Moderate growth in medical technology in Germany: Regulatory hurdles slow down innovation
- Patent applications in the field of medical technology and healthcare show a significant decline, now for the third year in a row
- The implementation of the new regulatory requirements (MDR/IVDR) has far-reaching effects on the German healthcare industry and is leading to a negative trend in new product developments
- The Medical Technology Index, developed by SHS Capital and Professor Dr Koziol, shows only minimal growth for 2022
Tübingen, 27 November 2023
The analysis of the SHS Medical Technology Index 2022 shows a stagnating development in the German medical technology sector. The index, which has been compiled annually since 2019 in collaboration between SHS Capital and Prof Dr Koziol, Chair of Finance at the University of Tübingen, shows only a moderate increase of one percentage point compared to the previous year.
The Medical Technology Index reflects the growth capacity, innovative strength and economic performance of the medical technology sector since 2010. The following data series are included in the calculation of the index: Number of patents granted, turnover or GDP, number of people in employment and share prices. Despite the growth, the sector’s development is significantly weaker compared to the increase in GDP in Germany. Several factors have a noticeable influence on this modest growth.
Although the companies were able to report substantial increases in turnover of around 5% and rising employment figures of around 8%, a concerning decline in the number of patents granted in medical technology is weighing heavily on the development of the index. A decline of 27% in the number of patents granted is indicated, which, after already significant declines of 13% in 2020 and 18% in 2021, points to an alarming lack of innovation in the industry. The significant loss in value of the industry on the stock market (-19%) also reflects this. The trend of sharply declining patent applications over the past three years is not only striking, but also concerning for the medical technology sector. Prof Dr Koziol comments on this development: “The continuing decline in the number of patents granted is worrying from the perspective of the medical technology sector. We need to closely monitor the impact this will have on the future development of the industry.”
One reason for this is the major regulatory changeover to MDR/IVDR. Medical technology associations have already pointed out several times that innovative SMEs in particular are facing major problems in this area. Due to the high regulatory burden, there is little capacity left for further development and innovation. This is particularly important in medical technology, as the innovation cycles for many devices are only three years. This could lead to a lack of innovation among German medical technology companies in the coming years. This in turn would lead to an innovation advantage for companies outside the EU and a significant competitive disadvantage for SMEs in Germany.
SHS Managing Partner Manfred Ulmer-Weber sees a possible solution in the expansion and internationalisation of medium-sized companies. He also says: “Innovations strengthen the market position of a medical technology company. Sufficient equity capital and a good strategy are crucial here in order to successfully realise innovation and increased regulatory requirements.”
SHS expects the medical technology sector to perform better than the economy as a whole in 2023. Partner Dr André Zimmermann lists demographic change, digitalisation and artificial intelligence as potential growth drivers for the sector.
The SHS Medical Technology Index
The SHS Medical Technology Index was developed by SHS Gesellschaft für Beteiligungsmanagement in cooperation with Professor Dr Christian Koziol from the Eberhard Karls University of Tübingen. It analyses the development of the medical technology sector since 2010, with the value in the base year 2010 corresponding to 100 per cent. The index records and compares the growth potential, innovative strength and economic performance of the German medical technology sector with the German economy as a whole. To this end, economic indicators (number of patent registrations, turnover or GDP, number of employees and share prices) are recorded and analysed for both the medical technology sector and the economy as a whole. The data was standardised using a mathematical model and is included in the index on a weighted basis. The index is updated annually.
About SHS Gesellschaft für Beteiligungsmanagement mbH:
SHS Capital is a private equity provider founded in 1993 that invests in healthcare companies in Europe. The focus of the investments is on expansion financing, shareholder changes and succession situations. “Building European Healthcare Champions” is the investment philosophy according to which SHS finances and develops portfolio companies. The German investor takes both minority and majority stakes. The national and international investors in SHS funds include pension funds, funds of funds, foundations, family offices, strategic investors, entrepreneurs and the SHS management team. The equity or equity-like investment of the AIF is up to € 40 million. Volumes in excess of this can be realised with a network of co-investors. In its investment decisions, SHS attaches great importance to the consideration of ESG aspects and has therefore committed itself to the guidelines of the UN PRI. SHS is currently investing from its sixth fund, which was launched in 2022 and has a volume of ca. € 270 million.
Further information at: http://www.shs-capital.eu
Would you like regular updates on SHS? Subscribe to our newsletter and follow us on LinkedIn
SHS Gesellschaft für Beteiligungsmanagement mbH