Can the MedTech sector keep outperforming?

Can the MedTech sector keep outperforming?

October 27, 2022

A vital industry faces opportunities and challenges

MedTech "winners" – highly profitable companies with strong growth – on average invested more in research and development than "underperformers" (8.5% versus 6.5% of revenues), the Roland Berger Global MedTech report 2022 shows. Winners were significantly more efficient in allocating capital (average SG&A of 28.6% versus 34.4% and average COGS of 42.0% versus 51.7%) and averaged twice the market capitalization of underperformers. Winners were also more active managing their portfolio in terms of M&A (4.9 deals versus 3.5 deals completed by underperformers). US-based MedTech companies were typically the most profitable, mainly the result of better access to the lucrative US market, with EBITDA margins on average five points higher than those of European or Asian peers. But Asia-based MedTechs, many of them Chinese, generally saw the fastest revenue growth. European companies tended to show the most impact from new EU new regulation.

"MedTech companies need to address current issues, strategies and structural challenges to continue to play their central role in global healthcare."
Portrait of Marco Bühren
Munich Office, Central Europe

A strong industry with noticeable regional differences...

The Roland Berger report looks at an industry that has traditionally outperformed leading stockmarket indices. Medical technology (MedTech) companies develop products and provide services that can diagnose, monitor, treat and increasingly also prevent disease. Crucial to the healthcare systems of the world, they are playing an ever-bigger role in safeguarding health and wellbeing. The industry has grown more quickly than many other sectors, but is now grappling with the impact of Covid-19, high inflation and soaring energy costs.

MedTech companies have averaged an EBITDA margin of about 22% over the past fifteen years. They have outperformed traditional manufacturing sectors like industrials and automotive, which typically have operating margins of less than 10% – although most MedTechs continue to lag behind pharmaceutical-industry margins of more than 25%. Rising demand and margins for MedTech devices and services have in recent years seen MedTechs consistently outperform global stock markets.

But our analysis revealed important regional differences – and that not all segments performed equally. MedTech companies based in North America have for many years enjoyed considerably higher operating margins than their competitors from Europe and Asia-Pacific (APAC). Their higher earnings before interest, taxes, depreciation and amortization (EBITDA margins) were driven by better access to the US market, in which prices are usually higher than elsewhere. Pricing pressure is higher in Europe as a result of its universal healthcare systems and APAC, where reimbursement of healthcare costs is usually lower than in North America.

…And some segments consistently outperforming others

Roland Berger’s analysis also showed that revenue growth and profitability vary significantly across the seven MedTech segments. Innovation and product differentiation have led to high EBITDA margins well above 20%, while companies focused non-differentiated disposables and supplies have margins below 10%.

A shift to personalized medicine, improvements in diagnostic testing and aging populations in developed countries supported that lab and diagnostics companies performed best in recent years, with sales and already-high profitability rising strongly. Diversified MedTech companies showed that being active in different segments is no disadvantage as sales rose steadily and high margins increased again. Electromedical and equipment manufacturers and medical aids and devices companies saw steady sales growth and stable, solid profitability.

The picture was more mixed elsewhere. A sharp decline in elective surgery meant surgical instruments and appliances manufacturers saw revenues grow only slightly, despite profitability remained high. Healthcare-related services providers saw only modest sales growth and margins decline. Low product differentiation meant disposables and supplies remained the least profitable segment.

"MedTech offers products and services that can detect, monitor, treat and, increasingly, prevent diseases. They are crucial for healthcare systems and play an important role."
Portrait of Thilo Kaltenbach
Senior Partner
Munich Office, Central Europe

Winners come from all segments – but have four things in common

Winning MedTechs from all segments share four characteristics. Winners show business leadership by being ahead in their fields, having managed to achieve top-3 positions or generate unique selling propositions that allow them to set prices and defend price points. Their strategic coherence starts with a clearly formulated vision and value proposition. Size and financial strength give them positions in leading global stock-market indices and good access to capital. They prove their ability to execute strategy through disciplined capital allocation, efficient deployment of resources, clear stakeholder communication and ensuing implementation.

All MedTechs must brace for structural challenges

The MedTech industry needs to concentrate on the four winners’ characteristics. Uncertain times make setting the right strategic priorities more important than ever. On top of that, MedTechs face six structural challenges. The industry is moving from:

  • unconnected, paper-based to automated, digital processes,
  • fee-for-service to value-based and personalized care,
  • inpatient to outpatient care and more disease prevention,
  • stand-alone hospitals to global networks and omnichannel sales,
  • focusing on the clinical value of products to clinical and economic value of solutions,
  • incremental to transformational research and development.

Essential questions for medtech executives

MedTech companies have to address current problems, strategic issues and structural questions to continue fulfilling their pivotal role in global healthcare ­– and to lock in solid growth trajectories. We at Roland Berger can help them do that.

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Can the MedTech sector keep outperforming?


The Roland Berger Global MedTech Report 2022 shows that medtech "winners" are highly profitable companies with strong growth and on average invest more in research and development than "underperformers". Winners are significantly more efficient in capital allocation and had on average twice the market capitalisation of underperformers. Medical technology companies from the USA are thus the most profitable, which is mainly due to better access to the lucrative US market.

Published October 2022. Available in
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