Consumer expectations are quickly changing how medical device companies should approach the creation of products and services. As highlighted in this year’s Pulse of the Industry report from EY, data and analytics will play a central role in personalized medicine, whether it takes place in or out of the hospital setting. “There are clear signs of the digital transformation already underway,” the authors state in the report. “Artificial intelligence is already sweeping through the sector and shaping a new generation of smart, robotic surgical devices.”

The authors also warn companies that if under-investment in digital capabilities continues, they will fall behind—potentially even behind technology companies that are entering the healthcare space.

“Medtechs must invest in new data and customer-centric capabilities to build stronger ties with consumers or risk being ousted by technology companies and other entrants from outside the sector. To succeed in the digital future, medtechs will be judged not only on the safety and efficacy of their devices and tests, but on their ability to capture and deploy insights from these products to inform care delivery, with a growing emphasis on coordinated care.” – Pamela Spence, EY

Other EY findings include the following:

• Data and algorithms will be a key driver; focusing on digital capabilities is critical
• Companies in imaging, diabetes and consumer genomics are leading the way in the focus on personalized medicine
• Companies need to shift their capital allocation strategy from a short-term, product-centric approach (investment in R&D has been on the decline as a result)
• Since the beginning of 2017, there were 43 devices that FDA approved through the PMA process, 16 of which have digital capabilities
• 2017–2018 industry revenue was up only 4% to $379 billion
• In the 12 months that ended June 30, 2018, there were no transactions valued greater than $10 billion
• M&A dropped 56% to $44 billion compared to 2016–2017
• Total medtech financing reached $37 billion: Funds raised by companies with less than $500 million in sales hit $22 billion and early-stage companies raised $3.3 billion from venture investors
• Since July 2016, U.S. and European medtech companies raised $9.1 billion in IPO capital; there were 28 IPOs in 2017–2018
• Venture investment from China will play a big role in future industry growth

Read the entire Pulse of the Industry report.