Trends and projections can only take you so far when trying to strategically plan for future business growth in MedTech. Strategic planning requires accurate numbers and the more accurate your forecasting, the better you’ll perform as a business. To ensure accurate forecasts, you need data that is backed up by validated sources that you can trace back to the original source of truth. That’s why we chose to write this MedTech financial report encompassing the $17.95 Billion dollars in investments that is validated in Zapyrus and traced back to the exact event from 2023.

For service providers in MedTech, it’s less important to know the overall projected size of the market but rather the growth rate of that market. For example, the size of a market that captures sales and revenue numbers could look healthy, but it does not guarantee that those revenue dollars are being reinvested into that same market vertical. This is why it’s more important to understand the investment dollars that are going into the MedTech vertical in order to better predict the growth and stability of the MedTech market going forward into 2024.

Below, we’ll take a deep dive into unpacking the investments made into MedTech in 2023 by company stages of development, technology type, and therapeutic area. We’ll first look into the post COVID-19 climate that went into MedTech 2023, followed by some real world examples of strategies that resulted in successful companies and those that were less successful. Lastly, we’ll dissect the 2023 data to answer the most important questions below to help us better plan for success in 2024.

1. How much is being invested in MedTech from preclinical to commercial launch?
2. What medical technology category is receiving the highest level of investment?
3. What therapeutic areas are being heavily invested in?
4. Where is the funding being distributed between NA, EMEA, APAC?

Introduction

The MedTech industry in 2023 is described with one word, uncertainty. Businesses were not sure where funding was going to come from and investors were hesitant to inject cash into the market until they had some assurances of the risks. In these times, businesses that thrive have a clear vision, product market fit, and strategic investments into the MedTech vertical. The companies that struggled lacked a decisive strategy and approached growth in MedTech with hesitation.

During the COVID-19 pandemic, we witnessed a rise in demand for point-of-care (PoC) In-vitro diagnostic testing. The first case of COVID-19 in Canada was reported on January 25, 2020 and by March 17, 2020 the whole country and several other nations announced a lockdown to contain the spread of infection. There were limited RT-PCR laboratories available to produce COVID-19 tests at the time with one notable site in India. By May 2020, approximately 600 Indian RT-PCR laboratories were set up in an attempt to increase testing capacity by 1,000-fold in order to manage the spread of COVID-19. At the same time, Europe and the United States combined, witnessed a 20-fold increase in demand for molecular diagnostics between March and October 2020.

However, by 2023 the narrative had shifted. We observed a sea of layoffs in most sectors including technology and MedTech. The technology sector witnessed a total layoff of 240,000 jobs in 2023 with key players involved such as Google, Amazon, Microsoft, Yahoo, Meta and Zoom, a 50% increase from 2022. The MedTech sector tells a similar story when it comes to layoffs. Acutus Medical announced a 65% reduction in workforce, J&J reduced their headcount by at least 1,000 employees, and Philips reduced theirs by 10,000. Not all businesses faced layoffs though, some businesses thrived while others struggled.

Leaning In

In challenging economic times, businesses choose one of two paths. They either lean into growth strategies or opt out of them. IQVIA continued to grow despite market conditions because they continued to strategically invest in the MedTech space with tools and data in order to increase productivity within their existing teams. IQVIA increased its revenues by 4.8% while mitigating layoffs and was named FORTUNE’s “World’s Most Admired Companies” in 2023. Labcorp decided to strategically split their preclinical & testing division from their clinical arm and spunout Fortrea as an independently operating CRO division. This will allow them to have an independent brand identity and establish their strengths in MedTech.

Opting Out

The companies that opted out were similar in profile even though they are at different sizes. They lacked the vision to differentiate their services and provide structure to the sales and marketing needed to have predictable and scalable growth. Curebase, formerly a CRO and DCT service, decided to sunset their CRO business to focus on the company’s SaaS platform, thus cutting their entire sales and marketing team. Biofourmis CEO stepped down one month after a global layoff a year after the company landed a $300 million Series D funding. Syneos Health was purchased by Private Investment Firms comprising Elliott Investment Management L.P., Patient Square Capital and Veritas Capital.

Let’s get on the same page with some definitions

What is MedTech?

Medical device, in-vitro diagnostic/diagnostics, and software-as-a-medical device (SaMD)/Digital therapeutics (DTx) companies that have or seek to bring a regulated technology to market.

What’s included in funding?

Funding includes stock offerings, fundraising, private investors, grants, prizes, and royalty payments. Revenue and sales dollars are left out.

Preclinical (this is a bit of a catch all): We define these companies as being at a stage of before clinical testing. This will cover startups and companies that are in design & development stages.

Clinical (this number changes daily based on market activity): Companies that are actively involved in a clinical study at any stage.

Commercial: These companies may have clinical trials but have at least one product clinically approved and may or may not be generating revenue.

The Numbers

The funding in MedTech in 2023 had its ups and downs. However, there was a concentration of funding that went into supporting the growth and innovation in the market. As shown below, $17.95 billion dollars worth of funding was captured in 2023. Each one of the 3,245 funding events that make up this number can be traced back to the exact event that happened in 2023.

Zapyrus users can find these specific funding events using this link.

$17.95 Bil

of investments supported ~11% of the MedTech market in 2023

Surprisingly, this funding amount comprises only 11% of the MedTech market and coming from less than 2000 companies in MedTech. Naturally this raises several questions on how we should develop strategy.

If you’re a MedTech service provider

1. Should you focus on funding as a primary signal for business development?

2. If 9/10 companies did not receive funding, how are you going to guarantee that you're investing your time in the right opportunities?

3. How much of the 90% already sit on top of funding from prior years that they are looking to spend in 2023?

4. What sales signals exist outside of funding events that would help to capture the 90%?

If you’re a MedTech OEM

1. Is this funding positively trending towards your therapeutic area of focus?

2. Can this insight help you set better business strategies going into 2024?

3. How well are you tracking against your competitors?

To contextualize this number in a meaningful way, let’s start by answering the obvious question. How much of this investment is going towards the key stages of MedTech company development?

Figure 1 below shows us a distribution of $17.95 billion dollars spread across the preclinical development, clinical validation, and commercialization stages. The preclinical funding of $5.42 billion dollars is approximately half of the clinical investments sitting at $10.50 billion dollars.

Figure 1: MedTech funding in billions of dollars (USD) separated by company stages of development, preclinical, clinical, and commercial. (see definitions above for more detail)

This means that investors are more cautious in investing in MedTech companies at the early stages of development and that funding needed to progress companies to the clinical stage is smaller at the preclinical stage.

Evident by Figure 2 below, there is twice the amount of MedTech companies that received funding in 2023 than clinical stage companies, but the total funding for preclinical stage companies was half the size of the clinical stage companies. This proportionally makes sense given that not all MedTech startup companies make it out of preclinical stages. Furthermore, we can see that commercial stage companies received the least amount of funding and are fewer in numbers. That’s because it’s even rarer that a MedTech company transitions out from clinical validation and into commercial launch.

Figure 2: MedTech companies that received funding in 2023 separated by company stages of development, preclinical, clinical, and commercial. (see definitions above for more detail)

I often hear business leaders say, “when they receive funding, it’s too late because they probably already have a partner, but we don’t want to speak to anyone without money to do the work.” These two statements sound contradictory at first but there is in fact a happy medium.

Figure 2 above, shows the funding from MedTech companies at each stage of development. What this graph fails to highlight is that these funding events were received at different periods in the year and with companies receiving multiple funding rounds in the same year. It’s common to see this because successful companies receive initial funding which attracts new investors to jump in.

Zapyrus users can find these specific funding events using this link.

There are key sales signals that you can use as a relatively accurate qualifier to get in front of a MedTech company that is about to receive a significant round of funding. For this, you’ll need to look at the two attributes of a MedTech company. Number one is looking at those early stage funding rounds like grants, seed, angel, or prizes and awards. If a company has received any of these, they have a high probability to quickly invest that funding towards doing the right things to attract new investors for the next round. This means getting together a tangible prototype, regulatory strategy, human factors strategy, and preliminary reimbursement strategy. Number 2 is looking at the immediate future development plans of that company out of any stage of development. With clear and defined milestones, this is a company that sends a signal to investors that they know what they’re doing and they have a clear vision.

E.g. Autonomix Medical, Inc. announced, “Based on the successful completion of the ablation animal safety study, the Company is advancing towards its first-in-human clinical study for the use of RF ablation in the reduction of pancreatic cancer pain, which is expected to commence enrollment in Q1 2024.”

It’s important to note that one month after this future plan announcement, the company released their $11.2 Million IPO. By this time, every other company trying to use funding as a signal for business development would be racing to jump on this opportunity.

Zapyrus users can find these future plan events using this link.

At the stage of announcement of future development plans, the company is primed to take action on any inbound outreaches from service providers and investors because they have just raised the flag that says “Check out our shiny plan, do you want to invest and partner?”.

There are many types of future development plans that can help you to proactively take action outside of the high level funding signals. Below are some examples.

Zapyrus users can click on the below link to view the different types of future plans.

1. Future Design & Prototype Development Plans
2. Future Preclinical Plans
3. Future Clinical Validation Studies Plans
4. Future Regulatory Submission/Approval Plan
5. Future Commercialization/Product Launch/Expansion Plan

Investments by Technology Category

It’s important to understand where the investments are going to support when it comes to the technology categories. This is especially true when it comes to business leaders in the MedTech service provider space where you specialize in a particular technology category that you can offer a value proposition that outpaces your competition.

Figure 3: Funding in billions of dollars by medical technology categories in 2023. Medical device, In-vitro diagnostics (IVD), and Software-as-a-medical device (SaMD).

Figure 3, shows us the total investments in 2023 by medical devices, IVD, and SaMD. Device investments are still much greater than IVD and SaMD. This is not surprising given the COVID-19 cliff post 2021. During COVID-19 peak pandemic, there was a rush to provide portable COVID-19 diagnostic testing to the world and this need drove investments and companies to rapidly develop portable and clinical grade diagnostic tests to help control the spread of infection. After 2021, we saw a normalization of inflated growth numbers in the IVD segment which is now reflected in the 2023 investments. Investments into SaMD however has significantly increased due to the rise in machine learning and large language models (LLM) popularized by ChatGPT. This opens up innovative opportunities that are unique to the MedTech vertical in that, standalone software and software combined with physical devices can unlock extremely powerful health treatment and diagnostic applications. We should expect these investments to continue to rise as big tech companies like Apple, Microsoft, and Google are all transitioning their way into the healthcare space through wearable medical device technologies like smartwatches.

Zapyrus users can find funded MedTech companies by technology categories using the links below.

1. Funding events for medical device projects
2. Funding events for IVD projects
3. Funding events for SaMD projects

Figure 4: Number of MedTech companies that received funding by medical technology categories in 2023. Medical device, In-vitro diagnostics (IVD), and Software-as-a-medical device (SaMD).

Figure 4 highlights the number of MedTech companies that received funding in 2023 by medical technology category. Between figure 3 and figure 4 we can calculate the average amount of funding that supports each MedTech company by technology type. On average, $11.9 million dollars of investment went into each medical device company, $11.5 million dollars went into each IVD company, and $8.3 million went into each SaMD company. This is important because although the total amount of funding for medical device companies is almost 4x larger than IVD, the average funding to support the growth in that subsector is normalized to roughly the same magnitude of investment.

Investments by Therapeutic Area

If your business hinges on a particular therapeutic area of expertise then Figure 5 below should provide some great insight into the stability of the different types of therapeutic areas in MedTech. Generally speaking, the top 8 therapeutic areas are relatively evenly distributed in MedTech.

Figure 5: Funding in billions of dollars by therapeutic area in 2023. Cardiovascular, Dental, Dermatology, Endocrinology, Gastroenterology, Infectious disease, Neurology, Oncology, Ophthalmology, Orthopedic, Women's health.

The top two therapeutic areas that received the most amount of investments are Cardiovascular and Neurology. This is expected as these two therapeutic areas traditionally see high levels of investments in MedTech. Representing a relatively large portion of the pie are Women’s Health, Gastroenterology, and Oncology. This is interesting because the Cardiovascular therapeutic area traditionally dwarfs the other disciplines however this year Neurology has taken the lead. This is a combination of SaMD expansion in the application of wearable devices and neurostimulation devices.

Zapyrus users can view the different types of funded companies by therapeutic area through the links below.

1. Cardiovascular
2. Dental
3. Dermatology
4. Gastroenterology
5. Infectious disease
6. Neurology
7. Oncology
8. Ophthalmology
9. Orthopedic
10. Women's health

Funding distribution by region

Figure 6: Funding distribution percentage by region of North America (NA), Europe, the Middle East and Africa (EMEA), and Asia Pacific (APAC).

The funding in North America is relatively larger than the rest of the world. Some factors that may be contributing to the large variation in funding distribution are the up-regulation from the EU MDR and IVDR policies, larger market opportunity in the United States of America, and available data on the smaller niche markets outside of North America.

Conclusion

As the MedTech market normalizes from the post COVID-19 pandemic boom, we can see industry niches start to emerge. The service providers like CROs, Preclinical testing services, contract Design & Development firms, CDMOs, and Regulatory agencies have become quite a crowded market. We’ve seen some of these companies try to break into the market through the COVID-19 pandemic boom, but without a clear vision, strategic investments in the plan, and a scalable process for sustained growth, these companies fail.

Businesses that adopt a data driven approach to sales and marketing have thrived by creating a repeatable process with a stable and predictable sales pipeline. These high performing teams prospect less but close more deals. Sales empowerment platforms like Zapyrus have become a secret weapon to allow businesses to develop foundational business strategies in MedTech and provide an actionable tool for the sales and marketing team to deliver results.

In 2024, with the rise of large language model machine learning, the market will become more noisy than ever before. Businesses that lean heavily on using artificial personalizations and high volume generic email marketing will be out competed by teams that are strategically timing and personalizing their B2B business development outreaches. Outside of funding, sales signals are difficult to find. Zapyrus is doing something special and in a league of its own. Just hit the free trial button below to learn more and try it for yourself.

Thank you for reading this report and we wish you all the best in 2024!

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