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Industry 4.0 to Steer MedTech to Higher Growth: A Sneak Peek

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We are in the era of Industry 4.0 or the fourth industrial revolution and witnessing the digitalization of manufacturing across all industrial domains. MedTech being no expectation to this breakthrough, already traversed a long way to observe this significant transition in healthcare application.

As Jim Cramer says, "I love behavior-change investing. It can be incredibly lucrative, and when you have a behavior-change theme you can use selloffs to pick stocks based on those changes."

From investors' perspective, it is baffling how they evolve with ever-changing trends whether to transform the entire MedTech portfolio or wait for the right moment. It's a huge opportunity out there and being myopic just won't work. One needs to be valiant enough to bet on the trend-shifting consumption habits stemming from Industry 4.0, and trust me, it's a gain game at the end of the day.

A Look Into the Trend Change

For layman’s recollection, it was in 1765 when mechanization (with water and steam power) replaced manual labour, marking it as the first industrial revolution in the history of mankind. In the second stage of industrial revolution, electricity got invented almost at the end of 19th century as a new source of energy. The third industrial revolution happened in 1969, which gained enormous prominence with the introduction of computers and nuclear energy, leading to an all new era of automation.

With its gradual evolution, the Industry 4.0 helped coin a few buzzwords of the century like Internet of Things (IoT), Cloud, Big Data, smart device, et al while digitalizing the entire production process. Per a Forbes article, “even though some dismiss Industry 4.0 as merely a marketing buzzword, shifts are happening in manufacturing that deserve our attention”.

Industry 4.0 Application in MedTech

Coming back to MedTech, the Industry 4.0 applications in this sector are already massive. Digitalization has been inoculated into every sphere of the sector, starting from workflow management to minimizing errors, increasing business value, optimal use of resource, supply chain digitalization and reducing treatment risk. Here are a few vital trendsetting aspects of Industry 4.0 in MedTech that investors can mull over.

IoMT: A Revolution in Itself

World Telecommunication Development Conferences project that by 2020, 40% of IoT-related technology will be health-related, ahead of any other category. Not only that, IoMT will capture around $117 billion market share within this time frame.

IoMT (Internet of Medical Things) combines technology with medical instruments and applications. Chronic diseases requiring frequent monitoring can be tracked effectively so that patients receive timely care and proper treatment. Consider a situation when a patient is able to obtain an instant report on his body’s hydration level just by clicking on the smart water bottle app on his mobile phone. Another smart IoMT device emerging fast in the market is Wireless Vital Sign Monitoring system, which provides continuous wireless beat-by-beat blood pressure reading.

This apart, a new-age IoMT device is the smart pill. These oral medications with ingestible sensors for gastrointestinal healthcare are commonly used in patients with dementia or any other mental illness. In this regard, Medtronic's (MDT - Free Report) SmartPill motility testing system is a striking instance. The company currently carries a Zacks Rank #2 (Buy).

Artificial Intelligence & Machine Learning

Already a lot has been said on the growing prosperity of AI and big data in every sphere of healthcare over the past few years. The latest FDA action on software as a medical device (SaMD) certainly emphasizes the fact that it is high time investors should focus more on the AI-driven Medical Device stocks with great potential for tremendous growth down the line.  

Needless to say, this gigantic prospect is luring even non-MedTech players. Late last year, Apple (AAPL - Free Report) won FDA approval for Apple Watch 4 with ECG app that provides irregular heart rhythm notification. Besides, Samsung's S-Patch ECG offers easier ECG monitoring. These are all strong indications that investors should start aiming for AI centric investment.

Mechatronics

Medical Mechatronics is a much-awaited digital evolution in the global healthcare industry.

The rising prevalence of minimally-invasive robot-assisted surgeries, self-automated home-based care, use of IT (Information Technology) for quick and improved patient care and a shift in payment system to a value-based model indicate the supremacy of Mechatronics in the MedTech space.

The best example of Mechatronics in the healthcare industry is 3D printing, which altered the face of the medical gadgets industry. Of the major companies, Stryker Corporation (SYK - Free Report) has been one of the early adopters of the 3D printing technology. This #2 Ranked stock’s FDA-approved Tritanium TL Curved Posterior Lumbar Cage is a 3D-printed interbody fusion cage intended for use as an aid in lumbar fixation.

Robotics

Frequency of powerful computing, improved sensing, microfabrication and molecular imaging enabled new robotic solutions to mitigate age-old problems for the MedTech companies. These services mete out a painless, error-free and inexpensive experience. Therefore, MedTech entities using Mechatronic-based robots to cure diseases gain a competitive edge with a solid customer base, robust revenues and handsome profits.

Of the bigwigs, the Zacks #2 Ranked MedTech giant Intuitive Surgical (ISRG - Free Report) is noteworthy. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

5G: Game Changer for Industry 4.0

Currently, the medical and non-MedTech mammoths are awaiting the next-gen mobile technology, 5G, which is expected to take digitalization to an all new level, courtesy of its instant data transfer speeds.

According to a Medical Device Diagnostic Industry report, the “5G capability will allow much more efficient and prompt device-to-device communication, thus making the medical Internet of things an operational reality”.

Bottom Line

Market experts recognize digitalization of MedTech as a booming space for investment at present. Going by a recent Data Bridge Market Research article, the global IoMT market is forecast to see a CAGR of 38.67% during the 2019-2026 period.

However, per a Deloitte story, this industry en route to digitization, is currently facing an array of challenges, thanks to the current shift in the MedTech competitive landscape. These concerns include downstream pricing pressures, stringent regulations and operational inefficiencies due to industry consolidation, which is forcing many MedTech companies to implement effective cost-reduction strategies to stay competitive. Undoubtedly, this is causing a survival issue for the industry players and we think, investors should pay attention to this while choosing stocks.

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