Navigating Medtech Regulatory Pathways: US vs. Europe
At LSI Europe ‘23, industry leaders discussed the evolving landscape of medtech investment, emphasizing the importance of understanding regulatory pathways when scaling companies in both the United States and Europe. While the United States is often favored for its more predictable regulatory environment, navigating the complexities of different markets remains a crucial factor in the success of medtech companies. This article explores key insights on the current investment climate, differences in entrepreneurial approaches, and the strategic considerations that can help companies thrive in today’s competitive market.
The Current Investment Climate in Medtech
The medtech investment climate remains robust despite recent economic challenges. Investors are still actively seeking out well-presented and innovative projects, indicating that rational money is available for differentiated ideas.
"There is money. Of our nine portfolio companies, five of them raised funds this year. We've seen them having no problem raising, even at better valuation expected," said Murielle Thinard McLane of Intuitive Ventures. This sentiment is echoed by Janke Dittmer of Gilde Healthcare, who noted, " In 2021 and 2020, we saw a lot of companies get financed—and now, the really good companies are still finding it not too difficult. However, if you have difficulties in your business model, fundraising becomes really challenging."
Differences in Entrepreneurial Approaches: US vs. Europe
The approaches of entrepreneurs from the US and Europe differ significantly, impacting investor perceptions and evaluations. US entrepreneurs often present with a more optimistic and aggressive growth plan, while European entrepreneurs tend to be more cautious and technically detailed.
Janke Dittmer explained, “It would be good to have more of that optimistic spirit on the European presentations and inject a little more realism in the slick presentations we see from the US." This difference is crucial as medical device investors look for both innovation and practicality. Murielle Thinard McLane added, "For us, it's about how the team can expand to the US market and how we can help them think about it—particularly around regulatory pathways and go-to-market deployment."
Team and Leadership Dynamics
The growth and scaling of medtech companies often necessitate changes in leadership. Determining whether the current CEO can lead the company through various stages is a sensitive but essential discussion.
Sasha Berger of TVM Capital shared, "We try to have an open conversation before we invest. We review the management team and the capabilities and then see what, from our perspective, would be a good way forward." This sentiment was reinforced by Janke Dittmer, who highlighted the need for honest dialogue: "There is data showing that 90% of the early stage CEOs will not be the right CEOs for the scale-up."
Navigating Regulatory Pathways
Understanding and navigating the complex regulatory landscapes of different markets is crucial for medtech companies. The US market is often preferred due to its more predictable regulatory pathway, despite the initial challenges.
"We're seeing a lot of companies that are bypassing Europe and going directly to the US," said Murielle Thinard McLane. Janke Dittmer elaborated, "It's really difficult; I cannot advise a company to go into this sort of uncertain adventure in Europe when the market is bigger and more straightforward in the US."
Importance of Business Models and Reimbursement Strategies
Developing a transparent business model and reimbursement strategy is essential for the success of medtech companies. Investors are keenly interested in how these companies plan to get paid for their products.
"It's almost like the first question; the second question that comes up in a presentation nowadays is how does that fit into the current reimbursement landscape?" noted Janke Dittmer. Mano Iyer, reflecting on the economic realities, said, "Just because you have a good therapy doesn't mean it's economically viable for the hospital."
Capital Markets and Scaling
The availability of capital markets, especially for IPOs, is critical for scaling medtech companies. Europe must improve its capital market infrastructure to compete effectively with the US.
Sasha Berger pointed out, "Things need to be done, and there are ongoing activities with the respective regulatory bodies. We have to work with the environment we're in." Janke Dittmer emphasized the need for development: "We need to upgrade the European capital markets. There are some nice beginnings with Euronext and NASDAQ Nordic, but it's not enough—and we're not competitive with the US."
As the medtech market continues to evolve, these insights from industry leaders at the recent medtech conference highlight the importance of strategic planning, understanding market dynamics, and being adaptable to both opportunities and challenges. For medical device investors, these elements are crucial in navigating and thriving in the current medtech landscape.
Conclusion
The full recording of the panel can be found in LSI’s resource hub at the link below:
Understanding regulatory pathways, adapting to market dynamics, and developing robust business models are essential for medtech companies seeking to scale and succeed. By navigating these challenges strategically, startups can attract investment and drive innovation in the evolving healthcare landscape.
