These 7 trends matter the most for medtech in 2019
Friday, August 2, 2019
The medical device industry is experiencing another eventful year in 2019.
Medtech companies face many headwinds, from the U.S.-China trade war to an FDA under fire. But the industry is also seeing the rise of new technologies — especially robot-assisted surgery.
In fact, so many major companies are getting involved in robot-assisted surgery that some might say it’s the “year of the robot” for the industry.
From the expansion of robot-assisted surgery to the U.S.-China trade war, here are the major medtech news trends that we’re seeing in 2019.
1. Every major medical device company wants a robot
More than five years after spending $1.7 billion to acquire Mako Surgical, Stryker is leading the way bringing robot-assisted surgery to the orthopedic space. Big competitors including Johnson & Johnson’s DePuy Synthes business, Zimmer Biomet and Smith & Nephew have either launched or are preparing to launch their own robots.
In December 2018, Medtronic closed on its $1.7 billion purchase of Mazor Robotics and its robot-assisted surgery platform for the spine. A month later, Medtronic launched its Mazor X Stealth robotic-assisted spinal surgical platform in the U.S.
Intuitive Surgical meanwhile is now in the first phase of launching its da Vinci SP robot for single-port surgery. The robot’s tube is about an inch wide and delivers fully articulating instruments: three that can manipulate things and one that’s a steerable endoscope.
“We design instruments and accessories to enable repeatable, high-quality surgeries that are efficient and cost-effective relating to total cost to treat,” Intuitive Surgical CEO Gary Guthart said in a July 18 earnings call, transcribed by Seeking Alpha.
2. The U.S.-China trade war is costing money
President Donald Trump over the past week announced a 10% tariff on an extra $300-billion-worth of Chinese goods, further escalating a trade war that doesnt show any sign of going away.
The trade war matters for the big, legacy medical device companies — many of whom have a manufacturing presence in China and source components from the East Asian giant. The U.S. medical device industry initially faced nearly $1 billion in tariffs after the Trump administration slapped China with its first round of tariffs in July 2018, trade group Advamed reported at the time. Medical device companies are getting some relief, though. The U.S. last month exempted several categories of medical devices from the 25% tariffs, including surgical, radiotherapy and dental devices.
3. EO sterilization shortage
The medtech industry and regulators continue to struggle with environmental, health and business ramifications of using ethylene oxide (EO) to sterilize disposable medical devices.
Just when it appeared a major Sterigenics EO plant in Willowbrook, Ill., would reopen soon, a judge granted three surrounding communities their own say in the matter. The plant’s sudden closure in February over what the state termed excessive emissions of the carginogenic sterilant caused device shortages and a push by the FDA to find alternatives and reduce EO emissions.
Also in July, an investigative report targeted EO emissions from medtech sterilization plants in two Atlanta suburbs, raising concerns among residents and government officials. BD called the report “misleading” and Sterigenics said it was voluntarily upgrading emissions controls.
4. Less FDA enforcement
Science magazine reports that FDA enforcement has slumped under the Trump administration — with the president apparently making good on his promise to deregulate industries. Warning letters are reportedly off by a third, and medical device warnings are off by two-thirds.
FDA has also faced some operational challenges this year, from the U.S. government shutdown to Commissioner Dr. Scott Gottlieb’s resignation.
5. FDA under fire
FDA has also found itself making a series of statements and proposed reforms to answer the harsh public criticism the agency and industry as a whole have received.
In the past year, Netflix’s documentary “The Bleeding Edge” and the International Consortium of Investigative Journalists’ “The Implant Files” series ripped the agency and the industry over patient injuries attributed to faulty devices. The FDA has been particularly faulted for its 510(k) clearance pathway, under which it allows devices that are similar to previously approved technology to undergo a less strenuous review before they can be sold.
There’s still a lot of M&A
They may not be as large as Medtronic’s $50 billion acquisition of Covidien, which closed in early 2015, but mergers and acquisitions continue at a fast pace in the medical device industry. Companies are snapping up new technologies and seeking expanded capabilities as they seek to compete in a rapidly evolving healthcare market.
Here are some of the notable deals so far this year:
- Boston Scientific (NYSE:BSX) is seeking to acquire London-based BTG (LON:BTG) for $4 billion.
- 3M (NYSE:MMM) announced in May that it would pay more than $6.7 billion to buy wound care giant Acelity.
- Johnson & Johnson (NYSE:JNJ) announced in April that its Ethicon business had completed its $3.4 billion acquisition of robotic surgery dev Auris Health,as well as the $2.8 billion divestiture of its Advanced Sterilization Products to Fortive (NTSE:FTV).
- The U.S. Federal Trade Commission in April gave final approval to Fresenius Medical Care (NYSE:FMS; ETR:FRE) for its $2 billion acquisition of NxStage Medical, which initially closed in February.
- Cantel Medical (NYSE:CMD) said last month that it would spend $775 million to acquire dental instruments maker Hu-Friedy.
- Boston Sci in June closed on its $465 million buyout of spinal implant maker Vertiflex.
- Smith & Nephew (NYSE:SNN) earlier this year closed its acquisition of Brainlab‘s orthopedic joint reconstruction biz.
- Johnson & Johnson (NYSE:JNJ) subsidiary Ethicon paid $400 million in cash to Takeda Pharmaceutical (TSE:4502;NYSE:TAK) for its TachSil fibrin patch.
- ConMed (NSDQ:CNMD) in February closed on its $365 million buy of Buffalo Filter from the Filtration Group.
- Medtronic (NYSE:MDT) in June offered a total $316 million for Epix Therapeutics and its DiamondTemp catheter-based radiofrequency cardiac ablation system.
- RTI Surgical (NSDQ:RTIX) in March closed on its $300 million purchase of Paradigm Spine and its Coflex lumbar stenosis device.
IPOs are back
Medtech IPOs are also picking up, especially in the digital health space. Notable IPOs include:
- Livongo Health(NSDQ:LVGO) — which has a digital health platform for chronic disease management — announced in July that it had raised $355 million with its initial public offering after a last-minute upsizing.
- TransMedics (NSDQ:TMDX) grossed nearly $105 million in an IPO that closed in May. The company boasts a better transportation system for organ transplants.