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.
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.
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.
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.
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).
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.
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.
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.
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.
Driven in LARGE measure by the $210 million funding of Intarcia Therapeutics, the total for medtech fundings in November is already at nearly $350 million by mid-month. Intarcia Therapeutics is developing a continuous subcutaneous delivery of drug for treatment of Type 2 diabetes (note, please, that we classify this product in “medtech” rather than “biotech” due to the fact that this is both a drug and drug-delivery).
According to the Intarcia Therapeutics:
The financings consisted of $160 million in proceeds from a preferred stock private placement and $50 million in proceeds from a private debt placement. Investors in these financings included existing investors New Enterprise Associates, Inc., New Leaf Venture Partners and Venrock, as well as new investors, The Baupost Group, LLC, Farallon Capital Management, LLC and three additional top-tier institutional investors based in Boston and New York.
Further according to the company:
ITCA 650 (continuous subcutaneous delivery of exenatide) is being developed for the treatment of type 2 diabetes. The investigational therapy employs Intarcia’s proprietary technology platform involving a matchstick-size, miniature osmotic pump that is inserted subcutaneously to provide continuous and consistent drug therapy, and the company’s proprietary formulation technology, which maintains stability of therapeutic proteins and peptides at human body temperatures for long extended periods of time.
Data from Intarcia’s ITCA 650 Phase 2 program have demonstrated significant and sustained reductions in HbA1c and body weight over 48 weeks of treatment with a marked reduction in the GI adverse events typically associated with the self-injection products in this class. ITCA 650 is an investigational new therapy and is not currently approved by any regulatory authority. Exenatide, the active agent in ITCA 650, is a glucagon-like peptide-1 (GLP-1) receptor agonist currently marketed globally as a twice-daily self-injection therapy for type 2 diabetes. Upon approval, ITCA 650 would represent the first injection-free GLP-1 therapy that can deliver a full year of treatment from a single placement. Intarcia’s robust intellectual property portfolio protects ITCA 650 through 2031.
The next most significant funding for the month of November thus far is transcatheter valve company, CardiAQ Valve Technologies, with a $32.5 million funding.
The complete list of November medtech fundings is being compiled at link.
Medical technology fundings for October 2012 totaled just over $600 million, comprised of many fundings, but with the biggest ones being:
$76.2 million for LifeTech Scientific Corp. (minimally invasive interventional devices for cardiovascular and peripheral vascular applications)
$60.2 million for Vital Therapies, Inc. (bioartificial liver device)
$45 million for EnteroMedics, Inc. (devices to treat obesity, metabolic disease and other GI disorders)
$45 million for Fibrocell Sciences, Inc. (autologous cell therapies for use in aesthetic dermatology)
$40 million for Alimera Sciences, Inc. (intravitreal implant for the treatment of chronic diabetic macular edema)
$35 million for Tornier NV (joint replacement and related orthopedic implants)
$31 million for InSightec Immage Guided Treatment Ltd (non-invasive MRI-guided ultrasound surgical devices)
The overall trend in medtech fundings has been a slow recovery from 2008. Indeed, recent press from venture capital associations and others have argued that fundings are at upwards of an eight year low. The problem, however, with these reports is that they often look at medtech too narrowly (e.g., medical devices as opposed to medical devices, biomaterials and other products that are either complementary to or directly competitive with medical devices) or fail to account for fundings that come from both public and private investment, fundings from startup competitions, fundings from outside the U.S. Below is the actual trend, from 2009 though October 2012, based on individual financing we have tracked, month by month, since 2009 (you can see the individual fundings listed through June 2012 and the fundings separately for July, August, September and now October 2012).
Source: Compiled by MedMarket Diligence, LLC
Another way we have presented this data is to simply show the month-by-month financings with the seasonality (above) removed and a calculated trendline added. See below.
Source: Compiled by MedMarket Diligence, LLC
The data is hard and documented on these fundings, so the trendline above is not only reliable, but encouraging.
It was a robust month for medtech startups being founded (or at least getting on our radar) with a wide range of technologies under development. Below is a list of technologies under development by these companies:
Device to assist in early detection of melanoma.
Small molecules for skeletal tissue regeneration.
Device for the point-of-care treatment of chronic central pain.
Technologies for detection of perforated bowel.
Prosthetic heart valve technology.
Catheter-based approach to carotid body modulation for treatment of sympathetic nervous system-mediated disease.
Sheaths, snares and other devices in interventional cardiology.
Device for non-invasive and reversible treatment of presbyopia.
Drill device to reduce complications in orthpedic and spine surgery.
System for evacuation of surgical smoke.
Minimally invasive technologies for the treatment of stroke.