Is your business in medical devices — or medtech? (there’s a difference)

In 1900, if you manufactured buggy whips, did you see yourself in the buggy whip industry — or the transportation industry?

I am not a big believer in conventional wisdom. Yes, of course, conventional wisdom does get things right sometimes, but the problem with conventional wisdom is that (here’s the problem) it is sometimes failingly conventional. That means it tends to be stuck with entrenched definitions and ways of looking at the world that tend to miss the fact that the world is not a statue that can be admired from different angles, but a moving, dynamic, fluid object that can only be understood from a moving perspective.

So, conventional wisdom has it that investment in medical technology is down. I don’t buy it.  I have seen the emergence of so many new medtech companies, even since the Great Recession of 2008 (see link). I have witnessed hundreds of millions of dollars flow into medtech — early-, mid-, late-stage and the occasional IPO — and I have tracked those dollars. Below is the month-by-month tally of medtech investment from 2009 through 2013:

funding-thru-May-2013

Source: Compiled by MedMarket Diligence, LLC (data at link)

Here’s what I will buy:

  • Investors are increasingly inclined to delay investments in later-stage medtech as a hedge against risk. They want to see highly promising clinical results and strong indicators that the FDA will reach decision to approve before they lay their money down.
  • Early-stage medtech companies are now less likely to derive funding from outside investment than they are from outright acquisition. Face it, new technologies are risky and costs of development to get through the R&D and regulatory minefield are high. At the same time, big medtech companies don’t have great incentive to carry expensive R&D activity on the books when they can alternatively bide their time watching young medtechs until the time is right to buy them up along with their fervent entrepreneurs committed to commercial success of their new widget.
  • Yesterday’s medtech is not today’s medtech (see link). Devices no longer compete against other, similar devices alone. They compete against any and all therapeutic alternatives to achieve the same desired clinical outcome.  Therefore, if you are analyzing medtech, you can’t just consider coronary stents and angioplasty in their varied embodiments. You have to also consider their competitors (and isn’t a medtech competitor also a medtech?) to be any and all therapeutic options targeting that same endpoint.  Hence, you have to look at Esperion Therapeutics for their cholesterol lowering drugs (BTW, Esperion just filed for IPO, so count that in, too).

The forces and developments that dictate success and failure evolve as new technologies, new operating practices, new variables are injected into the equation.

I am therefore left with the old business school adage about the buggy whip manufacturers I alluded to earlier. What is your industry? Horse motivation, or transportation?

Growth of established and advanced wound closure products globally

Sutures and staples are fairly low tech methods to close wounds.  Sutures in one form or another (mostly sheep intestines) have been in use for hundreds of years and staples have been in practice since the early 1900s. At the other end of the extreme are high strength medical adhesives or surgical glues, which are still largely in their infancy.

But the impact of these products in the market for wound closure varies by country and the local nature of medical practice, the impact of culture on the management of wounds, the economic climate and a large number of other factors.

Below is illustrated, for comparison, the compound annual growth rate in sales of sutures/staples versus high strength adhesives/glues.  What is clear is that the more rapid growth of high strength adhesives reflects the fact that their potential is a long way from being fully penetrated.  What is not as clear from growth rates is the relative size of the markets — or the absolute sales volume associated with the growth rates given.  Sutures and staples still represent an enormous ($5.5 billion) global market while high strength glues are less than a quarter of this.

CAGRs-sealants-high-strength

Source: MedMarket Diligence, LLC; Report #S190.

The complete picture — growth and current revenues — is represented in the sales by country, which (for the sake of this snapshot) is illustrated below in summary by geographic region.

regional-sealant-sales-2012

Source: MedMarket Diligence, LLC; Report #S190.


“Surgical Sealants, Glues, Sutures, Other Wound Closure and Anti-Adhesion, Worldwide Markets, 2012-2017″, Report #S190 from MedMarket Diligence, details the current and forecast market by country for the range of products in wound closure and related wound applications including tapes, sutures/staples/mechanical closure, hemostats, fibrin sealants/glues and high-strength medical adhesives and anti-adhesion products.

Medical technology being redefined by forces, innovation

One of the significant challenges in current markets for medical technology is the evolving definitions that dictate the nature of the competitive landscape. The unrelenting economic forces underpinning medtech — to drive down the cost of healthcare — have forced manufacturers to respond to competition that is broader, more aggressive and centered considerably less on “features” than on “benefits”, with benefits under intense scrutiny. Healthcare systems have limited the number of contracted vendors and the lower prices have reduced manufacturers’ margins, which has shaken out those unable to compete on cost and resulted in a market increasingly characterized by a much smaller number of competitors who must compete against all therapeutic alternatives, regardless of the nature of the technology approach.

In a very real sense, medical technology has in fact enabled these forces as manufacturers have responded to the market forces by developing products that compete, cost effectively, on a broader therapeutic scale. Innovators have been steadily stretching the boundaries of possibility through advanced materials technologies development (polymers, hybrids and embedded drugs, nanomaterial and other coatings, etc.). Researchers in basic and applied sciences are combining understanding from multiple disciplines impacting medtech performance — the benefits of understanding in cell biology, molecular biology, biochemistry, chemistry, flow dynamics, computer science, statistics, physics, and others are increasing the performance in vivo of new medical technologies.

As a result, the nature of medical technology has changed, particularly relative to competition. Below is a THEN and NOW view of medical technology.

medtech-defs1

Source: MedMarket Diligence, LLC

 

Growth in posterior pedicle screw fusion systems in spine surgery

Posterior pedicle screw fusion systems are used extensively in spine surgery; eight or more screws may be used in a single procedure.

The posterior pedicle screw fusion system will continue to be used in spine surgery for the foreseeable future. Industry managers believe that, even as new treatments come on to the market, spinal fusion will continue to be the gold standard treatment for degenerative disc disease unresponsive to conservative measures.

The global market for posterior pedicle screw fusion systems was nearly $3 billion 2012, and is forecast to reach a value of almost $6 billion by 2020. The average selling price (ASP) is expected to drop over this period, due largely to strong competition and the sheer number of companies manufacturing and selling these devices.

pedicle-screw

Source: MedMarket Diligence, LLC: Report #M520.

A variable number of pedicles screws are used in each procedure but this number on average will remain the same through 2020.  Consequently, with prices being squeezed, unit growth will outpace dollar volume sales growth.

The global leader for posterior pedicle screw fusion systems is Zimmer, followed by Medtronic, with the two companies controlling almost 75% of the market. There are many smaller companies in this market, and all of these are targeting the same customers, creating intense pricing pressure for devices that are generally ‘me-too’ and leading to consolidation as manufacturers hit their lowest limits on cost.

 

Wound healing physiology

Skin_layers.svgWhen body tissue is damaged by trauma, surgery, hypoxia, or other destructive processes, it quickly reacts to protect itself and begin the process of healing. Clean surgical wounds closed by primary intention heal rapidly and do not usually require additional medical intervention and support. Chronic wounds and those left to heal by secondary intention will require more attention from the medical team. Most of the literature describing the phases of wound healing has been written following investigation of clean, acute wounds, and the sequence and timing of the events described thus only relates to acute wounds. It is assumed that the chronic wound follows a similar wound-healing course with the timing of events delayed or prolonged compared with acute wounds.

All wounds must pass through three recognized physiological processes in order to achieve healing: the inflammatory phase, proliferative phase, and maturation phase. It is useful to view the stages of wound healing as distinct events with endpoints or goals that must be achieved in the proper sequence for healing to succeed. In reality, there is overlap between the phases, and an individual wound may be in several phases at the same time. When all the stages have been accomplished over the entire wound surface, complete wound healing is achieved.

Unlike acute or surgical wounds, which heal by “primary intent” – the joining of the wound edges by sutures, staples, or adhesive strips – skin ulcers and severe burns heal by “secondary intent,” through the formation of granulation tissue, contraction of the wound, and epithelialization. A normal wound heals in approximately 21 days in organized phases of inflammation, proliferation, and remodeling, but chronic wounds often stall between the inflammatory and proliferation stages, creating wounds that can last for months or even years.

Wound physiology is divided into three phases: defensive, proliferative, and maturation; each phase must be allowed to occur without impediment for healing to be complete. The defensive phase occurs from the time of injury to three days and is characterized by hemostasis and inflammation. The clotting cascade is initiated, and white blood cells mobilize to defend and protect the area from bacterial invasion. Vasodilatation and serous exudate facilitate the removal of debris and deliverance of nutrients to injured tissue. Proliferation lasts from day two until the area is healed and features granulation, contraction, and epithelialization. Granulation includes neoangiogenesis and collagen formation. Granular tissue is pale pink to beefy red, glistening, and has a rough surface due to blood vessels and collagen deposits Contraction occurs as a result of myofibroblasts pulling collagen toward the cell body, and epithelialization is the migration of epithelial cells to resurface the area. Maturation is the last phase of healing, and involves scar remodeling after wound closure and may take years. Maturation sees a scar change from red to purple/pink to white, and from bumpy to flat.

Wound management priorities include: 1) reducing or eliminating causative factors (pressure, shear, friction, moisture, circulatory impairment, and/or neuropathy), 2) providing systemic support for healing (blood, oxygen, fluid, nutrition, and/or antibiotics), and, 3) applying the appropriate topical therapy (remove necrotic tissue or foreign body, eliminate infection, obliterate dead space, absorb exudate, maintain moist environment, protect from trauma and bacterial invasion, and provide thermal insulation).

The diversity of wounds and wound care products complicates the dressing selection process; many wounds have several options for dressings that are effective. Matching wound characteristics with dressing features is one important goal in the healing process. For example, a heavily exudating wound needs an absorptive dressing, and a wound with necrotic eschar needs a dressing that facilitates debridement. Dressings fall into several categories: gauze, hydrogel, hydrocolloid, transparent film, alginate, foam, and accessory products such as enzymes, growth factors, biological dressings, compression devices, support surfaces, and methods for securing dressings.

Factors affecting healing include tissue perfusion and oxygenation, presence or absence of infection, nutrition, medications, underlying disease, mobility and sensation, and age. Circulation and adequate oxygen saturation deliver nutrients for wound healing and gas exchange. All wounds disrupting the integument are contaminated, but not necessarily infected. Bacteria compete with tissues for nutrients, prolonging the inflammatory stage and delay collagen synthesis and epithelialization. Vitamin C, the B vitamins, zinc, and copper are necessary for collagen synthesis. Vitamin A combats the effects of steroids and protein is needed for collagen and skin growth. Steroids and immunosuppressive drugs suppress the inflammatory phase thus slowing the entire healing process. Underlying chronic disease(s) also competes for nutrients, increases risk of infection, and stresses the healing process. Limited mobility and/or sensation contribute to wound formation and impair the perception of wound presence or complications.

Debridement is necessary when necrotic eschar or fibrinous slough is present in the wound base. Necrotic eschar is thick, leathery, devitalized, black tissue, and slough is white or yellow tenuous tissue. Methods of debridement are described as sharp (surgical), mechanical (dressings), autolytic (dressings) and enzymatic (enzymes). Sharp debridement is indicated for extensive necrosis or for large wounds. Mechanical and autolytic debridement are indicated for many pediatric wounds and is accomplished with dressings. Mechanical debridement is done with a wet to dry dressing using woven gauze; as wet fibers dry, tissue adheres to the fiber and is removed when the dressing is removed. Autolytic debridement is also indicated for many pediatric wounds and is done with an occlusive dressing that retains moisture on the wound and allows white blood cells and enzymes to break down necrotic tissue. Hydrocolloids, transparent films, and hydrogels are effective for autolytic debridement. Enzymatic debridement is indicated when selective debridement is desired because enzymes only work on necrotic tissue. Enzymatic preparations contain fibrinolysin, collagenase, papain or trypsin in a cream or ointment base. Enzymatic debridement is slow, but effective, and instructions for using enzymes must be followed closely.

Wound cleansing removes dressing residue, microbes, and cellular debris (may include healing tissue). Cleansing products need to be safe for healing tissue and effective at removing debris. The adage “don’t put anything in a wound you wouldn’t put in your eye” are safe words to work by. Many topical cleansing agents and antiseptics are cytotoxic, and it is imperative to weigh the risks of cytotoxicity against the benefits of cleansing effectiveness and antimicrobial activity. Normal saline is safe, effective, readily available, and inexpensive. Wound irrigation pressure needs to be high enough to remove debris and low enough to avoid traumatizing tissue. Pressures ranging from 4-15 pounds per square inch (psi) are effective for cleaning. For example, a 60cc catheter tip syringe delivers 4.2 psi, a 35cc syringe with a 19 guage needle delivers 8.0 psi, and a Water Pik at its highest setting delivers >50 psi. Frequency of wound cleansing varies with wound characteristics and dressing selection, but once a day cleansing is a minimum4,5. Clean versus sterile technique for dressing changes is constantly debated with varying outcomes and supporting arguments. Most importantly, consider the host system defenses and type of wound when deciding whether to use a clean or sterile technique for dressing changes and cleansing.

Wound assessment involves many parameters, but the following indices should be included in continued documentation of wound healing: size (length, width, depth), extent of tissue involvement (partial or full thickness; stage of pressure ulcer), presence of undermining or tracts, anatomic location, type of tissue in base (viable or nonviable), color (red, yellow, black categories), exudate, edges, presence of foreign bodies, condition of surrounding skin, and duration2. Photography is useful for documenting progress and should include a measuring scale and date.

For Inflammatory Phase, Proliferative Phase, Angiogenesis and Maturation Phase, see Report #S249.


Drawn from Report #S249: “Wound Management, Worldwide Market and Forecast to 2021: Established and Emerging Products, Technologies and Markets in the Americas, Europe, Asia/Pacific and Rest of World.”

See also Report #S190: “Surgical Sealants, Glues, Sutures, Other Wound Closure and Anti-Adhesion, Worldwide Markets, 2012-2017.”

Trend and distribution in clinical/technology focus of medtech startups

MedMarket Diligence has been tracking the formation of medtech startups for over a dozen years. For the sake of definition (since not everyone has the same view of “medtech” or “startup”), we view “medtech startups” as: Medtech companies are those principally developing and/or marketing medical devices and equipment, but also all technologies that are directly competitive with or complementary to technologies represented by therapeutic or diagnostic medical devices/equipment. Startups are companies typically founded within the two preceding years and often much sooner (months or weeks preceding).

Below is illustrated the clinical/technology distribution of medtech startups identified by MedMarket Diligence and included in the Medtech Startups Database:

startups-summary-may-2013

Note: Medtech startups may be categorized multiple ways (e.g., surgery and minimally invasive and spine).

Source: Medtech Startups Database.

The number of companies identified over time is illustrated below, with detail on the clinical and technology categories of each, with the overall shape of the curve reflecting both our ramp-up in the process of identifying companies and the rate of companies being formed (note, given the number of categories tracked, it is best to simply observe the overall distribution rather than the detail on specific categories, and for this reason the above graph shows the numbers by descending order of categories):

startups-summary-category-year-may-2013

Note: Medtech startups may be categorized multiple ways (e.g., surgery and minimally invasive and spine).

Source: Medtech Startups Database.

The decline in numbers of startups subsequent to 2007 reflects the global recession and its harsh impact on the availability of capital to support new company formation.

Medtech fundings for May 2013

We are tracking medtech fundings for May 2013 at link, so check back during the month to see updates.

Fundings for medtech so far this month total $447 million. Top fundings for the month thus far include:

  • $78 million for Tornier, N.V. (joint replacement and soft tissue repair)
  • $62.5 million for Proteus Digital Health (wearable and ingestible sensors)
  • $54.6 million for Natera (prenatal diagnostics)
  • $38.23 million for Silk Road Medical (endovascular treatment of neurovascular disease)
  • $35.17 million for Emisphere Technologies (drug delivery technologies for large molecule oral delivery)
  • $24.9 million for Cardio3 BioSciences (regenerative therapies for damaged myocardium)
  • $22.24 million (€17 million) for STAT-Diagnostica (rapid, comprehensive diagnostic device)
  • $20 million for BPL Medical Technologies (defibrillators other patient management/monitoring)

See below for the trend in fundings from 2009 through 2013 thus far (with trendline).

funding-thru-Apr2013

Source: Compiled by MedMarket Diligence, LLC (see detail at link)

 

Opportunities, drivers and growth platforms in medtech

horizon_00364590The medical technology industry is characterized by its steady focus on finding and developing innovative solutions on the horizon that will meet the demands of clinicians and healthcare systems to more rapidly and effectively solve problems in the management of disease and trauma.

Given the state of the art in healthcare regarding the performance of current and potential medical technologies, there are a number of key opportunities in medtech that are driven by specific forces and are likely to be solved by one or more high value platform technologies.  These opportunities, drivers and high value platforms are listed below.

The biggest opportunities in medtech:

  • Non-toxic, high strength closure and sealing of internal wounds (GI, pulmonary, cardio, etc.)
  • Closed-loop “artificial pancreas” comprising integrated glucometer and insulin pump
  • Versatile chronic wound management to accelerate healing of multiple chronic wound types
  • Non-invasive blood glucose testing (infrared, interstitial fluid or other approach)
  • Non-invasive large molecule drug delivery (transdermal, inhaled, encapsulated, etc.)
  • Interventional surgery (catheter or natural orifice) instrumentation
  • Infection control for nosocomial vectors
  • Organ replacement and transplant (preservation, bridge-to-transplant, etc.)

Drivers

  • Untreated or underserved, growing patient population
  • Cost containment
  • Eliminating lost productivity
  • Less invasiveness for lower cost, faster healing
  • Point-of-care (home, physician office, bedside) diagnostics for comprehensive screening and detection
  • Increasing demands for devices to be specific, be clinically effective and have small or non-existent long-term footprint

High Value Platform Technologies

  • Materials technologies incorporating one or more features of biocompatibility, adaptation, cell migration, drug elution, resorption, excretion or other easy removal
  • Adult, embryonic and other pluripotent stem cells
  • Gene therapy emerging from recent innovations (e.g., type 1 diabetes)
  • Interventional surgical technologies
  • Multi-parameter (MRI, CT, ultrasound, etc.) intraoperative imaging
  • Laparoscopic and natural orifice transluminal endoscopic surgery
  • Nanotechnology drug delivery, surface modification
  • Integration/fusion of information technologies with implants

We have identified these opportunities, drivers and platforms from research in a wide range of medtech markets, considering the state of the art in clinical practice, products/technologies on or nearing entry to the market, clinician and healthcare system perspectives, and the  current/forecast sales data for products in surgery, cardiology, spine/orthopedics, cell/tissue therapy, obesity, wound management, others.

See MedMarket Diligence Reports.

 

 

Technologies at recently identified medtech startups

Below is the list of technologies under development by medtech startups that were recently identified and included in the Medtech Startups Database.

  • Laser-based detection of metastatic cancer cells.
  • Ultrasound therapeutics.
  • Detection of concussion.
  • Orthopaedic implants.
  • Spine surgery implants including interspinous process spacers.
  • Technologies in ophthalmology.
  • Surgical implants including for hernia repair.
  • Stomal management solutions.
  • Ophthalmic drug delivery.
  • Device for the treatment of fecal impaction.
  • Developing low level light therapy for a variety of medical applications.
  • Device to prevent wound infections.
  • Targeted delivery of fluids including drugs and contrast media.
  • Implants for orthopedics, spine and trauma.
  • Various medical devices, including a device to assist laparoscopic surgery and pain management device.
  • Intraoperative nerve monitoring.
  • Treatment of peripheral artery disease.
  • Surgical instrumentation.
  • Minimally invasive device to treat collapsed nasal valves.
  • Minimally invasive treatment for venous reflux disease.

For a comprehensive listing of the technologies added to the Medtech Startups Database, see link.

Advanced wound technologies penetrating, expanding markets

Advanced medical technologies gain footing in medical technology markets by a combination of displacing caseload previously served by older, established technologies, and tapping into previously unserved (or underserved) caseload by offering new product benefits. In other words, new technologies gain sales by both penetrating existing markets and actually expanding the current market.

The global wound care market is characterized by such a shift toward advanced technologies, where the overall gain in sales of new technologies is accounted for by both the displacement of traditional product sales and the added caseload of patients previously untreated or under-treated.

Below is illustrated the shift in share of the total market arising from each of the multiple different wound management technologies. Growth in the market (and resulting decline of traditional technologies) is arising from growth factors, bio-engineered skin & skin substitutes, as well as growth in some older but still advancing technologies driving growth in foam and alginate dressings.

adv-wound-share

Source: Report #S249, “Worldwide Wound Management, 2012-2021.”