The global medical technology (MedTech) industry hit record revenues from July 2021 through June 2022, but faces an uncertain future, as described in the 16th annual Pulse of the Industry report produced by Ernst & Young LLP (EY US). As the global pandemic subsides, MedTechs are adjusting to a complex environment, including geopolitical conflict, soaring inflation, currency volatility, recession fears, changing health care ecosystems and supply chain difficulties.

Arda Ural, PhD, EY Americas Industry Markets Leader, Health Sciences and Wellness, says, "The MedTech industry proved it is incredibly resilient, as we've witnessed throughout the past few years. While current geopolitical and economic challenges pose a threat, we believe public markets should rebound and MedTech will be in a stronger position than before. This is the time for MedTech executives to reimagine their business models and think of opportunities beyond the upcoming slowdown."

Pulse of the Industry captures the current state of the MedTech industry, as expressed in revenues, overall financials, spending trends, M&A, R&D and other factors. The report also outlines four key areas that will promote the industry's transformation, and it encourages taking calculated risks for future success:

• Embrace the shifting nature of MedTech innovation
• Adapt to new commercial models
• Design forward-looking supply chain strategies
• Recruit and retain a strong workforce

"As global economy is ripe with uncertainty, MedTechs are facing the reality of new challenges in their day-to-day business," Jim Welch, EY Global MedTech Leader, says. "While this can be a tumultuous period, the industry is healthy and continues to invest in itself. R&D spending is well above the past-decade average, new FDA approvals offer promise of more innovation and there's an opportunity for supply chains to be reinvented. If the industry can focus on making itself more resilient, there is a lot of optimism to be had."

As detailed in the report, extrinsic obstacles are challenging MedTech leaders. Total capital raised by the industry dropped year over year, falling 30%, which was particularly noticeable in the first six months of 2022. However, despite this fall from the record highs, the overall fundamentals of the industry remain strong. Staffing recruitment and retention have proven difficult, and a looming shortage of clinical care providers in the next five years will stress the health sector overall. The IPO market also took a dip from the record highs seen in 2021, and M&A dealmaking — while generating $77b in the 12-month period ending June 2022 — is below the average of the previous decade.

But despite these challenges, rebounds are likely on the horizon. The innovation revolution of virtual care presents significant opportunity to MedTechs. The accelerated acceptance of home-based care was largely due to COVID-19, but flexible care delivery offers many benefits. MedTech companies can serve vulnerable populations, increase detection of underdiagnosed diseases and deliver better outcomes. Additionally, rethinking commercial models and redesigning supply chains provides the chance to market devices in a new way and ensure that there will be less disruption in the future. Supply chain transformation will be another priority for the sector: The disruption to supply chains during the pandemic continues to affect the industry, with the shortage of semiconductor chips, and the rising costs of raw materials and labor representing ongoing challenges that MedTechs will need to address as they plan their growth strategies for the future.