Opinion

A system on the brink: The UK’s MedTech equity gap

By Dr Pamela Walker, Healthcare expert, Advisor and Investor

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In the next 25 years, the number of people older than 85 in the UK will double to 2.6million.

While the proportion of older people who need care has fallen recently, the number of people over 75 with long-term conditions has risen.

The needs of this group are becoming more evermore complex, leading to heightened demand for NHS and healthcare services.

To address this population need, NHS spending is increasing at an unsustainable pace.

But despite greater spending, healthcare delivery and outcomes are not improving.

Critically, the UK has higher mortality rates from avoidable causes than most European and developed countries.

Added to this, UK data shows a 19 year gap in healthy life expectancy between the most and least affluent areas of the country.

Innovation at our fingertips

In a recent survey, 90 per cent of NHS staff said innovation is essential to improving healthcare services and tackling backlog.

More broadly, innovation and technology are well understood to be the key solutions for a healthcare system in crisis.

Fortunately, innovation is better than ever, with over 15,000 new MedTech patents per year in the UK and Europe (European Patent Office).

With advances in tech and user adoption at the highest levels ever post covid, our population is ready for a change.

Solutions offering optimised triage, remote monitoring, communication between services, sharing data and analytics, preventative care, and remote healthcare professional training, are only a handful of examples of what is being developed.

All these options can relieve pressure on the system, whilst improving patient experiences and outcomes.

In response to this significant need, the UK government and a number of organisations are offering increased grant funding, accelerator programmes, and wider initiatives aimed at supporting early stage MedTech startups.

A market opportunity

We have the technological advancements at our fingertips to transform the lives of nurses and doctors in the healthcare ecosystem, and of patients burdened by poor healthcare experiences.

Addressing this need, undoubtedly represents a significant market opportunity.

The healthcare market is growing at CAGR 8.9 per cent and there is a $433 bn forecasted market size by 2025 for medical devices; CAGR 4.1%.

Added to the dramatic need for innovation across our healthcare system, is the key trend of consumerisation of healthcare.

Individuals are asserting greater influence and control over their health destinies.

This trend has only been accelerated post COVID, as consumers increasingly focus on wellness.

Remote behaviours for accessing care, treatment, solutions, maintenance, and monitoring, have now been adopted.

Expectations for technology to provide real time personalised support for health and wellness have skyrocketed because of the shift from in person to digital experiences.

Increased confidence has been seen for self-service healthcare, creating a need for innovative solutions for the home.

The addressable market for the consumerisation of healthcare was estimated in 2019 at $600bn and will increase at a 5.5 per cent CAGR through 2025.

And yet…

Despite deepening need, unparalleled innovation, and extensive institutional support, investment in early stage UK MedTech is on the decline since 2016 by a staggering 21 per cent.

Conversely, investment in Series B+ MedTech has increased by 67 per cent since 2017.

This funding gap highlights the graveyard in medical innovation at the critical stage of getting products to market.

Certainly, developing medical technologies can be capital-intensive, with substantial research and development costs, clinical trials, and regulatory hurdles.

In a space where risk is closely monitored, it is no wonder investors look elsewhere.

Navigating this complex B2B2C landscape is often too burdensome, cumbersome, and costly for start-up founders who can struggle to accurately judge timelines and forecast realistic uptake in a highly nuanced market.

Added to this, the recent decline in MedTech IPO, SPAC and M&A deals creates an even more difficult environment start-up success.

Many investors are cautious about funding early stage MedTech companies due to the high risks and uncertainties involved.

They may prefer more established companies with proven technologies and revenue streams.

As a result, promising MedTech innovations are facing challenges in accessing the necessary funds to progress from concept to a market ready product.

Understandably, to invest confidently and successfully in this space requires deep expertise and extensive networks to unlock innovation. And this expertise is thin on the ground – with a grand total of 0 specialist early stage MedTech funds in the UK and only a handful across the EU and US. It is the lack of specialist expertise to identify, evaluate and build strong portfolios in this space that is driving the equity gap, deepened further by the lack of specialist skills to support MedTech innovations to land and grow.

Impact on innovation

The disastrous result of these dynamics is that we have fewer innovations available in the market to improve our healthcare systems and patient outcomes.

These are recognised gaps (and critical need spaces) in their own right, and they cannot be addressed if the funding and expertise are not available.

Collaboration

To unlock this challenge and transform healthcare as we experience it today, collaboration plays the ultimate role to:

1/ Ensure the right innovations are developed and backed via collaborations across industry, innovators, investors, and the health system

2/ Strengthen connections across the ecosystem to mitigate risk and reassure investors

3/ Drive adoption and scaling of MedTech innovations to prove commercial case and impact

Tackling this challenge can directly address the critical healthcare needs on the rise.

By bolstering the MedTech investor community and strengthening the foundations for innovation success we will see transformative change for the future of healthcare delivery, health experiences, and outcomes for our people.

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