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Medtech – A US market on the move

With a market size of around US$150 billion and more than 40 percent of global market share, the United States is the world's leading medtech market.

And it's a market that continues to grow at an unprecedented rate: analysts predict global revenues will increase by more than 4 per cent per annum to 2019, to almost half a trillion dollars.

So what factors are shaping the US medtech market and what are the commercial implications for Australian companies? The medtech stream of the 2016 Australia United States Business Week program travelled to three key US markets – Boston, San Francisco and Houston – to find out.

Medtech refers to diagnostic or therapeutic application of science and technology to improve the management of health conditions, including increasing life spans and improving quality of life.

The United States is already a strong performer in medtech sectors such as In Vitro Diagnostics, Neurology, Cardiology, Orthopaedics, and Diagnostic Imaging, all of which attract investors looking to capitalise on innovation. Newly emerging medtech sectors are also catching the eye of savvy investors. These include opportunities created through the convergence of medtech with the digital world, such as mobile health, wearable biosensors, health data analytics, robotics, 3D printing, tissue regeneration, and artificial intelligence. Another emerging area is companion diagnostics, which include medical devices that provide information for the safe and effective use of a corresponding drug or biological product.

Some of the market forces shaping the US sector include ongoing consolidation in the hospital and care sectors, and an increased focus on efficiencies, value for money and outcomes-based results. Merger and acquisition activity is at record highs in the sector, but early stage and venture investing has been declining. In 2015, medtech comprised just four per cent – or USD2.4 billion – of the total venture capital invested. However, analysts also note that big corporates are looking earlier down the biopharma/medtech pipeline at companies who are yet to secure regulatory approval.

On the policy front, the United States has suspended the 2.3 per cent medical device excise tax for two years. This move has been seen as a major win for the medtech sector and is expected to assist in promoting new R&D and partnership investment.

So what opportunities does the US medtech sector present for Australian companies? This was one of the key questions framing the medtech stream of the 2016 Australia United States Business Week program, which targeted three of the key US medtech markets: Boston, Houston, and San Francisco.

In Houston, Australian delegates took part in a medical research symposium at the Texas Medical Center Innovation Institute (TMCx), looking at the challenges and opportunities in the medtech industry from conception to commercialisation.

Houston is considered the birthplace of nanotechnology and has developed into a life sciences hub. Much of this is driven by the Texas Medical Center, which is the world's largest medical centre. The Center hosts over 8 million patient visits and performs more than 180,000 surgeries each year. Its 21 hospitals offer more than 9,200 total patient beds.

The aim of TMCx is to push the Texas Medical Center to be more than a global leader in research. It seeks to lead the development of technology and ultimately the successful commercialisation of life sciences products. TMCx is designed to use the advantages of a major medical centre to facilitate the development of medical companies, with a focus on digital health and medical device companies.

Since the 2016 Australia United States Business Week program in February, TMC leadership has visited Australia to explore potential research, innovation and commercialisation partnerships. Mr William McKeon, driver of TMCx, sees broad opportunities to create a 'bio-bridge' between TMC and Australia to link TMC and various Australian entities in the health innovation and med-tech spaces.

In San Francisco, the medtech delegation attended a networking dinner, a medtech venture capital investment session, and a tour and discussion with a major global medtech company in Silicon Valley around global value chains and partnership strategies.

In Boston, delegates engaged with research organisations, investors and major multinational companies on best practice approaches for medical technology financing and commercialisation, as well as exploring global medtech value chain opportunities.

Key speakers explained how local factors had contributed to establishing Boston and the state of Massachusetts as one of the great medtech and life science R&D hubs in the world. One such factor was a local talent pool driven by first class educational and research institutions such as Harvard and MIT, which supported technology commercialisation and encouraged their staff to patent, undertake sabbaticals and take new positions in spinout companies. Major medtech corporates and supply chain partners – such as Thermo Fisher, Biogen Idec, Boston Scientific and General Electric – had also chosen to headquarter or build large facilities in the area, creating a medtech cluster. Complementing this was the availability of capital, from early stage to venture to expansion, and proximity of that capital to companies, including the second largest venture capital industry in the US behind Silicon Valley. Supportive government initiatives – including medical infrastructure and public transport for ease of access, incubator facilities and National Institute for Health funding – rounded out the picture.

In recognition of the importance of Boston as an innovation hub, Austrade recently opened a satellite office in Boston inside the WeWork South Station facility to maximise engagement with the technology, medtech, and life sciences community. MassChallenge, one of the largest accelerators in the world based in Boston, also recently announced a partnership with the Australian Government and Microsoft to bring their Bridge program to Australia.

Feedback from participants in the medtech stream of the 2016 Australia United States Business Week program has been positive. According to Dr Bronwyn Evans, Chair of MTPConnect, the Australian Growth Centre for Medical Technologies and Pharmaceuticals, the program highlighted a number of key opportunities for Australia, including the venture capital funding environment in the USA and the importance of new Australian initiatives such as the Biomedical Translation Fund.

Mr George Sidis of IDE Group noted that being part of the medtech stream was a tremendous opportunity for the Group at a time they are investing more resources in growing a presence there. "It was great to see different markets within the US and how they operate, some of which have striking similarities to Australia, and it was great to be given the opportunity to network with likeminded companies, and leading government and industry figures on the trip. I found the introduction to Australian expats in markets we are trying enter particularly useful," he said.

The US market continues to be one to watch for Australian medtech companies. In October this year an Australian delegation will visit AdvaMed 2016 – the largest medtech industry event in the USA. The Victorian, South Australian, NSW State Governments, together with MTP Connect are supporting companies to be part of the Australian pavilion at AdvaMed in Minneapolis from October 17 – 19.

CEO of BioMelbourne Dr Krystal Evans has led a delegation to AdvaMed for the last three years. "There is growing interest from the US in investing in Australian innovation and accessing our world leading capabilities in medical technology. Participation in the AdvaMed conference and associated trade mission activities over the last few years has seen Victorian companies secure over $42 million in new trade and investment opportunities. This high calibre executive conference gives Australian companies access to US industry leaders to create new licensing deals, collaborations, contracts and partnerships, providing opportunities to explore Australia's competitive advantage in the global value chain for medical technologies."

Australia has a growing reputation for world-class excellence in medical technology. Australia excels in areas such as medical bionics, including global success with the bionic ear, and now with the development of the bionic eye and the bionic spine. Other areas of competitive advantage include strengths in neuroscience, point-of-care diagnostics, 3D printing for surgical implants and cardiovascular devices. There is growing international interest in Australia's world leading R&D services, with increased numbers of US clients accessing Australia's highly competitive clinical trial, engineering and design capabilities for medical technologies.

Last Updated: 26 August 2016
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