Pillar 5: Making Medtech Innovation sustainable, durable and scalable in Europe

The following is an opinion piece written by Daniel O’Mahony, partner at Seroba. The piece was written September 2024.

Continuous investment into Medtech Innovation, from concept through to clinical trials, regulatory approval, market launch and scalability can deliver patient-centric, digitally advanced, resilient and sustainable health care. Such deliverables will benefit all stakeholders in Europe including patients, doctors, hospitals and payors. Such innovation can also reduce healthcare costs. Such innovation can also grow and nourish the rich pool of medtech entrepreneurs and serial entrepreneurs in Europe, which in turn leads to new medtech companies employing highly skilled graduates across a number of inter-linked disciplines including engineering, regulatory and quality, scalable manufacturing, business development, sales and manufacturing, finance, to name a few. Such an ecosystem will prime the pump of Medtech Innovation and long term repeat new European company formation, which is sustainable, durable and scalable in Europe. Such an ecosystem can also foster inter-relationships and cross-fertilisation between pharma/biotech and medtech industry verticals leading to new medical solutions /medical technologies to treat the endemic of growing chronic diseases in Europe and elsewhere. Not all diseases can be treated by a drug or by a medical device, some diseases will benefit from the interplay between continuous, simultaneous and inter-linked innovations in medtech and pharma/biotech.

However, “priming this pump” and growing a sustainable medtech innovation ecosystem requires different types of funding: from ideation to seed stage to start-ups to clinical-stage development focused medtechs through to scalability, with each stage or “leap” funded by different types of investors along this continuous journey of innovation and development. This funding continuum requires seed funds, venture capital (VC) funds, cross-over funds, private-equity (PE) funds and/or public market funding. A major difference or gap in Europe vs USA for both European medtech and biotech is the lack of financial market breadth and depth, meaning there is a need for more cross over and IPO / post IPO specialists, as well as incentives for generalist funds to come into this sector.

In Europe today the life science venture capital (VC) industry is pivotal in supporting early stage ideation / seed stage investments into start-up and fledgling medtech companies through to follow-on Series A, Series B, Series C funding. This continuous funding typically funds medtech innovation early in the journey from concept to regulatory approval and very early commercialisation in Europe and North America. However, these “envelopes or pockets of funding” are also shrinking in Europe as many European-based life sciences VC funds and other investors are focused more and more on pharma / biotech investments.

Thus, there is both a need and a gap for a continuous funding cycle or continuum of specialist funding to support medtech innovations from concept through to regulatory approval, commercial launch and scalability; such a funding environment is at cross-roads in Europe today and is well behind peer funding in the USA. The longer we stand at these cross-roads, the bigger the chance such innovative ideas will shrink, shrivel or die, in many cases before they ever see the light of day.

Ideas on medtech innovation are not in short supply in Europe, coming from universities, hospitals, medical schools, incubators, medtech entrepreneurs and serial entrepreneurs, as well as programs like the Bio-Innovate program in Ireland. Such ideas on medtech innovation cannot and will not fledge, grow, mushroom or prosper in a vacuum of investment shortfalls, investment under supply-over demand and lack/shortage of “smart funders” who know the “DNA” of medtech innovation development.

At a pan-European level now is the time or window to create a framework to attract more “big ticket” investors  and more diverse sources of investment  into this funding ecosystem including into seed funds, Venture Capital funds, cross over funds and other funding vehicles which can provide a continuum of “smart funding” from concept through to scaling. For a successful medtech company developing disruptive medtech innovations this continuum of funding is a 5-8-10-12 year journey (i.e., it’s not for the short sighted), likely requiring “funding pockets” between €50m-€100m-€200m in investment per medtech company.

Creating such a vibrant funding environment to foster and grow medtech innovation in Europe will require “thinking outside the box” and a disruptive funding environment to support development of disruptive medtech innovations -examples include:

• creativity at both national and European level, be it on incentives to attract both private investors, pension funds, other international institutional investors and medtech strategics into investing in European medtech innovation at the VC fund level or through direct or co-investments alongside VC specialist in the VC-medtech sector
• such incentives may include thinking-outside-the-box on matters such as
  • taxation on returns (revenue) at the “corporate level” been offset vs investments into medtech VC funds,
  • R&D type tax credits to institutional investors and pension funds who invest in medtech VC funds that invest in medtechs (or via direct medtech investments)
• under-writing of investments in medtech funds /medtech , where such medtech investments fail or don’t realise a return, in high priority areas of importance to Europe such as high priority chronic diseases in Europe; – however such under-writing of investments in medtech fund means zero risk and thus no smart money needed for this; it may spread the cash too thin in too many projects; unsure it will really help the sector in the end, matching funding at national or European level through dedicated vehicles investing alongside medtech VC funds,
• increase pools of soft funding supports with minimal constraints.

At a time when there is more money available globally, and in Europe, than at any other time in history there is a growing reluctance of potential investors investing into the medtech sector or into funds that invest in this sector (“smart funders”). It is these “smart funders” that can identify and make educated or well-informed decisions on medtech investments that will prime the pump of Making Medtech Innovation sustainable, durable and scalable in Europe (or Funding Medtech Innovation that is sustainable, durable and scalable in Europe), bring medtech innovations through clinical development and attractive M&A opportunities for the big medtech strategies in Europe and North America and contribute to growing and deepening the highly skilled medtech employment base in Europe.

The other issue that needs further consideration is the current state of play on MDR which is currently hindering clinical trials in Europe.