COVID-19 undoubtedly unleashed a flurry of innovation in the healthcare industry. A recent report from Evaluate Vantage looks back at 2020 and reviews the short-term and long-term effects the pandemic had on the industry.
“In many ways, COVID-19 turbo-charged an industry that was already riding fairly high,” the report points out. “The financing climate had been strong for a few years, but 2020 saw records broken in the venture and IPO worlds. With the spotlight on biopharma, which made remarkably swift progress on a pipeline of pandemic therapies, investors rushed to inject money into the [biopharm] sector.”
However, the report's findings present mixed results for the medtech sector. “The more established end of the medtech sector is in a better position than it was in the summer, with the most successful big-cap companies seeing their share prices more than double. Even greater gains were seen among smaller companies — but so were greater losses.”
In the medtech arena, the report notes that diagnostics companies — both those developing tests for COVID-19 and those working on liquid biopsy cancer tests — saw a surge in revenues during the pandemic. According to the report, these diagnostic tests “appealed hugely to investors in publicly traded companies and to venture backers alike.”
M&A activity was strong in all sectors, and the pandemic provided the impetus for the biggest deal in medtech last year — the $18.5 billion merger of the telehealth groups Teladoc and Livongo. The report notes that so-called “heady valuations” did not necessarily diminish deals in 2020 but it cautions that this may be a concern in 2021. “When preclinical companies can easily achieve the sort of market cap more typically associated with later-stage developers, some big and expensive disappointments seem inevitable,” the report says. It also notes, however, that medtech M&A “has kicked off in spectacular fashion with deals worth more than $10 billion already arranged.” Remote patient monitoring has emerged as a major trend to watch in the coming year.
Evaluate says the main COVID-19 focus in 2021 will shift from tests for the disease to the progress of vaccines and therapeutics against the pandemic. Although medical device stocks did not show the gains companies saw in pre-pandemic 2019, the second half of 2020 showed improvement. “The remarkable thing about medtech business development trends across 2020 is how resilient deal values have been under truly extraordinary circumstances. Transactions worth a total of $27.3 billion were completed last year, scarcely behind the $29 billion figure for 2018.”
A return to M&A deal-making is predicted for 2021. “The groups negatively affected by hospitals prioritizing COVID-19 patients, such as those active in the orthopaedics and cardiology arenas, will be keen to catch up by buying high-growth businesses.”
Editor and Director of Medical Content
For a copy of the report, go here .