Hosted by Joseph Coletti
Published June 11, 2024 | 2 min read
Key Points
- MedTech’s fundamentals are the strongest they’ve been in decades and will remain robust as the U.S. population ages and lives longer.
- At the same time, many growth areas of MedTech remain underpenetrated, with significant market share up for grabs.
- Robotic surgery innovations remain quietly revolutionary and Doctor Days experts anticipate that the majority of surgeries will be robotically assisted within the next ten to 15 years.
The MedTech sector continues to grow in the U.S. as innovation in patient treatments and delivery meets increased demand from an aging population. Medical technology analyst Shagun Singh assesses key data points from the RBC Capital Markets’ Doctor Days events, looking at how the healthcare sector can empower investors to position themselves for future growth. There were a lot of positive trends in Q1 for MedTech and that’s a trajectory that she sees continuing past 2024.
“Sector fundamentals are the strongest they have been in decades,” she said. “We are seeing real strength in procedure volumes, which is the number one driver of revenue growth for our sector. This is being driven by the aging demographics that are spending exponentially more on healthcare as they age,” she notes.
Statistically, healthcare is around 10% of people’s total budget below the age of 65, but that rockets up to 60 to 70% for those over the age of 75. As populations in the U.S., as well as in other developed markets, are both aging and living longer, their need for more robust, continuous care is growing. This not only improves the total addressable market for healthcare firms and their revenues, it’s also sparking innovation in treatment and care.
“There’s been a shift to more efficient sites of care such as ambulatory surgery centers or ASCs so it's easy to get in and out post-procedure,” remarks Singh. “Surgery is also getting safer and minimally invasive, with faster recovery times, so patients are more likely to come in and get their conditions treated.”
Plenty of market share up for grabs
Singh notes that a number of areas in MedTech are still underpenetrated: “The diabetes market is just 2.5% penetrated in the U.S., surgical robotics is single digits penetrated globally, and there are multiple other specialties such as electrophysiology that are underpenetrated.”
In the coming months and years, the rising market share of aging patients, the correction of under-penetration and continued innovations are going to drive further opportunities in the sector.
“We see multiple catalysts ahead, including new product approvals, clinical data point releases, as well as opportunity for M&A and margin expansion; and we think these catalysts will drive stock performance,” says Singh.
A great example is pulsed field ablation (PFA) to treat atrial fibrillation or electrical imbalance in the heart that may cause it to beat erratically, which is likely one of the most significant catalysts in MedTech in a decade. PFA is faster and safer than the two primary methods of treatment that were used before, radiofrequency and cryoablation. Because PFA is using electrical signals rather than heating or cooling to break the electrical pathways, experts at Doctor Days are excited about its potential.
“70-80% if not 90% of the market will move to PFA over the next few years, and the EP ablation market will essentially double in the next three years because of higher average selling prices and treatment expansion due to improved diagnosis, safety, and efficiency of the procedure,” remarks Singh.
Robotic surgery continues to evolve
Surgical robotics represents another key area of innovation that has been on the cusp of breaking through for some time. Although penetration is still in the low single digits for now, Doctor Days KOL experts still expect robotic techniques to become more and more mainstream.
“Robotics is transforming surgery for surgeons due to its ease of use and standardization across surgeon capability, and for patients due to better outcomes, faster recovery, and other benefits of minimally invasive surgery. A good example is the latest da Vinci 5 that offers force sensing capability that can limit tissue trauma by 43%,” notes Singh.
“Innovation is likely to open newer procedure categories down the road, including with single port robotic surgery where companies are looking to expand to breast oncology for example.”
Robotic automation and remote surgery are the holy grail in robotic surgery, which is one of the most significant end-markets in MedTech. But while they are some ways off, we haven’t seen many of the innovations that AI and data analytics might yet bring. Many experts anticipate that the majority of surgeries will be robotically assisted within the next ten to 15 years.