Regulations hamper MedTech growth

The recovery after the coronavirus pandemic appears to be turning into a sideways movement for the German medical technology industry, reflecting only slight growth. This was the result of an analysis of the SHS Medical Technology Index 2022, which found that the German medical technology sector is stagnating. SHS Capital and Prof Dr Christian Koziol, holder of the Chair of Finance at the University of Tübingen, have been compiling the index on an annual basis since 2019, which shows only a moderate increase of a single percentage point compared to the previous year.

According to the authors of the survey, companies were able to report substantial increases in turnover of around 5% and rising employment figures of around 8%, but a worrying decline in the number of patents granted in medical technology is causing concern among the authors of the study. A decline of 27% in the number of patents granted is pointed out, which, together with the already significant declines of 13% in 2020 and 18% in 2021, indicates an „alarming lack of innovation in the industry“, as Koziol puts it. The significant loss in value of the industry on the stock exchange (-19%) fits in with this.

The major regulatory changeover to MDR/IVDR is one of the main causes. Medical technology associations have already pointed out many times that innovative SMEs in particular are facing major problems in this area. Due to the high regulatory burden, there is little capacity left for further development and innovation. This is particularly important in medical technology, as the innovation cycles for many devices are only three years, according to the study. A lack of innovation by German medical technology companies would lead to an innovation advantage for companies outside of the EU and develop into a significant competitive disadvantage for SMEs in Germany.

An expert survey conducted by the Boston Consulting Group at the turn of the year 2022/2023 pointed in a similar direction. In it, over 80% of participants made it clear that they are currently postponing investment decisions in Europe's medical technology sector and prioritising approvals in the USA even more than before. The BCG survey also revealed that Japan and China are also moving more to the fore and that Europe's self-employment is perceived with some uncertainty. The fact that the European medical technology sector and, as the largest national sector, the German medical technology sector is in danger of losing the continental advantage of a seemingly closed market compared to other global regions is also the subject of the current German Medtech Guide 2024, which will be published shortly.

SHS CEO Manfred Ulmer-Weber also sees the internationalisation of the company's own innovation efforts as a possible solution for medium-sized companies: „Innovations strengthen the market position of a medical technology company. Sufficient equity capital and a good strategy are crucial for successfully implementing innovations and increasing regulatory requirements.“ Demographic change and other factors should actually be reflected much more strongly as growth drivers in the industrial sector than has been the case to date and is reflected in the index. As an investor with the sixth fund, which was launched in 2022 and has a volume of around 270 million euros, SHS remains optimistic and expects a better performance for medical technology in 2023 than for the economy as a whole.

Source: transcript from 14 December 2023