Medical products and devices are ubiquitous throughout the healthcare industry, playing critical roles in patient outcomes. In this large global market, investors can create value by helping smaller businesses to increase commercial penetration, expand product and portfolio breadth, and optimize both owned and outsourced manufacturing. The sector also continues to be supported by several powerful themes, including demographic and regulatory tailwinds, and a favorable pricing environment.

Below, senior professionals from our Healthcare & Life Sciences Group delve into the dynamics driving investor interest in medical products and devices, particularly Class I consumables. They also share how recent Harris Williams client EHOB became a leader in the single-patient-use consumables segment of the market.

Rising Patient Volume and Healthcare Scrutiny

The medical products and devices sector includes a wide array of items classified by their relative risks to patient health. Across these Class I, II, and III medical products and devices, the global market is broad and growing.

A key trend driving this growth is an aging population that requires more acute care and consistency in hospital admissions, including average length of stay. Meanwhile, many product categories have recently seen pricing improvements, increasing the sector’s investor appeal. “The medical products and devices sector offers a large total addressable market, with further growth being fueled by rising patient volume and improved pricing, all of which create a favorable outlook,” adds Tyler Bradshaw, a managing director.

Heightened government scrutiny of hospitals is also buoying the sector as regulators push for better patient care within healthcare systems. To improve patient outcomes, hospitals are constantly seeking new high-quality and innovative products and devices. “Greater monitoring of hospital-acquired conditions is driving especially attractive growth for Class I consumable products used in acute care settings,” points out Julian Feneley, a managing director.

Pressure injury prevention devices are a prime example. In 2022, U.S. spending on these items was estimated at $1.3 billion, with steady growth expected for the next several years.¹ Taylor Will, a director, notes that, despite more regulations related to hospital-acquired conditions, pressure injuries continue to be pervasive. “The frequency of pressure injuries increased, according to recent data from the Agency for Healthcare Research and Quality, indicating there’s plenty of room to help more patients in need,” he says.

EHOB: A Leader in Pressure Injury Prevention

As a pressure injury prevention leader, EHOB is benefiting from the many trends driving demand for consumable medical products and devices.

EHOB’s differentiated solutions have led to robust penetration across hospital systems, with its products known for their ease of use and clinical efficacy. “The company’s high-quality products at cost-effective price points have helped it to separate itself from competitors,” says Bradshaw.

Due to its strong brand recognition, particularly with nurse clinicians, EHOB is well-positioned as regulatory scrutiny increases for hospital-acquired conditions. “EHOB educates nurses on how its products improve patient care, which drives greater product utilization,” explains Will. “In addition to creating better patient outcomes, EHOB’s solutions benefit the hospital by reducing the likelihood of hospital-acquired conditions related to pressure injury.”

EHOB also leverages its value proposition and practitioner relationships to bring more products to market. “By tailoring its portfolio to the needs of nurse clinicians in acute care settings, EHOB has successfully expanded into adjacent product categories, such as heel protection and safe patient handling,” says Feneley. “These value-added products have been rapidly adopted throughout the industry.”

EHOB’s owned manufacturing is another key advantage. Like many makers of Class I and II products, EHOB’s streamlined production process offers cost advantages while the business grows. “Best-in-class companies like EHOB are using automation in their facilities to generate margin improvement as they scale,” says Bradshaw. “Investing in these more cost-effective and efficient automated capabilities can help generate higher buyer interest.”

Opportunities to Accelerate Growth

Within the medical products and devices market, there are many small and medium-sized companies providing Class I and II items. “This highly fragmented space offers an opportunity to help smaller companies accelerate their growth, namely in the areas of commercial penetration, product portfolio, and manufacturing,” says Bradshaw. For example, from a commercial model perspective, investors can improve a company’s use of direct and indirect sales representatives and group purchasing organization (GPO) contracts to penetrate channels. “Commercial penetration is an opportunity that applies across the landscape and represents an attractive lever for investors,” he continues.

Investors can also make a meaningful impact by expanding the breadth of a company’s product offering. “A broader portfolio increases a company’s overall value proposition to the customer while appealing to GPOs looking to partner with a narrower base of suppliers that can deliver more products,” says Feneley.

Manufacturing improvement is another important area of opportunity. Bradshaw points to private equity’s success with many different medical product and device manufacturing business models across a variety of categories. “Investors that bring Six Sigma, Lean manufacturing, and overall process improvement to medical product and device businesses can better manage their margin profiles over the long term,” he explains.

Ubiquity Throughout Healthcare

Across healthcare, medical products and devices are vital for patient care, and they are ubiquitous in their applications. The market encompasses many different product segments, from consumables and other low-risk items to highly sophisticated devices placed inside the body. An aging demographic and increasing regulatory focus on patient outcomes provide favorable tailwinds for all device categories.

Within these segments, and particularly in consumables, numerous small and medium-sized businesses are poised for accelerated growth and offer investors plentiful opportunities.

Our Healthcare & Life Sciences Group continues to see rising investor activity throughout the medical products and devices sector. To discuss the M&A potential in the space, please contact our senior professionals.

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