Stealth medical technologies

The need to keep innovation under wraps until it has been allowed to develop enough to maximize the value is driving more and more companies to eschew any kind of promotion until they are actively seeking investment to formally bring the technologies out into the open as part of market introduction.At least by our anecdotal evidence — in the number of companies who we identify (by corporate filing or otherwise) but who have successfully avoided disclosing the nature of their technology anywhere.

There is a change in the dynamics at work here. It is doubtful that it is a diminution of hubris among entrepreneurs that is undercutting self-promotion, since pride is the trait that sets them out on their own in the first place. It is instead the result of at least two forces: (1) tacit recognition that with funding comes insidious influence to be studiously avoided until absolutely unavoidable and (2) tacit recognition that the hunger is great enough for new technologies that the innovator can take greater risk in funding from the 3F’s before seeking formal investment at market introduction.Of course, we have ways of piercing the stealth veil, and we’re getting better at doing so.

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).

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.