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Investments in the European medical device sector, particularly in technologies that promise cost-efficiency, are witnessing a gradual spike as efforts to cut reimbursements as well as healthcare costs take shape. Investors are shifting focus from early-stage to late-stage start-ups as failure rates and investments rise and exit options drop.

New analysis from Frost & Sullivan, Investment Analysis of the European Medical Device Sector, reveals that pricing pressures and uncertainty of returns have made private equity investors drift away from the medical devices industry. Regulatory demands, pricing pressures and fewer exit options have made venture capitalists too more cautious.

“Analysis of data shows that deals in the last quarter are continuing to decrease, implying that big investments that usually happen in the last quarter are slowly phasing out,” said Frost & Sullivan Senior Financial Analyst Saneesh Edacherian. “Mergers and acquisitions (M&As) will be the primary exit options for companies in the European medical device sector.”

Pricing pressures and lower returns on in-house R&D will compel major participants in the European medical device industry to scout for strategic acquisitions that will strengthen their therapeutic pipeline. With the market in the United States (US) becoming more competitive, the contribution of US buyers to M&As is likely to go up.

“While medical device companies acquire most integration deals, pharmaceutical and biotech firms are the second leading buyers of medical device companies,” expounded Edacherian. “This trend is primarily a result of reducing margins, regulatory uncertainty, and depleting pipelines that force top pharmaceutical enterprises to look for diversification in the European market.”

Investment Analysis of the European Medical Device Sector is part of the Business and Financial Services subscription. Frost & Sullivan’s related studies include: Investment Analysis of the US Medical Device Sector and Private Equity and Venture Capital Investments in Global Healthcare Industry. All studies included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants. Frost & Sullivan’s Business and Financial Services group serves clients around the world in all aspects of financial analysis, market research and monitoring, due diligence, idea generation, opportunity analysis, investment valuation, and other proprietary research.