Tissue engineering and cell therapy comprise a market for regenerative products that has been growing and will continue to grow at over 20% annually through 2018. This market spans many specialties, the biggest of which is therapies for degenerative and traumatic orthopedic and spine applications. Other disorders that will benefit from cell therapies include cardiac and vascular disease, a wide range of neurological disorders, diabetes, inflammatory diseases, and dental decay and/or injury. Key factors expected to influence the market for regenerative medicine are continued political actions, government funding, clinical trials results, industry investments, and an increasing awareness among both physicians and the general public of the accessibility of cell therapies for medical applications.
The current high rate of growth in cell therapy and tissue engineering product sales is due to the confluence of multiple market drivers:
Advances in basic science revealing the nature of cell growth, differentiation and proliferation
Advances by industry to manipulate and determine cell growth toward specific therapeutic solutions
Low barrier to entry for competitors in the market
Broad range of applications of cell/tissue advances to many different specialties with modest adaptation needed
Strong venture funding
The dominant clinical area driving cell therapy and tissue engineering product sales is orthopedics and musculoskeletal, wherein bone grafts and bone graft substitutes are well-established. Below is the projected balance of cell therapy and tissue engineering product revenues by clinical area through 2018.
While orthopedics, musculoskeletal and spine applications will remain a huge share of this market, more growth is coming from cell/tissue products in most other areas, which have only recently (within the last five years) begun to establish themselves.
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.
Surgical sealants have an enormous range of applications in the treatment of acute and chronic wounds, but while the majority of sealant revenues derives from their use in the hemostasis, closure and sealant of tissues to prevent blood loss…
Since 2008, medtech has taken a lot of hits. Indeed, when the capital crunch hit, medtech was not viewed as the safest place for investment by a suddenly very risk averse world. Blue chip stock, high volume, low growth, STABLE markets became the norm for a lot of money. But, after a short while, it became apparent that medtech was hardly junk bonds or penny stock, especially considering the battle-hardened innovators of medtech who continued to seize on innovations that provided treatment where there once wasn’t, that accelerated healing, that measurably improved outcomes, that resulted in real cost savings to health systems and insurers, that, in other words, met DEMAND.
So, money came back to medtech. I tracked it then, and I track it now, month by month, funding by funding, company by company. Was it coming back in the pollyanna-esque windfalls of biotech and pharma? No, and I don’t think it ever has or ever will — nor should it. Biotech seems to perennially able to tap the “hope springs eternal” deep pockets of venture capital that can regularly draw individual fundings of $50 million, $75 million or $100 million. Pharmaceuticals don’t seem to go to the VC well as often, but when they do, their funding rounds are no less spectacular.
Medtech excels at crafting plain and simple solutions to disease, suffering, high healthcare costs and clinical need. Not every solution is a blockbuster — in fact, there are more than a few 510(k) products that should probably just be called “me, too”, since they do not distinguish themselves independently, at least not from a clinical or technology standpoint. But medtech has proven its ability to keep pushing the treatment envelope by innovating a little further to gain a bit more edge on outcome or cost or both.
So, medtech regularly pulls in $5 million, $10 million, $25 million at at time — frequently less, but not infrequently more.
My Contrarian View. But let me highlight again that medtech is a moving target and not everyone is thinking apples to your oranges. What I consider medtech is, at its root, technologies that were traditionally represented as medical device treatments for disease and trauma. (And, yes, so I don’t have to answer this later on, by “medical device” I mean implants, instruments, instrumentation, even capital equipment.) But medtech is not only medical device, for it is also (at least by my authoritarian definition, since this is my blog, but it is read by many in this field), anything and everything (within reason) that is either adjunctive to medical devices like drug delivery, like biomaterial-based implants/grafts, drug/device hybrids, tissue engineering and cell therapy (this latter is perhaps at the fringe of medtech, bordering on pure biotech).
Where’s the boundary of medtech? In my mind, it is anything and everything that competes with markets that have in the past and are to some extent still served by medical devices, equipment and supplies. For the sake of repetition, this is the definition I have posted on the medtech fundings I report on month by month in this blog (and in the online spreadsheets linked here):
What is “medtech”?: We view medical technology (medtech) as principally 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.
Note: Historic coverage of “medtech” has been limited to medical devices, supplies and equipment. We feel that such a limited definition poorly reflects the true nature of the markets that once were limited to such products. In reality, assessing the markets and competition for medical devices by ONLY considering other medical devices would result in gross underestimations of both competition and market potential. Moreover, this is reflected in both the nature of medical devices (which may be hybrid device/bio/pharm products or products that may not be “devices” at all (especially in the typical definitions defined by material type and function) but that compete head-on with devices.
So, on this more liberal definition of medtech (which some still feel is too restrictive), I can point to a steady stream of investments that has been on an upward trend for the last five years. If you disagree, feel free to come up with your own definition(s), but here is the five year trend of medtech investment:
Source: MedMarket Diligence, LLC
Looked at from a seasonal standpoint, this data is shown below:
Source: MedMarket Diligence, LLC
The monthly data underlying both of these charts is at link. If that is not enough data for you, then you can look at a comprehensive listing of the individual fundings behind this at link.
Wounds have many different sources, etiologies and forms and, therefore, demand a range of approaches. By virtue of these differences, they have considerably different costs. At the top of the list of wound culprits driving up cost is the category of chronic wounds. Simply put, these wounds are very slow to heal due to poor circulation at the site (e.g., decubitus stasis, or pressure, ulcers), concomitant health issues (diabetes) and the difficulty in changing the local environment toward one with conditions more conducive to the healing process.
Chronic wounds are not the most common — that is a category represented by surgical wounds, in which the wound has been created medically or surgically in order to excise or otherwise manage diseased tissue. But surgical wounds, traumatic wounds and lacerations are by their nature acute and, especially for surgical wounds, can be surgically managed to create clean wound edges, good vascularization and other conditions that accelerate healing. Therefore, while the volume of surgical and traumatic wounds and lacerations is significant, their costs are manageable and their growth is unremarkable.
But the costs of chronic wounds are higher due to both the types of different products required and the length of time required for those products to be used. Moreover, given the association of chronic wounds with conditions that are growing in prevalence due to increasing incidence of obesity, diabetes and other conditions, combined with an aging population that is increasingly sedentary, the prevalence of chronic wounds is shifting the balance among wound types. Below is the balance of wound types by prevalence worldwide in 2011, followed by the projected balance of wound types in 2025.
Surgical wounds offer the potential for use of devices which can ensure hemostasis, prevent internal adhesions and anastomoses, secure soft tissue, and close the skin. Traumatic wounds also offer potential for skin closure products and for hemostats, and adhesion prevention during post-trauma surgery. New wound-covering sealant products may also offer potential for treatment of cuts, grazes, and burns.
Chronic wounds are generally not amenable to treatment by adhesives, sealants and hemostats unless the wound has either been debrided to a sterile bleeding surface (in which case it becomes like a surgical wound), or the product offers some stimulant activity. Many hemostats exhibit some inflammatory and cytokinetic activity, which has been associated with accelerated healing. However, this inflammatory activity has also been known to burn the patient’s skin. Chronic wounds are instead dealt with often by a combination of debridement, frequent dressing changes, products to address local vascular circulation and pressure (negative and positive) and others. Progress is being made in reducing the associated healing times, but a large opportunity remains.
Since January 2011, a total of 245 new medtech companies have been founded and added to the Medtech Startups Database from MedMarket Diligence. These are companies that are either device-based or based on other technologies that are directly competitive with, or complementary to, medical devices, inclusive of medical device implants, med/surg instruments or equipment, drug/device or biotech/device hybrids, bioresorable implants/devices and other similar technologies. The companies excluded from this are those that are developign pure pharmaceutical products with no direct competitive/complementary role with medical devices or hybrids of info technology (e.g., smart-phone) piggybacked on existing medical devices.
The companies represented here cover a surprising range of innovations and clinical applications. They have been identified based on recently issued patents, patent applications, corporate filings and a litany of press releases, social media sources, and other data sources. As we identify the companies during this process, we categorize them into a number of clinical/technology categories, with multiple categories possible (e.g., minimally invasive plus cardio therapeutics, or diagnostic plus oncology, and others). Below is illustrated, in descending order, the clinical/technology categories of the companies founded since January 2011:
[Note, please, that we have little focus on pharmaceutical or drug discovery or dental/oral surgery, so these terms low tally in the graphic reflects our lower focus than prevalence of startups in these areas.]
Clearly, the great majority of medical technology startup companies is focused on surgical and/or cardio therapeutics and/or minimally invasive and/or ortho/musculoskeletal applications, areas that have historically and persistently represented the dominant thrust of medtech innovation.
Another way to view these companies is a “word cloud” compiled from each company’s product/technology descriptions, with the most frequently occurring words in the descriptions being represented in larger type face in the graphic. Admittedly, this is little more than a curiosity, but in reflecting the words used to reflect the focus of these companies (whether the words are theirs, mine or a third party source), it lends a sense to the common/primary thinking is in conveying what these companies are about:
Global medical aesthetic and reconstructive products, which include medical/surgical implants, materials, injectable products, energy-based devices (e.g., laser, RF), “cosmeceuticals” and other products used in aesthetic and/or reconstructive procedures, achieved sales of more than $6.5 billion in 2013. By 2018, the worldwide market for aesthetic/reconstructive products will reach $10.7 billion. The U.S. and the Latin America markets will have a CAGR close to 10%. The U.S. and Latin Americawill experience growth, respectively, of 9.2% and 10% in line with global trends. Of course, the global trend is largely represented by the U.S. market, which holds 45% of the total. Europe has been witnessing relatively a slower growth of 6.6% per year. Declining purchasing power, particularly in southern Europe affects the European market and this geographical segment is estimated at $1.84 billion in 2013 to reach $1.94 billion in 2018.
The Asia/Pacific region will have an overall CAGR of more than 14.1% driven by increasing demand and, accordingly, by the expanded access to technologies and products in China and by the continued high growth in the strong economies of Japan and South Korea. Overall, Asia will experience the strongest growth in aesthetic/reconstructive product sales, eventually eclipsing the total for the European market in 2018, reaching $2.24 billion. Globally, the growth of the market from 2013 and 2018 be a 10%+ compound annual growth rate.
Global Segmentation of All Surgical and Non-Surgical Aesthetic/Reconstructive Procedures, 2013
Source: MedMarket Diligence, LLC; Report #S710, “Global Markets for Products and Technologies in Aesthetic and Reconstructive Surgery, 2013-2018”.
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:
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):
Palo Alto, CA
Menlo Park, CA
San Diego, CA
San Francisco, CA
Mountain View, CA
New York, NY
Redwood City, CA
M.P. Misgav (Israel)
Salt Lake City, UT
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).