A Changing Landscape in Medical Devices

Asia Population Density Map
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The usual suspects (Medtronic, St. Jude, J&J, Boston Scientific, Olympus, Stryker, Zimmer, Covidien, GE Healthcare, Hologic and others) continued their usual growth-via-acquisition strategies in 2010. Last year I wrote about two of the more notable medical device exits: St. Jude’s option to purchase CardioMEMS, and Medtronic’s deal to acquire Ardian.

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.

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Ardian – A Case Study in Value Creation

Image representing Ardian as depicted in Crunc...
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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.

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Hospital-Employed Physicians and Medical Device Opportunities – Update

Steen Doctor and His Patient
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A few weeks ago I wrote about the growing trend of physicians being employed directly by hospitals rather than in private practices, and how this trend impacts medical device opportunities.  Last week the Wall Street Journal published an article “Medical-Device Firms Lose Clout As Hospitals Buy Practices” which is well worth reading.  This week, PWC released a report “Health Reform is Driving Hospitals and Physicians Together.”  Have you analyzed the impact of this trend on your medical device market over the next few years?

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Stock Options – Wilson’s Rules

Fred Wilson of Union Square Ventures
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One of my most popular posts concerns employee stock options  (see Stock options – everybody in the pool).  Last week, Fred Wilson of Union Square Ventures described his formula for granting employee options, on his blog AVC. Everyone gets options, according to his transparent formula.  Makes a lot of sense to me, and I’m sure it will for you.  Read his post here.

Come Back When You Have More Data

Museum of Bad ArtOver the past several months, I’ve had the privilege of meeting many entrepreneurs who are raising funds for new medical device startups. One common VC refrain they hear: “Come back when you have more data.” Many times this can be a VC’s way of saying no without saying no. Sometimes though, the VC really means what s/he says: the current proof-of-concept data hasn’t proved the concept. It’s not just startups that face this challenge. I’ve seen weak proof-of-concept data in bigger companies too. How can you make sure your proof-of-concept data is solid?

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Begin With The End In Mind

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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.

There are likely to be four to six potential acquirers for your company, although there are occasionally less and sometimes a few more. Who are they?  Continue reading “Begin With The End In Mind” →

The Legend of the Too Tall Lasers

Ed "Too Tall" Jones

For the past several years, every Candela employee has heard the story of the too tall lasers. It goes like this: All Candela US sales reps have company vans, to carry demo lasers as part of the sales process. Several years ago, after more than a year of development, a project team wheeled their latest greatest device out to the local rep’s van. You can imagine everyone’s surprise when the product just wouldn’t fit. For the next couple of months, the launch team fumed while the engineering group shaved a few inches from the design.

How could this happen? And what should the company have done differently? Continue reading “The Legend of the Too Tall Lasers” →

Lean Medical Device Startup: Tales of Pivots

A surfer performing a gash, or very sharp turn...
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To pivot is to change one element of your business model to improve product/market fit.  Iterating the business model via a series of pivots is easy to imagine in a software startup, where code is relatively mutable, but aren’t hardware timelines just different?  Is the idea of a Lean Startup really applicable to medical device companies?

Last month, Eric Ries posted a real-life story of the iterations of a lean hardware startup in a “Case Study: Rapid iteration with hardware.”  It’s compelling.  Hardware startups can pivot.

Medical device companies can pivot too.  Here are a couple of examples.

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Suster on Startup Sales and Marketing

 

#Mark Suster of GRP Partners speaking @Wokcano
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On his blog Both Sides of the Table, Mark Suster of GRP Partners provides some of the best advice for startups, including his series on sales and marketing.  Although written for high-tech startups, Suster’s advice is readily applied to medical device companies.  His recent post on managing your sales pipeline is truly insightful.  Enjoy it here!

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