An AI Thought Experiment: Comparing Medical Device Companies Using and Not Using AI, Circa 2028.

Running small to mid-cap medical device companies has always been a challenge.  Resources are always somewhat constrained, competing priorities vie for every available dollar, and compliance is compliance…no way around it.  And then there’s the multi-nationals, the 500-pound gorillas you’re competing with day-in, day-out. 

I’ve recently been blogging about the benefits and competitive advantage custom AI products can deliver to small to mid-cap device companies.  Having more than 35 years in the industry, I have a pretty good idea of the value AI can deliver to processes in and around the design, development, testing and compliance of medical devices.  But what does AI have to say about the subject?  Time for a thought experiment!

I asked ChatGPT 4.0 what two similar, competing medical device companies would look like, in terms of performance, if one adopts AI and the other does not, in 2025.  What will they look like in just three years?  I used the three-year horizon due to several forecasts of significant AI coding breakthroughs coming into the world by 2027.  Things are happing that fast!

The following information is ChatGPT 4.0’s thoughts on the comparative profitability, growth, and valuation of the two companies, by 2028.

One of the entry points for adopting AI in a medical device (or with pre-clinical biotechnology companies) is in and around managing documentation and regulatory reporting.  Specifically, custom AI is wonderfully suited for enhancing, and in fact is quite capable of replacing, off-the-shelf Quality Management Systems.  Not only does AI-supported QMS enhance compliance, reduces errors, and lower administrative overhead, it adapts to your processes, rather than forcing you to adapt to the SaaS product’s rigid constructs.  It’s also far less expensive than current SaaS QMS solutions, in both the short and long-run.

In addition, predictive analytics in project management leads to fewer delays and budget overruns. Risk modeling before design freeze improves safety and lowers post-launch costs.  AI-driven Post Market Surveillance also provides faster feedback loops and proactive issue detection, lowering costs and improving compliance.

All of this leads to faster time-to-market, enabling more frequent product launches.  The resulting, enhanced product quality boosts adoption rates and contributes to market share.  Improved R&D ROI and lower costs associated with compliance also contribute to higher profitability.

Takeaways from AI-Enabled Medical Device Company

• Growth ~ The application of AI will enhance growth.  ChatGPT projects AI-enhanced medical device companies should experience a CAGR of between 12% to15% between 2025 and 2028.  Similar, competing companies that follow business as usual can anticipate a CAGR of 5% to 8%.

  
  

• Earnings ~ Higher margins combined with improved efficiencies should deliver EBITDA in the range of 25% to 30%.  This has a material impact on the valuation of the company.  Traditional companies will continue to see traditional earnings in the 15% to 20% range.

  
  

• Valuation ~ AI is an asset that will continue to perform and contribute value over time.  ChatGPT’s results indicates medical device companies that adopt and incorporate AI will see their multiples improve from between 9X to 12X EBITDA to 15X to 18X EBITDA, by 2028.

  
  

Companies that incorporate an AI adoption strategy positions themselves for faster growth, higher profitability, and a stronger valuation profile compared to companies that follow a traditional path.

AGIL f(x) is a bespoke AI firm that specializes in working with small to mid-cap, medical device and life science companies.  If you’re interested in how your company can leverage AI for rapid performance improvement, please feel free to give us a call at (747) 777-3365 or via email at tmurray@agilfx.com.

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