5th March 2024
For over six decades, major tech companies have played a significant role in healthcare, overshadowing the less noticed endowments of health-tech startups. However, the dynamics shifted dramatically, gaining momentum and attention in recent years, particularly accelerated by the challenges posed by the COVID-19 pandemic. In 2021 alone, health-tech startups raised a staggering $29.1 billion, setting a record in the healthcare industry.
This transformative period has unveiled myriad opportunities for health-tech startups. Actively engaging in identifying opportunities and growth potential, these startups are filling gaps in healthcare, enhancing existing facilities, and introducing innovative solutions to meet market demands. Media outlets regularly feature stories of health-tech startups reaching new heights, from innovative market strategies to fueling investors' enthusiasm. Despite this, academic literature on emerging trends in health-tech startups from a global perspective remains limited, creating a fertile ground for new research avenues and empirical evidence for practical guidelines. In light of this, this opinion piece seeks to shed light on the evolving trends in rapidly expanding health-tech businesses.
Such opinion articles play a crucial role by offering valuable insights into the challenges and opportunities facing the health-tech industry. By highlighting key issues and gaps in understanding this trend, they can guide future research directions and serve as a rallying call for policymakers, investors, and healthcare professionals to address challenges faced by health technology startups and support their growth.
Before delving into the nuances of this emerging era of health technology startups, it's essential to define what is encompassed by the term "health technology." Stakeholders and researchers often use this term extensively, and its interpretation varies. While some focus primarily on information and communication technology-driven healthcare, others adopt a broader view, considering pharmaceuticals, genetics, bioinformatics, and tissue-engineered products alongside IT, AI, machine learning, big data, IoT, and cloud technology solutions. The scope can be broadly categorized into digital health (telehealth to predictive analytics), Med-tech (robotics to hospital decision support systems), and biotech (genomics to clinical trials). Startups typically fall into one dimension but frequently operate across multiple dimensions. In essence, these entrepreneurial ventures leverage cutting-edge technologies to address or enhance healthcare by providing technology-driven products and resources.
Active M&A Environment: Boston Scientific to buy Axonics for $3.7B to gain incontinence treatment.
Boston Scientific announced its agreement to acquire Axonics, a company specializing in devices for treating urinary and bowel dysfunction, in a cash deal valued at $3.7 billion, equating to $71 per share. This acquisition marks Boston Scientific's entry into the sacral neuromodulation market, where it will now compete with established companies like Medtronic.
Sacral neuromodulation involves delivering electrical pulses to the sacral nerve through an implanted device in the lower back, aiming to restore communication between the brain and bladder for conditions such as overactive bladder and fecal incontinence. With estimates suggesting nearly 30 million Americans aged 40 and older experience symptoms of overactive bladder and 19 million face fecal incontinence, this market holds significant growth potential
Axonics' portfolio includes the rechargeable R20 and recharge-free F15 systems for sacral neuromodulation. The company also offers Bulkamid, a water-based gel designed to address bladder leaks in women by adding bulk to tissue, restoring urethra closure.
Analysts view the acquisition as a strategic move that complements Boston Scientific's urology business, constituting approximately 14% of its estimated 2023 sales. Axonics, based in Irvine, California, reported a 34% increase in net revenue to $366.1 million in fiscal year 2023.
Boston Scientific anticipates Axonics' revenue growth to significantly benefit its urology business in 2024, with a minor impact on adjusted earnings per share in the same year, becoming accretive thereafter. The completion of the acquisition is expected in the first half of the year, and industry analysts do not foresee competing bids given the deal's size, limited adjacencies with other large-cap MedTech peers, and potential overlap with Medtronic's existing business.
Medtronic has achieved the first-ever approval from the Food and Drug Administration (FDA) for a pulsed field ablation (PFA) system designed to treat atrial fibrillation (AFib). This development positions Medtronic ahead of other medtech companies in the race to introduce PFA technology to the U.S. market. PFA is gaining attention as a safer alternative to traditional radiofrequency and cryoablation techniques for addressing abnormal heart rhythms. Competitors in this space, such as Boston Scientific and Johnson & Johnson, are also actively pursuing the PFA market.
Medtronic's PulseSelect PFA system, which received Europe's CE mark last month, demonstrated a 0.7% safety event rate and clinical success rates of 80% in both paroxysmal and persistent AFib patients. AFib, known to increase the risk of stroke, is anticipated to affect over 12 million people in the U.S. by 2030, with numbers expected to rise as the population ages. Unlike traditional cardiac ablation methods that use heat (radiofrequency energy) or extreme cold (cryoablation), PFA is a nonthermal technique utilizing short high-voltage pulses to target cardiac tissue. Medtronic highlights the potential for lower risk of collateral structure damage due to the non-thermal mechanism of cell death. Data supporting the safety of PFA for AFib ablation has generated enthusiasm among electrophysiologists, with predictions that this approach will see rapid adoption. Boston Scientific, currently preparing to bring its Farapulse PFA device to the U.S. market, anticipates a "dramatic shift" to PFA technology, with expectations of PFA dominating the AFib treatment market within five years. Medtronic's PFA system is designed to seamlessly integrate into the clinician's preferred workflow, with a short learning curve for catheter and system usage. Boston Scientific's CEO, Mike Mahoney, has indicated an expected FDA approval of their Farapulse PFA system in the second half of 2024.
Johnson & Johnson's Robust Performance Signals Optimism for Medical Device Sector Amidst Stable Procedure Volumes, Johnson & Johnson's surgery and orthopedic units experienced strong growth in the closing quarter of 2023, with stable procedure volumes following COVID-19-related declines. This positive performance potentially signals encouraging reports for other procedure-dependent medical device companies during the earnings season. As a prominent player in the healthcare sector, Johnson & Johnson's insights are often considered indicative of broader industry trends.
CEO Joaquin Duato indicated that global COVID-19 impacts have stabilized, but the company is still contending with macroeconomic challenges such as inflation and hospital staffing shortages. Despite these challenges, Johnson & Johnson anticipates procedure volumes to remain above pre-pandemic levels throughout 2024. Duato mentioned that the company expects surgery volumes to counter ongoing macro challenges and exceed historical averages.
The positive environment for procedure volumes resulted in growth for J&J's surgery unit, as well as spine, hip, and knee surgeries in both the U.S. and international markets. This growth is seen as a positive signal for competitors in the orthopedics sector, such as Boston Scientific, Medtronic, and Stryker.
Analysts noted that J&J's significant global knee sales growth in the quarter, particularly in international markets, could be advantageous for Zimmer Biomet. However, strong utilization comments from health insurers, coupled with J&J's statements on continued orthopedic strength in 2024, are expected to benefit both Stryker and Zimmer's U.S. knee results. J&J's recovery in procedure volumes also positively impacted electrophysiology, which saw nearly a 25% growth in the last quarter, contributing to the success of the interventional solutions business. Additionally, the acquisition of Abiomed approximately one year ago has proven beneficial, contributing $340 million in sales in the fourth quarter.
Sustainability has become a central focus across various industries, and the medtech sector is no exception. With the healthcare industry contributing over 4.6% of global greenhouse gas emissions, medical devices play a significant role in this impact due to supply chain emissions, single-use devices, and consumables.
Both regulators and investors are exerting pressure on medtech companies to establish clear strategies aimed at achieving carbon neutrality. Major players in the industry have already outlined ambitious Environmental, Social, and Governance (ESG) targets for the coming decades. Evidence suggests that medtech companies positioned for growth and success in the future are those that transparently communicate their ESG credentials and genuinely integrate sustainability goals into their overall strategy.
In addition to environmental considerations, the social element of ESG is gaining prominence, driven by the advent of consumer devices and efforts to enhance healthcare access equity. This trend is anticipated to persist and strengthen in the coming years, reflecting a broader commitment to social responsibility within the medtech industry.
The use of telemedicine witnessed a significant surge during the COVID-19 pandemic, providing a safe alternative to in-person medical visits. Its widespread adoption showcased its convenience and utility, and this trend has continued in the post-pandemic era. Telemedicine proved particularly valuable for patients facing budget constraints or residing in remote areas, offering them a means to access necessary care remotely. Even for patients without such constraints, telemedicine has facilitated addressing questions or issues from the comfort of home, leading to shorter wait times in medical offices, reduced pressure on healthcare providers, and an enhanced overall patient experience.
Complementing the rise of telehealth, digital therapeutics—software-based medical devices—have also experienced significant growth during the pandemic. Often leveraging artificial intelligence, these devices enable clinicians to treat, manage, and prevent various diseases and disorders without the need for physical visits. Digital therapeutics enhance care efficiency and accessibility by empowering patients to manage their health independently without compromising on quality or care standards. A survey of medtech leaders indicated that 63% believe digital therapeutics will have a substantial impact on the industry in the next decade.
Both telemedicine and digital therapeutics represent lucrative markets. In the U.S., the digital therapeutics market is estimated to have a compound annual growth rate of 29.8% between 2020 and 2025, according to Frost & Sullivan. Concurrently, the U.S. Telehealth market is projected to reach US$ 309.9 billion by 2030, growing at a compound annual growth rate of 45.1% from 2022 to 2030, with a market size valued at US$ 23.8 billion in 2021.
The use of wearable and biometric technology continued to gain popularity in 2024, with expectations of sustained growth in the foreseeable future. The global market for wearable technology is projected to reach $161 billion by 2033, indicating a Compound Annual Growth Rate (CAGR) of 6% compared to 2023.
A broad spectrum of wearable technologies is contributing to this trend, ranging from mainstream devices like Fitbits and Apple Watches to more specialized ones such as ECG sensors, PPG sensors, and hydration and sweat sensors. These devices offer consumers and patients the unique ability to actively manage their health.
Several healthcare areas are at the forefront of adopting wearable technology, including audiology, health science, kinesiology, nursing, occupational therapy, pharmacy, and physical therapy. While new devices continue to emerge rapidly, the market is far from saturated, presenting ample opportunities for innovative medtech companies to develop wearables or biometric devices that provide value to consumers while alleviating pressure on hospitals and healthcare facilities.
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