Acquisition a growing focus in medtech

Yesterday, we commented on top 10 medical innovations reported at the Cleveland Clinic Innovation Summit.  

At the summit, Boston Scientific CEO Jim Tobin’s presentation underscored the other point we made recently, that acquisition is a routine part of medtech’s drive for innovation.  Boston Scientific has some $2 billion on hand and is looking for companies whose products can contribute to top line growth, underscoring that startups with a more future potential are less of interest.  The operative consideration is that revenues in the near term are important for Boston Scientific, as it recuperates from its expensive acquisition of Guidant.  Tobin’s presentation was well described here.


Med-Tech Buyout Targets, Sun Rises in East

This article in Forbes is interesting for its stranglehold on the obvious.

Noting that the shares of surgical device maker, Cardica, and gene therapy device maker, Cardium Therapeutics, have fallen of late, making them potential acquisition targets which, of course, virtually all med-tech companies are anyway. In fact, and to give Forbes credit, their point is that the companies’ limited access to cash will impede them from being acquisition targets by larger companies.

The nature of the medical device industry now, and probably for some time to come, is such that small startups or development phase device companies represent a vital source of innovation that make them ripe pickings for the well-established medtech companies. And, clearly, it isn’t even the small or early stage companies that are such targets — no one should need to be reminded of the battle-royale between J&J and Boston Scientific over the acquistion of the not-so-early-stage-or-small Guidant, said battle being “won” by Boston Scientific.

Indeed, I would venture that it is the minority of medical device company entrepreneurs who have the vision, desire and fortitude to make the IPO their ultimate goal. Innovating, developing and gaining regulatory approval for market introduction of devices is a very different different beast than commercializing a device through even a limited geographic scale, let alone worldwide.

Ablation: Radiofrequency Among Big Growth Segments in Surgery

The surgical ablation of soft tissues will see significant growth in the next few years and, among them, radiofrequency will demonstrate some of the most significant growth.  Other modalities include hydromechanical, microwave, thermal, cryotherapy, ultrasound, light, radiation and electrical.  Growth in these ablation segments in the U.S. is shown in the chart below.

Source:  MedMarket Diligence Report #A125, “Ablation Technologies Worldwide Market, 2008-2017: Products, Technologies, Markets, Companies and Opportunities.”


Radio frequency (RF) used in ablation is created by a stimulated electromagnetic emission process. When a resonant radio frequency energy flow is established between two reflectors, an intervening ionized medium stimulates and maintains the resonant radio energy flow. A number of companies are developing and marketing products around this modality; key companies, their products and applications are shown below.

Radiofrequency energy is gaining widespread use in the field of sports medicine surgery for the thermal modification of soft tissue structures within the joint. The use of radiofrequency energy for thermal chondroplasty has gained tremendous popularity because of the quality of the therapy. Radiofrequency surgical systems have the inherent ability to seal large vessels as a result of the tremendous temperatures the energy can generate.

Ablation technologies products, manufacturers and markets are detailed in the worldwide report #A125, “Ablation Technologies Worldwide Market, 2008-2017: Products, Technologies, Markets, Companies and Opportunities.” The report may be ordered for immediate download online or may be purchased via Google Checkout, below.



Optimism: perception and reality in healthcare, elsewhere

Forgive this less-than-medtech-relevant sidebar on the wild swings of optimism, pessimism, hope and fear. Perhaps, all things being equal, the simplest explanation is the right one.

Like Tom Hanks’ character in the movie “Big”, when he puts up his hand and says, “I don’t get it” (in his case a toy building that turns into a robot), I seriously struggle with the prospect of an economic downturn — I just don’t get it.

One could easily look at healthcare, as we have argued many times in the past, and conclude that it is a special case, an industry that is insensitive to recession (disease knows know bear market). Clearly this is the case, as I review hundreds of product approvals, patents, market introductions and other activity that stand as testimony to the juggernaut of the healthcare industry, seemingly rolling over as it does through every economic obstacle (save, almost, the VC cash crunch).

I just don’t get the self-fulfilling prophecies of Wall Street and elsewhere in which perception becomes reality. We have only to fear fear itself, said FDR. Because we think the market may go down, we sell our shares and, guess what, the market goes down.

I do not deny the hard reality that many of us (mortgage holders, banks) overspent our means and need to cut back, but in the scheme of the world, correcting this should be a marginal adjustment, should it not? Every one of us needs to get up every day, eat meals, take kids to school and do the myriad activities of life that, like healthcare, just don’t change. Shouldn’t that drive the world and the world markets? Why are thousands and thousands now out of work?

Or is it really that the world of investment exerts a hyperbolic pull on all of us, up and down, inflating and deflating the real values of our daily lives. Because someone wants to make money, their investment drives up value, and because someone desperately fears losing money, their panic drives down value.

And, yet, every day we get up and still need to live, still need to eat, have a roof over our heads, clothes on our backs.

Accuse me of being simplistic, but I don’t get it.

The Dow is up 900 points, the Dow is down 500 points, down 200 points, down 200 points. What happened? Did the world really gain or lose 900 points in value?

It’s insane and I don’t get it, so I refuse to accept it. My value — and every thing I value — has not changed.

European Ablation Markets, by Segment and Country

The major national markets in Western Europe for ablation technologies account for almost 12% of the global ablation market. Their share of the total medical device market is around 30%. Healthcare spending per capita is broadly similar across all the countries for which an example forecast (France) is provided below, ranging from approximately one-quarter to half of the equivalent expenditure in the USA. Apart from this variance, the inter-country differences in ablation market size are mainly a factor of different population sizes.

Source: MedMarket Diligence Report #A125
Source: MedMarket Diligence Report #A125

Below is a description of the MedMarket Diligence report #A125:

This report is a detailed market and technology assessment and forecast of the products and technologies in the ablation market for treatment of soft tissues via energy-based modalities, including electrosurgery, radiosurgery, gamma knife, brachytherapy, cryogenic therapy, fluidjet therapy (hydrotherapy), microwave ablation, radiofrequency ablation, laser, thermal ablation, and ultrasonic ablation.

The report describes alternative energy-based technologies and the nature of their effect on soft tissue, the underlying basis of the technology, the requisite systems for their use (including capital equipment, devices and disposables), and their strengths and weaknesses for specific clinical applications. The report details current and anticipated target applications and assesses the current and forecast caseload for each energy-based therapeutic considering competition from any and all alternative energy-based or other therapeutics, with current and worldwide market forecasts (2008-2017) segmented by technology type and specific clinical segment. The report provides segmentation of the worldwide ablation market by both ablation technology and region/country: Americas (USA, Canada, Mexico, Brazil), Europe (Germany, United Kingdom, France, Italy, Spain, BeNeLux), Asia/Pacific (Japan, China, India, Australia) and Rest of World. The report details the current and emerging products, technologies and markets for each energy-based therapy. The report profiles over 60 key companies in this industry detailing their current products, current market position and products under development.

The Report #A125, “Ablation Technologies Worldwide Market, 2008-2017: Products, Technologies, Markets, Companies and Opportunities,” is described in full at link. The report may be order for immediate download online or my be purchased via Google Checkout below.

When Medical Devices are “Finished”

In last week’s Wall Street Journal, Stephen Oesterle, the vice president for medicine and technology at Medtronic was paraphrased for his startling conclusion that medical devices are “finished”. His point, “You can’t keep stuffing gizmos into people to treat end-stage disease… When biotechnology gets right, we’re finished. Because it’s restorative, not palliative as devices are.”

While subsequent to his statement other Medtronic representatives tried to put this in the context of something other than foretelling the death knell of Medtronic itself, his point is, IMHO, right on target.

Setting aside pharmaceuticals in its own category and addressing biotech and medical devices, there is a fundamental distinction between these two approaches to healthcare that defines the status quo and an inevitable future for both. Succinctly put though Dr. Oesterle’s comments are, I can endeavor to put it in other words: medical devices treat symptoms while biotech — if not now, then ultimately, treats underlying disease.

Therein lies a distinction that has turned the medical device industry into a major market worldwide, while the biotech industry has yet to reach a fraction of its commercial potential.  With a focus on symptoms, arguably a much lower technololgy hurdle than the myriad challenges faced by biotech as it seeks to effectively eliminate disease(s) at their source, the medical device industry produces limited, though very specific clinical endpoints that are arguably very incomplete, yet highly valuable.  (The coronary stent does not cure the patient of his/her atherosclerosis; it just maintains the crucial patency of coronary arteries to keep the patient alive.)

This is a topic i have addressed in the past, sometimes hammering the point endlessly to anyone who would listen.  Biotech is ideal. Devices are now. However, lest one think that there is a point at which we simply switch from devices to biotech (when Medtronic folds!), the reality is that devices, imperfect as the are, will continue to evolve. To this point, below please find the August 2006 edition of “MedMarket Outlook” from our discontinued “MedMarkets” publication. 


(August 2006)  MedMarket Outlook: Medical Devices in a Future Scenario



The future of medtech is proceeding along paths determined by technologies already developed, but also guided by the need to provide less invasive treatment of disease with better long-term outcomes. If these paths are followed to their logical endpoint, medical technologies of the future can be predicted. Concurrently, paths toward the development of treatments via biotechnology have their own logical endpoints. Many biotechnologies have the potential to preempt medical technologies, due to their intrinsic design as “rational therapeutics” — treatments of the root cause of disease rather than only its symptoms.

Here we consider the development in medical technology to have largely achieved its potential and we describe the devices and their characteristics as they would exist in such a future. We make no assertion that each and every technological hurdle that needs to be crossed can indeed be crossed (we imply the possibility); we simply give the benefit of doubt to the technologies that may be developed in order to consider what benefits may ensue.

In short, the future of medtech will be such that two general categories of technologies exist; those that are focused on treating specific pathologies and symptoms and those that represent organs or organ systems. Lastly, it should be noted that we envision this “future scenario” not as one happening 25 years (or more) hence, but in some cases less than a decade.

Disease- and Trauma-Specific Device Solutions
In the idealized future medtech industry, medical devices will have been optimized to facilitate the body’s own capacity to heal. Devices will be constructed to provide the function — e.g., maintaining the patency of a vessel lumen (stents), serving as a temporary or permanent lumen (AAA graft), be a fully functioning hip replacement, etc. — as long as (and no longer than) necessary for the body to complete all of the repairs of its own that are possible. In this sense, devices will be developed to help the body help itself, then get out of the way to not impede further healing. In particular, bioresorption will have become highly sensitive to timing (stents will dissolve or deconstruct to be excreted at the precise time needed). This will include extracellular matrices used for the regeneration of tissues of all types of tissue (muscle, bone, even nerve) with the matrix facilitating tissue ingrowth before being resorbed. Similarly, biocompatibility will become a more active feature of implanted devices such that they will go well beyond simply being inert or inducing no immunological or other response and will at a maximum, will elute drugs, proteins or other agents that will actively stimulate or facilitate the body’s normal healing process.

Devices will be highly intelligent, sensing the conditions in their environment and responding as necessary. Responses will include bioresorption, release of drugs, change in shape or other responses

Devices will be tracked wirelessly for status, providing patient and clinician with information about the status of healing, alerting each to changes requiring intervention long before adverse symptoms appear. This tracking will also include tracking of the device itself, revealing data on device integrity and alerting the patient/clinician to any change.

Increasingly complex devices will be implanted percutaneously, endoscopically or by other means to minimize any trauma. During implantation, the devices will have very low profiles to enable them to traverse to the target site through very small and/or sensitive (e.g., enervated) tissues.

Cost will have played a critical role in determining the effectiveness of device development, but not simply considering the device cost itself, which may be significant. The true cost of these devices will be determined thoroughly as a measure of their ability to achieve specific outcomes compared to the costs of any and all technologies or approaches that compete for similar outcomes.

These device technologies are based on the premise of technologies under development now. Advances in materials technologies, drug/device innovations and many others may produce opportunities for devices with benefits largely unforeseen at this time.

Biohybrid, artificial organs
In light of medtech’s general inability to compete directly with the premise of biotech — treatment of root disease rather than symptoms, medtech will have the potential nonetheless to provide solutions to disease and trauma, with the solutions being ones in which medtech devices or systems so thoroughly address the symptoms of diseases as to emulate cures of them.

In the future world we are envisioning, many organs and organ systems will be available to replace or augment the functions of organs that have been removed or are dysfunctional as a result of disease or trauma. The organs will be comprised of mechanical and biological components that will variously house reservoirs of therapeutics that will periodically and painlessly be replenished, contain bioreactors that will express patient-specific proteins, hormones and other naturally occurring substance, or provide other therapeutic intervention (as with defibrillators, pacemakers, etc.). Mechanical components will be made of materials producing no inflammatory response, inducing no clot formation or other effect and will otherwise be completely neutral to the body.

These organ systems, like the devices described above, will be intelligent, sensing multiple parameters and responding in real-time basis to maintain ideal homeostatic control specific to the patient’s dynamic needs (sleep, stress, exercise, metabolism, etc.). The “intelligence” of the systems will be represented in ways from the simple, including elution based on the concentration of substances (platelets, specific proteins, etc.) in the environment (such as to prevent restenosis), to the complex, including microprocessor-calculated basal or bolus infusion of drug or other substance based on biofeedback-mediated function (e.g., insulin pump and glucose monitor).

The status of the biohybrid organ/system will be monitored remotely by the patient and, in turn, by the physician through wireless communication to display current patient condition, trended functions and other status. Eventually, such external monitoring will become unnecessary other than for unusual events, such as extreme changes in patient condition that, even though the organ/system may be well prepared to respond to, warrants attention by the patient and/or clinician.

The biohybrid organ/system status will also be communicated wirelessly, displaying data on its sensor functions, reservoir levels or other parameters of its function, as well as the system’s integrity. As with monitoring the organ/system’s environment (noted in previous paragraph), the monitoring of the organ/system itself will eventually be silent other than for unusual or adverse events signalling a problem with the system itself.

The power sources employed by these systems will have evolved from being extremely long-term batteries that only infrequently require recharging (done remotely) to motion-activated power (or similar alternative energy sources) to potentially biological sources deriving power from the patient, such as (in a very advanced scenario) through exploitation of energy from adenosine triphosphate (ATP).

Examples of the organs or organ systems that may ultimately be developed (and are in process) include the following:

  • Pancreas – Glycemic control will be ensured through basal infusion of insulin and periodic bolus matching fluctuating needs.
  • Heart – Effective replacement of normal heart function will be achieved through designs and construction that will produce no hemolysis, and produce cardiac output precisely matching circulatory need.
  • Lung – An artificial lung will largely be achieved through the development of highly effective materials that virtually mimic alveolar epithelium at the interface between lung and blood vessels, enabling efficient gaseous exchange.
  • Liver – The myriad functions of the liver will have made it one of the most difficult organs to replace, in effect demanding the development of a master organ with multiple separate organ components addressing the needs of homeostasis (proteins, fat/cholesterol, hormones, vitamins, glucose, etc.), synthesis (proteins, bile acids, cholesterol), storage, excretion, filtering and defensive barrier against bacteria in the gut. The development of biofeedback and control across such multiple areas will be a herculean accomplishment.
  • Kidney – Filtration and regulation of water and inorganic electrolytes in the artifical kidney, by comparison to the development of the artificial liver, will be considerably less challenging.
  • Skin/integumentary – As an organ system, the integumentary serves an extremely important one in its defense against infection. Artificial integumentary systems may well be developed, although tissue engineering technologies are likely to soon eclipse any artificial technologies.
  • Limbs – The necessary development of biomechanics and systems to enable autonomic and conscious neural control of limbs may ultimately only be limitated by the strength the patient’s healthy anatomy to which it is joined. Fine-motor skills will likely be indistinguishable from biological limbs. Sensitivity to heat and pressure may even be regulated to maximize tolerance of the environment such that performance will exceed that of normal limbs. Overall appearance and in detail will be indistinguishible from normal limbs.

In varying degrees, these developments are already on their way toward completion. And while, indeed, many hurdles remain before some of these scenarios will be possible, one must consider these hurdles in comparison to the hurdles faced by the biotechnology industry as it pursues solutions a variety of diseases and disorders. The “rational therapeutic” holy grail is one that has for biotech been a source of endless promise and endless solicitation of additional venture capital. But as “imperfect” as some of
the medtech solutions above may be, their potential as self-contained, cure-like solutions for disease make them eminently more promising for their near-term potential than do “perfect” biotech solutions.

Bleak outlook for safe(r) investment?

At the Musculoskeletal New Ventures Conference this week, hosted by the Memphis Bioworks Foundation and MB Venture Parters , a roundtable discussion was held including principals from EDF Ventures, the Vertical Group, and Thomas McNerny & Partners. The conclusion?  Investment looks bad for healthcare startups (Outlook Bleak for Investment in Health Care Startups).

With the credit crunch squeezing available money for investment, so the argument goes, money will preferentially flow to the later stage and well established medical technology companies, leaving startups struggling to finance new development.

I have no argument with this as a general assessment of the likely trend.  

However, with demands for investment to be in industries where the returns are more assured (e.g., healthcare) and in markets where there are more promising prospects for commercialization, I would argue that it is shortsighted if significant amounts of investment are moved downstream toward later stage companies, where the investment dollar will buy a decreasing share of the startup’s equity.  The real onus here is that, especially when available investment is limited, the investment should be made more carefully in ventures, with an eye to focusing on the really key criteria:


  • Does the venture have the proprietary position and technical expertise necessary to develop and commercialize products with competitive advantage?
  • Has the venture’s technology platform been judged against the full spectrum of competitive possibility (drugs, devices, biomaterials, biotech, hybrids, etc.)?
  • Does management have a track record of successful commercialization?


We have seen a real burst of new company formation over the last six months.  Yes, this precedes the recent credit crunch that has pounded the finance world, but one must keep in mind that the market for new investment in early-to-mid 2008 was not exactly robust anyway, so the fact that these companies have formed despite the (nearly) recessed market is testimony to someone’s confidence in them (if only the 3F’s: friends, family and fools).

Medtech startup formations economically immune?

There is certainly the possibility (despite my doubts) that the current economic slowdown in global markets will have major effects on the medical technology industry. One simply cannot deny that there is simply less VC or other cash floating around that might be put to medtech investment. And maybe, as has occurred in the past (e.g., in the post dotcom bubble era), investment that does take place will move further downstream, away from the speculative risk of very early startups. In hindsight, it is easy to see such trends and developments.

But looking forward, it is difficult to see significantly diminished demand for the promise of medical technology development. Companies continue to be founded at a strikingly active pace.

The Medtech Startups Database, from MedMarket Diligence, has over the past half dozen years accumulated the data on nearly 900 new medtech companies under two years old — a remarkable pace of entrepreneurship.  In the very recent activity in company formation, here are a samping of the technologies these companies are pursuing:

  • Laser devices to “weld” biological tissues together for wound closures.
  • Drug-coated urinary and other catheters and stents that are designed to prevent or treat scar tissue.
  • Artificial heart technologies.
  • Heart pumps.
  • Compliant balloon technologies.
  • Device for mitral valve repair without need for sternotomy.
  • Pharmaceutical treatments for ischemia and vascular disease, focused on peripheral artery disease.
  • Non-polymeric drug eluting stent
  • Device technology in diabetes management.
  • Medical device inflatables, including devices for biological navigation such as in support of colonoscopy and other endoscopy.
  • Minimally-invasive products for motion-preserving spine surgery.
  • Minimally invasive treatment of vertebral compression fractures.
  • Minimally invasive treatments for removing varicose veins.
  • Drug-coated angioplasty for coronary and peripheral applications


Medtech Startups Database described here. See pending and recent MedMarket Diligence reports: Sealants, Glues Wound Closure (coming in December), Ablation Technologies,  and Spine Surgery.

Asia-Pacific Markets for Spine Fusion Growing More Slowly

The markets which encompass Asia-Pacific are generally somewhat more mature markets which have seen these products and have been using these technologies. Hence, for spinal fusion, for example, the tendency away from fusion and towards intermediate treatments will be seen in the years to come.

Fusion markets in this region, at over $80 million annually in 2008, are growing at about 6% annually, but through the forecast period (to 2017), that annual growth rate will slip to only 4%.

Source:  MedMarket Diligence, Report #M510
Source: MedMarket Diligence, Report #M510

However, the non-fusion markets in this region are demonstrating annual growth in excess of 21%, illustrating the progressive displacement of traditional fusion procedures by procedures that are less invasive, result in greater mobility and have better long-term prognosis for spine patients.


The MedMarket Diligence report #M510 is described in detail at here. The report may be ordered online for instant download or may be ordered via Google Checkout, below.


Slowdown will be weathered in medtech

The credit crunch that has morphed into a global recession, or at least generated enough fears of a recession to drive the stock market way down, is now raising questions like, “is anyone immune?”

Of course, some sectors are more immunoresistant to the investment squeeze than others, notably the healthcare field, putatively unperturbed as it is by economic variables.

However, an article in Barron’s got my attention today, suggesting that healthcare missed its economic flu shot. On further investigation, it becomes clear that the original premise is sound:  healthcare is highly resistant to enconomic variables.  While capital-equipment expenditures may be delayed and cosmetic and other elective surgeries may be delayed, the fundamental need for diagnostic and therapeutic healthcare remains undaunted by bad real estate investment.  

This is clearly a relief.  There is already enough irrationality governing world financial markets.  To think that there might have been a co-morbidity between subprime lending and any particular disease incidence was too much to have to worry about.