Focus on cybersecurity
Focus on cybersecurity
Work to simplify supply chains
Reprioritize research and development
Develop commercial strategy from device type to pricing
Middle market medtech companies have been significantly affected by the rise of inflation, market disruptions and increased cost of capital. As a result of these market conditions, successful medtech companies are focusing on cybersecurity, strategically combatting supply chain challenges, reprioritizing research and development activities, and assessing and adjusting business models.
Following is an overview of challenges and considerations for middle market medtech companies.
“Middle market medtech companies need to continue to focus on cybersecurity as a key element of the device development process. If R&D efforts are rushed to get a device to market without consideration for cybersecurity, the manufacturer may encounter regulatory holds and development delays,” said David Stuart, RSM senior analyst for the life sciences industry.
Recent guidance from the U.S. Food and Drug Administration emphasizes the importance of having a multifunctional team planning and implementing cyber-risk mitigation measures. Companies should consider including health care professionals, health care technology experts, IT, legal, risk management and facilities staff in the process.
When preparing for a product launch, it is important that companies weigh the potential impact and extended delays cybersecurity incidents can cause against the investment required to appropriately plan for a cyberattack. In some instances, the potential for a cybersecurity incident may affect decisions to introduce new technologies or artificial intelligence.
Managing the supply chain has always been a key consideration for companies. Today’s environment—with rising interest rates, higher cost of capital and an increasingly complex geopolitical landscape—puts additional pressure on the importance of managing the process by which goods are procured and built.
“Many companies are working toward both simplifying their supply chains with onshoring options but also looking to find opportunities to reduce stockout risk with redundancy in the process. Because of the regulatory requirements around materials and processes that go into FDA-approved products, changes to the supply chain can involve significant lead times,” said Kristin Keating, RSM partner and medtech sector leader. “Given the uncertainty in many aspects of the process, many companies are waiting to see how geopolitical events play out over time prior to making significant changes.”
Regulatory approval processes, testing and validations lead to long product development timelines and require significant upfront capital investment. During a period of high inflation and rising interest rates, reprioritizing R&D activities is crucial for organizations to stay competitive and relevant in their respective fields.
“Investors are realizing that a higher return on invested capital doesn’t have to come at the cost of increased risk. Instead, they are seeking safer investments that prioritize patient safety, knowing that success in the medtech industry ultimately depends on delivering effective, reliable and safe solutions to those who need them most,” said Stuart. "Rising interest rates are expected to put pressure on businesses bottom lines, leading many companies to reduce their R&D spending in an effort to conserve cash and maintain profitability. While this may provide some short-term financial relief, it could have negative long-term consequences on companies' ability to innovate and compete in their respective markets."
Instead, by reprioritizing R&D activities toward areas with higher potential for innovation and growth, companies can improve their chances of developing successful new products or services. Companies can optimize their resource allocation and streamline their operations, allowing them to respond quickly to changing market conditions and maintain their competitive edge. Ultimately, effective reprioritization of R&D activities can lead to increased efficiency, profitability and long-term success for organizations.
“There is no one-size-fits-all approach to launching a medical device or technology. Middle market medtech companies should consider the unique attributes of each technology and determine how best to introduce it to the marketplace,” said Keating. “Each product requires a different approach to commercialization with specific strategies for stakeholder education and awareness, go-to-market approach, data analysis, pricing and more.”
The commercial strategy depends on a variety of considerations, from type of device to the method of operations, such as whether the device is disposable, implantable or diagnostic. In addition, the device commercial strategy is dependent on a number of things including alternative treatment options, ease of use, ultimate payor and the mix of benefits to the patient and payor. All of these factors create complexity for how a device is designed and brought to market.
Along with direct benefits, middle market medtech companies should also consider how their device or technology can provide added value to customers. Possible approaches can include collecting and providing data to further patient or health care provider experiences or research. Data collected can be used to help patients and health care providers track experiences and make decisions. It can also be used to publish important data for the industry to learn from.
As companies explore different technologies, they should focus more upfront research into the ultimate use and sale of the device to ensure the product is marketable and profitable.
Get additional sector insights by reading our outlook.