By McDermott Will & Emery
The escalating pace of innovation in medtech continues to revolutionise approaches to healthcare and drive deal opportunities for investors.
With a growing focus by companies across the value chain on enhancing the experiences of end users, we expect more deals in 2025 as medtech becomes a growing element of all healthcare and pharma services transactions, fuelled by trends like generative AI and personalisation.
In September, McDermott assembled hundreds of healthcare professionals, investors and industry changemakers for our annual Healthcare Private Equity Europe conference in London.
As our keynote speaker, the Right Honourable Rory Stewart OBE, outlined some of the macro and geopolitical themes that presents both threats and opportunities for investors, those present explored many of the more exciting developments driving the medtech landscape today.
A look at European deal activity across the healthcare and life sciences sector over the last three years shows that medtech transactions grew from just 6 per cent of the top 100 deals in 2022 to 17 percent in 2023 and 11 per cent in the first half of 2024.
Emmanuelle Trombe, partner in Paris and co-head of the Life Sciences industry practice at McDermott Will & Emery, says: “It is an exciting time for healthcare, as we embrace the use of technology to meet numerous challenges.
“The level of innovation in the industry over the last 10 to 15 years has been incredible and the money being put into healthcare is enormous, leading to an acceleration of that innovation and ultimately much better treatments for patients.”
Hotbed of innovation
Medtech is now having a transformative impact on the healthcare and life sciences landscape.
The industry is becoming a technology industry, increasingly shaped by advancements in AI, in B2B technologies, in patient-facing tools and in medical devices that are revolutionising approaches to healthcare.
Across the board, we now see users expecting more data and companies updating their technology offerings in order to meet those expectations.
There is a growing focus by companies on the experiences of end users and moving up the value chain.
Sharon Lamb, partner and head of UK healthcare at McDermott, says: “In the medtech space, when companies think about innovation, customer feedback is really important, as is the regulatory landscape and the power of data.
“Businesses need to take all those factors into account as they work to understand which innovations are most relevant, and as they look to ensure their products and platforms meet the demands of end users.”
For investors, medtech is becoming a growing element of all healthcare and pharma services opportunities, fuelled by AI and personalisation trends.
While innovation in healthcare used to be focused solely on the next FDA approval of new medical technologies, it is now much more about using technology for operational efficiencies, to enhance patient care and to get medical devices to market via medtech outsourcing.
Technology is having a massive impact in dentistry, for example, where PE investors are reaping the rewards of digital models being used to design prosthetics that can be much more efficiently produced using 3D printing.
Such advances allow dentists to see more patients, enhancing accuracy and driving better patient care, stronger margins and faster growth.
AI opportunity
While there is huge optimism about the potential for generative AI to transform the healthcare industry, investors are typically a little more cautious about its application.
While AI is now being used to support clinical decision-making in many aspects of healthcare services, and to improve the productivity of healthcare workers, for now having AI tools interact directly with patients remains a step away given concerns about issues of liability.
We have seen AI being used upstream in research and development but there is a growing opportunity in the consumer space.
Many pharma companies that have not historically built relationships with end consumers are now shifting to direct-to-consumer models, particularly in the US.
AI is playing a major role in driving that shift, helping patients with the use of products and supporting the personalisation and tailoring of therapies and medicines to achieve the best outcomes.
By putting that patient journey at the centre, powered by technology, companies are looking at healthcare more holistically and finding ways to move up the value chain.
As a result, we see a blurring of the lines between healthcare services and healthcare products, as the medtech story evolves from being about hardware and software in favour of a full value proposition based on better products and better services.
Regulatory backdrop
Regulation in areas like AI, medical devices and cybersecurity continues to create some challenges for cutting edge medtech businesses, but it also presents opportunities.
Recent developments like the EU Medical Device Regulation and the EU AI Act show the extent to which agencies are working to keep the legislative landscape in step with technological developments, while there is also a much more focused effort to protect consumers in relation to data privacy and cybersecurity.
We have seen some signs of harmonisation of approach between European and US regulators, but disparate regimes continue to have an impact on financial planning and product launch timelines.
While there is a desire on the part of dealmakers for that harmonisation effort to accelerate, the good news is that regulators are open to input from industry and there are opportunities for medtech companies to be involved in shaping the regulatory backdrop moving forward.
Jamie Ravitz, co-head of McDermott’s life sciences industry practice and head of the firm’s Food and Drug Administration practice, says: “The year 2022 saw a huge spike in medtech transactions globally and while that volume dropped off in 2023, we did see a lot of patents filed as innovation continued.
“Today, medtech has become a core part of both healthcare services and pharma services, and we expect AI to provide the tailwind to drive more deals and plenty of exciting trends in the next 12 to 24 months.”
Find out more about MWE at mwe.com
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