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living better using Medtech

Ageing population: living better using Medtech

13 June 2019

Previously when we reviewed investing for the ageing population megatrend, we examined the pharmaceutical and biotech sectors.

While developing new medicines will increase longevity, treatments alone may not be sufficient to ensure we are living better as well as longer. Medical technology (Medtech) is another sector set to aid the lives of an ageing population and bring financial opportunities for investors.

Medtech

Medtech can be viewed as a broad sector of devices, procedures, and systems that predict, prevent and treat health problems and improve quality of life. We explored some of the most exciting, leading technologies in our Beyond Human series around healthcare, human performance, and neuroscience.

At the same time, the technologies of today can support earlier diagnosis which reduces the cost and improves healthcare quality and outcomes. They can provide less invasive treatment options and reduce hospital stays and rehabilitation times. They can guide more personalised treatment for individuals and empower them to self-manage their care and health.

Enjoying longer, healthier lives

With Medtech, the hope is that the technology will help us to avoid or manage many chronic diseases to stop them becoming life-threatening. The sector aims to enable us to stay active and independent; ideally living in our own homes for as long as we can.

At the same time, Medtech can help governments and healthcare systems under the increased strain of ageing populations which continue to grow. Governments must control rapidly rising healthcare costs – which had reached 17% of US gross domestic product (GDP) by 2017.

US healthcare expenditure graph

Hospitals are the most expensive part of the healthcare system. The pressure to manage costs has already driven more healthcare to be administered outside traditional facilities – all assisted by new technologies. The number of patients remotely monitored grew by 44% to 7.1 million globally in 2016 and is projected to exceed 50 million by 20211. Linked to this, the global market for remote patient monitoring devices expected to reach $1.9 billion by 20252.

With medical devices being used more in the home, or in the case of wearables at all times, the relationship between medical professionals and individuals is set to be redefined. Diagnosis and monitoring, and most importantly prevention, will in many cases be conducted remotely without the need for costly trips to doctors and hospitals.

Additionally, medical devices can empower patients by providing them with valuable data and customised advice on their lifestyle. Medical devices can form part of someone’s plan and proactive approach to healthy living.

Investment opportunities

Given the role that Medtech can play for individuals and healthcare system there are opportunities for investors to gain exposure to the ageing populations theme through associated companies.

Within the sector there are a range of segments, such as:

  • Medical devices – products, services and solutions that prevent, diagnose, monitor, treat and care for people. The devices can range from a traditional pacemaker to a smart glucose measurement that doesn’t require finger pricks
  • In vitro diagnostics (IVD) – non-invasive tests used on biological samples to determine health status, ie tests that occur outside of the body, such as a hepatitis test
  • Digital health solutions – tools and services that use data in prevention, diagnosis, treatment, monitoring and management of health and lifestyle, such as continuous health feedback through a smartphone. 

From a diversification perspective, Medtech companies differ from pharma and biotech industries in commercialisation timelines and risk-reward profiles. There tends to be less reliance on drug breakthroughs and regulatory approvals to create protected markets. Commercialisation timelines can also be shorter, which reduces the costs of bringing products to market.

However, Medtech is not without its risks. Many categories and companies operate in nascent markets where demand needs to be created, and it can be unclear whether it will come from the consumer or healthcare providers. Multiple devices and services will launch. Few may thrive and become ubiquitous. The others will fail.

Next we cover investment opportunities where medical device manufacturers incorporate digital solutions within their proposition, bringing together medical devices and digital health solutions.

Smart medical devices

Worldwide Medtech sales are forecast to grow by 5.6% per year to US$595bn by 20243. This reflects increasing demand for innovative new devices and services to tackle the rise of chronic diseases. Also, economic development is generating demand in emerging markets with their own rapidly growing ageing populations.

Worldwide Medtech sales graph

Medical device companies have historically been simply manufacturers only. Unless they are the dominant leader, they face constant margin pressure and new entrants. Those looking to broaden their value-proposition to offer health services and patient-care solutions can be better positioned by building loyal user bases and defensible positions.

Monitoring patients’ health directly

By leveraging wider technology, data and analytics developments, device companies will be able to directly and continuously connect with patients and consumers. This will support preventing diseases ahead of treatment and cure; thereby addressing the rise of chronic diseases, such as cardiovascular or diabetes, which rank highly in the leading causes of death.

This could be by integrating data from a wearable into a remote patient monitoring mobile application, for better self-care, alongside their medical professional, giving patients greater control over their care. This could also be through integrating artificial intelligence (AI) with various devices to predict certain conditions and encourage healthy life choices based on their impact on the user’s own body.

This latter point also highlights another consideration for investors. Given the importance that data capabilities will have in the sector, the developers of healthcare products and services may not be traditional medical companies. Technology and AI firms that leverage vast data and data capabilities may innovate within healthcare space creating new entrants in the market.

Investment implications

Medtech that supports people living healthier, independent lives may have both significant benefits to the adopters of its products and to investors committing their capital to companies trying to solve some of the challenges that come from ageing.

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