Tagged: R&D

  • FDA scrutiny, financial pressures, and M&A inefficiencies push MedTech leaders to prioritise short-term issues over long-term strategies
  • Balancing short-term compliance with long-term strategic planning is crucial for survival
  • Innovation hubs, agile methodologies, customer engagement, and cross-functional teams are key to future growth and competitive advantage
A Playbook for MedTech Success
In December 2023, FDA compliance leaders convened at a conference hosted by the US Food and Drug Law Institute (FDLI) in Washington, DC, to discuss the year’s trends and plans for 2024. Keisha Thomas, the FDA’s Associate Director for Compliance and Quality, highlighted key issues from 2023, reporting that 89 inspections had identified violations requiring Corrective and Preventive Actions (CAPAs). Additionally, there were 790 device recalls, and ~70% of 28 device warning letters were associated with the use of unapproved devices. Thomas emphasised that in 2024, the FDA would target companies with a record of repeated infringements, “We’re developing strategies for addressing companies that are in and out of compliance within a short period of time,” she said. By June 5, 2024, the FDA had issued >45 recalls for medical devices.

Regulatory breaches arise from factors such as non-compliance, quality control issues, incomplete documentation, insufficient testing, inadequate risk management, poor communication and training, delayed reporting, lack of post-market surveillance, design failures, supply chain issues, and failure to implement corrective actions. Effective management of these issues requires comprehensive diligence.

However, these process-oriented challenges often do not receive the attention they require for optimal integration following acquisitions. MedTech companies have historically relied on mergers and acquisitions (M&A) as their primary growth strategy. While this approach has typically resulted in financial gains and increased company size, it has not always improved operational efficiency or quality. The financial complexities of M&A transactions often consume company resources, leading to insufficient attention to critical non-financial operational processes, which can increase the risk of non-compliance with FDA regulations.

To tackle these challenges, companies should prioritise digitising their production processes to boost operational efficiency and compliance, ensuring that growth does not compromise quality or safety. Heightened FDA scrutiny can divert resources from integration and process improvements to remediation efforts, which can be detrimental in a rapidly evolving healthcare landscape marked by advancing technologies and increasing investor scepticism.

Over the next decade, traditional companies must undergo transformations to generate new value for patients and shareholders. This requires rebuilding robust supply chains and leveraging the benefits of digitisation and Industry 4.0. Companies should be able to address FDA warning letters, while redesigning manufacturing and distribution networks, improving flexibility, driving innovation, and expanding market access. To support these initiatives, a strategic playbook is essential for driving growth, enhancing value, and boosting competitive advantage. Leaders must balance short-term compliance with forward-looking strategies to ensure long-term success.

In this Commentary

This Commentary provides a guide for MedTech leaders navigating the rapidly evolving healthcare ecosystem. It highlights key challenges such as heightened FDA scrutiny, financial pressures, and operational inefficiencies often resulting from sub-optimal M&A integration. The discussion underscores the importance of balancing short-term compliance with long-term strategic planning to sustain growth and maintain competitive advantage. Key strategies include continuous investment in research and development (R&D), integrating digital health solutions, and ensuring regulatory compliance. The Commentary also emphasises the need for enhancing patient-centric solutions, forming strategic partnerships, and maintaining robust talent acquisition and retention practices. Leaders are encouraged to adopt agile methodologies, establish innovation hubs, and leverage cross-functional teams to drive progress and improve market responsiveness. By focusing on these strategic areas, MedTech companies can foster creativity, enhance customer engagement, and ensure sustained growth in the dynamic healthcare landscape.
Key Drivers of Growth, Value, and Competitive Advantage
Technological Innovation and Integration
Technologically stagnant companies are unstable and prone to failure. Over time, they lose their ability to innovate and address challenges, ultimately leading to their downfall. To stay competitive, MedTech leaders must navigate rapid technological changes, particularly in AI, machine learning (ML), and personalised care. These advancements are transforming diagnostics, treatment, and patient journeys, making continuous innovation essential for increasing growth, enhancing value, and bolstering competitiveness.

Software has become a critical growth driver for companies. This shift requires adopting new approaches to product development and operating models like those of tech companies. Key strategies include: (i) building a resilient solutions stack with engagement, intelligence, and infrastructure layers, (ii) adopting best practices in software development, including reimagining product management, and (iii) strategically sourcing intellectual property (IP) and talent.

Integrating innovative technologies into traditional product lines is essential yet challenging, as it requires new skill sets, robust IT infrastructure, and strategic partnerships with tech firms. This approach can enhance patient engagement, improve outcomes, and streamline healthcare delivery.
Success in technology innovation and integration hinges on merging traditional medical expertise with cutting-edge digital innovations. Healthcare professionals must compliment their medical knowledge with an understanding of technological advancements. Leveraging digital tools like electronic health records, telehealth platforms, and AI enhances patient care. Such integration creates a blend of human expertise and digital innovation, leading to improved patient outcomes, efficient processes, and a more responsive healthcare system.
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Regulatory and Compliance Pressures
Navigating the regulatory landscapes, such as obtaining FDA approval in the US and CE marking in the EU, is both time-consuming and costly. These processes require meticulous documentation, rigorous testing, and continuous compliance, often delaying product launches and increasing expenses. Moreover, ensuring compliance with data privacy laws, such as GDPR in Europe and HIPAA in the US, while leveraging patient data for innovation presents another layer of complexity. Balancing the need for data-driven innovation with stringent privacy and security requirements demands robust data governance frameworks and advanced cybersecurity measures. Enterprises must invest in technologies and practices that protect patient information while still allowing for meaningful data analysis and use. Successfully managing these regulatory and compliance hurdles is critical for maintaining trust, achieving market access, and fostering innovation.

Market Dynamics and Competition
Large traditional MedTechs face increasing competition from both peers and start-ups. Every year, start-ups introduce new solutions to the market, often leveraging disruptive technologies and streamlined processes that outpace conventional approaches. To remain competitive, established companies must enhance their agility and speed to market while continuously innovating their product offerings.
Expanding into global markets, particularly emerging ones introduces additional obstacles. These markets come with distinct regulatory requirements, unique social and commercial norms, and varied healthcare infrastructures, leading to strategic and operational challenges. Successfully entering and thriving in these regions necessitates an understanding of local regulations, effective partnerships with regional entities, and tailored strategies that address the unique healthcare needs and economic conditions of each market. Navigating these dynamics and competitive pressures, enables MedTechs to unlock new growth opportunities and strengthen their global presence.

Cost Management and Efficiency
There are ongoing challenges associated with managing rising expenses. These include expenditures on R&D to stay ahead of technological advancements, costs related to recruiting, developing, and retaining top talent, regulatory compliance to meet stringent global standards, and manufacturing expenses. Balancing these financial demands while maintaining profitability requires strategic planning and resource allocation.
Enhancing operational efficiency is important to reduce costs and improve margins without compromising on quality or innovation. This involves streamlining processes, adopting advanced manufacturing techniques, and leveraging automation and digital technologies to optimise production. Additionally, implementing lean management practices can help eliminate waste, reduce lead times, and improve overall productivity. Emphasising cost management and operational efficiency allows companies to maintain their competitive edge, ensuring the efficient and sustainable delivery of high-quality, innovative products to the market.

Customer Expectations and Experience
In the evolving healthcare landscape meeting rising customer expectations has become an imperative. This has partly been driven by the shift towards more patient-centric solutions, which necessitates an understanding of patient needs and preferences, enabling companies to deliver personalised solutions and services that enhance outcomes and satisfaction. Embracing this approach requires robust data analytics and feedback mechanisms to ensure that products and services are aligned with customer expectations.
Equally important is the strengthening of relationships with providers. Effective collaboration with healthcare professionals is essential for the successful adoption and utilisation of new technologies and products. Companies should focus on creating strong partnerships, offering comprehensive training, support, and integrating their technologies into clinical workflows. Cultivating these relationships ensures that MedTech' innovations are effectively implemented, ultimately improving patient care and operational efficiencies.

Talent Acquisition and Retention
MedTechs face obstacles in attracting and retaining a skilled workforce, particularly in specialised areas such as AI, ML, and data analytics. The rapid advancements in these fields necessitate the recruitment of highly qualified professionals who can drive innovation and maintain competitive advantage. A 2023 McKinsey report suggested that demand for individuals with data science and natural-language processing skills is outpacing supply. To stand a chance of recruiting and retaining data scientist successfully, it is crucial for corporations to offer compelling incentives, continuous learning opportunities, and career advancement pathways.
Equally important is cultivating a corporate culture that supports innovation, collaboration, and agility. In an industry historically characterised by slow-moving processes, fostering a dynamic and forward-thinking environment is essential. This involves encouraging cross-functional teamwork, embracing new ideas, and being responsive to market changes. Developing a culture that values creativity and flexibility enhances companies'  ability to adapt to emerging trends, attracts top talent, and retains key employees motivated to drive long-term success.

Partnerships and Collaborations
Forming strategic partnerships is crucial for driving innovation and accessing new markets. Corporations must collaborate with technology companies, start-ups, and research institutions to leverage cutting-edge advancements and diversify their product offerings. Such partnerships can provide access to disruptive technologies, foster co-development opportunities, and facilitate entry into emerging markets, thereby enhancing the company's growth potential and competitive edge.
Additionally, strategically managing M&A is important for integrating new technologies and capabilities. This requires a balance to ensure that the integration of new assets does not disrupt existing operations. Companies must develop robust integration strategies that preserve the value of acquired entities while blending them into the corporate structure. This approach enhances MedTechs' technological capabilities and market reach, ultimately strengthening their industry position and driving sustained innovation and growth.

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Sustainability and Social Responsibility
Sustainability and social responsibility are increasingly important challenges for traditional corporations. Adopting sustainable practices in manufacturing and operations is essential to meet both regulatory requirements and stakeholder expectations for environmental responsibility. This involves reducing carbon footprints, minimising waste, and ensuring the responsible use of resources throughout the product lifecycle. Companies that prioritise sustainability can enhance their brand reputation and appeal to a growing segment of environmentally conscious consumers and employees.
Ethical considerations also play a role, particularly in areas such as AI in healthcare, data usage, and informed consent. As AI technologies become integrated into medical devices and healthcare systems, enterprises must ensure that these tools are developed and deployed ethically. This involves safeguarding patient data, ensuring transparency in AI decision-making processes, and obtaining informed consent from patients. Addressing these challenges proactively can build trust with stakeholders and ensure compliance with evolving legal and regulatory standards, ultimately fostering a more responsible and sustainable industry.

Funding and Investment
Securing sufficient funding for R&D can be an issue for traditional MedTechs. However, to stay ahead of the innovation curve, continuous investment in technologies and product development is essential. Established companies often face competition from start-ups that have access to venture capital funding, which enables them to innovate rapidly and take risks that larger, more conventional corporations might avoid due to their scale and existing commitments. To remain competitive, established firms must explore diverse funding sources, including strategic partnerships and government grants, while fostering a culture that encourages calculated risk-taking and agile innovation. This approach can help them maintain a leading position in the ever-evolving MedTech landscape.
Conquering Challenges

We suggest four initiatives to help MedTechs navigate these challenges, foster innovation, improve market responsiveness, and deliver value to customers, thereby driving growth, enhancing value, and increasing competitive advantage.

Innovation Hubs
It is recommended to establish innovation hubs or incubators within the company. These dedicated spaces are ideal for cultivating new ideas and technologies. Creating an environment that encourages creativity and experimentation enables enterprises to accelerate the development of novel solutions and services. Such hubs can also facilitate partnerships with start-ups, academic institutions, and technology firms, creating a collaborative ecosystem that drives innovation.

Agile methodologies
Implementing adaptive methodologies is crucial for speeding up development cycles and enhancing responsiveness to market changes. These practices emphasise iterative progress, flexibility, and close collaboration among team members. Utilising such frameworks allows MedTechs to reduce time-to-market for new products, quickly adapt to regulatory changes, and respond effectively to customer feedback. This adaptability is essential in an industry where technological advancements and market demands evolve rapidly.

Customer Engagement
Enhancing customer engagement through digital platforms, feedback loops, and continuous support is another key strategy. Utilising digital tools enables companies to gather real-time feedback from patients and healthcare providers, ensuring that products and services meet their needs. Creating robust support systems and engaging with customers through various digital channels can foster loyalty and trust. Continuous interaction with end-users helps in refining products and delivering superior customer experiences.

Cross-Functional Teams
Leveraging cross-functional teams is instrumental in driving integrated solutions that combine hardware, software, and services. These teams, composed of members from diverse departments such as R&D, marketing, sales, and customer service, can collaboratively address complex challenges and create comprehensive solutions. Encouraging interdisciplinary collaboration and eliminating silos enables companies to develop more holistic and innovative products and services that meet the needs of the healthcare industry.

The rapid evolution of medical technology markets demands that company leaders balance short- and long-term goals. Increased FDA scrutiny and financial pressures often shift leaders’ focus to immediate concerns, potentially neglecting long-term strategies. Traditional MedTech companies face numerous challenges that require strategic and adaptive approaches to maintain and improve their market position. Cultivating innovation, adaptability, customer engagement, and cross-functional collaboration enables enterprises to thrive in today’s complex healthcare landscape. Prioritising continuous R&D investment, digitisation, and regulatory compliance is essential for staying competitive. Enhancing patient-centric solutions, forming partnerships with start-ups, and attracting top talent are also crucial for driving innovation and market expansion. Embracing innovation hubs, utilising adaptive methodologies, and leveraging cross-functional teams can ensure sustained growth and maintain a competitive edge. Will traditional MedTech companies follow this suggested playbook to create lasting value for patients, shareholders, and the broader healthcare ecosystem or will they stick to their old tricks and hope for the best?
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  • MedTechs traditionally prioritise M&A over in-house R&D yielding size without always improving quality
  • Amidst healthcare's rapid evolution, companies must explore new avenues for growth and staying competitive
  • Embracing a Third Way, MedTechs can invest in start-ups to access disruptive technologies, mitigate risks, foster growth, and competitive advantage
A Third Way Growth Strategy for MedTechs
MedTech industry leaders must welcome fresh ideas to maintain their competitive edge and ensure ongoing growth. However, the conventional avenues of development, such as merger and acquisitions (M&A) and in-house research and development (R&D), often encounter obstacles that diminish their effectiveness. As the industry advances, companies face the dual challenge of adopting new technologies while breaking down entrenched organisational barriers. In an era marked by transformative breakthroughs and turbulent market forces, adaptability and innovation are indispensable drivers of success.
The line separating established enterprises from agile newcomers has blurred, paving the way for potential collaboration and strategic investment. To excel in this environment, traditional MedTechs should consider recalibrating their conventional growth strategies. Rather than solely relying on M&A or low-risk tweaks to in-house R&D, they should explore a Third Way: investing in and collaborating with a range of innovative start-ups. Giant MedTech have been doing this for decades and reaping the benefits of nascent enterprises, fuelled by high-energy talent, leveraging novel technologies, and offering a fresh approach to growth and value creation.
Collaborating with early-stage entities empowers traditional firms to foster a culture of innovation and adaptability, thereby improving patient outcomes and strengthening healthcare systems to thrive in an era of unprecedented change. Effectively managing inventiveness becomes imperative for traditional MedTech companies to successfully navigate the evolving healthcare ecosystem.

In this Commentary

This Commentary emphasises the importance for MedTechs to define a clear strategic path in response to the challenges posed by rapid technological advancements, geopolitical shifts, and advancing market dynamics. We propose a Third Way that moves beyond conventional strategies of M&A and internal R&D. We advocate for investment in a varied portfolio of innovative early-stage enterprises focused on developing disruptive healthcare solutions and services. This approach aims to avoid the drawbacks associated with conventional growth strategies and set up MedTechs for long-term growth and improved competitiveness.
Challenges of M&A

For more than four decades, the MedTech industry has predominantly relied on M&A as its primary growth strategy, which, over time led to the financialisaton of the industry. Larger conglomerates emerged, but their size does not always translate into enhanced patient outcomes or improved operational efficiency. This pattern emphasises a tendency where short-term financial objectives frequently overshadow longer-term strategies focused on quality systems, organisational structure, and talent within the acquired companies.
In many instances, early-stage enterprises have deficiencies in their operational and human resource systems. These weaknesses are frequently overlooked or insufficiently addressed during the integration phase. While the repercussions of such oversight might not be readily apparent, they tend to surface over time, potentially hindering growth.
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The Financialization Dilemma of MedTechs

The fallout from prioritising financial integration strategies can jeopardise the long-term viability of the merged entity and hamper its ability to innovate and adapt to shifting market dynamics. Successfully merging disparate corporate cultures, technological platforms, and operational processes requires meticulous planning and execution across all facets of the integration process. Neglecting to allocate adequate time and resources to address these non-financial aspects can lead to disruptions in workflow, employee discontent, and diminished performance.
Moving forward, corporations might consider adopting a more balanced approach to growth, one that not only factors in financial gains but also prioritises the assimilation of quality systems, organisational coherence, and human capital to ensure sustained success. Strategic complacency seems to be present in many large entities, and associated with an excessive dependence on conventional M&A for growth can dampen internal innovation.
Challenges of In-House R&D

Traditional MedTechs encounter challenges when considering disruptive in-house R&D endeavours. The inherent risks, coupled with resource constraints, often dissuade many traditional companies from pursuing innovative avenues of development. Also, complex regulatory environments present hurdles that require expertise, investment, and stringent compliance measures. The infrastructural needs for integrating new technologies exacerbate the situation, necessitating updates to current manufacturing facilities, supply chains, and distribution networks. These conditions emphasise the demanding nature of pursuing innovative R&D in-house. 

The demands of sales and marketing add additional complexity to internal development initiatives. New offerings require educating healthcare providers and consumers regarding their benefits, alongside developing specialised sales teams and tailored marketing strategies aligned with the product's unique demands. Incentivising sales teams to prioritise new offerings over established ones can be testing, which reinforces the hesitation of traditional MedTechs to pursue disruptive R&D projects.

A culture of risk aversion often prevails within traditional firms, leading to a reluctance to depart from established business models and technologies. This is reinforced by corporate structures that highlight stability and predictability over innovation and agility. Executives may hesitate to invest in ground-breaking R&D projects, opting instead for incremental improvements to existing devices. The allure of legacy products, despite their age and slow growth rates, provides a sense of security that dissuades corporations from exploring new technologies.
A Third Way

A Third Way for achieving growth and competitiveness, involves investing in innovative early-stage enterprises. Start-up culture thrives on creativity, fuelled by agility, entrepreneurial spirit, and a focus on disruptive solutions. Unlike traditional MedTechs, new ventures are free from the constraints of legacy systems, which enables them to take bold risks and explore new ideas. The collaborative culture of emerging businesses frequently attracts top talent from diverse disciplines, promoting interdisciplinary cooperation and fresh perspectives. This convergence of talent, flexibility, and risk-taking propels start-ups to the forefront of progress, extending the boundaries of what is achievable and contributing to transformative change in healthcare delivery and patient outcomes.
Engagement with entrepreneurial businesses warrants larger companies access to cutting-edge technologies while mitigating risk across a portfolio of ventures. Investment in early-stage entities opens avenues for collaboration, partnership, and potential acquisitions, enabling traditional firms to capitalise on emerging trends to maintain and enhance their competitiveness. Overall, embracing a broad-based investment strategy in start-ups represents a prudent approach for traditional MedTechs aiming to reconcile progress with risk.
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Supporting a variety of new ventures that are developing novel products through off-balance sheet investments presents a strategic advantage for traditional corporations. This approach allows them to access advancements without immediately bearing the financial burden of traditional acquisitions, thereby preserving their financial flexibility, and safeguarding their core business. 
By providing tax benefits and mitigating the impact on financial ratios, these commitments contribute to the overall financial wellbeing of the company. Additionally, they facilitate low-risk incremental acquisitions. As start-ups mature and demonstrate success, traditional enterprises can acquire them, leveraging their initial investment and minimising the risk associated with unproven technologies. This model fosters an ecosystem where new entrepreneurial entities thrive with support from established players.
Investing in emerging businesses for MedTechs extends beyond financial contributions and can include injections of expertise and knowledge. Established firms possess the capability to offer invaluable guidance and mentorship, drawing on their experience in navigating complex regulations, executing successful clinical trials, and effectively scaling manufacturing operations. By sharing their expertise and knowhow, mature companies amplify the impact of their financial stakes and strengthen their ability and reputation to drive innovation. 

The Potential of Venture Arms for MedTechs

The creation of venture arms by leading MedTech companies has facilitated creativity and driven commercial success. Johnson & Johnson (J&J) and Medtronic, for example, have embraced this trend with positive outcomes. J&J's venture initiative, JLabs, was initiated in 2015 in San Francisco to nurture ~50 start-ups across a spectrum of healthcare sectors, including medical devices and digital health. Since then, it has burgeoned into a dynamic ecosystem with key incubation hubs worldwide, from New York to China.
While J&J typically refrains from immediate investments, its strategic commitments to enterprises like Mauna Kea Technologies, Protekt Therapeutics, Cara Care, Cala Health, and Sight Diagnostics demonstrate the company's interest in nurturing entrepreneurial solutions aligned with its strategic objectives. Similarly, Medtronic's venture arm has effectively made strategic investments in a diverse array of early-stage businesses, with Axonics as a notable example. Axonics' recent (January 2023) FDA approval for its fourth-generation rechargeable sacral neuromodulation system serves as a testament to the success that can arise from such collaborative endeavours.
Traditional MedTech companies can take valuable lessons from industry giants such as J&J and Medtronic, especially in establishing their own venture funds to invest in a range of start-ups. This strategic manoeuvre not only provides these companies access to cutting-edge technologies and disruptive innovations that might outstrip their internal development capacities but also allows them to diversify their product portfolio and helps mitigate risks associated with reliance on a narrow range of offerings.
Entrepreneurial ventures often boast agility, enabling them to swiftly bring products to market, surmount bureaucratic hurdles that larger corporations may face, cultivate a culture centred on innovation within their organisations, and inspire employees to explore fresh ideas and collaborate with external partners. 
However, this can only be achieved if the MedTech market offers realistic opportunities.
The MedTech Start-up Market

We have argued that the MedTech start-up market holds potential for traditional companies seeking to revitalise their portfolios to maintain and increase their competitiveness. However, what are the realities of this market? Recent studies shed light on its trends and opportunities, and from these, we can judge whether such investments strategies are a viable option for mature MedTechs.

A 2017 study by the Deloitte Center for Health Solutions and AdvaMed Accel suggested that venture capital investments in early-stage MedTechs were slowing because alongside lacklustre returns, investors showed reluctance towards unproven technologies, and were deterred by regulatory and reimbursement obstacles. However, findings of a similar study repeated in 2021 paint a more promising picture. Since 2017 and the onset of the Covid-19 pandemic in 2020, venture financing in early stage MedTechs surged by ~67%, suggesting a renewed investor confidence. Notably, the bulk of investments were towards late-stage diagnostic and digital companies, highlighting a shift in investor priorities towards more mature ventures. Furthermore, alternative financing avenues such as public markets and family offices have emerged as viable options, opening new pathways for entrepreneurial endeavours. Notwithstanding, amidst this surge, seed, and Series A funding continued to decline, which poses difficulties for fledgling MedTech entities.

For traditional MedTech companies contending with aging legacy products in slow-moving markets, bridging the funding gap presents an opportunity to enhance their growth prospects and strengthen their competitive position. As we have asserted, beyond financial backing, start-ups often seek guidance on regulatory navigation, clinical studies, intellectual property, and reimbursement procedures. Leveraging their wealth of experience and established networks, large firms are ideally situated to provide such valuable insights and support to emerging ventures. 


By strategically committing to a diverse range of start-ups, traditional firms bolster their capacity to navigate the complexities of the technology ecosystem. This proactive stance not only positions enterprises to shape the future of healthcare but also augments their prospects for sustained growth and competitiveness in an industry experiencing rapid evolution.
Collaborating with emerging businesses at the forefront of technological development empowers large corporations to respond adeptly to market dynamics and drive progress. Such strategic engagement reinforces their relevance in the market, fosters a culture of cooperation and improvement across the healthcare continuum, strengthens traditional enterprises' competitive edge and ensures their long-term viability.
The entrepreneurial spirit inherent in start-ups can rejuvenate the development pipelines of traditional MedTechs, enhancing their decision-making and cultivating an environment of creativity conducive to growth. Establishing a fund to invest in start-ups helps to reduce risk and maximise returns, thus protecting corporations against potential disruptions. Adaptation is crucial for survival, and the approach outlined in this Commentary provides traditional companies reliant on legacy offerings with an opportunity to adapt and thrive, reaffirming their relevance in an era characterised by constant change.
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  • Many large diversified MedTechs are experiencing stagnate growth and aging products in slow growing markets
  • Initially, MedTech expansion leveraged disruptive technologies and underserved markets
  • As MedTechs’ evolved they shifted from innovation-led to financed-focused management taking advantage of low interest rates and cheap money
  • M&A substituted for innovation as a growth strategy
  • Today, MedTechs grapple with volatile politico-economic environments, stringent regulations, ethics, and increasing patient demands
  • The solution lies in visionary leaders driving R&D-focused growth, and more strategic M&A
  • This requires leaders able to blend finance, innovation and patient-centricity
Redefining Leadership in the Evolving Landscape of MedTech
Balancing Innovation, Profitability, and Patient Care
Over the past four decades the medical technology (MedTech) sector has experienced substantial transformation. Its initial rapid growth was driven by sophisticated devices, unmet clinical needs, entry barriers, and available funding. Later, expansion was primarily fueled by mergers and acquisitions (M&A), the integration of technology, market consolidation and financial undertakings. Decades of low interest rates, cheap money, and, the pursuit of top-line revenue growth, rather than profitability, led to an overemphasis on M&A, which enlarged the industry without equivalent enhancements in R&D. Over time, many large diversified MedTechs faced challenges associated with legacy products in slow-growth markets, and an overreliance on M&A. While the industry maintains ~6% compound annual growth rate (CAGR), much of this progress comes from smaller players. The industry’s maturity brings new challenges distinct from those of its early days. M&A, once effective for diversification, now struggles to sustain growth for larger companies. The industry’s financialization has shifted leaders’ focus from vision to short-term gains, creating a void in leadership. Amid current headwinds - political uncertainties, commercial pressures, stringent regulations, ethics, and patient empowerment - successful navigation requires visionary leaders committed to patient care over short-term gains. Emerging leaders must combine financial expertise with innovation. The next decade calls for a break from an overreliance on M&A-centred growth, embracing research-based, value-driven solutions and services, which enhance patient outcomes and reduce healthcare costs. This transformation demands leaders skilled in business strategy, R&D, and patient-centered approaches.
In this Commentary

This Commentary is comprised of four sections. Part 1 draws a distinction between leaders and managers and suggests that while both roles are necessary for a successful commercial enterprise, it is important for executives to balance the two roles. Part 2 describes the merits of M&A, the financialization of the MedTech industry, and its repercussions on leadership and innovation. Notably, financialization and M&A activities shifted executive focus away from innovation towards transactions. Part 3 explores the interplay between transactional proficiency and innovation and discusses the implications of M&A-focussed expansion on R&D and patient outcomes. Part 4 suggests a strategy for enterprises to reignite their stagnating values and slow growth rates, which entails less M&A-driven expansion and more innovation-centred growth. Achieving this involves developing leaders with a blend of financial and R&D acumen.
Part 1
Leaders and Managers

Leaders and managers play important roles in the success of commercial enterprises, each having distinctive yet interconnected functions. However, leadership and management differ, and this differentiation is important to understand their respective contributions to the medical technology industry.
Leadership, which has evolved over time, involves guiding, influencing, and motivating individuals and groups towards shared objectives. It includes envisioning a direction, making strategic choices, and inspiring growth within organizations. Leaders prioritize people, nurture relationships, and understand individual strengths, and motivations. This enables them to empower others to embrace change and achieve their potential. They adopt a forward-looking, longer-term strategic perspective, fostering innovation while being prepared to take calculated risks for growth. Effective leadership influences a company’s trajectory, culture, and efficacy. It fosters productivity, innovation, and a positive attitude to work. In an environment characterized by technological advancements, constant organizational change, and market shifts, leadership is crucial. Under such conditions, embracing change rather than resisting it not only brings stability but also reduces stress and prevents chaos. Leadership is essential for guiding enterprises and employees through uncertainty, fostering innovation, creative thinking, and stability. Leaders often possess a combination of leadership and managerial skills; and they know how to balance these and have the capacity to navigate dynamic environments which require adaptability, agility, and inspiring visions.
Conversely, management, revolves around organizing, planning, and efficiently controlling resources to attain specific goals. Managers address operational challenges, and focus on processes, structures, and day-to-day operations, ensuring tasks adhere to plans. Their strength lies in executing business plans, maintaining stability, control, and consistency in operations to ensure that organizations function smoothly. Managerial skills excel when supervising daily operations, allocating resources, and completing tasks efficaciously. Managers perform well in project-oriented environments, overseeing planning, execution, and monitoring to achieve objectives. They allocate budgets, personnel, and equipment optimally, managing risks and performance to ensure stability.
Part 2
The Rise of Financialization in MedTech

The financialization of the MedTech industry took root over several decades when interest rates were low and access to affordable capital was relatively easy. This encouraged corporate executives to lean away from developing innovative scientific devices for expansion and lean in on M&A to provide growth. One recent period during which central banks maintained low interest rates, and adopted accommodative monetary policies, is the aftermath of the global financial crisis of 2008. In response to the crisis, central banks, including the US Federal Reserve, (Fed) implemented measures to stimulate economic growth and stabilize financial markets. One of the primary tools used was reducing interest rates to near-zero. For instance, the Fed held its federal funds rate [the benchmark interest rate] at near-zero levels from December 2008 to December 2015. The purpose of this was to encourage borrowing and investment, which in turn was expected to stimulate economic activity, job creation, and consumer spending.
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The Financialization Dilemma of MedTechs

Have diversified medical technology companies blown their competitive advantage?

Such extended periods of low interest rates encouraged MedTech executives to explore growth opportunities beyond conventional R&D investments. With significantly reduced financing expenses, and a large, underserved, fast growing sector, managers turned to M&A to bolster their resources and expansion efforts. This trend was further buoyed by investors seeking higher returns amid limited profitability in low-interest rate environments. Consequently, MedTechs gravitated toward M&A and financial activities, which promised near-term gains and broader market reach. This shift diverted executive focus away from innovation-centered expansion to transactional approaches for growth, ultimately reshaping the industry's trajectory toward financialization. M&A opportunities initially helped companies to strengthen their presence in underserved, rapidly expanding market segments. By merging with, or acquiring, near adjacent enterprises, MedTechs accessed new customer bases, technologies, and product portfolios, which allowed their executives to consolidate company resources, increase market share, and achieve economies of scale, which drove growth.
Perceived benefits of M&A

This shift towards M&A and financial optimization did not diminish the significance of scientific progress and innovation; but it did incentivize many MedTech executives to recalibrate their reliance on R&D. As the industry evolved, several factors encouraged executives to prioritize M&A and financial engineering as their principal drivers of growth. These included the increasingly stringent regulatory landscape for medical devices, which extended the time and costs associated with new product launches. Executives recognized the value of acquiring readily available innovations with existing regulatory approvals. Additionally, M&A offered the opportunity for MedTechs to streamline their operations, eliminate redundancies, cut costs, and enhance financial performance.
Over time, intensifying financial activities increased the industry’s global competition, and many MedTechs employed M&A to expand internationally and gain access to new markets. Simultaneously, acquisitions facilitated the diversification of product offerings, which lowered risks associated with relatively narrow product portfolios. Publicly traded corporations faced pressure from investors to deliver near-term financial results and shareholder value, which further steered executives to lean in on M&A for quick returns and access to a wider talent pool and complementary technologies.
Impact on leadership dynamics

The rise of M&A activities and the financialization of the MedTech industry reshaped leadership dynamics. While the sector was initially driven by innovation-focused leaders, the shift we describe has led to a gradual transition towards transaction-oriented managers taking control. Visionary figures like Willem Einthoven, a Dutch physiologist and Noble Laureate for Medicine, Thomas Fogarty, an American inventor, innovator, and cardiothoracic surgeon, Patricia Bath, an American ophthalmologist, and inventor and Robert Langer, an American engineer, scientist, and entrepreneur, are just four  among many others  who laid foundations for the industry's growth with their pioneering medical technologies. For instance, Einthoven's invention of the electrocardiogram (ECG) changed cardiology, Fogarty's embolectomy catheter, (balloon catheter), transformed vascular treatments, Bath’s Laserphaco Probe, disrupted cataract surgery, and Langer's work on biomaterials led to several breakthrough medical devices.
Notwithstanding, over time, M&A pursuits by companies altered resource allocation, diverting attention away from R&D towards activities like due diligence and integrations. This shift redirected budgets and talent away from innovation, affecting the creative and scientific progress of enterprises. Metrics tied to M&A outcomes gained precedence over those that encouraged internal innovative momentum. Further, the growing financial acumen of MedTech executives overshadowed R&D capabilities, emphasizing short-term gains over longer-term strategic innovative initiatives. After decades of successful M&A, changes in economic, financial, and technological landscapes prompted concerns about the industry’s sustained growth and innovation-centric leadership.
Consequences of M&A for innovation and R&D

Prioritizing financial transactions over R&D in a fast-paced industry can undermine innovation, sustainable growth, and competitive advantage. Companies favouring financial activities at the expense of R&D have tended to show diminished ability to create novel medical technologies, which results in fewer disruptive solutions and a weakened ability to address evolving healthcare challenges. The significance of R&D for longer-term sector growth cannot be overstated. A disproportionate focus on financial transactions leads to short-term mindsets, which tend to neglect opportunities for organic growth through innovation, and thereby disadvantaging companies by hindering their adaptation to economic trends and market dynamics.
Companies with robust R&D cultures attract scientific talent. Conversely, leaning away from innovation makes it difficult to attract and retain top researchers, engineers, and experts. An enterprise's reputation is tied to its innovation and scientific capabilities, while an overemphasis on financial transactions projects profit-centric motives, which can erode stakeholder trust and credibility. In the rapidly advancing technology landscape, neglecting R&D invites obsolescence. Companies not allocating sufficient resources to innovation run the risk of falling behind competitors as new breakthroughs emerge, jeopardizing their market share. Over emphasising M&A introduces dependence on external factors such as regulations, negotiations, and integration challenges, which can disrupt an enterprise’s growth predictability. While financial transactions may promise more immediate gains, they tend to divert resources away from longer-term strategies and R&D, which can compromise sustained growth and value added. This shift risks a company losing a core identity, which can undermine employee motivation and reduce stakeholder alignment. Further, prioritizing financial transactions can create discord within an organization between transaction-focused executives and innovation-aligned employees, which could impede strategy execution. Thus, leaning away from R&D for financial gains can jeopardize innovation, growth, and competitive edge, ultimately hampering a company's longer-term success.
Part 3
The Implications of M&A-Centric Growth

The implications of M&A-centric growth are multifaceted and extend beyond the immediate area of financial transactions. A trend that emerges within MedTechs as they prioritize M&A activities over R&D, is an innovation gap, which can introduce strains within leadership dynamics as resources are disproportionately allocated to financial pursuits rather than fostering technological advancements. Reallocating resources in this way can stifle the development of innovative technologies. Moreover, often the shift is accompanied by a transformation in executive skill sets, where financial acumen takes precedence over the ability to drive R&D. Consequently, there is a shift in the overall performance metrics of companies. Short-term gains resulting from transactional activities, often overshadow longer-term, research-driven achievements that are essential for innovation, growth, and competitive advantage.
The change in company culture is another potential consequence of this growing inclination toward financial activities. The once-pervasive values of creativity calculated risk-taking, and scientific exploration, which have historically fueled innovation, start to wane. This is further exemplified by a shift in talent attraction strategies. The attraction of financial expertise can eclipse the allure of nurturing disruptive innovation, thereby resulting in a dearth of fresh perspectives that could potentially drive growth and value.
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Unleashing MedTech's Competitive Edge through Transformational Technologies
As decision-making processes prioritize short-term financial outcomes, there is a gradual sidelining of research-driven innovations that are needed for the sustained growth and relevance of MedTech companies. The ramifications of this choice are significant. Entities that opt for transactional expansion rather than innovative evolution may find themselves trailing behind competitors who continue to invest in R&D endeavours. This divergence in strategy could lead to a subsequent loss of market share and a gradual erosion of overall relevance. Innovation remains important to address the adaptive challenges that arise from evolving healthcare demands, increased patient voices, rapidly advancing technology, and increasingly stringent regulatory requirements. The transformation of MedTech companies into entities that prioritize financial outcomes run the risk of leaving them ill-equipped to effectively navigate these headwinds. A reduced focus on innovation tends to render companies vulnerable, impairing their capacity to anticipate and effectively respond to future industry and societal trends.
The importance of striking a balance between short-term financial goals and longer-term innovation objectives cannot be overstated. Companies that are unable to reconcile these contrasting perspectives risk compromising their ability to anticipate and adapt to the evolving healthcare landscape. In essence, the ramifications of an M&A-centric growth approach are not solely confined to fiscal aspects; they extend to the core of a company's competence to foresee, adapt to, and thrive within a rapidly evolving MedTech sector.
Reduced R&D resources impact on patient care and outcomes

The impact of diminished R&D resources on patient care and outcomes can be significant. At its core, a vibrant and forward-thinking MedTech industry is essential for the development and successful deployment of medical technologies, diagnostics, and treatments that increase the efficacy of healthcare and improve patient outcomes. The combination of innovation and healthcare can translate into tangible benefits for patients. For instance, personalized medicine therapies, which are outcomes of R&D, offer a transformative approach that enhances patients’ therapeutic journeys, and minimizes adverse effects.
Smart devices often mean swift and precise diagnoses, which pave the way for timely and effective interventions. Beyond this, innovation extends to healthcare accessibility. Remote monitoring and telehealth technologies reduce geographical barriers, bringing healthcare within reach of those in remote and underserved regions. This can reduce disparities in healthcare access, leveling the playing field for all individuals, regardless of their location, ethnicity, or socioeconomic status. Further, the shift toward minimally invasive technologies not only fosters quicker recovery times but also shortens hospital stays. The combination of improved healthcare protocols that promote better adherence and more efficient, cost-effective medical procedures helps to make quality healthcare accessible to more people.
Concern arises when MedTech innovation takes a back seat, which tends to perpetuate outdated medical devices that can result in suboptimal outcomes and the continuation of existing healthcare disparities. The neglect of innovative R&D endeavours delays the development of disruptive technologies, thus prolonging inequitable healthcare access and outcomes. In this context, companies that lean away from innovation could find themselves deepening divisions between different patient outcomes. The role of healthcare providers is associated with the availability of advanced technologies. Optimal care requires the integration of innovative technologies into medical practices, and the neglect of this can limit access to care, and potentially compromise patient outcomes. It is important to stress that the direction of the MedTech industry has an impact on the quality of healthcare that a society can provide. By placing innovation at the forefront of strategic priorities, companies are more likely to enhance treatments, patient experiences, and the overall efficiency of the healthcare ecosystem. Neglecting innovation, on the other hand, can result in stagnation that perpetuates inequalities, delays healthcare access, and slows the development of patient-centered care. The symmetry between financial considerations and the pursuit of innovation is important. The consequences of overlooking either aspect have effects, which can extend beyond company balance sheets into the health and wellbeing of patients who depend on the MedTech industry to provide leadership for a healthier and more equitable future.

Part 4
A Strategic Approach for MedTech Transformation

The phase of MedTech's growth driven by M&A has now matured, necessitating a fresh perspective and refined strategy. The transition from visionary leaders to financial managers has, in many medical technology companies, created a void in leadership, especially given the current headwinds faced by the industry. To improve patient outcomes and foster sustainable growth, a recalibration is required, which places innovative leadership and patient-centric care initiatives at the forefront. A synergy between financial and R&D strategies is important for success. Only by reconciling financial operations with innovation endeavours, can the potential for competitive advantage and improvements in patient care take place.
Strategic allocation of resources, particularly towards dedicated innovation efforts, drives research. Notwithstanding, the realization of this relies on company executives leaning in on the transformative potential of R&D endeavours. To counterbalance any undue focus on short-term gains, it is essential to develop and implement a balanced set of performance metrics that connect financial milestones with innovation breakthroughs. This provides the basis for a strategy, which fuses financial decision-making with the promotion of innovation-driven initiatives. Further, to help executives develop diverse and adaptable mindsets, enterprises might consider increasing collaborations with research institutions and start-ups, with the aim to gain access to talent and knowhow that complements internal capabilities.

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Re-imagining healthcare

The impact of big data, artificial intelligence, and machine learning on the medical technology industry

The establishment of structured innovation frameworks, closely tethered to fiscal objectives, should help to provide a consistency of purpose. Safeguarding innovations requires robust intellectual property (IP) strategies, and regular evaluations, attuned to prevailing market trends, and assisting with the ongoing alignment of a company’s strategy with exogenous trends.  This nuanced approach hinges on executives being able to balance essential financial imperatives with innovations to create a balance, which, in turn, is expected to contribute to sustainable growth, heighten competitiveness, improved patient outcomes and reduced healthcare costs.
Cultivating leaders with balanced expertise

Successfully blending transactional expertise with R&D capabilities requires leaders with vision and purpose able to develop and implement strategies that harmonize with an enterprise’s goals and politico-economic trends, evolving stakeholders’ demands and changes in healthcare systems. Let us briefly suggest a roadmap to achieve this.
First, develop cross-functional leadership teams that unite financial and R&D experts, and are expected to help ensure that decisions become grounded in both fiscal considerations and innovative pursuits. Advocating for innovation within finance and R&D units, helps to foster alignment between financial choices and R&D priorities. Developing and implementing key performance indicators (KPIs) is crucial. These should measure both financial outcomes, and advancements in innovations. Consider incorporating into performance evaluations metrics such items as newly filed patents, and the delivery of product launches and impactful R&D projects on-time and within budget.
Establish a dedicated venture fund to drive and reward innovation. Facilitate collaborative workshops that bring together finance, R&D, marketing, and other functions to ideate transformative solutions and services. Such endeavours should aim to increase growth, enhance enterprise value, improve patient outcomes, and reduce the cost of care. Align financial objectives with innovation goals, linking bonuses to achievements in both financial performance and successful innovation. When contemplating M&A, give precedence to targets that enhance a company’s innovative capabilities by aligning with R&D expertise and novel product portfolios, thus amplifying innovation.
Create small cross-functional review groups to assess innovation projects for alignment with business goals and fiscal viability. Establish agile committees to oversee resource allocation and to ensure consistent R&D funding. Implement programmes to recognize and celebrate employees who contribute to innovative ventures to help cultivate a culture of inventiveness. Set up platforms to facilitate interdepartmental sharing of creative ideas. Actively involve financial specialists in innovation discussions. Cultivate external partnerships to infuse fresh perspectives into R&D initiatives. Foster communication channels between financial and R&D teams and encourage regular exchanges of insights and opportunities. Provide training to enhance financial experts' understanding of R&D processes and offer financial literacy training to R&D teams. By integrating transactional expertise and R&D acumen, MedTechs can more effectively balance financial growth and innovation, to help enhance competitiveness, adaptability, and industry-leading innovation.
Reviving visionary leadership

This Commentary started by describing differences between leaders and managers to highlight the prevalence of transactional management during a period of M&A-driven growth, which in turn diminished the demand for visionary leadership. As the industry has reached a mature phase, and facing significant headwinds, a juncture arises that calls for leaders capable of bridging the gap between financial success and technological advancement. This involves aligning financial strategies with a broader vision of innovation and patient-centric progress. In doing so, visionary leaders establish a framework that both augments a company's financial performance, and drives healthcare technology forward, ultimately enhancing patient outcomes. This strategic evolution depends on leaders embracing a forward-thinking mindset that extends beyond immediate gains and helps to steer enterprises towards sustained innovation and growth.
Central to this transformation is the synchronization of financial goals with a company's longer-term vision. This ensures that financial policies are conducive to fostering transformative technologies. Cultivating an innovative culture within an organization, leaders instill a spirit of expansive thinking, experimentation, and the pursuit of innovative technological solutions and services that address healthcare challenges. Acknowledging the need for strategic investments in R&D, these leaders allocate resources optimally to bolster novel solutions and services. Furthermore, they have an awareness of market trends, emerging technologies, and evolving patient needs. This equips them to anticipate shifts in both the market and technology landscapes, which enables them to strategically position their companies to take advantage of emerging opportunities. By balancing innovation and astute risk management, leaders blend calculated risk-taking with prudent financial decisions, thereby contributing to stability and improved competitiveness. With a focus on the longer-term impact of their actions, visionary leaders understand the interplay between present-day technological advances and a company's future standing.
In the dynamic ecosystems of contemporary medical technology, visionary leaders exhibit adaptability in navigating change, guiding companies forward by skilfully adopting new technologies and strategies. Their longer-term strategic outlook attracts top talent from both finance and technology. Inherently collaborative, these leaders forge alliances with other companies, start-ups, research institutions, and industry experts, which increase the potential for accelerating the pace of technological innovations from the bench to the bedside. Harnessing novel technologies to create distinctive solutions and services, they lead their organizations to prominence within a competitive market. Upholding ethical considerations, these leaders ensure that technological progress not only yields financial gains but also has benefits for patients and healthcare systems. Investors tend to gravitate towards enterprises with visionary leaders. The ability to articulate a compelling narrative that emphasises how innovation drives future growth and financial returns enhances their allure. Thus, visionary leaders orchestrate a successful synergy between financial acumen and technological ingenuity, encouraging an ecosystem where strategic foresight translates into substantial dividends.

The evolution of the medical technology sector over the past four decades has presented a dual-edged transformation that healthcare professionals must now grapple with. The shift from pioneering innovators to adept managers within the industry reflects the interplay between economic, technological, regulatory, and ethical factors. As these converge, healthcare companies face significant headwinds that demand leadership rather than management. The financialization of the industry, driven by prolonged periods of low interest rates and accessible capital, has had a significant influence on the industry’s ecosystem, accelerating growth while simultaneously steering priorities away from innovation towards financial pursuits. This shift opened a new era, characterized by an abundance of skilled managers but a deficit of visionary leaders. Today, the MedTech industry stands at a juncture, with the demand for strategic foresight and innovative thinking never more acute. The need to pivot towards sustained growth and enhanced enterprise value necessitates leaders who can balance the strategic imperatives of R&D and the financial acumen required for M&A. The future trajectory of the medical technology sector hinges on the ability of healthcare professionals to recalibrate leadership dynamics. By addressing the scarcity of visionary leaders, the industry can leverage its potential to overcome the headwinds it currently faces and pioneer transformative innovations that redefine the landscape. As healthcare professionals navigate the future, their collective efforts will determine whether the MedTech sector continues to evolve along its current trajectory or takes a bold new direction towards enhanced growth, innovation, and added value.
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  • MedTechs have experienced significant transformation through mergers and acquisition (M&A) to achieve steady growth, diverting resources from innovative research and development (R&D) initiatives
  • The industry’s M&A activities were fueled by a prolonged period of low interest rates and easy access to capital
  • Consequently, R&D efforts focussed on incremental improvements rather than breakthrough innovations
  • This financial-centric business model led to risk-averse bureaucracies among many MedTechs, resulting in a strategic deadlock with limited growth prospects
  • Adding to the challenges, the current era witness’s debt and asset prices surpassing productivity and economic output
  • For many MedTechs, these macro-economic conditions potentially pose funding constraints, reduced market demand, tightening regulatory challenges, cost pressures, and market volatility, further hindering their ability to overcome the deadlock
  • To address these issues and help MedTechs break free from their strategic deadlocks and create long-term value we propose seven strategic initiatives
The Financialization Dilemma of MedTechs
In the 1990s and 2000s, medical technology companies received praise for their rapid growth. However, they currently find themselves at a crucial juncture, facing challenges of low and stagnant growth rates. Additionally, an uncertain long-term outlook looms over them due to the expansion of global balance sheets surpassing GDP, as well as debt and asset prices outpacing productivity and economic output. This Commentary aims to shed light on how many MedTechs reached this strategic deadlock. It also proposes strategies that these companies can pursue to break free from this predicament, which have the potential to significantly enhance growth rates, improve balance sheet health, and foster value creation.
An era of low interest rates and cheap capital

The financialization of MedTechs has played a significant role in their current strategic deadlock, and the most viable solution lies in accelerating productivity. This financialization was facilitated by a prolonged period of low interest rates and easy access to inexpensive capital. Over the span of four decades, starting from the 1980s to the early 2020s, interest rates steadily declined across most industrialized nations. In the aftermath of the 2008-09 financial crisis, many countries adopted a low interest rate environment to stimulate economic recovery and restore liquidity in their banking systems. For example, the US Federal Reserve Board (Fed) lowered short-term interest rates from 4.25% in December 2007 to nearly zero by December 2008, registering the lowest rate in the Fed's history.
During the era of persistently low interest rates and readily available capital, MedTechs experienced a surge in merger and acquisition (M&A) activities, primarily targeting companies in near-adjacent sectors to capitalize on low-risk opportunities for incremental growth. This trend fostered a culture of consolidation, driven by the desire to access new technologies and broaden product portfolios. While M&A activities bolstered short-term profits and shareholder value, they often led to a neglect of research and development (R&D) initiatives. Acquisitions were perceived as a less risky and quicker avenues for expanding product lines, overshadowing investments in R&D. Consequently, many MedTechs adopted a risk-averse approach, channeling their R&D efforts towards incremental improvements of existing products rather than pursuing ground-breaking innovations that could significantly improve patient outcomes and disrupt the industry. Moreover, the increasingly stringent regulatory environment for medical devices, particularly in Europe, further discouraged companies from investing in R&D due to longer development timelines and escalated costs.
Over the years, these policies resulted in the consolidation of power and resources among a few large players, leading to the emergence of market oligopolies and the decline in industry diversity. This scenario posed challenges for smaller companies with innovative ideas, as they struggled to compete with established enterprises, thereby impeding both innovation and healthy competition. Moreover, established MedTechs benefited from the significant and rapidly growing healthcare demands in affluent Western markets, particularly North America and Europe, which account for ~65% of the global medical device market. In these markets, compensation was often tied to medical and surgical procedures rather than focussing on patient outcomes, further favouring the established industry players. While M&A can be an effective growth strategy, it is important for companies to strike a balance and prioritize innovation alongside their consolidation efforts to ensure sustainable success and drive meaningful advancements in the industry.
An era of surging prices and low productivity

We have now entered a distinct era that differs significantly from the previous era characterized by low interest rates, and easily accessible funds. Starting from March 2022, the Fed has implemented 10 consecutive rate hikes, bringing its benchmark rate to 5.25%. These increases, coupled with high leverage in the corporate sector, escalating geopolitical tensions and  instability in the banking world triggered by the Silicon Valley Bank (SVB) collapse in March 2023, compounds the challenges faced by MedTechs. Furthermore, global balance sheets have expanded at a much faster pace than Gross Domestic Product (GDP). Debt and asset prices have surged far more rapidly than productivity and economic output. This trend is underscored by a report published in May 2023 by the McKinsey Global Institute, which reveals that the past two decades have resulted in the creation of US$160trn in paper wealth but have been marked by sluggish growth and the rise of inequality. According to the report, every US$1 invested has generated US$1.9 in debt.
Strategic initiatives to adapt and thrive

When global balance sheets expand at a faster rate than GDP and debt and asset prices outpace productivity, it becomes a concerning sign for MedTechs who find themselves trapped in a strategic deadlock characterized by sluggish growth and a fading belief in long term value creation. Under these conditions, companies should expect to encounter funding limitations, decreased market demand, stricter regulatory obstacles, cost pressures, and increased market volatility. In such a testing business environment, it is important for MedTechs to adopt bold adaptive strategies and navigate wisely to ensure continuous growth and enhanced value. We suggest seven such initiatives that are likely to help MedTechs break free from their strategic cul-de-sacs. By implementing these with vigour, companies can position themselves for success in an ever-changing and demanding economic and geopolitical landscape.
1. Revamp R&D
In recent times, costs associated with MedTech R&D have escalated. A study published in the September 2022 edition of the Journal of the American Medical Association (JAMA), and carried out by the US government’s Office of Science and Technology Policy, found that the development cost for a complex therapeutic medical device, from proof of concept through post approval stages, is US$522m. Significantly, the nonclinical development stage accounted for 85% of this cost, whereas the US Food and Drug Administration (FDA) submission, review and approval stage comprised 0.5%.
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Re-imagining healthcare
Thus, MedTechs have the potential to optimize their R&D processes, enabling them to develop more swiftly and economically ground-breaking devices that result in enhanced patient outcomes and expanded market share. To achieve this, companies may consider the following strategies to improve their R&D processes: (i) Integrating artificial intelligence (AI), machine learning, and big data techniques into their R&D endeavours and harnessing the power of these advanced technologies. (ii) Collaborating with academic institutions and start-ups to gain access to novel innovations and expertise. This collaboration can involve joint development and co-creation of innovative offerings. To tap into a diverse pool of expertise and resources, companies should consider a platform-based approach to R&D, which potentially improves the capacity to drive breakthrough advancements that improve patient care. (iii) Implementing agile methodologies to accelerate the R&D process, which involves breaking projects into smaller, more manageable segments and swiftly iterating based on stakeholder feedback. (iv) Engaging patients in the design process to ensure that newly developed offerings cater specifically to their needs, ultimately enhancing patient satisfaction.
2. Emphasize patient-centric care
Enhancing patient-centric care to improve outcomes is a crucial factor in the future of healthcare provision. There is a growing body of evidence indicating that patient choices will have an increased influence on the provision of healthcare over the next decade. With patients having more options and autonomy, MedTechs can leverage patient-centric strategies to better understand and address their needs, ultimately leading to improved market share. To achieve this, companies must prioritize effective communication, product education, and support services to build stronger relationships with patients. This requires increased utilization of electronic health records, advanced AI, data analytics capabilities, active engagement with patient communities, leveraging social media platforms, establishing patient advisory boards, and forging partnerships with payers and providers.
Further, embracing value-based care models is important for MedTechs. By prioritizing positive patient outcomes over quantity, companies can contribute to the development of sustainable care. As global healthcare systems transition toward value-based care, MedTech companies should align their offerings accordingly. Emphasizing solutions that enhance patient outcomes, reduce healthcare costs, and provide overall value positions, MedTechs become indispensable partners in the evolving healthcare landscape. This also may involve developing outcome-based pricing models, implementing remote monitoring solutions, and demonstrating real-world evidence of product effectiveness.
3. Revitalize organizational and operating models
Revitalizing organizational and operating models is essential for MedTechs to boost their growth rates and adapt to a rapidly evolving market. While companies experienced significant growth in the past, recent trends have shown a shift towards risk-averse bureaucracies, accepting modest annual growth rates as the "new normal". To overcome this stagnation and meet evolving customer demands, traditional MedTechs should consider embracing agile and flexible structures.
By flattening hierarchies and fostering cross-functional teams, organizations can facilitate faster decision-making processes. Implementing lean manufacturing and optimizing operational processes can reduce waste, enhance productivity, accelerate time to market, and lower costs. Leveraging AI-driven data analytics enables the extraction of valuable insights from vast datasets, empowering MedTechs to anticipate customer needs and market trends.

4. Harness the power of digital, AI and big data
Digital transformation has become a necessity rather than a choice. Although companies like Stryker and Siemens have championed digitalization, widespread implementation still remains a challenge. Indeed, Siemens’ suggests digitalization is “something that is often talked about but not fully implemented”. Previous Commentaries have shown how MedTechs can employ digital technologies to improve products, streamline operations, enhance customer experiences, and reduce costs. Streamlining operations and optimizing costs without compromising quality is crucial in the face of escalating economic pressures. This may involve re-evaluating supply chains, improving manufacturing processes, and adopting digital solutions.
In today's rapidly evolving digital age, investing in digital and analytics capabilities has become indispensable for companies as they shape their R&D, hone their processes and shift to a customer-centric stance. The seamless integration of digital and AI-driven techniques, along with data-driven decision processes, has emerged as a crucial factor in maintaining and improving competitiveness. For MedTechs, it is imperative to cultivate a culture of innovation that encourages and rewards experimentation and risk-taking. By doing so, organizations create an environment where employees are empowered to explore ideas, learn from failures, and ultimately drive meaningful innovations.  Therefore, actively seeking external partnerships with technology companies, start-ups and academic institutions is a strategic move for MedTechs to access cutting-edge technologies and expertise in digital and analytics. By embracing these capabilities as core rather than adjunct components of their strategies, fostering an innovation-centric culture, and investing in talent development and retention, corporations position themselves optimally to leverage the transformative potential of digital and analytical technologies. This, in turn enables them to thrive in an increasingly interconnected and data-driven healthcare ecosystem.

5. Talent acquisition and retention
The rapidly changing landscape of globalization, the increasing influence of AI techniques, and the demands of a new generation of consumers seeking personalized experiences have compelled MedTechs to reassess their approach to talent acquisition and retention. To keep up with the pace of change, it is crucial for these companies to attract and retain highly skilled professionals with expertise in technology, healthcare, and business. A talented workforce plays a vital role in driving innovation, ensuring efficient and safe processes, navigating complex market dynamics, and effectively executing growth strategies. To achieve this, companies should invest in the development of their employees, foster a culture of innovation, and offer competitive compensation packages to attract and retain top performers.
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According to a study published by the Harvard Business Review in January 2020, retaining top talent has become increasingly challenging for employers. The study revealed that in 2018, 25% of employed Americans left their jobs, with approximately 33% of this turnover attributed to unsupportive management and a lack of development opportunities. MedTech companies are not exempt from this trend, and to acquire and retain talent, they must strategically revamp their value propositions to align with the evolving needs and expectations of the modern workforce.
A crucial step in this direction is fostering a purpose-driven culture that highlights the significant impact medical technology companies have on improving people's lives. By instilling a sense of purpose, employees are more likely to develop a strong connection to the company's mission, inspiring them to consistently deliver their best work. Furthermore, providing ample career development opportunities is essential in empowering employees to enhance their skills and progress in their professional journeys. This can be achieved through training programmes, mentoring initiatives, and leadership development schemes.
Recognizing the importance of work-life balance is also critical. MedTechs can prioritize flexible working hours, a 4-day week, remote work options, generous vacation policies, allowing employees to effectively balance their personal and professional lives. By creating a supportive environment that promotes overall well-being and job satisfaction, companies can foster employee loyalty.
Competitive compensation and benefit packages are essential. Additionally, a commitment to diversity and inclusion is pivotal for MedTechs aspiring to become employers of choice. By emphasizing diversity in hiring practices and cultivating an inclusive work environment where every individual feels valued and respected, corporations can attract and retain a diverse array of talent. This, in turn, creates an environment conducive to enhanced innovation, creativity, and problem-solving.
Despite best efforts, there may be instances where companies are unable to attract and retain individuals with the necessary capabilities. In such cases, strategic partnerships, joint ventures, licensing agreements, and co-development initiatives allow MedTechs to tap into external expertise and resources, which can be employed to enhance product portfolios and gain access to new markets.

6. Realize global opportunities
MedTechs, traditionally reliant on most of their revenues from affluent US and European markets, now have the chance to expand their horizons and explore the untapped potential of the rapidly growing markets in Asia, Middle East and Africa, and Latin America. These regions boast transitioning demographics, with aging populations and a surge in chronic diseases. Additionally, their large and expanding middle-class populations demand advanced care, prompting governments to increase their healthcare expenditures significantly. By venturing into and expanding their footprints in these markets, Western MedTechs can diversify their revenue streams and leverage the growth opportunities stemming from the escalating demand for cutting-edge medical technologies and services.
Expanding into emerging markets not only provides a means to mitigate risks associated with economic volatility and changing regulatory environments but also necessitates acquiring new capabilities, fostering a change in executive mindsets, and embracing flexible pricing models. By adapting to the unique demands and challenges of these markets, MedTechs can position themselves strategically to tap into the vast potential they offer. This expansion serves as a catalyst for sustained growth and allows companies to seize opportunities that would otherwise remain untapped, thus bolstering their long-term success.

7. Align with rising ESG standards
To fully leverage their capabilities and resources and meet rising standards in ESG (Environmental, Social, and Governance), MedTechs might consider taking bold actions that: (i) embrace sustainable manufacturing practices to minimize their environmental impact, which entail reducing waste, water, and energy consumption, as well as transitioning to renewable energy sources. Such practices contribute to environmental conservation and mitigate a company’s carbon footprint, (ii) adopt circular economy principles, which involve designing products with a focus on reusability and recyclability. Additionally, establishing take-back programmes for end-of-life products, which ensure responsible disposal and encourage the reuse of valuable materials, thereby reducing waste and promoting sustainability, (iii) develop products that improve patient health, safety, and overall quality of life. This requires a patient-centric mindset, discussed above, that emphasizes the social impact and positive contributions MedTechs can make to society, (iv) produce offerings that are accessible and affordable to all segments of society. By addressing underserved communities and partnering with them to provide better healthcare solutions, companies can contribute to reducing healthcare disparities and promote equitable access to quality care, (v) enhance transparency and accountability, which includes setting clear targets, regularly measuring and reporting progress, and disclosing ESG performance, and (vi) engage with stakeholders, such as investors, customers, payers, employees, and patients, to better understand their expectations and concerns regarding ESG issues. Such a bold proactive approach to ESG issues contributes to a more sustainable and equitable world, strengthens a company’s reputation, and fosters its long-term success.
In today's rapidly evolving and technology-driven world, a successful pivot for MedTechs, which have been financialized and now find themselves in a strategic cul-de-sac, requires a simultaneous introduction of the suggested strategic initiatives, rather than a sequential approach. To regain high growth rates and create long-term value, MedTechs must:
  1. Revamp R&D efforts to develop innovative solutions and services that address evolving market needs, prioritizing cost-effectiveness, and improved patient outcomes as primary drivers of value creation.
  2. Prioritize patient-centric care by delivering solutions and services that significantly enhance outcomes, establishing a reputation for consistent value provision.
  3. Revitalize outdated organizational and operating models through increased collaboration with industry stakeholders, enabling accelerated technology development and adoption. This ensures alignment with patient needs and facilitates swift market entry.
  4. Harness the transformative power of digital technologies, AI, and big data to unlock new possibilities for innovation, efficiency, and personalized healthcare experiences.
  5. Attract, retain, and develop talent equipped with 21st-century capabilities while fostering a purpose-driven culture that fuels innovation and drives organizational success.
  6. Recognize and capitalize on the vast and rapidly expanding opportunities present in emerging markets, approaching them with a strategic mindset.
  7. Align with ascending ESG standards, demonstrating a commitment to sustainability, ethical practices, and social responsibility, which reinforces the credibility and long-term viability of MedTechs.
By embracing these strategies simultaneously, corporations position themselves to navigate policy shifts, overcome global uncertainties, and take advantage of evolving technologies, which stand them in good stead to enhance their growth rates, and significantly improve their value.
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  • AstraZeneca has turned traditional biopharma R&D on its head and is targeting early stage cancer
  • This strategy benefits from  some of AstraZeneca’s R&D endeavours
  • But the strategy faces strong headwinds, which include significant technological and market challenges and substantial Competition from at least two unicorns
AstraZeneca’s strategy to target early cancer

Will José Baselga’s gamble pay off?
Baselga is AstraZeneca's new cancer research chief who has turned traditional biopharmaceutical drug development on its head by announcing AstraZeneca’s intention to target early- rather than late-stage cancer. “We need to spend our resources on those places where we can cure more people and that’s in early disease”, says Baselga, who knows that early detection can significantly improve patient survival rates and quality of life, as well as substantially reducing the cost and complexity of cancer treatment. Baselga also must know his strategy is high risk. Will it work?
In this Commentary
In this Commentary we discuss the drivers and headwinds of AstraZeneca’s strategy to increase its R&D focus on early stage cancer. But first we briefly describe cancer, the UK’s situation with regard to the disease and explain why big pharma targets advanced cancers. Also, we provide a brief description of AstraZeneca’s recent history.  
What is cancer?

Cancer occurs when a normal cell’s DNA changes and multiplies to form a mass of abnormal cells, which we refer to as a tumour. If not controlled and managed appropriately the tumour can spread and invade other tissues and organs. In the video below Whitfield Growdon, a surgical oncologist at the Massachusetts General Hospital in Boston US, and a Professor at the Harvard University Medical School explains.
The UK’s record of cancer treatment
In the UK cancer survival rates vary between types of the disease, ranging from 98% for testicular cancer to just 1% for pancreatic cancer. Although the UK’s cancer survival rates lag those of other European countries, the nation’s overall cancer survival rate is improving. Several cancers are showing significant increases in five-year survival, including breast (80% to 86%), prostate (82% to 89%), rectum (55% to 63%) and colon (52% to 60%). Many of the most commonly diagnosed cancers in the UK have ten-year survival of 50% or more. With regard to cancer spending, compared with most Western European countries, including France, Denmark, Austria and Ireland, the UK spends less on cancer per person, with Germany spending almost twice as much per head.
Why big pharma targets advanced cancers?
Most cancers are detected late when symptoms have manifested themselves, which renders treatment less effective and more costly. When cancer is caught early, as in some cases of breast and prostate cancer, tumours tend to be removed surgically or killed by chemoradiation therapy (CRT) and this, for many people, provides a “cure”, although in some cases the cancer returns.
Studies in developed economies suggest that treatment costs for early-diagnosed cancer patients are two to four times less expensive than treating those diagnosed with advanced-stage cancer. Notwithstanding, there are physical, psychological, socio-economic and technical challenges to accessing early cancer diagnosis and these conspire to delay cancer detection. Thus, big pharma companies have traditionally aimed their new cancer drugs at patients with advanced forms of the disease. This provides pharma companies access to patients who are willing to try unproven therapies, which significantly helps in their clinical studies. And further, big pharma is advantaged because regulators tend to support medicines that slow tumour growth and prolong life, albeit by a few months.
Imfinzi: the only immunotherapy to demonstrate survival at three years
A good example of this is AstraZeneca’s immunotherapy drug called Imfinzi (durvalumab) used in unresectable stage-III non-small cell lung cancer (NSCLC), which has not spread outside the chest and has responded to initial chemoradiation therapy. Imfinzi works by binding to and blocking a protein called PD-L1, which acts to disguise cancer cells from your immune system. Imfinzi removes the disguise so that your immune system is better able to find and attack your cancer cells.
Findings presented at the June 2019 meeting of the American Society of Clinical Oncology (ASCO), build on a clinical study of Imfinzi reported  in the September 2018 edition of The New England Journal of Medicineand suggest that Imfinzi is the only immunotherapy to demonstrate survival at three years in unresectable stage-III NSCLC. AstraZeneca has begun a phase-3 clinical study of the PD-L1 inhibitor protein in stage II NSCLC patients.


Some information about AstraZeneca
AstraZeneca is a British-Swedish multinational biopharmaceutical company with a market cap of US$107bn and annual revenues of US$22bn. The company operates in over 100 countries, employs more than 61,000, has its headquarters in Cambridge, UK, and is recovering after patents expired on some of its best-selling drugs and a failed takeover bid in 2014 by Pfizer.
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A paradigm shift in cancer diagnosis
Patents, legacy drugs and new biologics
When pharma companies develop a new drug, they can apply for a patent that stops other companies from making the same thing. A patent lasts for 20 years, after which point other producers can replicate the drug and its selling price plummets. This happened to AstraZeneca’s when the patents expired on two of its best-selling drugs: Crestor (rosuvastatin), and Nexium (esomeprazole). The former is a statin  that slows the production of cholesterol by your body, lowers cholesterol and fats in your blood and is used to reduce your chances of heart disease and strokes. The latter is a drug used to treat symptoms of gastroesophageal reflux disease (GERD) and other conditions involving excessive stomach acid. Unlike some of its rivals, these were oral medicines based on small molecules that are easy for generic manufacturers to copy, which made AstraZeneca vulnerable to cut-price competition immediately after the legal protection of the drugs had expired. Notwithstanding, AstraZeneca’s new generation of biologic medicines, which it launched in the first decade of this century, are protected to some degree by the fact that they are difficult to copy as they are manufactured using cells, instead of big chemistry sets used to make conventional drugs.
AstraZeneca’s history with early stage cancer therapies
Baselga’s gamble benefits from the fact that AstraZeneca developed an interest in the detection of early stage cancer before his appointment. Today, AstraZeneca is active in clinical studies with other biopharma companies and leading academic institutions targeting earlier-stage therapies.

Working with collaborators over the past two decades, AstraZeneca has tested a number of drugs including Iressa (Gefitinib) and Tagrisso (Osimertinib) in cancers from stage-I onward, in some cases to try to shrink tumours before they are removed surgically. Tagrisso is a potential star-drug for AstraZeneca. It  was originally developed to treat a group of lung cancer patients whose cancer had become resistant to established tyrosine kinase inhibitor therapies such as Iressa  and Roche’s Tarceva (erlotinib). Tagrisso surprised AstraZeneca as it turned out to be better than Iressa and Tarceva when used in untreated patients with epithelial growth factor receptor (EGFR) mutations. EGFR is a protein present on the surface of both normal cells and cancer cells, and are most common in people with lung adenocarcinoma (a form of NSCLC), more common with lung-cancer in  non-smokers, and are more common in women.

Epithelial growth factor receptor (EGFR)
Think of EGFR as a light switch. When growth factors (in this case tyrosine kinases) attach to EGFR on the outside of the cell, it results in a signal being sent to the nucleus of the cell telling it to grow and divide. In some cancer cells, this protein is overexpressed. The result is analogous to a light switch being left in the "on" position, telling a cell to continue to grow and divide even when it should otherwise stop. In this way, an EGFR mutation is sometimes referred to as an "activating mutation". Tagrisso "targets" this protein and blocks the signals that travel to the inside of the cell and growth of the cell stops. In 2003, when AstraZeneca received regulatory approval of Iressa we had little understanding about EGFR. Today however about 50% of drugs approved for the treatment of lung cancer address this particular molecular profile.

Technological challenges
Baselga’s gamble is assisted by advances in  liquid biopsies, which work by detecting fragments of malignant tumour DNA in the bloodstream to identify oncogenic drivers, which help treatment selection. The challenge of this approach is that tumours shed meniscal amounts of circulating tumour DNA (ctDNA), which significantly raises the difficulty of detecting the genetic signals that oncologists need to identify specific cancers and select treatments. ctDNA should not be confused with circulating free DNA (cfDNA), which is a broader term that describes DNA that is freely circulating in the bloodstream but is not necessarily of tumour origin.
The good news for Baselga is that in recent years looking for ctDNA has become a viable proposition because of improvements in DNA sequencing technologies, (see below) which make it possible to scan fragments and find those few with alterations that may indicate cancer. While other blood-based biomarkers are being investigated, the advantage of ctDNA is that it has a direct link to a tumour and can be very specific at identifying cancer.  ctDNA also provides a means to profile and monitor advanced stage cancers to inform treatments.
Notwithstanding, a paper published in the June 2018 edition of the Journal of Clinical Oncology  suggests that, “there is insufficient evidence of clinical validity and utility for the majority of ctDNA assays in advanced cancer”, and therefore it is still early to adopt cfDNA analysis for routine clinical use.

Next generation genome sequencing
DNA sequencing is the process of determining the sequence of nucleotides in a section of DNA. The first commercialised method was “Sanger Sequencing”, which was developed in 1977 by Frederick Sanger, a British biochemist and double Nobel Laureate for Chemistry. Sanger sequencing was first commercialized by Applied Biosystems, and became the most widely used sequencing method for approximately 40 years. More recently, higher volume Sanger sequencing has been replaced by next-generation sequencing (NGS) methods, which cater for large-scale, automated genome analyses. NGS, also known as high-throughput sequencing, is a general term used to describe a number of different state-of-the-art sequencing technologies such as Illumina’s Solexa sequencing. These allow for sequencing of DNA and RNA significantly more quickly and cheaply than the previously used Sanger sequencing and has revolutionised the study of genomics and molecular biology.
Can AstraZeneca acquire success?
Baselgo’s gamble is not helped by the relative dearth of biotech companies engaged in clinical studies of early stage cancers. This significantly narrows AstraZeneca’s options if it wants to buy-in clinical-phase assets to fit with Baselga’s strategy.
Notwithstanding, there are at least two biotech companies of potential interest to AstraZeneca. One is Klus Pharma, founded in 2014, based in Monmouth Junction, New Jersey, US, and acquired for US$13m in October 2016 by the Sichuan Kelun Parmaceutical Co., a Chinese group based in Chengdu. Another is Dendreon, a biotech company based in Seal Beach, California, US. In 2014 Dendreon filed for chapter 11 bankruptcy. In 2015 its assets were acquired by Valeant Pharmaceuticals. In 2017, the Sanpower Group, a Chinese conglomerate, acquired Dendreon from Valeant for US$820m.  
Klus is recruiting patients with stage-I rectal cancer for a phase 1/2 clinical study of its anti-HER2 antibody drug, and is also working to extend its flagship product, Provenge (sipuleucel-T) as an option for patients with low-risk prostate cancer. Provenge is an autologous cellular immunotherapy. It was the first FDA-approved immunotherapy made from a patient’s own immune cells. Since its approval in 2010, nearly 30,000 men with advanced prostate cancer have been prescribed the therapy.  
Unicorns threaten AstraZeneca’s strategy for early cancer
Perhaps the biggest threat to Baselga’s gamble is competition from unicorns, which include  Grail, and Guardant Health.  
Grail was spun-out of the gene sequencing giant Illumina in 2016 and backed by more than US$1.5bn in funding, including money from Microsoft cofounder Bill Gates and Amazon founder Jeff Bezos. Grail is on a quest to detect multiple types of cancer before symptoms manifest themselves by way of a single, simple and cheap blood test to find fragments of ctDNA. Grail has made significant progress in its quest to develop highly sensitive blood tests for the early detection of many types of cancer, but it still has to engage in further large-scale clinical studies. At the 2018 ASCO conference, the company presented data from its Circulating Cell-free Genome Atlas (CCGA) project, which showed detection rates ranging from 59% to 92% in patients with adenocarcinoma, squamous cell and small cell lung cancers. The rate of false positives - a major concern for the oncology community - was under 2%.
In an effort to improve its technology and its outcomes, Grail has been working with researchers from the Memorial Sloan Kettering Cancer CenterMD Anderson Cancer Center and the Dana-Farber Cancer Institute, to develop a new assay. According to results published in the March 2019 edition of the journal Annals of Oncology, this joint venture has successfully come up with a method, which can detect mutations in NSCLC patients’ blood with high sensitivity. In some cases, the technology was useful when tissue biopsies were inadequate for analysis. The new tool uses Illumina’sultradeep next-generation sequencing", which involves reading a region of DNA 50,000 times, on average, to detect low-frequency variants. White blood cells were also sequenced to filter out "clonal hematopoiesis", which are noncancerous signals that can come from bone marrow. The sequencing information was then fed to a machine learning algorithm developed by Grail to determine mutation readouts.
Guardant Health
The other unicorn for AstraZeneca to watch is liquid biopsy developer Guardant Health. Founded in 2013, it is now an US$8bn precision oncology company based in Redwood City, California US. In April 2019 Guardant presented data of its oncology platform at the American Association of Cancer Research (AACR) in Atlanta, US. The platform leverages Guardant’scapabilities in technology, clinical development, regulatory and reimbursement to drive commercial adoption, improve patient clinical outcomes and lower healthcare costs.  In pursuit of its goal to manage cancer across all stages of the disease, Guardant has launched two next-generation sequencing liquid biopsy-based Guardant360 and GuardantOMNI tests for advanced stage cancer patients, for minimal residual disease/recurrence monitoring and for early detection screening, respectively.
The Guardant360 test is used to track patients’ responses to drugs and select most effective future therapies. It can identify alterations in 73 genes from cfDNA and has been used by more than 6,000 oncologists, over 50 biopharmaceutical companies and all 28 of the National Comprehensive Cancer Network Centers. 
Further, Guardant has launched a new liquid biopsy called Lunar.  At the April 2019 AACR meeting the company presented data of Lunar’s use as a screen for early-stage colorectal cancer. The assay was used to test plasma samples taken from 105 patients with colorectal cancer and 124 age-matched cancer-free controls. It is the test’s utility as a screen for early-stage disease that should interest AstraZeneca most. Guardant expects to position Lunar as something approaching a true diagnostic: a screening test to identify solid tumours in the healthy population. Wider clinical studies of Lunar are expected to start soon and Guardant believes that Lunar’s market opportunity as a cancer screen is some US$18bn and sees a US$15bn market opportunity in recurrence monitoring.
Also, in April 2019 Guardant acquired Bellwether Bio,  a privately held company founded in 2015, for an undisclosed sum. Bellwether is focused on improving oncology patient care through its pioneering research into the epigenomic content of cfDNA. This could aid  Guardant in its efforts to develop a cancer screen and further advance its research into cancer detection at earlier stages of the disease.
Guardant is well positioned to develop individual early indications of cancer. Grail, on the other hand,  is well positioned to develop a pan-cancer test. Notwithstanding, both companies need to engage in further lengthy, large-scale clinical studies before it will become clear which of these strategies will be more successful. However, both unicorns and other start-ups are potential competitors to AstraZeneca’s endeavours to target early cancer.

AstraZeneca’sproposed bold and risky shift in its R&D strategy is to be welcomed since the early detection and treatment of cancer should significantly enhance the chances of a cure, which would radically improve the quality of life for millions and substantially reduce the vast and escalating costs associated with the disease. AstraZeneca has some advantages since over the past two decade it has significantly enhanced its technology and been developing a platform of therapies for early stage cancer. Notwithstanding, for its strategy to target early stage cancer to be successful the company will have to overcome intense, fast growing, well-resourced competition and substantial technical and markets challenges.  
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Will China become a world leader in health life sciences and usurp the US?
After World War II, the US captured the global lead from Europe in life sciences thanks to the large American domestic market, its strong network of university research laboratories, competent regulation, effective pricing regimens and generous federal R&D funding.
America’s leadership in life sciences is slipping
Over the past two decades, as China has systematically upgraded its economy from low-grade to high-grade production, it has come to realize the significance of the health life sciences and Beijing has become determined to win a larger share of the industry’s activity. During this time America’s leadership position in the life sciences industry has slipped.
  • Will China usurp the US and become a world leader in health life sciences?
  • What could the erosion of the life sciences industry mean for the US economy?
  • What can American life sciences corporations do to reduce or slow their market slippage?
Health life sciences
Health life sciences refers to the application of biology and technology to improve healthcare. It includes biopharmaceuticals, medical technology, genomics, diagnostics and digital health and is one of the future growth industries positioned to radically change the delivery of healthcare, substantially reduce the morbidity and mortality of a range of chronic and incurable diseases and save healthcare systems billions. The life sciences industry plays a key role in supporting the economies of the US and China as well as other nations and helps them to compete internationally. The sector requires a complex ecosystem, which integrates high-tech research, large, long-term investments of capital in the face of significant technological, market and regulatory risks, skilled labour, specific manufacturing skills, intellectual property (IP) protection and policy support. According to a 2019 Deloitte’s report on health life sciences the global market size of the industry is projected to grow from US$7.7trn in 2017 to US$10trn by 2022.
Reason’s for America’s slippage
America’s slippage in its life sciences industry is due to:
  • Increased fair competition from a number of nations, including the UK, and increased unfair competition from China who aggressively steals US IP to piggyback on American life-sciences innovations in order to benefit from enhanced therapies without having to pay their fair share for the costly R&D. China then uses its government’s monopsony power as a purchaser of life sciences offerings to limit the prices of US and other international firms
  • Recent US Administrations’ lukewarm support for the industry. Federal biomedical research funding has been cut in real terms. Reimbursement policies are changing to a value-based approach and pricing policies have tightened. Such policies create uncertainty regarding the government’s willingness to pay for future treatments and the research necessary to discover and bring them to market. The US is also falling behind in providing innovative tax incentives for the industry
  • American life sciences corporations’ reluctance and inability to adapt their strategies and business models to changing international markets.
Permanent economic damage
The Chinese competitive threat is real and significant. It is important for the US to maintain a competitive life-sciences sector since it generates high-skilled, high-paying jobs and its product offerings are sold throughout the world and the industry is a key component of the US traded economy. A weaker American competitive position in the life sciences could mean a lower value for the dollar, a larger trade deficit, plant closures and job losses. China and other nations, which are gaining global market share at the expense of the US, could cause significant damage to the American life-sciences industry.
Creating a health life sciences industry is challenging enough, recreating one after it has lost significant market share is even more challenging, if not impossible. We suggest that to reduce to possibility of this happening US life sciences corporations might consider changing the mindsets of their leaders and demonstrate a greater willingness to learn from and engage with Chinese start-ups, especially those in adjacent industries with AI and machine learning capabilities and experience. The cost of doing this will be to give up some IP, which might be worth doing given the potential financial benefits from such a strategy.

A “bullish” American perspective
The generally accepted Western perspective is that the US excels at visionary research and moon-shot projects and will always be the incubator for big ideas. The reasons for this include: (i) American education is open, encourages individuality and rewards curiosity and its universities have consistently produced vast numbers of innovative discoveries in the life sciences, (ii) American scientists have been awarded the majority of Nobel prizes in physiology/medicine, physics and chemistry, and (iii)  America is the richest nation in the world. This suggests that there are no apparent reasons why the US should not continue as a world leader in health life sciences.

By contrast, China has stolen and copied America’s intellectual property (IP) for years and is a smaller economy fraught with politico-economic challenges. Although China’s economic growth has lifted hundreds of millions of people out of poverty, China remains a developing country with significant numbers of people still living below the nation’s official poverty level. Beijing has challenges balancing population growth with the country’s natural resources, growing income inequality and a substantial rise in pollution throughout the country. Further, China’s educational system is conformists and not geared to producing scientists known for making breakthrough discoveries. This is borne-out by the fact that China only has been awarded two Nobel prizes for the sciences: one for physiology and medicine in 2015 and another for physics in 2009.

Copiers rather than inventors
Over the past four decades Chinese scientists, with the tacit support of Beijing, have aggressively and unethically stolen Western technologies and scientific knowhow. According to findings of a 2017 research report from the US Intellectual Property (IP) Commission entitled The Theft of American Intellectual Propertythe magnitude of "Chinese theft of American IP currently costs between US$225bn and US$600bn annually."

America’s response to China’s IP theft has been to adopt the moral high-ground, dismiss China as an unscrupulous nation not worthy of investment and focus on commercialising its discoveries with “single bullet” product offerings and marketing them in wealthy regions of the world, predominantly North America, Europe and Japan. Over the past decade, this strategy has been supported by a US Bull market in equities, which started in 2009, outpaced economic growth in most developed nations and led to a significant degree of satisfaction among C-suites and boards of directors of US life sciences corporations, which did not perceive any need to adjust their strategies and business models despite some market slippage and changing market conditions.

Confucian values support conformism rather than discovery
Although China has benefitted economically from the theft of American IP, the American view tends to be that China is unlikely to become a world leader in the life sciences because the nation has not produced a cadre of innovative scientists and its education system is unlikely to do so in the near to medium term. Chinese education encourages students to follow rather than to question. Indeed, Confucian values remain a significant influence on Chinese education and play an important role in forming the Chinese character, behaviour and way of living. Confucianism aims to create harmony through adherence to three core values: (i) filial piety and respect for your parents and elders, (ii)  humaneness, the care and concern for other human beings, and (iii) respect for ritual. According to Confucian principles, “a good scholar will make an official”. Thus, some of China’s best scientists leave their laboratories for administrative positions.
Further, Chinese universities tend to bind students to their professors who expect unquestioning loyalty. Scepticism towards generally accepted scientific theories is discouraged, especially when they are held by senior academics. Also, China unlike the US, does not tolerate “failure”, and this incentivises Chinese scientists to conduct “safe” research that yields quick and “achievable” outcomes. All these factors conspire to discourage high risk creative scientific activity and encourages safer, “copycat” research endeavours.
The strength of the US$ and the US economy
America’s global leadership in the life sciences is supported by the fact that the US is the world’s richest and most powerful nation. In nominal terms (i.e., without adjustment for local purchasing power) the US and China have GDPs of US$19trn and US$12trn respectively and  populations of 326m and 1.4bn. Further, the US has an “unrivalled” global trading position: the US dollar is the strongest currency in the world and dominates the overwhelming percentage of all international trade settlements: 70% of all world trade transactions are in US$, 20% in €’s and the rest in Asian currencies, particularly the Japanese ¥ and increasingly the Chinese ¥. Also, US dollar holdings make up the largest share of foreign exchange reserves and the effect of this is to maintain the high value of the US$ compared with other currencies and provide US corporations with significant profits, US citizens with cheap imports and the US government with the ability to refinance its debts at low interest rates.
An Asian context
We suggest that it is increasingly important for American health life science professionals to get a better understanding of China and Asia. The Asian perspective described here is drawn from three recent books: The New Silk Roads: The Present and Future of the World by Peter Frankopan, The Future is Asian by Parag Khanna and AI Super-Powers: China, Silicon Valley and the New World Order published in late 2018 by Kai-Fu Lee.  

Crudely put: the 19th century was British, the 20th century American and the 21st century is expected to be Asian. The era of breakthrough scientific discoveries and stealing American IP is over, and we have entered an “age of implementation”, which favours tenacious market driven Chinese firms. “Asians will determine their own future; and as they collectively assert their interests around the world, they will determine ours as well”, says Khanna. This is starkly different to American prognosticators who assume that the world will be made in the American image, sharing American values and economics.
Asian view of the US$

Some observers suggest that there are chips appearing in the giant US edifice of international trade described above. The current US Administration’s policies have triggered and intensified discussions in Europe and Asia about America’s dominant global economic position and suggest that the US$ might be starting to weaken against a basket of currencies as China, Russia, Iran, Turkey and other nations, choose to use local currencies for some international trade transactions, which they then convert into gold. Further, central banks are tightening their monetary policies and adjusting their bond purchasing strategies. A common US view is that such trading activities are so small relative to global US$ transactions they will neither weaken the US$ nor dent America’s pre-eminent global trading position.
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Can Western companies engage with and benefit from China?
Notwithstanding, replacing the US$ with the Chinese ¥ seems to be part of Beijing’s long-term strategy, as Beijing encourages its trading partners to accept the ¥ as payment for Chinese exports. China’s recent trading agreements with Canada and Qatar for instance have been based upon local currencies rather than the US$. China, which is the biggest importer of oil, is preparing to launch a crude oil futures contract denominated in Chinese ¥ and convertible into gold. European, Asian and Middle Eastern countries have embarked on domestic programs to exclude the US$ from international trade transactions. Also, oil exporting countries are increasingly able to choose which currencies they wish to trade in. At the same time, oil-producing countries no longer seem so interested in turning their revenues into “petrodollars. For the past decade, President Putin of Russia has been calling for the international community to re-evaluate the US$ as the international reserve currency. All this and more suggests that increasingly, emerging economies may transition from their undivided dependence on the US$ for international trade settlement to a multipolar monetary arrangement. Whilst small relative to the full extent of global trade, it is instructive to view these changes within a broader Asian context.
The US has had little exposure to China and Asia
One outcome of America’s pre-eminent global economic position and the financial success of American life sciences companies is that corporate leaders and health professionals tend to have little or no in-depth exposure to Chinese and Asian culture and markets. For example, few Fortune 500 senior executives have worked in China; few American life sciences corporations have sought in-depth briefings of Asian markets and few US students and scientists have studied or carried out research in China. Instead, American life science corporate leaders tend to be US-centric; they condemn China for its IP theft and recommend not to invest in China because a condition of doing so is that you are obliged to part with some of your IP.
Asia a potential economic powerhouse
This distancing has resulted in life science professionals “misdiagnosing” China in a number of ways, which we will discuss. One misdiagnosis is to conflate China with Asia. Asia is comprised of 48 countries. East Asia includes China, Japan and North and South Korea. South Asia includes India, Pakistan and Bangladesh. South East Asia includes Indonesia, Malaysia, Philippines, Singapore and Thailand. These three sub-regions link 5bn people through trade, finance, infrastructure and diplomatic networks, which together represent 40% of the world’s GDP. China has taken a lead in building new infrastructure across Asia - the new Silk Roads - but will not necessarily lead this vast region alone. Rather, as Khanna reminds us, “Asia is rapidly returning to the centuries-old patterns of commercial and cultural exchanges, which thrived long before European colonialism and American dominance”.
The difference between IP theft and imitating ‘what works

Market driven Chinese start-ups, supported by the government, are expected to transform China into a world leader in health life sciences by 2030. The thing to understand about China is that it is not just a few start-ups that steal and copy American IP but thousands, which then aggressively compete. This entails cutting prices, improving and adapting their product offerings, developing leaner operations and aligning their strategies and business models to the demands of different markets. The vast scale of this activity has led to a unique cadre of über agile Chinese entrepreneurs, who imitate successful business models and then engage in value added culture-specific product development processes. This has led to Chinese companies becoming exemplary “market driven” implementors. By contrast American companies tend to be “mission driven” and operate a “single bullet” business model and are either slow or reluctant to adapt to the demands of different markets. This results in US discoveries being exploited in Asia by Chinese rather than American companies. We suggest that there are significant benefits to be derived from American life sciences companies developing joint ventures with market driven Chinese start-ups even if it means surrendering some IP.
As a postscript, it is worth pointing out that the first Chinese patent was only granted in 1985 and recently, after decades of widespread theft, IP protection in China has improved at lightning speed. As Chinese companies issue more patents, the keener they are to protect them. According to the World Intellectual Property Organization in 2017 China accounted for 44% of the world’s patent filings, twice as many as America.

US inventions exploited in Asia by Chinese start-ups
An illustration of a disruptive life science technology invented in the US but exploited faster and more extensively in China is CRISPR-Cas9 (an acronym for Clustered Regularly Interspaced Short Palindromic Repeats), which is generally considered to be the most important invention in the history of biology.  The initial discovery was made in 2012 by a collaboration between Jennifer Doudna, at the University of California, Berkeley, USA and French scientist Emmanuelle Charpentier. Applications of CRISPR technology are essentially as infinite as the forms of life itself. Since its discovery, modified versions of the technology by Chinese scientists have found a widespread use to engineer genomes and to activate or to repress the expression of genes and launch numerous clinical studies to test CRISPR-Cas9 in humans.
Virtuous circle
Notwithstanding, transforming CRISPR genomic editing technologies into medical therapies requires mountains of data and advanced AI capabilities. China has both. The more genomic data you have the more efficacious clinical outcomes are likely to be. The better your clinical outcomes the more data you can collect. The more data you collect the more talent you attract. The more talent you attract the better the clinical outcomes. China is better positioned than America to benefit from this virtuous circle. China’s less than stringent regulation with regards to privacy and storing personal data gives it a distinct competitive advantage over American and Western life sciences companies. China also has more efficient means than any Western nation for collecting and processing vast amounts of personal data.
Collecting personal data

Any casual visitor to China will tell you that one of the striking differences with Western nations is that the Chinese economy is cashless and card-less. Citizens pay for everything and indeed organise their entire lives with a mobile app called WeChat, a multi-purpose messaging, social media and mobile payment app developed by TencentWeChat was first released in 2011 and by 2018 it was one of the world's largest standalone mobile apps, with nearly 1bn daily users who every day send about 38bn messages. Not only is WeChat China's biggest social network it is also where people turn to book a taxi, hotel or a flight, order food, make a doctor’s appointment, file police reports, do their banking or find a date and has become an integral part of the daily life of every Chinese citizen. State-run media and government agencies also have official WeChat accounts, where they can directly communicate with users. Further, an initiative is underway to integrate WeChat with China’s electronic ID system. It may be hard for people outside of China to grasp just how influential WeChat has become. There is nothing in any other country that is comparable to WeChat, which captures an unprecedented amount of data on citizens that no other company elsewhere in the world can match. This represents a significant competitive advantage. Applying AI and machine learning technologies to such vast data sets provide better and deeper insights and patterns. These vast and escalating data sets, and advanced AI capabilities for manipulating  them, give China a significant competitive advantage in the high growth life sciences industry, which  increasingly has become digital.
 Processing personal data
AI is another example of  a technology invented in the West and implemented much faster in China. The “watershed” moment for China was in 2017, when AlphaGo became the first computer program to defeat a world champion at the ancient Chinese game of Go. Since then, China has been gripped by “AI fever”.

Until recently AI machines were not much better than trained professionals at spotting anomalies and mutations in assays and data. This changed in early-2,000 with the ubiquitous spread of mobile telephony and the confluence of vast data sets and the development of neural networks, which made the onerous task of “teaching” a computer rules redundant. Neural networks allow computers to approximate the activities of the human brain. So, instead of teaching a computer rules, you simply feed it with vast amounts of data and neural networking and deep learning technologies identify anomalies and mutations in seconds with exquisite accuracy.

The Beijing Genetics Institute

An illustration of the scale and seriousness of China’s intent to become a world-leader in life sciences and to eclipse similar initiatives by the US is the 2016 launch of a US$9bn-15-year national initiative to develop technologies for interpreting genomic and healthcare data. This national endeavour followed the launch in 1999 of the Beijing Genomics Institute (BGI), which today is a recognised global leader in next generation genetic sequencing. In 2010, BGI received US$1.5bn from the China Development Bank, recruited 4,000 scientists and established branches in the US and Europe. In 2016 BGI created the China National GeneBank (CNGB) on a 47,500sq.m site in Shenzhen, which benefits from BGI’s high-throughput sequencing and bio-informatics capacities. CNGB officially opened in July 2018 and is the largest gene bank of its kind in the world. Dozens of refrigerators can store samples at temperatures as low as minus 200 degrees Celsius, while researchers have access to 150 domestically developed desktop gene sequencing machines and a US$20m Revolocity machine, known as a “super­sequencer”. The Gene Bank enables the development of novel healthcare therapies that address large, fast growing and underserved global markets and to further our understanding of genomic mechanisms of life. Not only has CNGB amassed millions of bio-samples it has storage capacity for 20 petabytes (20m gigabytes) of data, which are expected to increase to 500 petabytes in the near future. The CNGB represents the new generation of a genetic resource repository, bioinformatics database, knowledge database and a tool library, “to systematically store, read, understand, write, and apply genetic data,” says Mei Yonghong, its Director.

US life sciences benefit by engaging with Chinese companies

Lee, in his book about AI, suggests that it is not so much Beijing’s policies that keep American firms out of the Chinese markets, but American corporate mindsets, which misdiagnose Chinese markets, do not adapt to local conditions and fail to understand the commercial potential of Chinese start-ups and consequently get squeezed out of the Chinese market.

This is what happened as Google failed to Baidu, Uber failed to DiDi, Twitter failed to Weibo, eBay failed to TaoBao, and Groupon failed to Meituan-Dianping. We briefly describe the demise of Groupon and point to lessons, which can be learned from it.
Lessons from Groupon’s failure in China

Groupon failed to adapt its core offering when group discounts in China faded in popularity and as a consequence it rapidly lost market share. Meituan, founded in 2010 as a Chinese copy of Groupon, quickly adapted to changing market conditions by extending its offerings to include cinema tickets, domestic tourism and more importantly, “online-to-offline” (O2O) services such as food and grocery delivery, which were growing rapidly.
In October 2015, Meituan merged with Dianping, another Chinese copy of Groupon, to become Meituan-Dianping the world's largest online and on-demand booking and delivery platform. The company has become what is known as a transactional super app, which amalgamates lifestyle services that connect hundreds of millions of customers to local businesses. It has over 180m monthly active users and 600m registered users and services up to 10m daily orders and deliveries. In the first half of 2018 Meituan-Dianping facilitated 27.7bn transactions (worth US$33.8bn) for more than 350m people in 2,800 cities. That is 1,783 enabled services every second of every day, with each customer using the company’s services an average of three times a week. Meituan-Dianping IPO’d in 2018 on the Hong Kong stock exchange and raised US$4.2bn with a market cap of US$43bn.
Efficiency also drives innovation. Meituan-Dianping’s Smart Dispatch System, introduced in 2015, schedules which of its 600,000 motorbike riders will deliver the millions of food orders it fulfils daily. It now calculates 2.9bn route plans every hour to optimize a rider’s ability to pick up and drop off up to 10 orders at once in the shortest time and distance. Since Smart Dispatch launched, it has reduced average delivery time by more than 30% and riders complete 30 orders a day, up from 20, increasing their income. In 2019, the American business magazine Fast Company ranked Meituan-Dianping as the most innovative company in the world.
Although Meituan-Dianping and other companies we mention may not be well known in the West and are not in the health life sciences industry, they are engaged in highly complex digital operations disguised as simple transactions, which enhance the real-world experiences of hundreds of millions of consumers and millions of merchants. To achieve this the companies have amassed vast amounts of data and have perfected AI and machine learning technologies, which make millions of exquisitely accurate  decisions every hour, 24-7, 365 days a year. Such AI competences are central to the advancement of health life sciences. American life science professionals might muse on the adage: “make your greatest enemy your best friend” and consider trading some of their IP to joint venture with fast growing agile Chinese data companies in a strategy to restore and enhance their market positions.
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  • Dementia has emerged as one of the biggest killer diseases of the 21st century
  • Studies suggest that moderate alcohol use significantly increases the risk of dementia
  • There are no treatments that slow or stop the progression of dementia
  • There are 50m people worldwide living with dementia, by 2050 there will be 132m
  • 0.85m people in the UK are living with dementia and this is expected to rise to 1m by 2025
  • Public policies alone are not sufficient to limit and control alcohol use
  • This increases the importance of a medical solution for dementia
  • Recent innovative research on neurodegenerative disorders provide some hope for future dementia sufferers
Alcohol use and dementia

Two significant recent studies described in this Commentary link alcohol use and the onset of dementia. One study published in the June 2017 edition of the British Medical Journal (BMJ) suggests that moderate alcohol use increases the risk of adverse brain outcomes and a steeper decline in cognitive abilities. The other, published in the February 2018 edition of the Lancet Public Health, suggests that excessive alcohol consumption is a significant risk of early onset dementia.

Dementia is a chronic progressive disorder, which has emerged as one of the biggest killers and the only leading cause of death without a treatment that can slow or stop its progression. Of the 529,655 deaths recorded in the UK in 2015, dementia accounted for 61,686 (11.6%): the majority are women, 41,283, compared to 20,403 men.

In this Commentary
In this Commentary we outline how alcohol affects you, explain its misuse and describe some of the UK’s drinking patterns and their consequent costs. We then suggest that public policies alone, which are aimed at both the individual and population levels to reduce and control alcohol use in order to save lives and reduce healthcare costs, are insufficient. This shifts the burden of a solution for alcohol related dementia onto potential medical treatments. We describe dementia and provide a few epidemiological facts before describing the findings of the 2 studies. We suggest that the studies are significant because there are no effective treatments or cures for dementia despite the vast amounts of money spent on neurodegenerative diseases over the past 2 decades. We end by mentioning a couple of significant UK-based innovative dementia research initiatives, which signal hope for future dementia sufferers.


How alcohol affects you and its misuse

Alcohol is a dependence-producing psychoactive beverage, which has been widely used throughout the world for centuries. Problems associated with the consumption of alcohol have been around since the beginning of recorded history. There are 3 mechanisms by which alcohol can affect you: (i) alcohol has toxic effects on your brain and other organs and tissue, (ii) alcohol has intoxicating effects, which manifest themselves in physical and mental impairment and (iii) you may become dependent of alcohol, which means control over your drinking habit is impaired. Alcohol’s harmful impact is influenced by, (i) the volume you consume, (ii) your pattern of drinking and (iii) the quality of the alcohol. When your body takes in more alcohol than it can metabolize, the excess builds up in your bloodstream. Your heart circulates the blood alcohol throughout your body leading to changes in your body’s chemistry and normal functions. 

Studies have consistently suggested that heavy alcohol consumption is detrimental to health and a leading preventable cause of death. There is an increasing awareness of the harmful impact of alcohol misuse on individuals and societies. According to the 2011 World Health Organization’s (WHO) Global status report on alcohol and health, only about 50% of the world's population consumes alcohol, and most users are in the wealthier northern hemisphere countries, although alcohol use is increasingly becoming a problem in emerging economies. Eastern European countries have the highest consumption, riskiest patterns of drinking and the highest levels of alcohol-related deaths and disabilities. According to a February 2018 WHO report, an estimated 3.3m people a year worldwide die as a result of alcohol misuse, which accounts for about as much death and disability worldwide as tobacco and hypertension. 
Drinking in the UK and its costs
The latest available data suggest that the total alcohol consumption in the UK is 9.5 litres per person aged 15 years and older and 7.8 litres per person on average throughout the entire population in 2015. This forms part of a recent downward trend from a peak of 11.6 and 9.5 litres per head respectively in 2004 and positions the UK 16th out of the 34 OEDC countries. 21m people in the UK do not drink alcohol. According to NHS Digital, in 2014 there were 1.1m hospital admissions in England wholly or partially attributable to alcohol use: more than double the number recorded a decade earlier. In 2014 about 6,600 people in England died from causes related to alcohol and about 115,000 adults received specialist alcohol treatment. Treating alcohol related conditions is estimated to cost NHS England about £3.5bn per year: around 3.6% of its annual budget. About 6% of adults in England are dependent on alcohol. 195,000 prescriptions were written in 2014 by the NHS to treat alcohol dependence at a cost of £3.4m. Over the past decade these prescription costs, measured in 2014 prices, have increased by nearly 80% from £1.9m in 2004.
Public policies to curb alcohol use are insufficient

In May 2018, Scotland became the first country in the world to introduce legislation for minimum pricing on cheap, high-strength alcohol. The government said it was an endeavour to cut the consumption of alcohol and save lives. For several decades, similar alcohol reduction and prevention measures have been available at both the individual and population levels in the UK and elsewhere. The most effective include alcohol taxes, restrictions on alcohol availability, and drink-driving countermeasures. Despite the success of these policies, alcohol problems continue to present a major challenge to medicine and public health. In part, this is because population-based public health alcohol control policies tend to be overlooked in favour of approaches aimed at the individual and these have tended to be more palliative than preventative. It is reasonable to assume therefore that, in the near- to medium-term, alcohol related dementia will neither be significantly slowed nor reduced by public policies alone. This shifts the emphasis to a medical solution for alcohol related dementia.


Dementia is an umbrella term, which describes a group of symptoms that impair your cognitive functions and behavioural abilities severely enough to interfere with your daily life and activities. It is a chronic, progressive and incurable disorder, which ranges in severity from ‘mild’, when it is just beginning to affect your functioning, to ‘severe’, when you depend completely on others for basic activities of living. Dementia involves damage of nerve cells in your brain, which can occur in several areas and affect people differently, depending on the area of the brain affected. Alzheimer's, a neurodegenerative disease, is the most common irreversible cause of dementia, accounting for 60% to 80% of all dementia cases.
The biggest risk factor for dementia is age. We are living in the age of the aged, which represents the successes of improved healthcare over the past century. There are some 50m people worldwide living with dementia. The total number of people with dementia worldwide is projected to increase to 75m by 2030 and 132m by 2050, with the largest proportion of these in low- and middle-income countries. There are 0.85m people diagnosed with dementia in the UK, with numbers set to rise to over 1m by 2025 and to 2m by 2050. 225,000 people in Britain will develop dementia this year. There is a similar story to be told in most wealthy developed countries. For example, in the US an estimated 6m people have Alzheimer's, which equates to 10% of people aged 65 and older. The current annual cost of dementia globally is estimated to be about US$1tr: 1% of global GDP. The annual cost of the condition in the US is US$259bn, which is expected to rise to US$1tr by 2025. Dementia costs the UK exchequer about £26bn each year.
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Dementia is not an inevitable part of ageing. The notion that dementia is a disease rather than a side-effect of aging has been around for 100 years. Early onset of the disease can begin when people are in their 30s, 40s, or 50s. For example, over 42,000 people under 65 have dementia in the UK. Age, family histories and heredity are factors of dementia that we cannot change. But lifestyle factors such as alcohol use are modifiable risks. There is no cure for the condition and no therapy that slows or stops its progression although some drug treatments may temporarily improve its symptoms.

The BMJ study

For some time, scientists have suggested that moderate alcohol consumption could delay the onset of cognitive impairments in ageing, but few studies have examined the effects of modest consumption of alcohol on the brain. This increases the significance on the BMJ study, which includes an analysis of the relationship between moderate alcohol consumption and dementia. Researchers from Oxford University  and University College London studied a cohort of 550 healthy adult civil servants over a 30 year period between 1985 and 2015. At the beginning of the study the average age of the cohort was 43 and none were dependent on alcohol. At regular intervals during the study tests were administered to assess participants’ levels of alcohol consumption and cognition. At the end of the study participants underwent an MRI brain scan, which enabled researchers to analyse correlations between average alcohol consumption, cognition and brain structure. Findings suggest that alcohol use is associated with reduced right hippocampal volume. The hippocampus is a small region of your brain associated with memory and spatial navigation. Poor memory is linked with small hippocampal volume as measured by an MRI scan. The more you drink, the more you are likely to have hippocampal atrophy, which is regarded as an early marker for dementia. Significantly, the study found that even moderate drinkers were 3 times more likely to have hippocampal atrophy than abstainers.

The principal strength of the study is that it is a longitudinal observational analysis of a specific cohort, which yielded detailed information on long term alcohol consumption and cognition and confounding variables. These are “extra” variables, which are important to know in order to avoid bias. Because this was an observational study the researchers were unable to draw any conclusions on cause and effect. Notwithstanding, they were able to conclude that moderate alcohol use is associated with adverse brain outcomes and, “Alcohol might represent a modifiable risk factor for cognitive impairment, and primary prevention interventions targeted to later life could be too late.” In an editorial note in the same BMJ, Killian Welch, a consultant neuropsychiatrist at the Royal Edinburgh Hospital suggests the findings of the study, “strengthen the argument that drinking habits many people regard as normal, have adverse consequences for health.”

The Lancet Public Health study
The second study from The Lancet Public Health presents findings of a large retrospective study predicated upon data of more than 1m adults diagnosed with dementia between 2008-2013 from the French National Hospital Discharge database. These data provide details on all hospital admissions, including patient demographics, reasons and durations for hospital stays and treatments received. Findings suggest that being hospitalised with alcohol dependence or a health issue caused by continuous heavy drinking is a significant risk factor for dementia. Although the condition is more common in people over the age of 65, the study identified and examined 57,000 cases, which presented with the onset of dementia before 65. Of these, 57% were heavy drinkers, 39% regularly consumed alcohol and 18% had an alcohol use disorder as an additional diagnosis. “Heavy drinkers” were found to be more than 3 times likelier to develop dementia. Excluding alcohol-related brain damage, alcohol use disorders were still found to be associated with a 2 times greater risk of dementia.

According to Michael Schwarzinger, the lead author of the study, who is the director of the French Translational Health Economics Network and a researcher at the Universite Paris Diderot, France, “Chronic heavy drinking was the most important modifiable risk factor for dementia onset in both genders and remained so after controlling for all known risk factors for dementia onset.” While other studies have reached similar conclusions, some research suggest that drinking one or two units of alcohol a day - a small glass of red wine particularly - could be of benefit to brain health and slow the onset cognitive deterioration. Indeed, the Lancet Commission on dementia, associates light to moderate alcohol use with a healthier brain. Schwarzinger and his colleagues however are clear, “Our findings suggest the burden of dementia attributable to alcohol use disorders is much larger than previously thought . . .. Chronic heavy drinking leads to irreversible brain damage [and even] heavy drinkers who got sober didn’t have a lower dementia risk than their peers who remained problem drinkers. . . Additionally, clinicians should be better aware of the role of alcohol use disorders in dementia onset over the lifetime, which seems to be a risk factor often omitted.”
Why there is no cure for dementia

Over the past 2 decades pharmaceutical companies, biotech’s, governments, universities and charities have devoted vast amounts of money, time and effort to the dementia challenge, but without being able to develop any credible treatment let alone cure. This partly reflects the complexity of neurodegenerative disorders. The brain is a complex organ, which scientists are still endeavouring to understand. This lack of understanding is one of the main obstacles preventing the development of effective treatments for dementia. The disorder seems to present as a result of an intricate interaction of genes, lifestyle factors and other environmental influences. But, without knowing the exact mechanisms that cause damage, especially in Alzheimer's, it is impossible to target the disease process effectively.

In addition to our rudimentary understanding of the brain there are some specific challenges faced by researchers into neurodegenerative disorders. One is the blood-brain barrier, which is formed by brain endothelial cells, which protect the brain by preventing toxins from reaching it. This presents dementia researchers with a significant challenge because the blood-brain barrier also prevents treatments getting through to the brain and working effectively. Newer immunotherapy drugs, also known as biologics, are large complex molecules or mixtures of molecules, which because of their size and shape may only partly cross the blood-brain barrier. This suggests that dangerous doses would be needed for them to work effectively. And even if the biologics could penetrate the blood-brain barrier and target the proteins causing damage to brain cells, dementia is irreversible and may have started to develop decades before the presentation of symptoms and before the administration of drugs. Further, there is no test for dementia, which means the disorder is difficult to diagnose. This leads some health professionals to suggest that with no effective treatments, early diagnosis has no benefits. A significant proportion of those living with dementia have not received a formal diagnosis, which presents further challenges not least for clinical studies.

The amyloid hypothesis

For the past 2 decades dementia drug development has been dominated by the ‘amyloid hypothesis’, which suggests that Alzheimer’s can be treated by attacking the sticky plaques of beta amyloid protein that builds up in patients’ brains. The pharmaceutical industry has lost billions in failed development of drugs designed to target amyloid, and there is still no treatment that affects the underlying progression of the disease. In January 2018 Pfizer, the world’s largest pharmaceutical company, which has spent billions on dementia R&D, announced that it was pulling out of research into drugs to treat complex neurological disorders. Notwithstanding, many pharmaceutical companies, driven by the potential financial gains from finding a medicine that can arrest the disease of 50m people, continue to work on treatments for neurodegenerative diseases.
Innovative research endeavours that target dementia

The UK’s 2013 presidency of the G8, (an inter-governmental political forum comprised of the major industrialized democracies) focused on dementia. This resulted in the condition rising up global political agendas and the UK Government unlocking more money for research into neurodegenerative disorders. In 2015 the UK government with the help of JP Morgan, an American multinational investment bank, set-up the Dementia Discovery Fund, with an initial investment of £15m and the commitment from several big pharmaceutical companies to invest. The fund’s strategy was to raise £100m for dementia R&D and move beyond the amyloid hypothesis. It has invested in some 12 start-ups and projects investigating novel ways to stop or reverse the complex biological processes that lead to dementia. In November 2017 the Bill and Melinda Gates Foundation invested US$50m into the fund, which took its total to £130m. Other well-funded novel research projects include the UK Dementia Research Institute, which brings together the Medical Research Council, Alzheimer’s Society and Alzheimer’s Research UK in a £250m initiative involving more than 400 scientists, who are leading efforts to transform the treatment and care for people with dementia.

Dementia is a 21st century Damocles Sword positioned to bankrupt healthcare systems in the developed world. Dementia is a vast, fast growing global killer disease effecting about 7% of people living in wealthy nations and costing billions. Despite billions spent on dementia R&D over the past 2 decades there are no viable treatments to either slow or stop the progression of the disorder. Alcohol use has been suggested as a significant contributory factor for the onset dementia. Public policies to curb the use of alcohol are insufficient to significantly dent the vast and escalating burden of dementia. This shifts the emphasis for a solution to medicine. Despite the dearth of medical solutions, things are beginning to change with some recent novel research initiatives specifically targeting neurodegenerative disorders, which might help to lift the Damocles Sword
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