Global MedTech: Balancing innovation and operational efficiency

By Thilo Kaltenbach and Marco Bühren

This study analyzes the performance of 127 of the world's leading listed MedTech companies between 2020 and 2023. It shows an industry whose profit margins are under pressure, but also identifies top performers that are rising to the challenge to deliver above-average revenue growth, profitability and shareholder returns. In detailing what sets these "winners" apart, the report shows what other MedTechs can learn from them as they brace for change.

The most successful MedTech companies have enabled the industry to continue to outperform stock markets even in difficult times. Winners saw an average compound annual growth rate in total shareholder returns of 16.7% between in the fours years to the end of 2023. This was one-third higher than the share-price and dividend growth of the MedTech industry as a whole, two-thirds higher than the S&P 500 Index of the largest US companies, and more than double the rate of the MSCI World Index of more than 1,500 corporations.

The MedTech industry's operating income fell from an average of 19% of revenue in 2021 to a near-term low of 15.9% in 2023, while the average cost of goods sold (COGS) increased from 48.0% in 2020 to 49.6% in 2023. Both manufacturing and non-manufacturing costs increased as the Covid-19 pandemic and rising geopolitical tensions drove up energy and raw material prices, and subsequent inflation pushed labor and financing costs higher.

MedTech companies need to improve operational efficiency to cut manufacturing costs, champion innovation excellence to get next-generation products to market more quickly, adopt next-generation go-to-market models to improve sales and marketing efficiency, and harness artificial intelligence and other technologies to provide new opportunities along the MedTech value chain. Winning companies are already leading the way in these areas.

Winners were able to streamline and strengthen their businesses, while “underperformers” with low margins and low revenue growth did not. Winners limited the increase in COGS to 48% of revenue from 44% in 2019-2022, while underperformers saw COGS rise to 61% six points higher than in the Global MedTech Study 2023. Winners on average grew revenue 16% per year, underperformers 1%; winners spent 7.3% on R&D, underperformers 5.1%.

Regionally, MedTechs based in North America continued to enjoy the highest operating margins and saw the largest revenue growth between 2020 and 2023, while those based in Asia saw margin and revenue growth slowed by the challenging Chinese market. Medtechs based in Europe, particularly Germany, continued to perform below the level of US competitors. However, business in all regions improved slightly in 2024, a sign of possible stabilization ahead.

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