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Cranfield, UK, 12th March 2024, The theme of this year’s European Congress of Radiology (ECR) was “Next-Generation Radiology,” with AI featuring prominently. Vendors spanning the breadth of the imaging ecosystem were exhibiting, with many of the better-known imaging AI brands sharing latest developments, alongside perhaps less expected AI competitors such as United Imaging and displays firm Barco. While the dedicated AI exhibition featured approximately 50 vendors, fewer than its RSNA counterpart, foot traffic in the AI hall created a sense of optimism for AI vendors. Following discussions with numerous vendors during the event, we present our analysis of what the conference revealed about the medical imaging AI market.
Charting the Path to Profitability
Amidst the buzz on the conference floor, an undeniable reality persists: many medical imaging AI companies are yet to be profitable, despite many demonstrating notable revenue. While a few vendors are predicting 2024 to be the year that they break-even or become profitable, this remains a minority sentiment. The vendors within this rarified category have successfully demonstrated a viable path to reimbursement and are providing solutions that address real clinical problems, rather than targeting capabilities that radiologists can perform well or lack demonstratable ROI for providers. AI ISVs focusing on the European market also have a bigger hurdle to overcome when looking for a route to reimbursement, requiring a proactive market education and lobbying approach to ensure that reimbursement models are devised, therefore establishing who pays for AI within this region.
Conversation among vendors centred on how revenues can be made from AI. Vendors are looking to grow their installed base, with encouraging results from vendors such as Riverain Technologies, who reported 30 new customers in 2023. Nevertheless, a significant proportion of vendors are still in the nascent stages, reporting small numbers of live commercial sites.
As this gap between vendors that have established customer base versus new entrants widens, concerns may be raised for the survival of vendors with less robust customer credentials. The long time to market for AI solutions raises a big concern for investors in a much riskier macro-economic market. The alignment of VC investor expectations in a market such as healthcare, which is notoriously slow moving, means that a route to break-even is not fast enough resulting in a hesitancy to invest. Whilst no acquisition announcements were made at ECR, market consolidation has been ramping up since the end of 2023. As funding runways diminish and the cost of rising debt curtails efforts to raise additional rounds, more partnership and M&A announcements are expected in the coming months.
Many AI ISVs in the market viewed platform partnerships as a way to boost revenues, secure additional sites and increase the visibility of their solutions. Direct sales channels require regional sales teams and the resources to integrate into providers IT systems, both of which have associated time and cost factors. However, although platforms provide a single integration point into a provider’s network, a narrative which resonates with providers, the general sentiment is that most AI ISVs hosted on AI platforms are yet to realise significant revenues via this channel. AI ISVs must consider the cost of integrating into the numerous platforms, and how much of a cut they will receive once the solution is deployed via this means. The direct approach, although more cumbersome and expensive, offers the ability to truly interact with the customer, ‘handholding’ and ensuring that customers realise maximum benefit from using the AI solution.
Nevertheless, healthcare providers are turning increasingly towards ‘turnkey’ agreements, both for AI and more broadly in adopting new technology, and with AI orchestration platforms still in their nascency, the added benefits including care-coordination, security and validation that they bring is an attractive offering. This brings back into focus consideration for AI vendors the importance of partnerships with modality vendors and PACS vendors.
While AI ISVs viewed the relatively slow pace of PACS-based orchestration offerings as a hinderance to their aggressive growth plans, the growing realisation of the curation of AI, especially in terms of workflow, combined with the underpinning of managed service contracting for a large proportion of the market, had led to renewed interest in partnerships. This is especially the case for AI ISVs that have made good progress on economic and clinical evidence – as PACS and modality vendors are more willing to put in the investment to integrate these offerings as the inherent risk of the AI vendor going bust or adding limited value is reduced.
New models of AI deployment are also reaching Europe, most notable with DeepHealth launching its OS offering for Europe at ECR. Spurred on by strong US performance, DeepHealth is targeting screening markets in Europe especially with a turnkey offering of not just AI image analysis, but a much wider reading and operational feature-set. To date, this plays more heavily on outpatient settings, yet has the potential to disrupt large acute care organisations also. The underlying interest in AI-assisted “outsourcing” was also clear in the behind-the-scenes presence of well-backed teleradiology service firms, who believe they can leverage AI and the current radiologist workforce shortage to provide a competitive edge over “in-house” reading services for screening and other higher-volume, less acute imaging. For many AI ISVs, this may also provide a commercial “lifeline” as teleradiology service revenues are demonstrating robust growth, bring a potential new customer base (or even partner/acquirer) into the market quickly.
Embracing Market Consolidation
The medical imaging AI market boasted a valuation of $576 million in 2022, with participation from over 200 vendors. However, this figure, while substantial, pales in comparison to the $5 billion invested into the market since 2015. This influx of funding raises questions among vendors and investors alike regarding the allocation and utilisation of these substantial resources.
As trust in AI among radiologists continues to grow, fuelled in part by numerous clinical trials affirming its efficacy in practice, and as key decision-makers recognise the health-economic benefits AI offers, enthusiasm and adoption grow. Vendors should therefore not be deterred as conversations centre around market consolidation; most new industries are fragmented and consolidate as they mature. The crucial question for some vendors becomes how to position themselves for acquisition rather than exiting the market entirely.
ECR demonstrated that medical imaging AI is here to stay. As time forges on, the polarity in the market for the “haves” and “have-nots” in terms of commercial traction and expensive prospective clinical evidence will only broaden. With this comes transition and market forces dictating a re-evaluation of go to market strategy for AI. While footfall in the AI hall is expected to remain a constant, we anticipate that the number of vendors over the next few years will shrink considerably, as increasing consolidation occurs, and the emergence of comprehensive clinical application powerhouses emerge. When viewed through the lens of AI adoption in Europe, this is no bad thing.
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About The Author
Ellie joined Signify Research in 2023 as part of the Medical Imaging team. She holds a BSc in Biomedical Sciences from the University of Bath and an MSc in Clinical Drug Development from University College London.
About the AI in Healthcare Team
Signify Research’s AI in Medical Imaging service provides expert market intelligence and detailed insights for several of the leading AI and Imaging IT vendors. Combining primary data collection and in-depth discussions with industry stakeholders, our thorough research approach yields credible quantitative and qualitative analysis, helping our customers make critical business decisions with confidence. Furthermore, our commitment to seeking a plurality of perspectives across the markets we cover guarantees that our insights remain independent and balanced.
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