Developing new products to improve patient care is the best part of being in the medical device industry. Who can argue with that?
You’ll find the most exciting devices being developed in venture-funded start-ups – a structure that provides the single-minded, do-or-die focus needed for success, along with the risk capital needed to fuel the work. Here in New England, we have a great medical device start-up ecosystem, with dozens of companies working to solve significant medical problems with great new devices.
Each quarter, the MoneyTree Survey lists virtually all venture financings in the US. The 2011 Q1 numbers just came out. Reviewing the data, I thought it would be a good time to look back at the New England medical device companies started in the past several years.
In their spring 2011 Life Science Report, the law firm Wilson Sonsini Goodrich & Rosati (WSGR) provides helpful advice on “What Senior Management of Commercial-Stage Life Sciences Companies Need to Know about Interactions with Healthcare Professionals.” Definitely check it out here and then turn it into a corporate SOP.
Broadly defined, platform technologies are families of IP that enable multiple distinct clinical applications for distinct patient populations. MicroCHIPS and Seventh Sense are great examples.
Because platforms address multiple market opportunities, the revenue potential of a company with a platform technology can be several times that of a single application company. Does that mean platform technologies are easier to fund?
Pitching platform technologies to VC’s can be challenging. First, cool new technologies need lots of explanation. Second, presenting multiple market opportunities takes lots of time. One of my most popular posts has been “Medical Device VC Funding: Slide Deck – Part 1,” which covers a company developing a single medical device product to address a single unmet need. How should companies with platform technologies present to VC’s?
As online communities have evolved from BBS’s and usenet groups, to forums and yahoo groups, to social networks and blogs, the quantity and quality of direct patient-to-patient interaction has dramatically increased. In March 2009, an article in Forbes called these new patient-centric social networks a disruptive innovation in patient care (Disruptor of the Month: Creating A New Kind Of Health Care Community by Renee Hopkins Callahan). If you’re developing a novel device or a novel procedure, there’s a chance you are already the subject of an online patient conversation. The more patient-facing your product (either used-by or implanted-in a patient), the more likely patients will share their experiences with each other online.
However, a less-noticed acquisition in December 2010 may turn out to be the most notable medical device deal of all. This relatively small acquisition heralds the entry of a significant new player into the medical device industry, and marks the beginning of a shift in the geographic landscape of the medical device industry.
I’m surprised that there hasn’t been more written about Ardian since their sale to Medtronic last month. It may be the largest venture-backed medical device exit to-date. Ardian’s $800M-plus-milestone-payments may end up being larger than Medtronic’s purchase of CoreValve for $700M-plus-milestone-payments in 2009. Even more unusual was Ardian’s relatively early-stage. At the time of sale, CoreValve had implanted devices in 2,600 patients at 125 centers in 25 countries. Ardian exited much earlier, with about 150 patients treated.
Overnight sensations don’t happen overnight. While Ardian seemed to come out of nowhere in 2009 and exited large in 2010, the truth is that the company had been hard at work for almost 10 years. Ardian achieved more than 10X return on $66M invested – at least $732M of value created, before milestones. While the end of the story is still unwritten, Ardian’s first few chapters form a great case study for medical device entrepreneurs and investors.
Wow – two big medical device exits were announced in the past week: Boston Scientific bought Sadra, and Medtronic bought Ardian. Most successful medical device startups are ultimately acquired, enabling their investors to achieve a financial return and reputational enhancement. (With sufficient return and reputation, the investors will be able to raise another fund and keep their jobs.) Relatively few medical device startups remain standalone businesses, earning a return for their investors by going public or throwing off profits. Still, it’s usually better to build your company to be successful standalone, as it puts you in the best negotiating position vis-à-vis acquirers if and when they come.