Category Archives: economy

Medtech succeeds by responding to multiple demands

Medtech is resilient, adapting to the changing demands of patients, payers, regulators, and the economy, but only in the hands of the innovators who keep a finger in the wind on these demands.

  1. Comprehensive outcomes versus symptomatic intervention. Competition in medtech, heightened by cost pressures in particular, is characterized by the demand for comprehensive solutions to disease/trauma rather than technologies that simply ameliorate symptoms. Manufacturers are focusing on longer term solutions, competing against the full spectrum of therapeutic alternatives rather than incremental improvements in their widgets.
  2. Whatever the cost, make it lower. Cost is poorly understood in healthcare (hence the problem!), but it is recognized as important simply by the rate at which premiums increase, the percentage of GDP adding to healthcare spending, the cost of Medicare and other similar benchmarks. Cost is difficult to assess in medical technologies, because there are long term, unforeseen implications of nearly every medtech development. Nonetheless, the manufacturer who does not only bow down in homage to cost but also makes cost at least an implicit part of its value proposition will be quickly put out of business.
  3. The life spans of “gold standards” of treatment are getting shorter and shorter. Technology solutions are being developed, from different scientific disciplines, at such a pace as to quickly establish themselves, in a broad enough consensus, as new gold standards. Physicians are increasingly compelled to accept these new new standards or find their caseload shifting to those who do.
  4. Many manufacturers strive for being able to claim their products are “disruptive” — overturning existing paradigms. However, few medtech manufacturers really ever achieve anything more than marginal improvements. Note the relative amount of 510Ks versus PMAs in regulatory approvals (not that a PMA denotes a “disruptive” development).
  5. Materials technologies are defining what is a “device” as well as what they can accomplish. Competitive manufacturers are aggressively gaining a broad understanding of materials technologies to encompass traditional device, pharma, biopharma, biotech, cell biology and others, ensuring their success from a broadly competitive position.
  6. Interest in startup innovations by VCs and large-cap medtech companies has never been more intense, but funding still demands concrete milestones. Proof-of-concept gets entrepreneurs excited, but 510(K) or better is what gets the money flowing. This is not the credit-crunch of 2008, when the sour economy caused funding to largely dry up. Money is indeed flowing into medtech now, as evidenced by the IPO market and the volume of early stage funding, but potential investments — especially at very early stages — are no less intensively vetted. Startups must therefore carry the risk well into the development timeline, when the prospect of their products reaching the market has been demonstrated far more effectively.
  7. Medtech markets are influenced by many forces, but none more strongly than the drive of companies to succeed. Reimbursement. Regulatory hurdles. Healthcare reform. Cost reduction, even a 2.3% medical device excise tax, et cetera, et cetera. None of these hold sway over innovation and entrepreneurship. And the rate of innovation is accelerating, further insulating medtech against adverse policy decisions. Moreover, that innovation is reaching a sort of critical mass in which the convergence of different scientific disciplines — materials technology, cell biology, biotech, pharma and others — is leading to solutions that stand as formidable buttresses against market limiters.
  8. Information technology is having, and will have, profound effects on medical technology development. The manufacturers who “get” this will always gain an advantage. This happens in ways too numerous to mention in full, but worth noting are: drug and device modeling/testing systems, meta-analysis of clinical research, information technology embedded in implants (“smart” devices), and microprocessor-controlled biofeedback systems (e.g., glucose monitoring and insulin delivery). The information dimension of virtually every medtech innovation must be considered by manufacturers, given its potential to affect the cost/value of those innovations.

This is not a comprehensive list of drivers/limiters in medtech, but these stand behind the success or failure of many, many companies.

Patrick Driscoll is an industry analyst and publisher of content on advanced medtech markets through MedMarket Diligence.

Surgical Sealants: Advanced Technologies in Well Developed Markets

Advanced technologies are frequently developed in well developed economies, then migrate to other economies over time. Consequently, relatively new technologies tend to be more dominant in the well developed economies while relatively old technologies tend to be more dominant in the developing economies.

Case in point, surgical sealants for wound management versus surgical tapes, the former relatively new (and advanced) and the latter relatively old.

Screen Shot 2015-03-21 at 12.45.52 PM

Source: MedMarket Diligence, LLC; Report #S192

Advanced and basic wound closure markets in contrast globally

In a prior post, I noted the migration of advanced technologies from countries/regions with well developed medical technology markets (U.S., Europe, Japan) to countries/regions such as China, which have large economies but relatively undeveloped markets for these technologies.

To elaborate on that, one of the more advanced technologies in wound closure is for the devices used in vascular closure, represented in the majority of cases by those used for closure of femoral artery puncture following diagnostic and interventional catheterization procedures. By contrast, perhaps the most basic wound closure technology is surgical tapes.

Diagnostic and therapeutic catheterizations are advanced procedures designed to reveal and treat vascular pathologies, respectively, and require access to the vasculature through a femoral artery. Following the procedure, the prompt and effective closure of the femoral puncture is critical, given the size of the artery and the potential for its inadequate closure leading to rapid blood loss and death. The overall procedure comprises advanced technology in the catheterization and the closure that is therefore relatively common in advanced economies, such as the U.S., Europe and Japan, and relatively scarce or non-existent in markets, such as China.

By contrast, surgical tapes are the simplest form of wound closure with minimal technology. However, the caseload for use of surgical tapes is enormous, given the incidence of simple lacerations that can be addressed through surgical tapes. Given advanced alternatives to closure (sealants, glues, hemostats, etc.) in the U.S., Europe and Japan, surgical tapes have considerably lower demand than in China.

The contrast is illustrated in the two forecast graphs of global sales of surgical tapes and vascular closure devices.

Screen Shot 2014-11-24 at 8.36.49 AM

Source: Report #S192, “Worldwide Surgical Sealants, Glues, and Wound Closure Markets, 2013-2018″; MedMarket Diligence, LLC.

Screen Shot 2014-11-24 at 8.36.30 AM
Source: Report #S192; MedMarket Diligence, LLC.

 

Rising and fading technologies in the global market for wound closure

Technologies emerge, gain clinical acceptance, grow in caseload and become the standard of care. Then new technologies emerge, developed to improve on or eclipse established technologies. They gain acceptance and the cycle continues.

The pace of technology and market development in the products used in wound closure — sealants, glues, hemostats, sutures/staples, tape, and vascular closure devices — follow this path as characteristically as any medtech market. However, the pace of adoption varies both by technology type and geographic location. Consequently, there is a pretty wide range of compound annual growth rates in the sales of these product globally, regionally and by country.

Below illustrates the highest growth segment-geography combinations in the wound closure market. This frequently illustrates that novel technologies more rapidly penetrate well developed economies, which can sustain the initial high premium pricing of novel technologies, then progressively migrate to less well developed economies.  (For the sake of direct comparison, the high and low growth graphics are shown on the same scale.)

High Growth Segment-Geographies in Wound Closure

Screen Shot 2014-10-23 at 2.07.43 PMSource: MedMarket Diligence, LLC; Report #S192.

Low Growth Segment-Geographies in Wound Closure

Screen Shot 2014-10-23 at 2.07.52 PMSource: MedMarket Diligence, LLC; Report #S192.

Aesthetics and Reconstructive Surgery: A Market in Transformation

Aesthetic and reconstructive surgery has been undergoing a transformation over the past ten years.  A wide range of forces are changing the dynamics of clinical practice and the market for products used.  The drivers and limiters behind this have been and, to some degree, will continue to be:

  • Aesthetic or purely cosmetic procedures are growing among all demographics (male/female, old/young).
  • The economic hits of the 2008 recession were severe, especially for aesthetics, but have begun to be replaced by new procedure volumes.
  • Aesthetics have become a more complex clinical practice employing surgery, a wide range of implant types and materials, topicals and physician driven procedures.
  • Reconstructive medicine has advanced through developments in autologous tissue engineering, extracellular matrices, and other technologies that address bone defects and other orthomusucloskeletal problems.
  • The advances in reconstructive medicine have begun to trickle-down to aesthetic procedures, stimulating increasingly volume of cosmetic procedures paid out-of-pocket.

There has been a series of shifts in aesthetics/reconstruction procedure volumes commensurate with these and other forces. The result is a wide swing in procedure volumes over the past decade, much of which is expected to continue. See the table below.

Percent Change in Aesthetic/Reconstructive Procedures, 2002 to 2012

Screen Shot 2014-05-07 at 10.34.34 AM

Source: MedMarket Diligence, LLC; Report #S710.

Other forces behind transformation in aesthetics and reconstruction are fundamental advances in cell biology, continued progress in biomaterials development, advances in wound sealants, glues and wound closure, and others.


The topics in this post are the subject of the comprehensive MedMarket Diligence report, “Global Markets for Products and Technologies in Aesthetic and Reconstructive Surgery, 2013-2018.” See link for further details.

Over $24 Billion in Spent on Plastic Surgery Worldwide

And that’s just the product sales including implants, fillers, and other products used for aesthetics and reconstruction. It doesn’t include the physician fees, the outpatient site fees and other money spent.

There are two parts to this, of course. Plastic surgery has two faces — reconstruction and aesthetics, the first medically-indicated and the second elective.  Of course, the surgical reconstruction of anatomy and outward appearance to restore what has been lost to disease or trauma (the medically-indicated side of plastic surgery) has  benefitted greatly by the expertise and medtech innovation of aesthetics (the elective side).  Because of this, the market for products in plastic surgery has elements of both the traditional medtech market (reimbursement, economy-independed funding) and consumer markets (elective products, sensitivity to general economic conditions).

Overall, the market for these products is growing at a compound average of 7.9%, which is a strong but not extraordinarily high growth rate for a medtech market. Within it, of course, there is wide variation in the growth rates of plastic surgery product sales. Below is illustrated the aesthetics and reconstructive surgery products market from 2013 to 2018.

Screen Shot 2014-04-07 at 1.57.15 PM

MedMarket Diligence, LLC; Report #S710

 

Top Locations for New Medtech Companies

Medical technology thrives in geographic locations where economics, access to intellectual property, tax incentives and other synergies and infrastructure support it. Reflecting this is the locations where entrepreneurs decide to locate their medical technology startups. As an exercise, we compressed roughly 10+ years of data collected for our Medtech Startups Database to reveal the geographic locations in which there was the most concentration.

From a country standpoint, it should not be surprised that, by virtue of its population, economic strength and many other determinants, the United States is the most common country in which medtechs get started. Below is the list of the top countries in our Medtech Startups Database, ranked in descending order by the number of startup companies:

  1. USA
  2. Israel
  3. Switzerland
  4. United Kingdom
  5. France
  6. Germany
  7. Ireland
  8. Canada
  9. Australia
  10. Sweden
  11. Denmark
  12. Finland
  13. India
  14. Belgium
  15. Hungary
  16. Japan
  17. Korea
  18. Netherlands
  19. New Zealand
  20. Singapore

Since the U.S. is the most common country for new medtechs, it follows that the top cities in which all startups would be founded are in the U.S. The exception to this is Israel’s M.P. Misgav, a very concentrated area of investment and development in that country. The rest of the top cities are indeed U.S., with cities in California the most prevalent in the list (in descending order):

  1. Palo Alto, CA
  2. Menlo Park, CA
  3. San Diego, CA
  4. San Francisco, CA
  5. Cleveland, OH
  6. Cambridge, CA
  7. Mountain View, CA
  8. Irvine, CA
  9. New York, NY
  10. Austin, TX
  11. Redwood City, CA
  12. Boulder, CO
  13. Fremont, CA
  14. Minneapolis, MN
  15. Sunnyvale, CA
  16. Houston, TX
  17. Chicago, IL
  18. M.P. Misgav (Israel)
  19. Salt Lake City, UT
  20. Lexington, KY

It is noteworthy that, from our periodic review of startups, the locations that have been progressively moving up the chart are Austin, Boulder and Mountain View, while locations that have seen fewer startups than were newly located there in the past are Minneapolis and Chicago (we will leave it to others to speculate the reasons behind these ups/downs).

Global and regional growth rates for wound care product sales

Manufacturers of wound care products, from traditional dressings and bandages to growth factors and bioengineered skin, see variable sales growth driven by different levels of new product adoption, variations in clinical practices, and other technology, reimbursement, regulatory, economic and other forces that vary by geography across the globe. The balance of sales across multiple wound care product types can be radically different from country to country and region to region.

Emerging from the 2013 analysis (Report #S249) by MedMarket Diligence are the current and forecast wound care product sales resulting from the net effect, region by region, of these multiple forces. Below is illustrated the high growth country/product segments in wound management, reflecting the rapid adoption of new technologies such as growth factors and bioengineered skin, as well as older products such as alginates that are gaining sales in rapidly developing economies.

wound-country-high

Source: MedMarket Diligence, LLC; 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.”

At the other end of the extreme are those very well established products growing at less than anemic rates in countries where the economy is not as robust and/or where the growth has been superseded by sales of more novel products. Conventional dressings and bandages offer considerably less demand than do growth factors, bioengineered skin and skin substitutes and similar new products.

wound-country-low

Source: MedMarket Diligence, LLC; Report #S249

Of course, growth of sales in wound management products (and any product) is defined as the percentage change in sales volume over time. Smaller markets (typically soon after they have formed as a result of their initial commercialization) tend to grow on a percentage basis much faster. Indeed, a $1 dollar sale in year 1 followed by a $2 sale in year 2 represents a 100% growth rate, while a $1 increase in sales from year 1 to year 2 for a $100 million market represents virtually zero growth. Conversely, a 1% increase in a $1.75 billion market is a $17.5 million increase. This is indeed obvious, but must be kept in mind when considering the growth rates discussed above.

Medtech Financing: August 2013 and Trend 2009-2013

Fundings in medical technology for August 2013 came in at $478 million, driven in huge part by the $167.7 million funding of ConforMIS, without which the month’s fundings total would have been rather unremarkable, but which certainly cannot be ignored (“Other than that, Mrs. Lincoln, how did you enjoy the play?”).  The complete list of August 2013 fundings is detailed at link.

The trend in funding year-to-year in medtech shows two significant trends: first, it illustrates a kind of seasonality, though not perfectly so, in the ups and downs occurring at common times during the year (at least between March and June); and, second, in the unambiguous upward trend in fundings, at least since we began plotting the fundings in early 2009.

The year-to-year pattern is illustrated below (using smoothing primarily for aesthetics):

funding-seasonal-2009-2013

Source: Compiled by MedMarket Diligence, LLC

The four-year trend is shown below, with the trendline computed and shown over the monthly data (the raw data is at link):

funding-trendline-2009-2013

Source: Compiled by MedMarket Diligence, LLC

For reference, the total fundings for the years 2009 through 2013 (run rate) are:

YearFundings
($millions)
Growth over prior year
2013 (run rate)$6,22143%
2012$5,014-2%
2011$5,12143%
2010$3,5939%
2009$3,290--

Source: Compiled by MedMarket Diligence, LLC

Reference reports in Ophthalmology, Coronary Stents and Tissue Engineering

MedMarket Diligence has added three previously published, comprehensive analyses of  medtech markets to its Reference Reports listings. The markets covered in the three reports are:

  • Ophthalmology Diagnostics, Devices and Drugs (see link)
  • Coronary Stents: Drug-Eluting, Bare, Bioresorbable and Others (see link)
  • Tissue Engineering, Cell Therapy and Transplantation (see link)

Termed “Reference Reports”, these detailed studies were initially completed typically within the past five years. They now serve as exceptional references to those markets, since fundamental data about each of these markets has remained largely unchanged. Such data includes:

  • Disease prevalence, incidence and trends (including credible forecasts to the present)
  • Clinical practices and trends in the management of the disease(s)
  • Industry structure including competitors (most still active today)
  • Detailed appendices on procedure data, company directories, etc.

Arguably, a least one quarter of every NEW medtech report contains background data encompassing the data listed above.  Therefore, the MedMarket Diligence reports have been priced in the single user editions at $950 each, which is roughly one quarter the price of a full report.

See links above for detailed report descriptions, tables of contents, lists of exhibits and ordering. If you have further questions, feel free to contact Patrick Driscoll at (949) 859-3401 or (toll free US) 1-866-820-1357.

See the comprehensive list of MedMarket Diligence reports at link.