Drivers, Forces and New Thinking that Redefine Medtech Market Outlook

From the December 2007 edition of MedMarkets

Never before, or so it seems, have there been so many widely different dynamics in medical technology markets that determine whether a company will be successful, or if successful, to what degree. Science, its application in technology, and its commercialization in healthcare has traditionally been driven by a narrow scope on a limited number of specific functions provided by the product — the expanded coronary artery lumen, the successfully implanted artificial hip, the endoscope that delivers good images. However, as the famous Greek philosopher Heraclitus said, “You can never put your finger in the same river twice.” So, the target changes as businesses seek greater commercial success with products that deliver more functions better. Third party payers strain to ensure coverage even while premiums grow out of control, so they demand better, more cost effective performance from a longer term perspective. Enabling these perspectives, or even driving them, is technology development that increasingly redraws boundaries of what is possible. And the overarching force that accelerates change is globalization of markets. Here we consider in the space allotted just some of the specific drivers and forces that are redefining the medtech market outlook.

Redefining the product. Market opportunity and technology development operate hand-in-hand. In 2007, the development of products is limited in scope seemingly only by imagination, due to the spectrum of opportunities created by materials technology, information technology, product hybridization and others, enabling manufacturers to focus on the fullest possible achievement of clinical outcome delivered by their products. (We have frequently addressed this issue; the dissolution of boundaries between devices, drugs, pharmaceuticals.) Realizing this is necessary means realizing that a whole slew of other companies out there looking at that same clinical outcome, often from a very different perspective. Of course, this sometimes means being opportunistic to recent developments, such as in stent developers adapting development (or maybe just their marketing message) to address a sudden hot button issue like late stage thrombosis. As comfortable as it may be to lean on one’s existing technology platform, unless that platform is predetermined to anticipate the wide range of competition possible, manufacturers must think beyond the platform and focus on the clinical solution, redefining the product in all its forms to simply reach that solution more effectively.

Redefining the process. There is always another way to get the job done, the “job” being the development, regulatory approval, manufacturing, marketing, sales, and distribution of medical products. It is a safe bet to say that no manufacturer has optimized that entire process. And even if a manufacturer has done so, the process remains a moving target, with new options emerging on all fronts. New vendors appear, regional/national/international economics change, and technologies create new possibilities to get the “job” done. Every step of the process then demands regular scrutiny to adjust: what is the appropriate balance between in-house development versus acquired innovation, what are the current sensitivities of regulators as to specific demands for market approval, what new options exist for OEM and how do they measure against the costs, how have marketing channels changed to create opportunities and challenges in product/price/placement/position, what are specific healthcare systems’ new requirements for purchasing new technology, are products reaching the market through distribution channels that optimize the market penetration given associated delivery cost? These questions only scratch the surface.

Never taking an eye off of “cost”. In the most optimistic view, the issue of cost has to be view through the lens of opportunity. Cost must be considered from the most relevant perspective. Can you make the argument that this new device/product is more effective than competitive alternatives? Although you believe your product is not only competitive against similar technologies but is it also competitive against different technologies targeting the same patient population(s) — and do third party payers really see it this way? Can you make an effective case?

Competition is a chameleon. Be careful what you consider to be your competition, because accurate though you may be today, your competition could be entirely different tomorrow. Competition of course is any entity serving the need of your current/potential customers by any method and from any source. You know the companies with like technologies currently going head-to-head with you in the geographic markets in which you market/sell product, but are you considering the bigger picture of any potential alternative technology on the market or under development, currently active in your territories or looking at yours from across the border? The corollary to this is, of course, that one must also look aggressively at those new technologies that will open up patient populations to be served and also look back across those geographic boundaries to markets that are attractive enough, and/or with barriers low enough to make it worthwhile for one to compete there as well.

Do not limit your potential. Once a manufacturer decides the product and market opportunity that will be pursued, it becomes a sort of self-imposed limit. We frequently witness innovative medtech startups who dare to assume that they need not limit their market introduction to the U.S. or Europe, or that even though they have only a handful of employees, they are capable of competing with multi-nationals who who have million- or billion-dollar budgets. To assume any limitation is to make it real, so one best make the biggest reasonable assumptions about market potential.

We must admit that this view of the medtech market outlook can be accused of being myopic, since it only considers a limited number of possibilities in the list of possible market drivers, and only briefly touches on them. Competing in medical technology markets these days can be an overwhelming proposition because all of the possibilities must be explicitly considered or they will be implicitly made so. The most compelling advice to be offered is that the successors in medtech markets rarely view these market drivers as daunting challenges, but instead view them as invigorating opportunities.

New report from MedMarket Diligence:  Worldwide Wound Management 2007

MedMarket Outlook: High Growth Medical Technologies

(From the September 2007 issue of MedMarkets)

Drawing upon the clinical and technology sectors we have addressed in MedMarkets and the Market and Technology Reports of MedMarket Diligence, we have previously identified a number of areas where we see substantial growth in medical technology markets. In our white paper, High Growth Medical Technologies, we note those areas we consider high growth due to their “likely success in clearing technology hurdles, the size of their respective current/potential caseloads or target markets and their reasonably short (<5 year) timeline to achieve considerable realization in measurable (or even sizeable) commercial terms.” We highlight them here and note additional areas worthwhile to watch.

Nanotech and MEMS. Applications of [tag]nanotech[/tag] in medical/healthcare are incredibly diverse, from device coatings to complex drug delivery, sensors and other diagnostics. Applications are seemingly limited only by imagination: drug delivery, gold nanoshells for heat-killing cancer cells, diagnostics, nanobatteries for artificial retinas, nanosensors for pathogens, etc. [tag]MEMS[/tag] (microelectromechanical systems) applications include implantable pumps, hearing aids, defibrillators, lab-on-a-chip and other biomedical research.

Drug Device Hybrids. Drug-coated stents are only the most obvious. Demarcations between drugs, devices, biotech and biopharm have become almost arbitrary as the products are now more often defined by their functions than their composition, pitting widely different technologies against each other or combining them into products that are far more than the sum of their parts. These include bioresorbables, drug coatings for biocompatibility, [tag]drug delivery[/tag], tissue ingrowth and myriad other possibilities.

Atherosclerotic plaque reversing drugs. Take an established, invasive device market, or markets ([tag]angioplasty[/tag], [tag]stent[/tag]ing, coronary artery bypass technologies. etc.) and penetrate it with a drug — the word “growth” would be inadequate in describing the potential.

Rational therapeutics. Both drugs and device markets, of virtually all types, are at best symptomatic, arguably with high efficacy, but symptomatic nonetheless. Any clinical intervention, however, that directly addresses the root cause of disease or at least moves further upstream in the pathogenic pathway (e.g., insulin for diabetes is a far better clinical solution than dialysis for end stage renal disease), will have substantially more potential. Pharmaceutical development in general, and biotechnology in even more specific terms, recognizes the value in this. However, many a venture capital dollar has been spent overestimating this value while underestimating the technical challenge.

RFID — Radiofrequency Identification. The integration of information technologies with medical devices is inevitable, given the value of information that can be exploited by identification of devices using [tag]RFID[/tag], from ensuring surgical instrument count in the OR, identifying implants in patients, tracking product inventories, etc.

Infection control. The global population and its increasing capacity to migrate brings pathogens from, and to, all corners of the globe. The overuse of antibiotics has stimulated a startling number of drug resistant bacteria. Nosocomial infections represent a huge cost in healthcare systems. These reasons are enough to point to the huge potential for products in infection control.

Obesity Drugs. Effective drugs to treat [tag]obesity[/tag], and preempt all the downstream healthcare complications of obesity, represent potential recognized by a growing number of pharmaceutical companies, even in spite of the recent failure of Accomplia (rimonabant) by Pfizer. High volume caseload with high healthcare costs are strong drivers in support of continued obesity drug development.

To these high growth areas previously identified, we add a number of additional ones, due to the emerging potential seen as high volume potential is matched with achievements in technology development:

Apoptosis. “Programmed cell death” is a normal part of an organism’s life cycle, encompassing necessary functions of cellular differentiation, but also orepresents an area of tremendous study for its potential in areas as diverse as cancer therapeutics and other disease treatments due to the normal or even dysfunctional role it plays in those diseases.

Gene-driven drug development. The mapping of the human genome was a major stumbling block for the development of gene-based medicine, but it is not the only hurdle. The complex interactions of the human genome as it operates in molecular biology, resulting in either healthy or pathogenic tissue systems, are a gargantuan puzzle more complex than the genome mapping goal itself. However, we predict that the progress made in understanding the genetic basis of disease will yield dramatic successes in the development of drugs created based on this knowledge or, in the least, screened against genetic profiles that will dictate the likely success of pharmaceutical candidates.

Neuromodulation. In the September issue of MedMarkets, we highlight some of the developments in [tag]neuromodulation[/tag] and [tag]neurostimulation[/tag]. While applications are diverse, the apparent commercial successes in this field have been limited, but certainly significant to have been noticed (or created) by companies like Medtronic. The human nervous system has an architecture and function that make it innately less amenable to yielding its secrets than are other organ systems, yet advances in implantable devices have converged with the huge unmet need of chronic pain management to create enormous opportunity in the market.

As we have noted previously, the potential markets for advanced medical technologies appear to be limited only by imagination. Manufacturers have demonstrated time and again their ability to create product types, product combinations, applications and all their various customized variations in order to capitalize on the convergence of technical achievement and umet market demand.

The (Medtech) World is Getting Smaller

It has already been said that medical technology is getting complicated. Now it’s time to point out that the world is getting strikingly small(er).

Even the youngest startup has to consider market opportunity on a global scale. So a little medtech startup with not much more than a patent (and sometimes not even that) and with a staff you can count with one hand, is highly likely to be considering their moves based on global markets. The opportunities are all too apparent and tangible.

A caseload of 100,000 U.S. patients annually as prospects for a new device can be reasonably attractive if the device offers a measurable clinical advantage over alternative approaches  — approaches that may include a device, a drug, a hybrid of both or just a lifestyle change — and if that advantage is tangible and can be sold as such. But if the real potential market is any healthcare system sophisticated enough to use the device, willing and prepared to pay for the device and one reachable by distribution systems, then that U.S. caseload can actually represent a minor share of the total. The “rule of thumb” is that for most medical device markets, the U.S. represents roughly 50% of the world market, and while clearly the U.S. healthcare system is ready, willing and able to pay for medical technology that sometimes shows only marginal clinical advantage, that remaining 50% is comprised of an awful lot of Westernized, democractic, and capitalistic geographies, with sophisticated distribution systems, well established reimbursement schemes and, not least of which, painfully favorable currency exchange rates against the dollar. Combine this with increasingly sophisticated manufacturing and design companies capable of producing prototypes, CRO’s capable of generating clinical data, and tax structures, work forces and economies globally just begging for outsourcing opportunity and it seems a rather foolish notion to limit market consideration to the U.S., does it not?

Then there is that other earth-shrinking force, information technology. Time was when my business’s worldwide focus meant a rather heavy FedEx bill to deliver reports to Europe, Japan, China, Australia, Korea and the Middle East, but thankfully, the idea of the “paperless” world is getting more and more real, since now the vast majority of business reports are ordered and delivered electronically within 30 minutes from start to finish. It’s only the deliberative dialogue that takes longer as clients decide on the relevance of report content and that process takes place largely electronically, of course.

Worldwide markets MedMarket Diligence have covered recently:

Obesity (final edits in process)
Ophthalmology
Surgical Sealants
Orthopedic Biomaterials
Micro/Nanotechnology
Diabetes
Wound Management

Tags: medtech

Medical technology definitions and markets get blurry

Time was when a device was a device, a drug was a drug and biotech was . . . well, still in R&D.  When is a device a device? When is a duck a duck?  If it walks like a duck, sounds like a duck and looks like a duck, it’s a duck — or is it? You have to make certain that you carefully define your assumption of what defines a "duck" versus what is like a duck in appearance or what has duck-like qualities or what has aquatic grazing tendencies similar to ducks but in fact is a quite unrelated waterfowl.

Over the recent past (say, five years), the steady rate of development to make products do more, perform at higher standards, and to play more roles in achieving a more aggressive goal in clinical outcomes is seriously complicating any effort to categorize a technology into such previously neat niches. And it isn’t just at these higher levels of definition (of course, devices like stents are coated to impede restenosis, others in tissue engineering are made of materials designed to stimulate cellular in-growth and then just dissolve); it’s the subtle distinctions between otherwise similar products that make some issues more blurry. Issues like trying to assess market potential. So, when is a fibrin sealant a glue and when is it a hemostatic agent? When does a device compete with a similarly designed device and when does it in fact compete with a lifestyle change? It’s not simple enough anymore to be able to distinguish equipment from reusables. We no have to be able to separately measure usage of disposables, reusables and (I abhor this term) reposables. Perhaps most importantly, at least in the eyes of the weary medtech manufactuters, is the idea that competition has long since been changed from being defined as those products performing a similar, albeit narrowly-defined function, like when the angioplasty manufacturer could reasonable consider his/her competitors to be all other manufacturers of devices that produce catheter-based recanalization of the atherosclerotic lumen. Oh, woe the angioplasty manufacturer who does not now also consider atherectomy, transmyocardial laser revascularization, bare metal stents, drug-eluting stents, traditional/open, MIDCAB (and similar) or and even percutaneous coronary artery bypass graft, let alone the classes of drugs and other non-device approaches to produce non-surgical reversal of atherosclerosis. But any analysis of an established market and/or technology sector (see MedMarket Diligence Reports), must find a way to wrap up the data and weigh it in specific "market segment" bundles. As carefully as any such effort is handled, with assumptions laid out carefully, rarely is it any guarantee (trust us on this score) that all clients will see any particular market the same way, and they will be all too ready to challenge the notion of a hemostat, calling it instead a sealant, or a glue or some other moiety of their choosing, or insisting that a <5% market share does not make a company a "minor" player. To argue this is, of course, their perogative. So, bear with those like us when, however tedious it may seem, we methodically define a duck in excruciatingly explicit term so we can ensure that we gotten all "ducks" in a row and counted.

See a selection of our reports here.

 

Tags: medtech, device, implant, biotech, drug.

 

Bone and Other Allografts Worldwide

Worldwide Allograft MarketAllografts are the main “traditional” orthopaedic biomaterials. This market segment includes bone allografts (fresh, or freeze-dried bone; also demineralized bone) and soft-tissue allografts, including cartilage, tendons and meniscus.

The global market for all allografts was $1.5 billion in 2006, with bone allografts contributing half of that, soft-tissue allografts $500 million, and demineralized bone the remaining $250 million. The ligament and cartilage segments are expected to double from 2006 to 2011, and there will be even greater growth in the meniscus segment, but relatively slow growth in bone allografts. The reason for the anticipated surge in soft-tissue allografts is the increasing demand for repair procedures related to growth in more active lifestyles among affluent younger people. Bone allografts, by contrast, face increasing competition from synthetic bone substitutes and there is a continuing shortage of donor material.

(From “Emerging Trends, Technologies and Opportunities in the Markets for Orthopedic Biomaterials, Worldwide,” Report #G625.  Published December 2006.  See link.)

Tags: medtech, orthopedic, biomaterial, allograft

Medical/Surgical Sealants; Worldwide Growth

Sealants GrowthSurgical sealants and fibrin glues are biologically-based products designed to aid in the process of clot formation. Clotting is the first naturally occurring process in wound repair, and affects many subsequent biochemical processes in the wound healing cascade.

During the wounding event, blood from capillaries at the damaged tissue site seeps out and reacts with tissue proteins and air to cause platelets and complement factors to trigger the cleavage of pro-thrombin into thrombin which then changes fibrinogen into fibrin, the main insoluble component of a blood clot.

It was natural for practitioners, looking for effective haemostasis, to look at fibrin as a source of effective haemostatic activity. In the 19th century, physicians used fibrin powder to stop bleeding. During the period from 1940 to 1960, understanding of blood fractionation and the development of processes for preparing blood fractions, meant that a pure form of fibrin could be prepared and manufactured in a stable format.

Fibrin sealants represent the most useful of surgical hemostats. These products can be used to clot blood but are also used to seal around suture lines for organ transplants, mastectomies, and various resection procedures, to prevent leakage of fluids and gases. A number of companies have developed devices capable of preparing autologous fibrin and platelet formulations that can be used as sealants, and active mixes of growth factors to aid repair. Harvest Technologies, Plasmaseal, Thermogenesis, Biocoral Inc, and Interpore Cross Medical (Autologous Growth Factors product) are four companies with products designed to address this need.

Because sealants are often available as multicomponent systems that need to be mixed immediately prior to surgical application, several innovative devices have been developed to facilitate application. During product manufacture, the thrombin component and the Factor XIII/fibrinogen components are kept separate until required. Addition of fibrin product to a bleeding surface primed with the other component results in accelerated hemostasis and a sealing effect on the bleeding surface.

(From “Worldwide Surgical Sealants, Glues and Wound Closure Market, 2007-2011.” Published February 2007, MedMarket Diligence, LLC. For more information see report description, table of contents.)

Tags: medtech, sealants, fibrin, cyanoacrylate

Selected Medical/Surgical Sealant Product Companies and Their Strategies

Exhibit ES-8:  Selected Sealant Product Companies and Their Strategies

Company

Products and Prices

Strategy

Focal
division of Genzyme
Biosurgery

Focal
Seal L $30 per ml

Available for lung resections in Europe and as an adjunct for non-hemostasis
sealing in the USA. Focal exploiting light activated hydrogel IP.
Focal is strategically focused on exploiting unique sealant
capability of its products in neurological, cardiovascular,
gastrointestinal, and thoracic applications.

Angiotech

CoStasis
(Dynastat) $50 per ml

A sprayable liquid hemostat adjunct for use in surgical procedures to
control bleeding in specific clinical applications. Five year
agreement with Tyco for a broad range of indications in the USA,
Europe, Latin America, Middle East, Australia, New Zealand, and India.
Cohesion provides unique products for sealing and hemostasis
targeted at the full range of surgical procedures.

Fusion
Medical

Acquired by Baxter

Floseal
$28 per ml

Non-sealant hemostat for all hemostasis as an adjunct, including problematic
bleeding. Strategy is to develop patented products which combine
technologies incorporating a number of processed mammalian
biomaterials and have hemostatic benefits for surgery in demanding
actively bleeding procedures, and lead to rehabilitation and
re-operation benefits by reducing adhesion formation.

Baxter
Healthcare

Tisseel
$65 per ml

Homologous pooled fibrin, human thrombin, and bovine aprotinin. Adjunct for
hemostasis in an expanding range of indications. Baxter focuses on
biopharmaceuticals, vaccines, biosurgery and transfusion products and
provides products for medication delivery and dialysis. The bioscience
division of Baxter provides innovative solutions for biosurgery,
tissue regeneration and surgical hemostasis.

CryoLife

Bioglue
$45 per ml

Haemostatic adjunct for aortic dissection during surgery and may also be used
during lung procedures; contains proprietary mixture of bovine albumin
and glutaraldehyde. CryoLife focuses on providing donated human
tissue for surgical procedures. Recently has focused on developing
synthetic and engineered products as replacements for donated tissue.
CryoLife will continue to target Bioglue at procedures which require a
strong hemostatic tissue sealant, and compete on product benefits with
Tisseel etc.

Haemacure

Haemaseel
$65 per ml

Hemostat adjunct identical to Tisseel. Strategy to become a fully
integrated supplier of haemostatic and sealant products and to evolve
these into new uses such as drug delivery.

 

Source: MedMarket Diligence, LLC

From “Worldwide Surgical Sealants, Glues and Wound Closure Market, 2007-2011,” published February 2007. Click for details.

This report details the complete range of sealants & glues technologies used in traumatic, surgical and other wound closure, from tapes, sutures and staples to hemostats, fibrin sealants/glues and medical adhesives. The report examines the clinical and technology developments underlying this huge and rapidly growing worldwide market, with data on products in development and on the market; market size and forecast; competitor market shares; competitor profiles; and market opportunity. This report is a market and technology assessment and forecast of products in wound closure. The report details the current and emerging products, technologies and markets involved in wound closure and sealing using sutures and staples, tapes, hemostats, fibrin and sealant products and medical adhesives. The report provides a worldwide current and annual forecast to 2011 of the markets for these technologies, with particular emphasis on the market impact of new technologies through the coming decade. The report provides specific forecasts and shares of the worldwide market by segment for the U.S., Europe (United Kingdom, German, France, Italy, BeNeLux), Latin America, Japan and Rest of World.

The report provides background data on the surgical, disease and traumatic wound patient populations targeted by current technologies and those under development, and the current clinical practices in the management of these patients, including the dynamics among the various clinical specialties or subspecialties vying for patient population and facilitating or limiting the growth of technologies. The report establishes the current worldwide market size for major technology segments as a baseline for and projecting growth in the market over a ten-year forecast. The report also assesses and projects the composition of the market as technologies gain or lose relative market performance over this period.

 

See http://mediligence.com/rpt/rpt-s145.htm.

Tags: sealant, fibrin, cyanoacrylate 

Medical product industry investment making a turn

Healthcare product (medical device and biotech) investment, like all investment in the past four years, has been pinched, but not so much as one might believe. The total investment has been relatively stable, and in fact has increased recently in the both the aggregate and for medical devices specifically. What is more the case with investment in the post-9/11 and post dotcom era is the conservative shift in that investment, notably a shift in investment from earlier or expansion stage of company development to later stage investments. We’ve talked about this before. (Perhaps the most telling aspect over the past four years has been that MedMarket Diligence experienced a big increase in information purchased from the investment community, apparently no longer satisfied solely with their own research.) The conservative shift is waning, however. We’ve read the tea leaves and see signs (numbers of deals, size of the deals, and numbers of startups forming) that opportunity-hungry investors are ready to take more chances.Expect the following to happen in 2006 – barring any unforeseen global event (let’s be safe, but let’s also live our lives!). Aggregate investment in healthcare products will take a healthy jump, with a measurably bigger share going to medical devices, and investment will shift back upstream in the development cycle. Many more deals, at bigger average investments (i.e., $10 million each).

Aggressive medtech development in lieu of perfect solutions

In reviewing a past report we produced on the management of obesity, which was addressed more recently in our October issue of MedMarkets, I was struck by the proliferation of companies pursuing surgical device solutions to obesity. These include variants of the gastric band approach, which simply reduces gastric capacity. The market for these devices has burgeoned in the past couple years, and is expected to grow aggressively. Why? For one, the stigma of obesity is fading as it is being viewed in the popular press more as the result of pathology than character flaw. This has opened the floodgates to people seeking a surgical solution. Reimbursement (not my forte) has at least not been an impediment. But why all the device development? This is a classic device-centric pathology; the stomach is a structure whose capacity can be readily reduced through gastric banding, it is a relatively simple surgical procedure and produces the immediate effect of reducing intake of food. This is, of course, also the rapid adoption phase of a market, and it is difficult (short of available long term data on approved devices – especially since most devices are not approved in the U.S., yet) to see the downside. It would be misguided of me to not acknowledge that devices are rarely (ever?) perfect solutions to pathology. But, I also recognize the tremendous potential for devices to achieve solutions that increasingly raise the barrier to the development of biotech/pharma/biopharm solutions to pathology, because devices, imperfect or limited in functional performance or fit with the premise of “rational therapeutics” though they may be, they are available now and are achieving solutions sine qua non.