EP Vantage Medtech Half-Year Review 2016

2016
Medtech
Half-Year Review
Madeleine Armstrong & Elizabeth Cairns August 2016
EP Vantage Medtech Half-Year Review 2016

The first half of 2016 does not provide the medtech industry with
many reasons for optimism.
Some worrying trends seen last year have become even more pronounced: venture capital funding has become
ever more concentrated in fewer hands, leaving the majority of companies struggling to raise cash. Meanwhile, the
other classic funding route of an initial public offering is now all but shut off after last years slowdown.
Life has got even tougher for medtech start-ups. But the pain will spread beyond small companies. Larger groups
depend on the current ecosystem for acquisitions and, therefore, their future growth when their food source dies
out, they are likely to starve too.
The megadeals that characterised 2015 have declined, but the corresponding increase in mid-sized acquisitions
could be good news if it means that the big players have returned to the traditional model of buying in innovation.
If this does turn out to be the case it could make smaller groups in the sector more attractive to venture capitalists,
who have so far this year remained on the sidelines, giving these investors much-needed new exit routes.
Approval trends are also somewhat reassuring: there were fewer FDA approvals of innovative devices in the first
half of the year versus H1 2015, but they came through more quickly. If the agency has streamlined the approval
process making it easier for companies both big and small to get their products on the market, this could shorten
development times and bring down costs which could ultimately encourage potential acquirers or investors to
take a chance on an earlier-stage group.
Medtech stocks did comparatively well, with many big caps insulated from the problems in the wider economy.
But this was probably because they are seen as a safe haven amid the current turmoil in biotech, rather than
anything they had actively done.
Last year the market delivered greater rewards to the more innovative players. Given the uncertainty in the
global economy and continued political insecurity, this might be the best the industry can hope for the remainder
of the year.
Unless stated, all data are sourced to EvaluateMedTech and were accessed in July 2016.
EP Vantage MedTech Half-Year Review 2016
Copyright 2016 Evaluate Ltd. All rights reserved.
M&A dollar decline could herald return to mid-sized deals

2016 has a lot to live up to in terms of M&A given a record breaking 2015 and so far it has
failed. Even if Medtronics $50bn purchase of Covidien is excluded from the 2015 total, the
aggregate deal value in 2016 is on track to be less than half of that recorded last year. If deals
continue at roughly the same rate in the second half of 2016, the amount spent this year is set
to be the lowest since 2013.
Of the deals that closed in the first half of 2016, only five broke the $1bn barrier and none were over $10bn
in contrast, all of the 2015 top 10 were over $1bn, and four exceeded the $10bn threshold.
But the number of deals this year should remain around the same, suggesting that there is still an appetite for M&A,
just that companies are spending less.
This might in fact be good news for the industry: the last couple of years have seen a move towards fewer, bigger
transactions that benefit only a select few; the latest data could be a sign that the sector is returning to the small or
mid-sized deals that are its lifeblood.
Medtech acquisitions of the last decade
Source: EvaluateMedTech July 2016
140
300
$127.4bn
266
265
261
MedtronicCovidien
($49.9bn)
244
226
Deal Value ($bn)
100
227
212
250
213
200
174
80
150
60
$51.5bn
$47.7bn
$44.6bn
106
$40.2bn
40
Deal Count
120
100
$27.7bn
$20.5bn
20
$19.7bn
$16.9bn
$13.2bn
2007
2008
2009
2010
2011
2012
2013
2014
2015
H1 2016
50
Year
Deal Value ($bn)
Deal Count
This theory is supported by the average deal value, which has fallen to around $400m, well below the average of
$2bn in H1 2015 or $835m when the Medtronic-Covidien purchase is excluded.
If the first half of the year marks a return to business as usual, it could help reverse one of the other trends seen
recently the clustering of venture capital funding. With exit routes opening up venture capitalists might want to
increase their appetite for risk beyond the biggest, surest bets, benefiting start-ups who have recently missed out
on the money flow in the sector.
Young companies will no doubt be watching carefully to see if this trend towards more bolt-on deals continues,
and whether it has a knock-on effect on future early-stage funding.
Medtech acquisitions H1 2016 v H1 2015

Completion Date
Value ($bn)
No of deals
No of deals*
Average deal
size ($m)
H1 2016
16.9
106
42
401
H1 2015
84.1
96
42
2,003
H1 2015 (excluding Medtronic-Covidien)
34.2
95
41
835
* with known value
The disappearance of the megadeal from the 2016 menu could be because the industry has consolidated as much
as possible for now: any more overlap would cause too many antitrust issues to be worthwhile.
Even the orthopaedic sector, where companies have been particularly keen to build scale in the last few years,
seems to be moving away from this model and companies are looking for white space to move into.
Many have rushed into the robotic surgery space, demonstrating the interest in new technologies particularly
those that can cut costs, as robots promise to do by reducing recovery times after surgery. The first half of 2016 saw
the closure of Smith & Nephews purchase of Blue Belt Technologies, while deals agreed but not yet closed include
Auris Surgical Robotics takeover of Hansen Medical and Zimmer Biomets acquisition of French company Medtech.
However, there were still transactions aimed at outright consolidation, with Dentsply taking out rival Sirona to give it
added muscle in the dental sector, which is dominated by a handful of big players.
And one very large deal is in the works: Abbotts $25bn purchase of fellow cardiac device developer St. Jude
Medical, which looks set to be the biggest acquisition of the year, is slated for completion in Q4.
It is too early to call time on the megadeal, believes John Milad, chief executive of the haemodialysis specialist
Quanta and former investment director at NBGI Ventures. They dont happen every day. Im not sure if weve had
long enough of a lull to conclude thats over.
Top 5 deals closed in H1 2016
Acquirer
Target
Dentsply Sirona
Sirona Dental Systems
5.5
Stryker
Sage Products
2.8
Thermo Fisher Scientific
Affymetrix
1.3
Stryker
Physio-Control
1.3
Panasonic
Diabetes Care business of Bayer
1.1
Value ($bn)
Daniel Mahony, a partner at investment management company Polar Capital, agrees it is getting harder to do mega
mergers. I think the problem with big deals is finding the assets when theyre available. And also I think they need to be
done for the right strategic reasons.
If consolidation continues it will be bad news for some mid-sized players, he adds.
Were beginning to see buyers move towards one or two preferred suppliers. Then they might have four or five
suppliers of something thats unique or innovative that they cant get anywhere else, he says.
This means there should always be a place for smaller innovative companies. The losers here are the me-toos in
the middle, who arent quite big enough and whove got somewhat undifferentiated products. I think those sorts of
companies will struggle.
This could explain why some mid-sized players are also trying to build scale. Other smaller purchases aimed at
bringing companies in the same sector together include the tie-up between in vitro diagnostics groups DiaSorin and
Focus Diagnostics, and NuVasive and Ellipse Technologies in orthopaedics.
Other notable acquisitions involved companies moving into a new sector or gaining a new technology. Thermo
Fishers takeover of Affymetrix gave it a non-invasive prenatal testing offering as well as helping it extend its reach in
the genetic testing sector.
Top 5 deals closed in 2015
Acquirer
Target
Value ($bn)
Medtronic
Covidien
49.9
Zimmer Biomet
Biomet
14.0
Danaher
Pall
13.8
Becton Dickinson
CareFusion
12.2
LivaNova
Sorin
3.4
So the number of M&A deals has held up in 2016, albeit at much reduced prices. Good news for start-ups if the
top medtech companies are spending less cash, time and energy on acquiring each other, and on the subsequent
integration, they might have more resources to dedicate to technology-based deals.
And the signs point towards a continuation of this trend, particularly if assets become cheaper, which could happen
if wider macroeconomic issues hit the valuations of smaller players. There is evidence this is already happening, with
St. Jude, HeartWare and Sequenom all going through rocky patches on the public markets before being acquired by
Abbott, Medtronic and LabCorp respectively.
The problem to watch for in the second half would be a slowing in the number of deals along with a reduction in the
amount spent. Then the sector might be in trouble.
Worrying signs for venture funding and IPOs

If the average size of M&A transactions fell, the reverse was seen in the venture capital funding
environment, with a pronounced move towards fewer, but bigger. This trend has been seen
in previous years but was even more marked in the first half of 2016.
Medtech companies raised a total of $670m from VC rounds in Q2, the lowest quarterly amount since Q1 2009.
But it is the number of rounds which plunged to 27 in the most recent quarter that is the real worry.
This means the average round size was $25m in Q2, the largest since the second quarter of 2000. On the surface
this might seem positive. It in fact means that a handful of companies are getting most of the cash available and
leaving the rest fighting over the scraps.
Quarterly Medtech VC Investments
2000
140
1800
120
100
1400
1200
80
1000
60
800
600
Financing Count
Investment ($m)
1600
40
400
20
200
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2009
2010
2011
2012
2013
2014
2015
2016
Investment ($m)
Financing Count
The figures do not bode well for the rest of 2016 either, as the second quarter is usually the richest of the calendar
year. If 2016 follows the usual pattern it could be the worst year for VC funding since 2009.
This will have a knock-on effect on the entire industry, not just the smaller companies that are trying to raise funds.
In the near term, many start-ups will be squeezed out, but longer-term this could leave a depleted pool of companies
for the bigger players to acquire. As the top companies increasingly rely on takeovers for growth, this trend could
eventually hit their bottom lines even the likes of Medtronic will not be immune from the sectors downward spiral.
Arguably, it is the big companies that have caused or at least contributed to the problem, by demanding that
acquisition targets not only get their products approved, but also in some cases get reimbursement and revenues
as well.
Smaller companies need to be generating at least a $50-100m run rate in order to make it worthwhile for someone
to buy it, says Polar Capitals Mr Mahony. Its not enough to be growing rapidly, youve got to be going into a decent
size market, and youve probably got to have just enough revenue for the acquirer to say, its going to add a couple
of pennies to earnings.
With it taking longer and longer to get to the exit point, VCs, perhaps understandably, are looking for companies
that are relatively advanced. In this context, it is easy to see why investors are becoming more risk-averse, clubbing
together to increase their chances of success.
VC funding has crashed this year, but maybe things need to get worse before they can get better. Some of the big
medtech companies have set up their own venture arms to try to combat the problem.
If their pipelines begin to dry up this could be the impetus the big players need if nothing is done, the long-term
consequences for the industry as a whole could be dire.
As well as product-focused companies, other corporate investors are now helping to fund start-ups, including US
healthcare service providers such as Kaiser Permanente and United Healthcare. And what those guys are looking
at is, particularly, anything with a data play that ultimately can start reducing the cost of treatment, says Mr Mahony.
Going digital
This has helped to fuel a huge interest in digital health that has been evident in recent VC analyses. The biggest
fundraiser so far this year is Flatiron Health, which reeled in $175m in a round led by Roche. The company, which
also counts Google Ventures among its investors, specialises in electronic health records and data analytics, an
increasingly hot area as healthcare providers digitise, partly to improve efficacy and cut costs.
As well as promising savings, software is relatively simple and cheap to develop compared with other devices that
need clinical trials in order to prove they are safe and efficacious in humans. With short development timelines and
a growing market for their products, it is no wonder IT companies find it relatively easy to get investment.
However, digital health is not always the easy option, as shown by another top fundraiser, Proteus, which saw its
first product which combines its ingestible sensors with Otsukas schizophrenia therapy Abilify rejected by the
FDA in April.
There are also other factors attracting investors to the digital space according to Quantas Mr Milad. Its seen as
an untapped frontier. Healthcare is one of the last big industries to fully embrace digitisation and all the potential
that can deliver.
But ultimately, hot areas tend to perpetuate themselves. The more money that gets invested in this, the more that
seems to validate the proposition that this is something whose time has come, he adds.
Top 5 rounds of H1 2016
Company
Round
Investment ($m)
Flatiron Health
Series C
175.0
Guardant Health
Series D
100.0
Acutus Medical
Series C
75.0
Exosome Diagnostics
Series B
60.0
TransMedics
Undisclosed
51.2
The most popular sector for funding was in vitro diagnostics, with four rounds in the top 10. Three of these went to
companies involved in developing liquid biopsies, an area that has been the subject of much excitement of late.
Guardant Health, Exosome Diagnostics and Quanterix raised more than $200m between them.
This is partly due to the interest from the pharma industry, as liquid biopsies promise better monitoring of treatment
of cancer patients as well as early cancer detection. Whether this could cut spending is arguable early detection
could lead to better treatment and lower downstream costs, but also carries the danger of false-positives and
unnecessary therapy. This is an issue with which liquid biopsy companies and their investors will no doubt need
to contend in future.
Companies tapping into the zeitgeist stand a good chance of making a lot of money. Others are often not so lucky.
But there is always a chance of attracting capital, providing a company can show it is solving a clinical problem in a
cost-effective manner.
IPOs nosedive
Things might be bad in the VC world, but it could be worse. IPOs have all but dried up in the first half, with only three
companies listing on US or pan-European exchanges and the largest amount raised a relatively paltry $45m.
This compares with 12 IPOs in H1 2015, bringing in a total of $665m. Last year saw six $100m-plus IPOs, which seems
an unachievable goal for those hoping to go public now.
While poor returns for recent floats could be playing a role, stock market instability and resulting investor
nervousness is probably the main reason the IPO window has shut.
Another is historical. The US medtech IPO market never really came roaring back in the way that biotech did, says
Mr Mahony. A lot of that is because you reap what you sow: there wasnt much VC money around five or six years
ago and that has a knock-on effect.
With the current dearth of VC funding, this does not seem likely to get better anytime soon.
Medtech initial public offerings by quarter on Western exchanges
750
12
$677m
$480m
500
$401m
$382m
$397m
6
$259m $268m
$243m
250
$257m
$122m
$58m
0
Q1
$80m
Q2
$45m
Q3
Q4
2013
Q1
Q2
Q3
Q4
Q1
Q3
Q4
2015
2014
Amount Raised ($m)
Q2
Financing Count
Amount Raised ($m)
10
2
$47m
Q1
Q2
2016
Financing Count
Of the three companies that did manage to float this year, implantable continuous glucose sensor developer
Senseonics is the standout performer, but this is not really saying much the company still had to lower its target
to go public.
But at least its stock has since risen. Belgian diagnostics group Asit Biotech had to take a haircut and has since
suffered a share price decline.
Pulse Biosciences is up since its IPO but only raised $20m, which presumably will not last it long. It might need to
carry out another fundraising soon not ideal in the current climate.
As there are so few of them, it is difficult to pick out trends from the IPO class of 2016, but one thing is clear the
medtech IPO window is closing leaving no sign of when it might reopen.
The funding data for the first half of the year paint a gloomy picture. Most companies are finding it tough to raise
venture money but cannot turn to the public markets for the cash they need either.
Alternative models, like crowdfunding and corporate investment, are unable to pick up the slack. It seems likely
that an increasing number of start-ups will become extinct before they reach the point where a trade sale becomes
feasible. Those that do make it will have to be extremely cash-efficient or look for creative ways to raise money
or maybe just stick to proven or popular sectors where VCs are more likely to get involved.
This could mean that products with a longer path to approval, or those in neglected sectors, could fail.
Solid performances rewarded with share price gains

After a mixed performance for medtech shares in 2015, it looks like more of the same this year.
But things seem to be stabilising, at least for the big companies, which supports the theory that
investors see them as a safe haven amid the current stock market volatility.
People are looking for good, solid, defensive growth, says Polar Capitals Mr Mahony. And theres a desperate
search for yield. I think thats one of the reasons why big medtechs have worked quite well.
Meanwhile, mid-sized and small medtech players saw bigger fluctuations, both positive and negative although
even these were relatively muted compared with previous years.
In spite of these apparently calm waters, the first half of 2016 was a tale of two continents. While the US share indices
picked up after a slowdown last year, European stocks went backwards. More instability in Europe could come
following the UKs vote to leave the EU as a Brexit plan is thrashed out.
Share price indices

Stock Index
% change in 2015
Thomson Reuters Europe Healthcare (EU)
(5%)
Dow Jones U.S. Medical Equipment Index
11%
S&P Composite 1500 HealthCare Equipment & Supplies
12%
Nonetheless, the European medtech and broader healthcare sectors could remain relatively protected from these
macroeconomic headwinds by long-term growth drivers including the ageing population and an increase in chronic
disease, as well as improvements in medical technology.
Investors will hope this means the industry does not get caught up in a broader EU contagion sparked by Brexit.
But with current turmoil in Turkey and the Middle East, and the US presidential election coming up, worldwide public
markets could be set for a rocky ride for the remainder of the year.
For now, at least, it is very much business as usual for US-based big cap medtech groups. Only three companies
with market caps above $15bn experienced a decline in their stock in the first six months of 2016, while there were
healthy rises for stalwarts like Stryker, Boston Scientific and St. Jude Medical.
Stryker in particular has done well to wring impressive growth out of a highly commoditised orthopaedic sector,
helped by a string of acquisitions. But striking deals does not work for everyone: Abbotts shareholders were far from
impressed with its move for St. Jude Medical.
Conversely, it was the lack of a deal that sent Smith & Nephews stock on a rollercoaster ride this year. The UK-based
orthopaedic firm has long been rumoured as a takeover target for Stryker, but this looks unlikely as the US group
continues to look elsewhere.
10
The recent Brexit vote caused a slump in S&Ns stock, but this could make the group more likely to be acquired if
it pushes its price tag down to more affordable levels. While potential buyers might welcome this development, it
would not be good news for investors who have bought into a stock with a hefty M&A premium.
Large cap ($15bn+) medtech companies: Top risers and fallers in H1 2016
Market capitalisation ($bn)

YE 2015
H1 2016
6M change
Stryker ($)
Top five risers
Share price change

29%
34.95
44.81
10.15
Boston Scientific ($)
27%
24.81
31.71
6.88
St. Jude Medical ($)
26%
17.46
22.17
4.67
Edwards Lifesciences ($)
26%
17.04
21.12
4.11
C. R. Bard ($)
24%
14.00
17.24
3.28
Abbott Laboratories ($)
(14%)
66.99
57.75
(9.24)
Coloplast (DKr)
(13%)
17.32
15.02
(2.30)
Smith & Nephew ($)
(4%)
15.95
15.35
(0.61)
Top fallers
As ever, poor financial performance was a factor for many of the first-half fallers, with Coloplast, Qiagen, Intersect ENT
and ConforMIS all dipping after releasing disappointing quarterly results or guidance.
The reason for the declines at Japanese groups HOYA and Olympus was more dramatic: both are still dealing with
the fall-out from last years duodenoscope sterilising scandal, which continues to hit sales.
The top mid-cap riser was the solid but unexciting Teleflex, while many of the other smaller-cap successes came
thanks to growing markets. Examples include cochlear implant producer Cochlear, patient monitoring specialist
Masimo and robotic surgery group Mazor Robotics.
Mazor was also helped by a licensing agreement with the number-one medtech company, Medtronic. Orthopaedic
group LDR was the other riser to benefit from a deal a takeout by Zimmer Biomet.
11
Other significant risers and fallers in H1 2016 (ranked on market cap)
Market capitalisation ($m)

Selected five risers
Share price change
YE 2015
H1 2016
6M change
5,469
7,730
2,261
Teleflex ($)
35%
Cochlear (AUS$)
27%
3,934
5,315
1,381
Masimo ($)
27%
2,087
2,572
485
LDR ($)
47%
729
1,082
353
Mazor Robotics ($)
77%
215
401
186
Hoya ()
(27%)
17,273
13,423
(3,850)
Olympus ()
(21%)
13,701
11,872
(1,829)
Qiagen ($)
(21%)
6,436
5,082
(1,354)
Intersect ENT ($)
(43%)
630
366
(264)
ConforMIS ($)
(59%)
704
293
(411)
Selected five fallers
While innovation was the driving force behind many of the top performers last year Edwards being an example
the reasons for this years gains were generally more prosaic, with bankable performers like Stryker, Boston and
Teleflex bagging the top spots.
With movements in the public markets remaining unpredictable, investors will still be seeking safe harbours
and the larger medtech companies will doubtless continue to benefit.
12
Fewer, but faster, approvals

Anyone hoping for another big surge in FDA device approvals in 2016 will likely be disappointed:
if the half-year trend continues there will be 38 first-time premarket approvals and humanitarian
device exemptions across the year, which would be a 27% decline over 2015.
It is not all bad news. Although the number of approvals has dropped, the FDA does at least seem to be speeding
up, with the average review time in the first half of 2016 just 16.2 months compared with 17.3 months in 2015 and 16.7
months in 2014.
The process of getting a device past the FDA appears to be becoming smoother at least for those with the means
to do so.
Quantas Mr Milad agrees that the FDA is becoming more user-friendly and efficient. I wouldnt say theyve lowered
the bar, but theyve been doing things more quickly.
Meanwhile, getting the CE mark in Europe, once seen as a low-hanging fruit for device companies, is becoming
tougher to the point where the US and European regulatory systems are getting closer together.
Number of PMAs and HDEs granted, 2005-2016
60
Number of Approvals
50
40
30
20
10
2005
2006
2007
2008
2009
2010
2011
Year
13
2012
2013
2014
2015
H1 2016 Projected
2016 Total
At the moment, it is the bigger companies that dominate the list of US debuts, with two approvals apiece for Boston
Scientific, Medtronic and Roche.
This might change as new initiatives like the expedited access PMA route come into play, and clearer paths to
approval could create a virtuous circle, helping younger groups get access to funding.
One notable micro-cap on the approvals list is German company Epigenomics, which needed a dose of
determination to eventually get the go-ahead for its Epi proColon colon cancer blood test in April after over three
years and two rejections. It eventually succeeded via an appeal.
This did, however, push up the average approval time for the in vitro diagnostics class, which would have been
the fastest, at 5.2 months, without Epi proColon. As it was, the speediest sectors for approvals were ophthalmics
where only one product got the go-ahead and cardiology.
Average review times of first-time PMAs and HDEs by therapy area (months)
EvaluateMedTech Device Classification - L1
2014
2015
H1 2016
Count
Average
Approval
Time
Count
Average
Approval
Time
Count
Anaesthesia & respiratory
61.3
18.5
Blood
13.2
8.7
Cardiology
17.1
11
12.9
15
14.4
9.5
Diabetic care
15.7
19.0
9.8
10.3
Average
Approval
Time
Count
Average
Approval
Time
Diagnostic imaging
16.8
13.0
11.7
Ear, nose & throat
9.5
Gastroenterology
17.7
11.2
General & plastic surgery
68.2
28.7
General hospital & healthcare supply
39.8
In vitro diagnostics
8.6
13.3
12
11.3
12.0
Nephrology
25.1
Neurology
40.5
8.9
19.4
12.4
Obstetrics & gynaecology
12.9
Ophthalmics
21.4
11.0
28.1
9.2
Orthopaedics
30.0
48.0
24.5
85.4
Physical medicine
80.9
Urology
29.3
Wound management
31.2
14.7
11.5
33
51
19
Total
Average
14
2013
23
26.9
16.7
17.3
16.2
Cardiology also saw the greatest number of approvals, followed by in vitro diagnostics, echoing the pattern seen in
previous years.
There were fewer approvals in less innovative sectors like orthopaedics; more products in these fields likely went
down the less stringent 510(k) pathway, so are not captured by this analysis.
First-time PMAs and HDEs by Therapy Area, 2013 to H1 2016
16
14
Number of Approvals
12
10
8
6
4
2
2013
2014
2015
Wound Management
Urology
Physical Medicine
Orthopaedics
Ophthalmics
Obstetrics &
Gynaecology
Neurology
Nephrology
In Vitro Diagnostics
General Hospital &

Healthcare Supply
General &
Plastic Surgery
Gastroenterology
Ear, Nose & Throat
Diagnostic Imaging
Diabetic Care
Cardiology
Blood
Anaesthesia &
Respiratory
H1 2016
While PMAs and HDEs are down, the number of devices getting de novo clearance for products that are innovative
but pose a lower risk to patients is on track to increase slightly over last year. There were 10 de novos in the first
half of 2016, compared with 18 in 2015 overall. This is good news because many of the devices getting de novo
clearance have been developed by smaller companies.
2015 was an unprecedented year in terms of medtech approvals. It is possible that it was just a blip and the sector is
now returning to a steady rise over the previous couple of years.
15
The future
The first half of 2016 has seen no end to the concerning developments in the medtech industry.
In fact, they have become even more extreme, with the venture crisis worsening and the IPO
well drying up almost completely.
Smaller groups could, however, seize on two potential glimmers of hope. The sector could be moving away from
megadeals and back to mid-sized acquisitions, and the FDA seems to be becoming more accommodating. That said,
it is too early to be definitive.
Delivering innovation to patients and returns to investors are key to the health of the medtech industry so these
developments, if they bear out, should be good news for the entire sector.
Companies will need to hold onto those hopes, as the rest of 2016 is shaping up to be rocky, and turmoil in the public
markets could continue into 2017 given large global events including the outcome of the US presidential elections.
This is on top of an already shaky European sector that is still getting to grips with the consequences of the UKs
Brexit vote.
If this uncertainty fuels an extended exodus away from biotech stocks, large medtech could be the beneficiary, as
investors look for stable sectors in which to stash their cash. But this would only represent a short-term gain and will
do nothing to address the fundamental problems in the medtech industry.
The central problem is a dearth of funding for young companies, leading to a lack of new products and a dip in the
quality of innovation subsequently available for the big players to acquire.
Report authors: Madeleine Armstrong and Elizabeth Cairns
16
The future
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EP Vantage Medtech Half-Year Review 2016

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EP Vantage Medtech Half-Year Review 2016

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2016

EP Vantage Medtech Half-Year Review 2016

EP Vantage MedTech Half-Year Review 2016

Copyright 2016 Evaluate Ltd. All rights reserved.

M&A dollar decline could herald return to mid-sized deals

Medtech acquisitions of the last decade

Source: EvaluateMedTech July 2016

Deal Value ($bn)

M&A dollar decline could herald return to mid-sized deals

Copyright 2016 Evaluate Ltd. All rights reserved.

Medtech acquisitions H1 2016 v H1 2015

Source: EvaluateMedTech July 2016

H1 2015 (excluding Medtronic-Covidien)

* with known value

Top 5 deals closed in H1 2016

Source: EvaluateMedTech July 2016

Sirona Dental Systems

Thermo Fisher Scientific

Diabetes Care business of Bayer

M&A dollar decline could herald return to mid-sized deals

Copyright 2016 Evaluate Ltd. All rights reserved.

Top 5 deals closed in 2015

Source: EvaluateMedTech July 2016

M&A dollar decline could herald return to mid-sized deals

Copyright 2016 Evaluate Ltd. All rights reserved.

Worrying signs for venture funding and IPOs

Quarterly Medtech VC Investments

Source: EvaluateMedTech July 2016

Worrying signs for venture funding and IPOs

Copyright 2016 Evaluate Ltd. All rights reserved.

Worrying signs for venture funding and IPOs

Copyright 2016 Evaluate Ltd. All rights reserved.

Top 5 rounds of H1 2016

Source: EvaluateMedTech July 2016

Worrying signs for venture funding and IPOs

Copyright 2016 Evaluate Ltd. All rights reserved.

Medtech initial public offerings by quarter on Western exchanges

Source: EvaluateMedTech July 2016

Amount Raised ($m)

Worrying signs for venture funding and IPOs

Copyright 2016 Evaluate Ltd. All rights reserved.

Solid performances rewarded with share price gains

Share price indices

Source: EvaluateMedTech July 2016

Thomson Reuters Europe Healthcare (EU)

Dow Jones U.S. Medical Equipment Index

S&P Composite 1500 HealthCare Equipment & Supplies

Solid performances rewarded with share price gains

Copyright 2016 Evaluate Ltd. All rights reserved.

Source: EvaluateMedTech July 2016

Market capitalisation ($bn)

Top five risers

Share price change

Boston Scientific ($)

St. Jude Medical ($)

Edwards Lifesciences ($)

Abbott Laboratories ($)

Smith & Nephew ($)

Solid performances rewarded with share price gains

Copyright 2016 Evaluate Ltd. All rights reserved.

Other significant risers and fallers in H1 2016 (ranked on market cap)

Source: EvaluateMedTech July 2016

Market capitalisation ($m)

Share price change