Global MedTech: Dragons at the gate, who will feel the heat?

MedTech players have not needed to worry about major disruption, driven by a number of factors standing in the way of new players and new models, including:

(i) Highly fragmented and complex payers/user landscape,
(ii) Time/ability to bear losses required for successful disruption, and;
(iii) More scale leads to better R&D returns

We believe Chinese players can meaningfully disrupt previously stable global MedTech markets. We use a 6-stage framework to assess where several key markets are in this disruptive process. Our analysis suggests the medical imaging and patient monitoring markets are at most risk and are likely to grow at c.3%, not the 5% that's in consensus.

Medical imaging is the furthest along the disruptive curve as domestic medical imaging players have made considerable headway in building leadership share in China, assisted by government incentive schemes and state procurement, but also through their own competitive strengths (breadth of offering, on the ground responsiveness, etc.) developed over the years. They are also in the early stage of internationalisation.

We expect less disruption for now in the other markets identified (dental, hearing aids, orthopaedics) given how early they are in the 6-stage framework. Whilst there has been progress made on stages 1-3 of our framework, western companies still dominate in China and have a sizeable technology advantage. As such, we see little to worry about in the near to midterm given we would not expect much in the way of meaningful internationalisation in the next 5 years.

We believe Chinese players can meaningfully disrupt previously stable global MedTech markets. We use a 6-stage framework to assess where several key markets are in this disruptive process. Our analysis suggests the medical imaging and patient monitoring markets are at most risk and are likely to grow at c.3%, not the 5% that's in consensus.

China now accounts for 10-12% of the global MedTech market but is closer to 25% of growth.

There are some unique features about China that can allow domestic companies/start-ups to bear these investments and do so in a short timeframe, we hypothesise these can be broken into the following 6-stage framework:

(i) Building a domestic market
(ii) Establishing manufacturing
(iii) Establishing R&D capability
(iv) Growing domestic player penetration
(v) Domestic market dominance
(vi) Internationalization