Recession sequellae play out as predicted in medtech industry

Back in July, we looked at the medical technology industry which, like all industries, was facing the effects of a lingering recession.

While we have since seen that the recession has ended (by its pure definition being two or more quarters of decline in GDP), we know that this is not synonymous with a spike in growth or boost in employment.

Today, at Xconomy, I saw the post, "Medical Device Startups Getting Squeezed by Recession, Lawmakers, Says E&Y Report".  Drawing as it does from the Ernst and Young report, it illustrates that the small companies have been hit much harder than the big ones.  With established product lines and cash flow from operations, companies like Medtronic, Abbott and others have some economic immunity while startups, with their need for external financing severely crimped not only by a squeeze on VC investment but also further aggravated by VCs reducing their own funding, are feeling the effects with little shielding.

I have watched as a number of small medtech companies have either gone out of business or been acquired in whole (or just assets) by other companies.  Notable examples include the dissolution of Xtent, the sale of the assets of Innovative Spinal Technologies and others.  However, I have also seen companies like Haemacure which, despite the challenges of operating losses and reduced financing options, have persisted in moving products through various stages of commercial development toward market introduction.

The severity of the recession has guaranteed that, even for medtech companies, the effects will also persist.  As we also noted previously, the continued disparity between established companies with positive cashflows and early stage companies with limited financing options may well lead to a flurry of acquisitions, but as yet, that trend has yet to show much substance.

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