“Only when it is dark enough can you see the stars,” Martin Luther King, Jr. said in his final speech.
The quote could apply well to the medtech industry right now. From price pressures at health providers to a strong U.S. dollar reducing profits from overseas sales, it can be tough to achieve growth, according to analysts following the industry. At the same time, the situation is pushing medical device companies to experiment with promising new products and business models that they may have been blind to in the light of their previous dazzling success.
First, here’s the bad news. Moody’s on March 3 reduced its outlook on the industry to stable from positive, predicting that aggregate organic earnings before interest, taxes, depreciation and amortization (EBITDA) will grow by about 2.5% to 3.5% over the next 12 to 18 months. The reason is “ongoing strengthening of the U.S. dollar and, to a lesser extent, slowing inpatient admission trends.” Those trends are expected to erase much of the savings of the United States’ two-year suspension of the medical device tax.