• Record deal activity: From June 2020 to June 2021, medtech companies executed 288 M&A deals – the highest annual number seen since EY began this report in 2007.

• Across-the-board growth: Of commercial leaders and conglomerates, 94% reported improved revenues in the first half of 2021 compared with that time in 2020, up to a collective 30% increase.

• Strong investor sentiment: US/EU public medtech valuations were up 55% from January 1, 2020, through July 31, 2021, outpacing all major indices, except digital health.

• Increased venture capital (VC) funding: The industry attracted US$9.1 billion of VC in the 12-month period ending June 30, 2021, a 34% increase over the previous year and the highest level in at least a decade.

• Twofold initial public offering (IPO) increase: IPO funding grew by 100% in the 12 months ending June 30, 2021, generating US$6.4 billion, with over half of the value coming from just two deals.

The global medical technology (medtech) industry has significantly rebounded after COVID-19 hurt top-line growth rates, as detailed in the 15th annual Pulse of the Industry report produced by Ernst & Young LLP (EY US). Just over 18 months after COVID-19 was declared a pandemic, the data shows that the medtech industry has weathered this crisis and entered a period of recovery and renewal, as evidenced by the M&A activity, improved revenues, strong and confident investor sentiment, and VC and IPO funding.

Arda Ural, PhD, EY Americas Industry Markets Leader, Health Sciences and Wellness, says, "While COVID-19's impact was felt throughout the medtech industry, many companies are resiliently emerging from the crisis. Medtech is experiencing unprecedented venture capital levels, robust deal volume and a strong growth rate. If executives continue focusing on innovating new products and services, trying digital business models, optimizing their portfolio composition and mitigating supply chain disruptions in the wake of this global disruption, we can anticipate a continued strong trajectory for the industry."

Pulse of the Industry captures the current state of the medtech industry, as expressed in M&A and deal activity, R&D investment and other factors. The report also outlines the following five key areas of focus for medtech companies that will help prioritize future growth and drive business transformation:

• Continue a "human-centered" approach, prioritizing patient care
• Leverage data and digital technologies effectively
• Validate the resilience and agility of supply chains
• Increase commitment to sustainable business models
• Push for regulatory reform to support the industry's ongoing evolution

Jim Welch, EY Global Medtech Leader, says, "Medtechs must focus on these key issues to pursue a successful future, not just for the business itself, but the patients they serve. The industry has proved to be resilient, and this in turn has allowed for incredible technological breakthroughs and improved care delivery. To not only sustain momentum, but also drive further business value, executives should prioritize these efforts within their enterprise."

As detailed in the report, medtech significantly evolved its business models during the pandemic, and it must continue to focus on growth and transformation to stay relevant. As an example, compelled by pandemic lockdowns, medtechs explored new approaches to delivering care, reaching into patients' homes to deliver therapeutics, diagnostics and other tools. Data suggests that, in the future, digital health will play a greater role in managing conditions from diabetes to mental health for up to 45% of the US patient population; medtech, integrating with telehealth, has the potential to meet this growing need.

Supply chains and data security represent other innovation opportunities for the sector. The pandemic disruption has highlighted the need to ensure greater supply chain resilience in the future. At present, medtech supply chains operate in an asset–heavy business model and hold a significant amount of redundant inventory. Leaders should explore downsizing inventory, improving forecasting and building smarter, more agile supply chain models. Flows of data, as well as products, will be vital to health care in the future, and medtech can play an important role in sharing patient data if companies can secure devices against cyber attacks and privacy breaches. Data security will be a necessary foundation for the new medtech ecosystem.

Other key findings highlighted include:

• Over the course of 2020, the industry's revenues (+6.3% to US$446 billion) grew for the fourth consecutive year, with the non-imaging-diagnostics segment recording a particularly impressive 24% annual growth rate.

• Pure-play medtechs reinvested heavily in R&D in 2020, recording the highest annual growth rate in R&D spending (+17%) since before the financial crisis of 2007.

• A few companies made significant gains from product lines relevant to COVID-19, from personal protective equipment to diagnostics to lab equipment. However, the more significant long-term impact of the pandemic may be its effect on the industry's business models. The pandemic has shifted health care's center of gravity in fundamental ways, to which the industry must now respond.

To read Pulse of the Industry, visit https://www.ey.com/us/pulse.