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Looking beyond Brexit - inward investment to Poland

MedTech in Poland – an attractive industry for foreign investors

By Adrian Synoradzki, Hare Street Consulting
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The economic crisis caused by the Covid-19 pandemic has hit global economies hard and unexpectedly. However, there are industries and sectors of the economy for which the current situation is sometimes advantageous. Even Brexit has not harmed them. These are the sectors of Medical Technology (MedTech) and Biological Technology (BioTech). They are involved in the fight against the pandemic and benefit from the market boom, where unprecedentedly huge amounts of money are pumped by almost all world governments. The MedTech sector supports the development and competitiveness of economies in which it operates. So far, the world has already spent well over $9 trillion in fighting the pandemic. According to the International Monetary Fund, the lion's share, $8 trillion, has been allocated by the governments of the G20 countries.

Medical technology industry

Medical technology is an industry with a very broad spectrum. Whatever definition we apply to it, every idea or invention that can be used in medicine and contributing to saving human life or improving it should be classified as Medical Technology. So here we have modern diagnostic devices, such as scanners, tomographs, implants, bionic prostheses, as well as the simplest everyday hygiene products – latex gloves, syringes, laboratory tests or commercially common products such as contact lenses. Currently, there are around half a million technologies and devices used in medicine in the world.

Europe is the second largest market of medical technologies after the US, worth nearly €110 billion and holding a 29% share in the global market. Together with the US, with its market share of 43%, they form a global duo that the next Japanese (7% share in the global market) or the Chinese (6% share) are unlikely to threaten. In Europe itself, the leader in the medtech industry is Germany, responsible for 28% of all European production of medical technologies. The French are in second place with a 15% share of the European market. The UK is third place (12%), and Italy (10%)

The medical technology market, like no other, is based on and dependent on innovation. Few other sectors of the economy have as many patents filed as MedTech. According to the data of the European Patent Office, EPO, in 2016 over 12,000 applications were filed. patent applications originating from the medical technology sector, which accounted for nearly 8% of all applications received by the EPO. Comparing it with other related industries, MedTech beats computer technology (with over a thousand applications or digital communication). The pharmaceutical and biotechnology industries submitted twice as few applications compared to MedTech.

Technologies changing the medical world are the work of an extremely creative and well-educated team of specialists and engineers. in Europe alone, employing 700,000 people in over 27,000 firms, of which some 95% of them are small and micro-sized companies with less than 50 employees. Not surprisingly, the top four are also in the lead In Germany alone, the TechMed sector employs over 210,000 people. employees. In Great Britain, 100,000 In France, 85,000 and in Italy 76,000.

The demand for solutions improving the comfort of treatment, innovative patented ideas and qualified staff attract investors and prevent the sector from complaining about the lack of funds for the implementation of developed concepts. Healthcare is a very significant part of the expenditure of every European government. Depending on the country, GDP share varies from 5-7% to 10-12%. 203 EUR - Expenditure on medical technology per capita in EU. With 440 million EU citizens, this adds up to nearly EUR 9 trillion.

Telemedicine/remote medicine was the fastest growing area of the MedTech industry even before the pandemic. Its global value in 2018 was estimated at $26.5 billion. Keeping the current upward trend, and due to the global lockdown and traffic restrictions caused by the pandemic, turbo accelerating it in 2021/2022, its value may increase to over $40billion.

Europe has a large trade surplus in this sector of €17.5 billion. The main recipients of the European medical technology industry are the US and Asia, with 36.9% of medical products designed and manufactured in European companies going to the US. Nearly 18% of European technology goes to Asia. China (10.3%), Japan (5.4%) and India (1.9%) are responsible for the majority of these exports.

How does the Polish TechMed market look like?

Polish medical start-ups contribute to changing the face of the Polish healthcare system. But there is no revolution yet. It takes time and capital. According to health minister Adam Niedzielski, the internal market of Poland itself has sufficient needs to be able to create demand for MedTechs being created in Poland. “The entire startup sector related to innovations in medicine is a lifesaver for the healthcare system (…) We have a geometrically growing demand for various medical services and a supply that stands still - a shortage of doctors and nurses. These two trends can only be addressed with technology. It is not so much about technologies that increase efficiency, but about solutions that allow to capture certain phenomena at an early stage and reduce the cost-intensity of interventions. Without start-ups, the health care system may crumble”, he said.

However, the majority of Polish MedTech start-ups see their future in a global context. It is a very young industry, a dynamically growing and developing industry. More than half of the Polish medtechs were established in the last three to four years, and their total number in Poland is estimated at around 100 entities. Polish technical universities are their base, from which their creators are also recruited. We have solid foundations underlying the emerging industry in Poland, with a solid number of technical and bioengineering universities, biomedical engineering and medical universities. The number of students in Poland also provides a large base for MedTech start-ups. Out of 19 technical universities in Poland, nearly 6,750 students study biomedical engineering at 15 of them. Each year, the labour market is supported by over 2,000 graduate engineers of this speciality.

What do the Polish Medtechs do?

Telemedicine. More than half of all MedTechs deal with the creation of solutions in the field of telemedicine, although currently only one medical procedure using telemedicine solutions is reimbursed in Poland – hybrid cardiac telerehabilitation. Remote monitoring of patients reduces the risk of their death and hospitalisation. Telemedicine can reduce queues in waiting rooms, and in some cases a visit to a specific facility may even be completely unnecessary. Telemedicine is therefore a response to the shrinking resources of medical personnel, as well as to the separation and minimisation of direct contacts.

Wrocław’s Infermedica and its investors will probably benefit from this trend. Infermedica is a Wrocław-based technology company, founded in 2012, creating tools for initial medical diagnostics based on artificial intelligence algorithms and machine learning. Having a team of over 80 engineers and specialists in the field of data science, as well as doctors, it develops applications and chatbots that help in the initial diagnosis, health assessment (triage) and the recommendation of appropriate further steps. The solutions provided by Infermedica help to improve the way of patient service, support doctors in initial diagnostics, while reducing costs. In mid-2019, Infermedica obtained 14m złotys from investors, which it spent on expansion in the US and acceleration of technology development. In mid-2020, it was announced that Infermedica started cooperating with Microsoft under the Microsoft Healthcare Bot service. It is a service that allows representatives of organisations from the medical industry to create and implement large-scale virtual assistants based on artificial intelligence. Infermedica has so far established cooperation with over 50 partners, such as Microsoft and Allianz, Canadian Global Excel or Polish insurer PZU.

Although telemedicine is of interest to almost 50% of Polish MedTechs, other areas are modern diagnostics (40%), mHealth (35%), medical devices (31%), 3D printing (10%), robotics (5%), software (5%).


15% of medtechs operating in Poland focus on the field of medical science, which is cardiology. Why are medtechs so fond of cardiology? There are several reasons for this.
Regularity of publications and accompanying guidelines describing the diagnosis and treatment of cardiovascular diseases step by step. Moreover, parameters describing the work of the heart are relatively easy to obtain and automatically verify. They are also universal, thanks to which new solutions are easier to scale. Cardiologists are also famous for being very open to new things. An interesting ecosystem has been created in Zabrze, which is the heart of the cardiology industry, around the project of building an artificial heart. Does Poland have a chance to become a world leader in providing advanced medical technologies for cardiology? There is a good chance of that. Take Medicalgorythmics as an example. The company, which devised an innovative diagnostic system used in cardiology, whose flagship product is PocketECG, which records the heart's work, and then sends the data to an external server, where it is analysed using advanced algorithms.

What else do Polish MedTechs do.
The niche nature of the areas that Polish MedTechs use is noteworthy. For example, geriatrics and senior care is provided by 6% of Polish MedTechs. Taking into account the demographic changes, in the near future it will be an area of great demand – and on a global scale. Especially in Asia, where nearly 46% of global healthcare expenditure is already spent. This is due to the age structure in this region. Asian societies are aging rapidly. So maybe this speciality of Polish MedTechs may be very desirable in a short time.

Although the Polish MedTech sector is only a few years old, it is very creative and can already boast of other interesting projects and success stories. One of the most famous MedTechs from Poland is Braster - producing devices for home breast examination. Braster's solution can complement the traditional ultrasound or mammography. Another one is Nestmedic, the founders of which developed Pregnabit, a device designed to perform CTG examinations at a distance and monitor the condition of pregnant patients.

MedTech industry solutions are not intended only for the direct benefit of patients. More and more companies are starting to focus on the needs of doctors, making their work a little easier. An interesting example is Wrocław's Laparo. The company operates in a specific niche, designing and producing medical simulators that improve the qualifications and skills of laparoscopic surgeons. Laparoscopy, a technique that is gaining recognition and range in the world, allows less surgical intervention in the abdominal cavity, limited to three, 3mm incisions and the entire operation inside the patient's body can be carried out using laparoscopic instruments without the need to open the abdominal cavity. Thanks to this technique, surgery is safer for the patient, causes fewer complications, complications and disfiguring postoperative scars, allowing the patient to leave the hospital on the second day after surgery. For the hospital and the entire health system, this means huge savings and greater turnover of hospital beds, thanks to which more patients than before can undergo surgery. But it requires the highest skill and maximum precision. In almost three years, Laparo has sold over 1,700 simulators to over 90 countries around the world.
How is the MedTech industry financed in Poland so far?

For 45% of MedTechs, own funds were the primary source of financing. Until now, Polish MedTechs were and are still very independent. Usually, the creators invest their own savings in their venture. They also eagerly reach for funds from the Polish Industrial Development Agency (PARP), the National Centre for Research and Development (NCBiR), and Venture Capital funds. Bank loans are much rarer (only 5% of the capital comes from this source). The share of foreign investors in the financing of Polish MedTechs is also almost zero. And this is a great opportunity for investors, especially those from the British Isles. Although, as KPMG notes, the global interest of foreign capital in MedTech is constantly increasing. Investors on a global scale have so far invested as much as $23 billion on them. Unfortunately, so far this interest of funds has only a limited bearing on Europe. On the old continent, VCs spent $2.3 billion on early-stage start-ups. Funds in Europe are looking for, among others MedTech solutions have already proven themselves in biotechnology and e-health. However, Polish capital is starting to activate. MedTechs with the most innovative ideas can apply for an injection of cash from the teams that have been involved in the BioMed PFR Academy project. They are: Biomedin, Arkley Brinc, Montis Capital, Augere Venture, Redbreek Investment and Valuetech Growth.

The difficulty of Polish MedTechs

What distinguishes MedTech from many other start-up activities is the high barrier to entry into the industry. Due to the contact with the human body and participation in saving human life – the highest quality and systemic regulation is necessary and required. Strict procedures also apply to medical devices. For this reason, most of the Polish MedTechs are in the initial stage of development (those whose financing did not exceed 3m złotys), are waiting and looking for wise experienced investors to be able to go to the next phase.

What are startups missing? Above all, capital and competence. In addition, capital needs to be wise (smart money). Without external funding, Poland’s MedTech sector will not be able to reach its potential. Apart from the capital, which 71% of Polish MedTechs indicate as the biggest problem, the creators of as many as half of them suffer from a lack of contacts. This is what Polish companies need in particular. A foreign investor will facilitate reaching customers (which corresponds to the difficulty of reaching customers, declared by 35% of Polish MedTechs as a barrier to growth) and creating a network of contacts – networking, with which 29% of Polish MedTechs have a problem.

How does the Polish government supports the development of this highly innovative industry? This is what worries the sector the most. There is insufficient state activity in relations between the public medical sector and MedTech companies, a lack of adequate staff, lack of time and lack of financing. The state should be creating a MedTech-friendly ecosystem to some extent; start-ups operating in the UK can look to the state for support. This can also be one of the arguments for moving further development to a much more favorable environment.

When it comes to cooperation with government institutions, only 19% of Polish MedTechs have declared their cooperation with the Ministry of Health or the National Health Fund. The main reasons for such low interaction with state-owned entities include the lack of willingness to cooperate on the part of government institutions (61%) and their lack of understanding of technology (50%).

UK MedTech ecosystem.
Poland is far from the ecosystem functioning in the UK. It does not even make sense to compare it, because there is practically no MedTech infrastructure in Poland. The government and the Ministry of Health are planning some discussion forum on the needs of MedTechs, while in the UK, the National Health Service, mistakenly comparable with the ineffective and archaic Narodowy Fundusz Zdrowia (NFZ), has been operating since 1948 with the effectiveness of a well-organised corporation that spends on MedTech alone annually over £6 billion. Under the auspices of which over 30 agencies operate (such as the Medicine & Healthcare Products Regulatory Agency, MHRA Innovation Office, NIH – the National Institute for Health Research, NICE – the National Institute for Health and Core Excellence, IRAS - the Integrated Research Application System, CPRD – the Clinical Practise Research Datalink, AHSN – the Academic Health Science Networks), all supporting MedTechs in every area of their operation, product certification and marketing, in all these stages: Discovery and deep research development stage; Regulatory and health technology assessment development stage Launch global access development stage, which means that the British Medtech is currently worth £16.8 billion, generated by 2,150 entities employing 86,000 people.

For this reason, British-Polish cooperation seems to be attractive to both sides. In exchange for the global experience of the British sector and investment support, you can get access to a new, fresh dose of ideas. Certainly, also with so many limitations or underdevelopment of the early stage of construction of the sector in Poland, the British ecosystem may turn out to be attractive and geographically close enough to transfer knowledge and know-how, moving from the Vistula to the Thames and going global from there.

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