What Do Medical Device Companies Do?

A primer on medical device companies and what investors need to know.

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Medical device companies provide a vital role in the medical landscape by producing and innovating on the latest technologies available to medical experts and patients.

Medical device companies develop instruments to diagnose, treat or prevent various medical conditions. Often medical devices will facilitate the life of doctors by providing cutting edge technology through simple to use gadgets or machinery. Many companies will try to find an untapped niche where they can step in, innovate on the current methods or devices and make major profits of that unmet specific need.

Here, the Investing News Network (INN) provides a brief overview of what medical devices companies do for those interested in investing in this niche sector.

Approval Process 

All medical device companies must face trials and approval process from various regulatory bodies in the US, Europe, and Asia. Similar to the pharmaceutical industry, medical devices must be approved by the US Food and Drug Administration, in order to be available in the market.

This process can take years, and every step crucial for the companies, with most of them celebrating even being part of an FDA trial for their equipment.

Companies will also seek patents on their technologies if they are innovative enough to warrant a protection, this way the company is the sole developer of the device and can choose to manage it as it pleases it. Agreements, licensing and manufacturing deals can bring in sustainable profits for a company holding a patent on any specific medical technology.

Small Company Innovation

Medical device companies share some of the struggles faced by biotech and pharma—namely, the astronomical costs associated with research and development (R&D), as well as a lengthy testing and approval process for products. As a result, many of the larger medical device companies are wary of innovation, instead opting to iterate on existing models or technologies.

In this case, the innovation that could prove to be risky for bigger companies turns to be the bread and butter of smaller startups, that while they may not be public companies yet, they aim to get absorbed by bigger players in the sector.

Meghan Alonso. CEO of Imua Services, a resource center for medical device companies looking to grow in the market told INN larger companies will host these startups, let them work on their tech and if things become promising, they could outright buy them and their tech.

“What [Johnson & Johnson (NYSE:JNJ) have] done to feed this system of innovation and make it easy at to grab anything that they want to – they’ve built infrastructure [in several cities in the US] where they have an incubator, and they have space available for these small start-up companies to have their office, and they share lab space,” Alonso said.

Monetary Projections

According to SelectUSA stats, the American medical device industry is set to hit $155 billion in 2017. In 2015, the US market accounted for 43 percent of the global medical device sector all on its own. Of course, the global market continues to grow rapidly,  with Brazil, Russia, India, and China investing more in researching and developing medical devices over the past few years.

That said, investors will surely be watching the industry with a sharp eye to see how this exciting market continues taking shape.

Don’t forget to follow us @INN_LifeScience for real-time news updates.

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

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