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Economic downturn bad for investment? Depends on who’s buying.

Typical exit strategies for medical technology companies who have succeeded in developing and commercializing their products include IPO, but  the prospects for this strategy have diminished in recent years.  With global financial markets in disarray as they wait breathlessly to see where and when the bottom will be, the prospects for entrance, let alone exit, have gone down even further.

Another strategy toward reaching market and eventual exit includes significant investment or outright acquisition by the well established medtech companies looking for innovation.  Lest one think that the chance for that exit route are any better than IPO, one should approach that notion with caution.  Among the companies often noted for their investment-acquisition tendencies is  Boston Scientific, but recently, CEO Jim Tobin put a wet blanket on this, noting that the company has recently shelled out more than its fair share of investment dollars (the $28 billion Guidant acquisition alone should suffice) and that any new investments or acquisitions will have to be accompanied by higher expectations of each investment, and even then Boston Scientific is unlikely to "overpay".

Similarly, one would have to expect that other companies with historically big wallets — e.g., Medtronic and Johnson & Johnson — are equally likely to be closely scrutinizing future investments to ensure that the desired returns are sufficient and achieveable.   Having said that, we must note that J&J just announced that it would be purchasing aesthetic and reconstructive product manufacturer Mentor for $1.07 billion.   It therefore may be the case that the real impact of the economic downturn on these big benefactors is that their plans for expansion and growth through investment may not be so much curtailed, but perhaps optimized by the economic conditions.  

In other words, the business of medtech acquisition may well have simply become a buyers’ market.

Posted 02 December 2008 † P. Driscoll § innovation § investment § medtech § startups ‡ Comments (0) ° Tagged: , ,

Medtech less insulated from the recession

A truism exists that there are certain industries that are less sensitive to economic downturns and that the best example is medical technology or, more generally, healthcare.  Patients cannot wait to be sick or traumatized at a more economically convenient time.

However, the scope and degree of the current recession (according to the National Bureau of Economic Research, NBER, the U.S. entered a recession in December 2007) are such that virtually every industry is affected to some degree — if only in terms of the psychological wet blanket that such a downturn can cause, stifling optimism about returns on investment.

The truism of healthcare’s insulation from recession fades when considering aesthetic and other elective procedures and capital equipment expenditures.  It is also increasingly true that patients are shouldering a greater share of healthcare costs through higher deductibles and other lowered coverage by employers.

I found the article in MX ("Developing Capabilities to Thrive in the Economic Downturn") by Pete Masloski of ZS Associates to be a lucid consideration of the issues that are confronting medical technology manufacturers facing the very real prospect of the economy pinching the medtech arena.   Mr. Masloski proposes some specific actions for manufacturers to improve their prospects through sales and marketing activities.  These include new product launch, sales force optimization, value-based strategies, pricing management, and sales performance management.

Another truism applies as well and that is that "adversity is opportunity."  There appears to be plenty of "opportunity"  as we approach year-end 2008.

 

 

  

 

Posted 01 December 2008 † P. Driscoll § innovation § investment § market data § medtech ‡ Comments (0) ° Tagged: ,

High Growth Markets in Ablation Technologies

A cursory review of data in the recent MedMarket Dilgence report #A125 reveals the countries with the highest expected growth rates in markets for ablation technologies.

Based on the growth in the ablation modality segments (e.g., radiofrequency, microwave, cryosurgery, thermal, ultrasound, etc.)  that comprise each country’s total ablation market, the countries with the highest ablation market growth are India and China.  The high growth in these countries ensues from how nascent these markets are, since potential application of ablation in these countires have yet to be tapped to any significant extent (the current market for ablation in India is $190 million compared to the U.S. market at $12.9 billion).

 

Ablation Technologies Market by Country
Compound Growth Rate 2008 to 2017

 

 
Country/Region
CAGR 2008-2017
India
23.2%
China
22.6%
BeNeLux
22.2%
Mexico
19.6%
Spain
19.3%
Australia
18.5%
Italy
17.6%
France
16.5%
Brazil
15.9%
United Kingdom
15.9%
Japan
15.1%
Germany
14.7%
Canada
14.6%
U.S.A.
12.5%
Rest of World
12.1%
 
Source: Report #A125, Worldwide Ablation Technologies
 
 

 

 

 

Posted 01 December 2008 † P. Driscoll § ablation § cancer § cardiology § gastroenterology § innovation § investment § market data § medtech § neurology § ophthalmology § orthopedic § spine § startups § surgery § urogenital § wound management ‡ Comments (0) ° Tagged: , , , , , ,

New medical technologies at recent startups

New medical technologies under development by recent startups:

  • Biomaterials for use in aesthetic surgery
     
  • New vascular devices for use on patients that undergo procedures with a high risk of blood vessel blockage
     
  • Treatments and diagnostics for orthopedics
     
  • Devices for cardiac surgery, including a device for performing structured sternal incisions
     
  • Handheld diagnostic device detecting cancer cells via fluorescing enzyme, performed following tumor removal to detect residual cancer
     
  • Ambulatory cardiac monitoring
     
  • Minimally invasive RF tissue welding technology for use in lung resection and biopsy
     
  • Innovative technologies to treat heart valve disease
     
  • Imaging capsule long-term monitoring of bladder cancer

 

These technologies are among those detailed in the Medtech Startups Database.

 

Posted 29 November 2008 † P. Driscoll § biotech § cancer § cardiology § diagnostics § innovation § investment § medtech § orthopedic § surgery ‡ Comments (0) °

Wound care technology balance is shifting

The global market for wound management includes many products that fall into more than one category. For simplicity sake, however, product-based revenues can be assembled into categories including fabric dressings, first aid dressings, dressings and internal wound management products for surgery, advanced wound management products, active pharmaceutical wound care products, tissue engineering, physical therapies for wound care, and pressure relief products and skin treatments, for preventative wound management.

The total wound management market worldwide yields revenues in the range $13-14 billion. The aggregate market is forecast to grow at a modest annual rate through 2016. While some well established wound care product segments will grow at barely more than inflationary rates, the aggregate market growth will be driven predominantly through exceptional growth in advanced wound management (roughly $5 billion in 2005) and in active therapy areas (roughly only $900 million in 2005).

The charts below illustrate the size and evolution of the Advanced Wound Care market from 2007 to 2016.

Advanced Wound Care Market, by Segment, 2007 & 2016

 Source:  See Report #S245, "Worldwide Wound Management, 2007-2016."

Posted 27 November 2008 † P. Driscoll § biotech § medtech § wound management ‡ Comments (0) ° Tagged: , , , , , , , ,

Sandcastle worms, mussels, burrowing frogs and gecko feet

Add to the list of naturally occurring glue sources — mussels, the C. crescentus bacteria, Australian burrowing frogs and the gecko ("geckel" glue) — the sandcastle worm.  University of Utah bioengineers have made a synthetic version of a superglue based on a naturally occurring glue produced by sandcastle worms, which use this glue to build tube shaped homes out of bits of sand and shell fragments.

The synthetic version of the sandcastle worm glue is being explored for its application in orthopedic applications — glueing together small bone fragments in fractured knees, wrists, elbows, and ankles, as well as the face and skull.  The applications will at least initially not be for gluing load-bearing sites like large bone fractures, since these can be addressed with screws and pins, while small fractures are more problematic for existing methods.

The researchers will be publishing their findings in the journal Macromolecular Biosciences.

Naturally occurring glues, especially those such as the above, which have demonstrated high strength, are particularly of interest for medical/surgical applications, since existing "biocompatible" glues such as autologous fibrin sealants provide reasonably effective sealing, and even hemostasis, but do not withstand the more challenging stresses of orthopedics and other applications like sealing leaks in lung resections.  The higher-strength alternative to fibrin sealants is cyanoacrylate-based glues, but for all their "superglue" strength, their toxicity is a limiting factor.  It is for this reason that naturally occurring "bioglues" like those from mussels, geckos and sandcastle worms hold such promise.

MedMarket Diligence is finalizing its report #S175, "Worldwide Surgical Sealants, Glues and Wound Closure Market, 2009-2013" for publication in December 2008.

Posted 26 November 2008 † P. Driscoll § biotech § innovation § medtech § surgery § wound management ‡ Comments (0) ° Tagged: , , , , , , , ,

Refractive surgery only minor ($4B) part of global ophthalmic market

[See Report #G125]

There are four opportunities for significant growth in the ophthalmic medical device arena – each focusing on improving therapeutic outcomes. These include (1) Refractive Surgery, (2) Glaucoma, (2) Cataract Surgery, and (4) Management of Retinal Disorders. The drivers for each of these segments overlap in certain areas – aging demographics, increased consumer awareness, improved access to healthcare services and increasing disposable incomes, but they diverge in others areas as indicated in the discussions that follow.

 

Note: Figures above represent manufacturer revenues, not total costs that would also include physicians fees and facility charges for surgical procedures.

Source: MedMarket Diligence, LLC, Report #G125, "Worldwide Ophthalmology."

Refractive Surgery

Refractive surgery is performed using a number of surgical techniques. The term refractive surgery refers to any and all procedures that reduce refractive error, for example; myopia, hyperopia and astigmatism. Each of these procedures is designed to minimize the patient’s dependence on eyeglasses and contact lenses. Although there are many options to improve refractive error making it a complex field for the surgeon, while at the same time offering a broad range of options to treat each patient’s unique needs, some approaches will grow at a greater rate while other refractive surgery options will be cannibalized by these faster growing techniques or they will be relegated to serving the needs of niche populations. For those techniques that serve a particular niche population, manufacturers will struggle with how to maintain visibility for these sub-population therapies while ensuring that clinical competence will be maintained at a level to allow the surgeon to deliver the outcomes that are feasible.

Numerous factors will come into play as the market for refractive surgery evolves. Among these;

 

  • Clinical Outcomes – documented clinical advantage will not only encourage physicians to embrace new approaches to refractive surgery, it will help clinicians to determine the subset of patients that are most likely to benefit by one technique over another.
     
  • Physician Education – the speed with which surgeons can be trained on the new techniques
     
  • Access – how rapidly will the market adopt the technology that is necessary to perform the procedure and how quickly will the market be penetrated
     
  • Patient Education – the ability of physicians and marketing efforts by manufacturers to inform patients of various options
     
  • Cost – Significant differences in price to the patient as well as cost associated with training and equipment by physicians and ambulatory care centers
     
  • Reimbursement – insurers willingness to pay for such procedures will continue to be a factor in a patient’s decision to undergo refractive surgery

The various types of refractive procedures are indicated below.

  • LASIK – Laser Assisted in Situ Keratomileusis – a laser or microkeratome is used to create a flap so that the cornea can be accessed to use an excimer laser to modify the shape of the cornea.
     
  • Epi-LASIK – Epithelial LASIK – uses a keratome to remove the epithelial surface of the cornea rather than a microkeratome or femtosecond laser as in conventional LASIK. Once the flap is created and folded out of the way, an excimer laser is used to sculpt the underlying corneal tissue.
     
  • LASEK – Laser Epithelial Keratomileusis – similar to LASIK, however, instead of creating a flap, alcohol is used to loosen the epithelium to create a flap and to give the surgeon access to the cornea. Once the cornea is re-shaped, the flap is replaced.
     
  • Wavefront LASIK – sometimes referred to as Custom LASIK – uses a computerized device to correct for an individual’s specific visual aberrations. This not only corrects for lens power, but for subtle imperfections that lead to astigmatism as well as other higher order aberrations (hales, glare and blurry images).
     
  • CK – Conductive Keratoplasty is a direct threat to laser vision correction in moderate hyperopes. The procedure uses radio frequency energy to shrink collagen in the periphery of the cornea, thus steepening the cornea. This technique may also be used to correct for under or over-correction following LASIK.
     
  • PRK – Photorefractive Keratectomy – a laser is used to reshape the outside of the cornea to correct refractive errors. Unlike LASIK, it does not involve the creation of a corneal flap. It is appropriate for patients who are myopic, hyperopic or astigmatic.
     
  • P-IOL – Phakic Intraocular Lens – a lens is placed in front of the natural lens to correct visual limitations.
     
  • RK – Radial Keratotomy – a refractive surgery procedure for myopia which places radial incisions in the peripheral cornea to reshape its surface and improve visual acuity. It has largely been replaced by PRK, LASIK and Custom LASIK.

LASIK contintues to be the dominant choice for the performance of refractive surgery, although Custom LASIK seems to have the edge when it comes to clinical outcomes. The only factors holding Custom LASIK from overtaking LASIK are access, which is somewhat of a cost issue, and, perhaps more importantly – the significant cost differential to the patient.

P-IOLs are a promising technique for certain subsets of patients, however, they have neither the awareness among patients, nor the educated physician base to capitalize on their potential. This is, in some way due to the size of the companies that offer P-IOL technology and their investment in market development programs that include both physician and patient education. As larger players enter this segment, it is likely that the investment in marketing programs will create opportunity for each of the manufacturers in this segment.

Laser vision correction (LVC) continues to evolve giving the surgeon more choices in the management of each patient’s individual needs. Not only have lasers become more accurate, they allow for customization as in Custom LASIK. Further, the lines have begun to blur between LVC and corrective lens implants. These dynamic options to vision correction have created an unlimited pool of options from which the patient and surgeon can choose. But is it possible for industry to ensure that a patient’s choice is not constrained by the depth of his/her ECP’s awareness?

Although advances in LVC continue to offer improved vision to patients, the adoption of the technology continues to be affected by economic considerations. These procedures are expensive and not typically covered by insurance plans. The total dollars spent globally on refractive surgery — including manufacturers revenues (included in this report) and fees for physician/facility services are upwards of $4 billion annually. In international markets, this poses a particularly daunting set of challenges as most capital equipment manufacturers that provide laser vision correction systems have developed a market model in which they charge a per-procedure fee for the use of the laser.

[See Report #G125 for exhaustive procedure, incidence, product, market and geographic data.]

 

 

Posted 25 November 2008 † P. Driscoll § medtech § ophthalmology § surgery ‡ Comments (1) ° Tagged: , , , , , ,

Medical devices versus nature

If one is in the position of needing to look to the future of medical technology to identify opportunities or predict challenges in the market (and who in this industry is not?), then it is hard to not factor into the analysis two very different current trends and play them out toward the resulting future market impact. One trend is the biotech-driven trend of elucidating natural processes of health, disease and healing in order to exploit understanding of the natural sciences to solve medical problems. The other trend is the technology-centric trend of developing hardware, largely surgical or at least interventional technology, that may dramatically achieve better surgical/interventional endpoints. To (over)simplify, one could say this is the biotech versus device polemic, but that really does simplify the dynamics too far, suggesting there is ultimately an either/or conclusion, which is false.

A group at Harvard-MIT earlier this year reported in the Proceedings of the National Academy of Sciences on a flexible, waterproof and even biodegradable bandage based on the sticky feet of the gecko. The lesson of the gecko is that the gecko’s stickiness comes from nanoscale fibers or "pillars" that increase the surface adhesion, which the Harvard-MIT team mimicked in the construction of the tape with nanostructures in the surface. Now, while this does not really represent a biological solution (such as the protein-based glue used by mussels to attach to surfaces; see also Report #S175), the study of natural processes revealed a solution that could be modeled in medical technology. This points up the huge number of opportunities that reside in nature directly (e.g., mussel glue) or indirectly (nanostructured adhesive based on the gecko). After millions and millions of years of evolution that has produced survival advantage for the natural world, it would almost be viewed as foolish to pursue solutions to medical problems without considering that those problems have already been solved, somewhere, in nature. Some scientists are convinced, for example, that the biological diversity resident in the Amazon rain forest holds cures for cancer and many other diseases.

At the other end of the spectrum is technology like the Da Vinci (Intuitive Surgical, Inc.), a four-arm, flexible wrist robot on which are mounted miniaturized tools and cameras controlled by a surgeon, at a cost of $1.4 million, not including the cost of parts, maintenance and training. The system enhance the precision of surgeons performing prostate surgery and is also being adapted to the performance of hysterectomies, fibroid removal (and other gyn procedures), heart valve replacement and kidney surgery. The system enable a level of control that is simply not possible by the freehand surgeon, which enables much more challenging procedures, ones that may heretofore have been inoperable or simply not possible without causing unacceptably high complications. Intuitive’s Da Vinci is not alone in this trend. Accuray has developed its CyberKnife for its ability to precisely attack tumors without surgery. There are also complex systems under development by Hansen Medical and Stereotaxis.

Certainly, the emergence of medical/surgical robotics can be viewed analogously, albeit simplistically, to the advent of laparoscopy, with its technology-intensive approach that minimizes trauma to the patient. But, the several-thousand dollar investment of laparoscopy hardly compares to $1.4 million (plus) for Da Vinci. Nonetheless, the facts of Da Vinci’s market success to date have been clear, since Intuitive has been exceeding Wall Street’s expectations for sales, revenues, etc., all of which is nothing less than remarkable in this era of cost containment.

What do these trends say for future market opportunities? The "biotech" trend tells us that there are many opportunities yet to be discovered based on the amount of disease (and even trauma) in the world and the lack of cures for them that are not "perfect" — reversing the disease condition and restoring health without the smallest complication. Of course, there also remain a huge number of "nearly perfect" solutions, or even less perfect ones that hold potential due to the fact that they provide even the most marginal advantage over existing therapies, if such exist at all for the treatment of specific diseases.

The "technology-intensive" trend suggests that the limitation of what we can achieve is not dictated by our knowledge of natural systems but is determined only by the apparent limits of our imagination and technology development well outside of healthcare (e.g., robotics are not inherently medical), which will include materials sciences, information technology and the stunning array of technology hybrids that can be constructed to achieve specific outcomes (RFID-embedded surgical instruments, ingestible "pillcams", etc.).

The two schools of thought are not mutually exclusive, by any stretch of the imagination. In fact, there are are enormous opportunities in the marriage of the two. The mandate for medtech manufacturers seems to be then that they should, on the one hand, come to as thorough an understanding possible of the natural biological processes associated with the disease or disorder of interest and, on the other hand, imagine and apply any and all technology, regardless of scientific discipline, that will result in an improved outcome for the patient. With the rapid growth in our understanding of the complex etiologies of disease and with the spectrum of technologies that can be constructed to serve specific functions, the only limitations appear to be imagination and reimbursement, and with Intuitive Surgical’s market success, one would wonder if the latter is even a problem.

 

Posted 25 November 2008 † P. Driscoll § biotech § innovation § medtech ‡ Comments (0) ° Tagged: , , ,

The Spine Market: Big, Growing and Persistently Device-Intensive

[Having covered a very wide range of medical technology markets, spanning cardiology to gastroenterology, biotechs to devices and disposables/reusables/"reposables" to capital equipment, I have to note that the spine surgery market is really unique among all of them --- resistant to cost containment, persistently device-oriented, and subject to tremendous innovation all the same. In some ways, spine surgery may be the last bastion of medical device development, clinging as it does to its inherent need for products that are structural in nature and therefore keeping at bay the wholesale intrusion of biotechs and pharmaceuticals. - P. Driscoll]

The global spine market is large, active and growing rapidly in revenues. Several dynamic forces, in addition to the aging of the population, are expected to affect the market and treatments during the next several years. While spinal fusion will always have a place, its share of the treatment market is expected to decline. Newer treatments such as total disc replacement and nuclear arthroplasty will erode the spinal fusion market, as these and other treatments which preserve spinal motion gain favor over the invasive and traumatic fusion of two or more spine segments.  

The total global spine surgery market includes includes devices for spinal fu