St. Jude must be next

St. Jude Medical is number 3 in the rhythm management market, behind Guidant (#2) and Medtronic (#1), so when either J&J or Boston Scientific lose out in the grab for Guidant as their new rhythm management acquisition, where are they going to look next? It’s not likely to be Medtronic, with a $70 billion market valuation.

What is St. Jude’s stock price likely to do?

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).

The ideal author

I’ve often been asked what makes a good author of the reports we publish. My answer comes as the result of the truth having been pounded into me repeatedly over the past 20 years (I have lots of scar tissue).The ideal author has:

  1. 10-20 years in the industry about which they will write
  2. Experience in that industry in senior management or VP/Director level roles in marketing/sales or business development
  3. Diligence research capabilities to ensure that 99% of the market is considered, not 80% or 70%
  4. Demonstrable analytical skills to prioritize the relevance of data (i.e., wade skillfully through the BS), identify important trends (besides the “aging population”), reveal opportunities (I have to force even the best to do this), and otherwise give insightful conclusions.
  5. Good-to-excellent writing skills. It doesn’t matter if they can research among the best if they can’t put it in words. I can and will edit extensively to bring out the best, but the content has to be good enough to start with so that I’m not writing reports for authors.
  6. Acceptable computer skills. It’s maddening to have an author who has skills 1-5 above, but doesn’t know how to back up his/her files, doesn’t run anti-virus software or is running Windows 95.
  7. Je ne sais quoi: At some point during my initial interview with an author, I can identify whether the author has that certain “something” that I want or has that certain “something” that I know will prohibit them from doing a good report. My instincts have proven themselves in the long run.

This is a REAL challenge. If I am going to publish studies that will command the prices they do, it’s imperative that the authors fit the bill. If I have to compromise on any of these, I know I will pay for it (one way or another) in the long run. I have therefore learned to take it on the chin and decline prospective authors when the truth is plain to me. Examples of who doesn’t fit this bill:

  1. Anyone who says, “I’ve always wanted to write. I think it will be fun.” You’d be surprised how often this comes up.
  2. Almost anyone with the letters PhD behind their name. Don’t get me wrong, I’ve had a couple great PhD authors, but among the worst prospects were those with this degree. The failing is simply the tendency toward ivory tower thinking and the lack of direct industry experience or relevant analytical skills in business.
  3. Anyone who says, “Now where do I get the market data to do this report?”
  4. Technical writers (convinced though they may be about how well qualified they are)
  5. Medical marketing brochure writers (certain they may be that brochure experience = report authoring skill)
  6. Anyone who has written for specific other report publishers —- [censured by lawyer].

I could go on, but it’s too exasperating to think how often I have to say no.

Novel technologies in diabetes management

A glimpse of newer technologies in diabetes management (from http://mediligence.com/rpt-d500.htm).

  • Pancreas transplants
  • Islet cell transplants
  • Stem cell developments
  • Antibody treatment
  • Vaccines
  • Genetic approaches (genetic testing, SiRNA)
  • Novel drugs (DDP-IV Inhibitors, NN-14, Rimonabant)
  • Continuous glucose monitoring (electroenzymatic sensor, optical sensor, carbon nanotube sensor)

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.

Technologies among newly identified startups

Newly identified companies developing advanced technologies in medical/surgical applications: » Medical device based treatment for obesity (Newport Beach, CA)
» Treatment of intervertebral disc via conduits to restore nutrient/waste exchange (San Jose, CA)
» Beating heart bypass technology (Fullerton, CA)
» Diagnostic device to detect arteriosclerosis (Misgav, Israel)
» Surgical and percutaneous treatment of cardiac valve and CHF (Ft. Lauderdale, FL)
» Undisclosed minimally invasive surgical technology (Menlo Park, CA)
» Image guidance for open liver surgery (Nashville, TN)
» Surgical device (Menlo Park, CA)
» Dialysis on a microchip (Cambridge, MA)
» Surgical product development of implants, instrumentation and surgical devices (Mission Viejo, CA)
» Endoluminal platform technology for gastroenterology and uro/gyn (Ayer, MA)
» Fluorescence spectroscopy for diabetes screening (Albuquerque, NM)Company details in the November MedMarkets.