The long-term trend across the sector is for mid-single digit growth—but that hasn’t been happening recently.

“Over the past 12 to 18 months there have largely been restrictions on elective surgery, and there have been a lot of people who are scared to go to hospitals,” says Lachlan Towart, equity sector strategist at UBS. This, he adds, has had less of an effect on devices that are broadly seen as consumer products—hearing aids, cosmetic dental devices and so on—but a profound effect on the likes of pacemakers, stents and anything else invasive, where users think of themselves as patients rather than consumers.

The post-Covid recovery, however, is already underway. “The data now—we look at hospital admissions, lab test volumes, hospital financial results—is getting close to back to pre-Covid levels,” he says. “Some companies are reporting that they’re ahead of two years ago.”

The pandemic has also made people think a bit more about their health, and likely to be more welcoming of tech-driven predictive and preventive healthcare models. According to Jens Ewert, life science and healthcare industry leader for Deloitte China, “Digital health development was already ongoing for years and the pandemic has accelerated the progress, especially in fulfilling the unmet needs in medical consultation, in-patient reservation and prescription drug refill.

“More Chinese consumers, especially the upper-middle class, have become more active in involving themselves in personal health management through online self-checks or wearable devices for better disease risk analysis and early warning.”

For Seemant Jauhari, partner at HealthXCapital, a Singapore-based early-stage healthtech investment fund backed by Singapore VC Jungle Ventures and Indian healthcare giant Apollo Hospitals, those devices are at the heart of a coming revolution in healthcare.

“I believe where we stand today is at a juncture, as we transition to a hybrid of digital and brick-and-mortar healthcare, especially in Asia, where we think digital and point-of-care diagnostics will play a huge role,” he says.

“You have ridiculous ratios here like less than one doctor per thousand patients. That sums up the problem: there’s a large disproportion between the people who need healthcare and the people who provide it, so large that it can’t be bridged by building more hospitals or training more doctors. That is exactly why the application of digital and data-driven models has to be more effective in Asia. How can you make one doctor equivalent to 10 doctors?”

He adds that if blood pressure, blood sugar and ECG monitoring could be integrated into a single device, it could both constantly monitor the patient’s condition and feed back data that’s potentially clinically actionable—and it could do so, moreover, from the patient’s home, freeing up doctors to see many more patients. In other words, medtech is moving from a product model to a service model, with services like smart diagnostics and constant monitoring set to grow in importance.

Investing in the medical industry also presents its own unique challenges. Some of those revolve around time—specifically, the amount of time it takes to commercialise a medical technology, for reasons that include everything from the incredibly fragmented nature of the medical industry to the difficulties of obtaining regulatory approval. As a result, “For retail investors, we would suggest focusing on funds that have a shorter ROI period and are already making profits,” says Ewert.

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He adds that patient privacy is another potential risk factor. “It is very important and urgent for enterprises, medical establishments and regulatory authorities to establish a specifically targeted risk control plan to safeguard patients’ privacy while ensuring legal and reasonable use of patient data. They also need to find a balance between information security guarantees and open use.”

Inevitably, medtech is a sector where regulators mostly play catch-up, but in many countries they’re becoming more positive towards new healthcare models, particularly in the post-Covid era. “The trend has been towards more regulatory flexibility,” says Towart. Furthermore, “These manufacturers fly largely under the radar from a political perspective. I’ve heard lots of politicians complain about drug prices, but I’ve never heard a politician complain about the price of a hip implant.”

The biggest risk of all, he adds, is product recalls and liability for failures, particularly in the US. “It’s rare, but it definitely happens. But it’s not really something you can do much about proactively, so it’s all about diversification. Don’t try to be too clever with picking stocks. There are plenty of ways of diversify: by geography, by different sub-sectors, or between products paid for by governments and those paid for by consumers.”

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