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4 key themes for MedTech in 2023


In this short piece we reflect on the prospects for MedTech in 2023 following a challenging period and discuss 4 key themes for MedTech in 2023.


1. The recovery of procedural volumes and the impact on the backlog in healthcare systems

MedTech has entered 2023 in a more bullish mood after an extremely difficult few years given the impact of COVID-19 on access to healthcare, and the economic challenges following pandemic restrictions and the war in Ukraine. Procedural volumes continue to show a robust recovery and are quickly approaching pre-pandemic levels meaning many larger players have given strong guidance for top line growth in 2023. Although COVID-19 continues to pose some challenges, healthcare systems have become more adept at dealing with outbreaks of the virus and ongoing staff shortages, although absences are now less frequent. Despite the recovery in procedural volumes, the backlog in healthcare systems remains and is expected to be a small tailwind to MedTech companies over the coming years (early estimates suggested the benefit would last only a few quarters).

2. Supply chain issues and how they have been addressed

Supply chain problems have also improved since 2022. There is now less need to use spot markets to ensure they can meet customer demand. While challenges are still expected in 2023, resilience has been built into companies’ supply chain and sourcing should not be a constraint across the sector.

3. The problem of inflation and how MedTech companies are facing up to the challenge

Inflation remains a key headwind and the main reason many larger MedTech companies expect limited margin progression in the coming year. Inflation was originally attributable to raw material and freight/distribution costs, but now staff awards are expected to be a bigger component in 2023 as companies attempt to support staff during the cost-of-living crisis.

Large MedTech companies are using several tools to offset inflationary effects:

  • We are in an unusual pricing environment with price stability, and sometimes even price inflation, compared to the historical norm of low single-digit price deflation. Elevated input costs make customers more amenable to conversations around pricing. Increased investment in R&D has also resulted in desirable innovative new products.
  • Several companies have ongoing broad cost efficiency programs, helping them to be leaner and agile.
  • Product mix is now focused on growth within the higher margin opportunities.
  • Freer supply chains and recovery in procedural volumes result in top line growth and ultimately operating leverage.

4. Prospects for M&A

Larger MedTech companies remain very open to bolt-on acquisitions and obtaining assets which give a clinically differentiated proposition and help boost the top line. Over time, MedTech companies have been exiting from non-core therapy areas and have plenty of firepower to make deals happen. The macroeconomic situation has led to a reset in valuations and the new reality is setting in. In addition, the financing environment for earlier-stage assets has become more challenging. Both trends could make conversations between larger players and private companies likely to happen.

The largest MedTech companies have been quiet on the deal front so far this year, but we expect to see this pick up, especially if/when there is more certainty on the macroeconomic outlook.

From an acquiree perspective, there are two key trends that we think are important. Firstly, the broad adoption of value-based care means that acquirers are increasingly demanding real-world evidence of the clinical and economic value propositions of new technologies, especially where the new technology offers an incremental improvement in the standard of care. Secondly, the switch from the Medical Device Directive (MDD) to the Medical Device Regulation (MDR) has increased the focus on clinical evaluation and post market surveillance. The transition period has now been extended, but the increased cost and uncertainty, combined with generally lower pricing in the EU, is leading many development companies to launch in the US first. Historically, companies might have achieved a CE Mark and generated some revenue before tackling the US market, but this strategy is being inverted.

Taken together, these factors mean that M&A is tending to occur later in the product development cycle, and start-up companies need to think about longer term financing strategies.

We are looking forward to sponsoring the MedTech Strategist Innovation Summit, taking place in Dublin on 25 to 27 April. Adam Barker, Head of Healthcare Equity Research at Goodbody, will be joining a panel discussion on the current M&A environment.


If you would like to discuss any of these themes, don’t hesitate to reach out to the Goodbody MedTech team:

Adam Barker, Head of Healthcare Equity Research
T +353 1 641 9023  [email protected]

David O’Flynn, Corporate Finance Director
+353 1 643 2466  david.o’[email protected]

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