Medtech outlook: Successful solo launches require CDMO support and more

Over the past few years, the number of deals within the medtech sector has been steadily decreasing from a peak in 2021, according to PitchBook. Despite this decline, 2024 is on track to see the highest amount of capital invested in the sector since 2021. This investment surge is primarily driven by mergers and acquisitions, as noted by PitchBook. We highlighted in a previous industry outlook that while the number of deals has decreased, the value of each deal has increased significantly, and this trend has continued.

Economic trends, particularly higher interest rates, have influenced the medtech sector. Companies are becoming more cautious and looking to minimize risk due to the increased cost of borrowing. However, as of late November, interest rates are expected to continue to drop, which could lead to a resurgence in investment. Nevertheless, it is unlikely that we will see the same level of activity as during the COVID-19 pandemic, when deals and investments were exceptionally high.

Additionally, companies in the medtech sector that primarily serve biopharma clients, such as those providing life sciences equipment and technology, will face a prolonged recovery period. This is due to capital constraints within the biopharma sector, which will slow their ability to invest and expand. As a result, while the overall outlook for the medtech sector is positive, certain segments may experience slower growth and recovery.

Amid the current climate of decreased deals, some medtech companies are pivoting to a solo launch strategy, independently bringing their first medical devices to market while bypassing traditional licensing agreements and M&A. For these companies, however, navigating the approval process for their first device has become a challenge. They often lack prior experience with regulatory pathways, whether through premarket approval (PMA) or the 510(k) process. If the downtrend of new devices being submitted and approved by the U.S. Food and Drug Administration via PMA and 510(k) pathways continues, 2024 is set to have the lowest number of approved devices by first-time applicants in the past decade, according to Evaluate Medtech.

The 510(k) regulatory pathway for companies seeking FDA approval for their first device now takes, on average, approximately 50% longer than for companies that already have an approved device, according to Evaluate Medtech and data gathered from 2020 to 2024. This extended timeline can be attributed to the rigorous scrutiny and detailed evaluations conducted by the FDA to ensure the safety and efficacy of new medical devices.

As a result, companies looking to achieve first-time approval must invest more resources into understanding and navigating the regulatory landscape. Despite these challenges, the success of first-time applicants gaining approval highlights the resilience and innovation within the medtech sector and underscores its commitment to bringing new and effective medical devices to market, ultimately benefiting patients and health care providers alike.

For first-time launchers, developing a pricing and reimbursement strategy is crucial. If looking for Centers for Medicare & Medicaid Services reimbursement, a company must ensure it has the appropriate coding and pricing and the right data to substantiate the use of the device. When companies face missteps in this area, they may launch a product without an appropriate pricing and reimbursement strategy in place, and can struggle to achieve product adoption or obtain appropriate reimbursement, which could lead to a failed launch. 

Outsourcing provides support

Medtech companies that may be starting the regulatory approval process without prior experience will likely look to outside vendors to assist. For instance, the use of high-quality contract development and manufacturing organizations (CDMOs) that support the scale-up and commercialization of a new medical device could be key to ensure a high-quality, effective and reliable device. CDMOs offer specialized knowledge and resources, along with manufacturing capacity and capability, which can help companies navigate the complexities of bringing a new device to market.

According to Alira Health, despite challenges in the medtech sector in 2023, the U.S. medtech CDMO market grew by 12.9% that year. By engaging a CDMO early on, medtech companies can better access highly skilled technical experts, such as scientists and specialists who have a deep knowledge of product development, specialized manufacturing processes and the regulatory compliance needed for a smoother and faster time to market. Moreover, CDMOs bring the financial resources to invest in cutting-edge technologies that enable faster manufacturing processes while ensuring adherence to current good manufacturing practice standards.

However, even when utilizing a CDMO, first-time launchers should be aware of the risks associated with insufficient oversight of critical development and manufacturing processes handled by a CDMO. Medtech companies should look to invest in robust audit processes and comprehensive supplier qualification and monitoring programs within their quality systems.

Liz Bouchard, a quality systems process and strategy professional on RSM US LLP’s life sciences team, says, “This helps ensure product efficacy, quality and safety are consistently upheld to the agreed-upon standards so the medtech company retains proper controls and accountability around the outsourced activities done by the CDMO.”

In addition, medtech companies contemplating a first-time launch may consider engaging a specialist to assist in holistic planning services to help ensure that their administrative, regulatory and financial goals are being addressed and executed optimally, streamlining processes and reducing time to market.

Moreover, partnering with experienced CDMOs and utilizing comprehensive launch planning services can mitigate risks associated with regulatory approval and commercialization. These partnerships provide access to industry best practices, regulatory insights and advanced manufacturing capabilities, all of which are interrelated. Specifically, when looking at launch planning services, a successful planning partner can assist with the creation of a commercialization roadmap, laying out the steps needed for a successful launch.

Partnering for launch services should assist first-time launchers with developing an appropriate pricing strategy as well. As a result, medtech companies can focus on innovation and product development while relying on their partners to handle the complexities of regulatory compliance and market entry.