are seen” by James Welch, head of life science at EY Central America – more than 30 million Americans suffer from the disease, 95% of whom have type 2 diabetes. According to the American Diabetes Association, an additional 84 million American adults have pre-diabetes. Leerink analysts recently predicted that the insulin pump market will grow at least 11% in 2019 .
Diabetes has always been a testing ground for digital solutions —predictive analytics and customer-facing software are beginning to provide personalized treatment for people with diabetes, something that doctors with over-stressed resources can’t do.
Some studies have shown that people with diabetes spend only six hours a year communicating face-to-face with health care workers, and that these people must cope with them for the remaining 8,730 hours of the year . This is where digital technology can make a big difference. By focusing on the user experience, digital devices can be closer to patients and provide ongoing and effective care management.
Industrial technology is gradually shifting from the finger stick of the blood glucose meter to the continuous glucose monitor (CGMs). With the convergence of mobile monitoring, intelligent delivery and real-time analysis tools, automated diabetes management will become a reality.
Google-backed Verily partnered with Dexcom to develop a low-cost, miniaturized continuous blood glucose monitor for patients with type 2 diabetes.
The MiniMed 670G system introduced by Medtronic in 2017 still requires consumers to manually enter dietary data, but its ability to automatically adjust insulin doses based on predictive analysis suggests that the “artificial pancreas” is closer to reality than before.
▲The world’s first hybrid closed-loop insulin pump system MiniMed 670G
Medtronic, Abbott and Dexcom products account for the majority of the diabetes care market, but like Insulet Corporation (production of insulin infusion systems for insulin-dependent diabetes patients), Tandem (products predict hypoglycemia 30 minutes earlier), Welldoc ( The founding companies of the FDA-approved type 2 digital therapy are also gaining market share in these new digital healthcare companies.
In addition to diabetes management, the market for side effects of diabetes is also growing . In April 2018, the FDA approved the IDx-DR algorithm, an artificial intelligence-based algorithm that uses machine learning to screen for diabetic retinopathy.
2 Cardiovascular field – the largest digital medical risk investment field
In 2017 and 2018, cardiovascular disease is the only treatment category that can beat diabetes in the amount of digital medical investment . Data show that cardiovascular disease has attracted nearly $700 million in digital healthcare ventures over the past two years .
Heart disease remains the number one killer in the United States. As cardiac health monitoring is recognized by people of all ages and even health, it has become a wide market. The popularity of Apple Watch can be seen as evidence of a growing public awareness of personal health.
The return on cardiovascular risk investment is also considerable. Between 2011 and 2017, the revenue of cardiovascular treatment equipment increased by an average of 7%.
In the field of structural heart care, competition between companies such as Medtronic, Edwards Life Sciences, Boston Scientific and Abbott is growing. With the growing demand for transcatheter aortic valve replacement, left atrial appendage occlusion, and mitral valve repair, these companies will continue to receive FDA approval and CE marking for positive competition.
But there are still some unresolved questions about who will be the winner. Although there have been huge innovations in the past few decades, some aspects of cardiovascular disease have still not been well treated, such as heart failure.
3 Oncology – using data insight to provide care
The medical device sector has produced more diagnostic tools for a variety of cancers aimed at early detection of disease, identification of potential responses to cancer treatment, or detection of residual signs of cancer after cancer treatment.
Data show that revenue in the field of non-imaging diagnostics has increased by 7% over the past five years . From 2016 to 2018, nearly 40% of medical technology venture capital entered this field, and a large part of it was used for oncology.
Biosensor wearable devices are one of the hottest technologies, such as Higia Technologies’ EVA bra, designed to detect early breast cancer.
GRAIL, a startup backed by Bill Gates and Jeff Bezos, has raised more than $1.5 billion since 2016 to develop a blood test that can detect multiple cancers.
The combination of diagnostic and monitoring tools is becoming more common, making better interventions in the field of cancer possible. From a medical technology perspective, the ability to take action and provide care with this insight is powerful. In 2019, we will see more.
Note dynamic simple dividing line
Consumer-oriented medical technology seems to be reaching every corner of the industry. For example, patients can choose their own wristband to measure stroke risk or blood pressure; use one app to track asthma and chronic obstructive pulmonary disease, another app to help manage drug addiction, and a third app to connect patients during postoperative recovery And surgeons.
As patients increasingly receive an opportunity to play an active role in data health care, digital interfaces such as wearables and sensors will become key tools for personal healthcare management. Using this data and analyzing it maximizes clinical insight and provides the best and effective care.
When the human body is the largest data platform, how do medical device companies gain value?
Traditional therapeutic equipment companies often have an advantage in acute treatment, and “emerging ” data medical technology companies have largely captured both ends of the field: prevention and patient monitoring . The back end is where the current cost of chronic disease treatment is going to be a lot of money, which will lead to a better return on investment. The demand in these areas is still unmet, and we will continue to see more innovation in these areas.