What Does 2020 Have in Store for Medtech?

It’s the time of year for reflection and prognostication. A recent report from Mike Matson, a medtech analyst at Needham & Co., offers a little of both for the medical device industry.
Here are the key takeaways from Matson’s Dec. 19 report:

• Matson said he expects medtech market growth to improve somewhat in the new year (from 4.9% in 2019 to 5.5% in 2020 on a constant currency basis). Breaking that down to specific sectors, the analyst expects to see market growth in knee and hip replacements, spine, trauma, extremities, cardiovascular, pacemakers, peripheral vascular, transcatheter aortic valve replacement, drug-eluting stents, electrophysiology, and neuromodulation.
• Matson noted that the medical device tax is scheduled to kick in again in January after being suspended for the last four years, but a repeal “appears imminent” as part of a bipartisan year-end spending deal that could be signed into law by Dec. 20. If the tax is not suspended or repealed, the analyst estimates it would reduce 2020 earnings per share at large companies by an average of 5% and at small and midsize companies by an average of 11%.
• The analyst noted that the number of medtech M&A deals was relatively stable this year, with about 332 deals in 2019, which is down a bit from 338 deals in 2018. The dollar value of such deals dipped this year, however, from $30 billion in 2018 to about $28 billion in 2019. Looking at the year ahead, Matson said he expects deal activity to remain high in 2020. “From a financing perspective, interest rates have been lowered and are likely to continue to remain stable next year, in our view, and they remain very low by historical standards,” he said. “Since stock prices remain relatively high, we think that companies should continue to be willing to use their stock as currency. However, we think that there is a risk that M&A slows as the 2020 election approaches given increased uncertainty about potential changes to healthcare policy.”
• Matson said transitioning to become compliant with Europe’s new Medical Device Regulation (MDR) framework may be causing disruption for medtech today, but he said the change should be beneficial for the industry in the longterm. The new MDR will demand more rigorous clinical evidence for Class III and implantable devices (both pre-market and post-market), he noted, and existing products will need to be recertified under the new MDR requirements by 2024 in order to keep them on the market in Europe. “Our conversations with management teams suggest that the notified bodies in Europe have backlog of new and existing products which has resulted in a delay in products receiving approval,” Matson said. “We went through transcripts for our coverage universe and the consensus seems to suggest that the longer-term impact should be beneficial however, there is a significant amount of disruption and investments in the near-term to either come into compliance with the new framework or to try to get products approved before the MDR effective date.”

Original Article: (https://www.mddionline.com/what-does-2020-have-store-medtech)