Gaining insights from experienced medtech investors is invaluable when trying to understand the intricacies of the fast-evolving medtech market. At LSI USA ‘24, a panel of seasoned experts shared their perspectives on the current landscape, investment strategies, and critical success factors for successful exits. Here are some key takeaways from this enlightening discussion, designed to help medtech investors and entrepreneurs sharpen their approach to this dynamic market.

The Importance of Differentiated Products in A Large Medtech Market

A central focus for medtech companies working toward successful exits is to have a unique product that addresses a substantial market. Anthony Williams said, "While it may feel a bit obvious, it’s really important to have a differentiated product and a large market, or at least a large addressable market, even if it's not being served today." This highlights the critical role of innovation in improving patient outcomes while also capturing significant market interest.

Positive Trends in Medtech M&A Deals

Despite the challenges of the past few years, the medtech market has shown promising signs of recovery, especially in M&A activities. Alexander Schmitz noted, "Last year was a pretty good year; there was an 81% uptick in the volume of medtech M&A deals and a 60% increase in the value of those deals versus 2022." This uptick suggests growing investor confidence and a robust market for medtech innovations.

Considering Coverage in Clinical Studies

For medtech companies, aligning clinical study criteria with payor policies is crucial for ensuring coverage. Susan Stimson emphasized this: "It’s never too early to think about it. When it comes to coverage, especially in markets that are predominantly commercial payors versus Medicare, what you need to do to get coverage may or may not be aligned with your initial clinical study. However, there may be aspects of your clinical study that you can add." This strategy can substantially enhance the likelihood of reimbursement, making the product more attractive to medtech investors and buyers.

Challenges of Strategic Investments

While strategic investments can provide vital funding, they come with their own set of hurdles. Kyle Dempsey warned about the potential risks, particularly concerning information rights: "You have to be really thoughtful about those information rights. You always have to remember that strategics may, at some point, decide they want to go into the same market you’re in, and they may want to design a product that competes directly with yours." Companies must carefully negotiate these terms to protect their competitive edge.

Shift Towards Conservative Investment Strategies

In response to the current economic climate, investors are becoming more conservative and focusing on efficient capital deployment. Anthony Williams discussed this trend: "We've refocused slightly on efficient capital deployment. The days of raising capital and then nine or 12 months later thinking you’re going to do another big round aren’t where we are right now. Therefore, having a long enough runway with the round that you’ve raised to change the outcome in terms of the value of the business is important." This approach ensures companies can sustain operations and achieve significant milestones before seeking additional funding.

Importance of Realistic Reimbursement Strategies

A viable reimbursement pathway is crucial for the success and attractiveness of a medtech product. Alexander Schmitz highlighted this necessity: "To be attractive to an acquirer, or to be viable as a standalone company, you really need a sustainable reimbursement pathway specific to your product." Early planning and clear strategies for reimbursement can greatly enhance a company's market potential and investor appeal.

Learn More About Medtech Financing

The full recording of this panel can be found in LSI’s resource hub at the link below:

• Medtech Growth Capital: What is the New Normal in Late-Stage Financing? | LSI USA ‘24

The panel provided valuable insights into the factors that drive success in the medtech market. By focusing on product differentiation, understanding market trends, aligning clinical studies with payor policies, cautiously navigating strategic investments, deploying capital efficiently, and planning realistic reimbursement strategies, medtech companies can position themselves for successful exits and sustained growth.

These discussions offer a clear roadmap for medtech investors and entrepreneurs, demonstrating the importance of strategic planning and adaptability in a complex and dynamic market.