A Tale of Two Specialties

If you haven’t already heard the big news from last week, Johnson and Johnson’s Cordis subsidiary announced its withdrawal from the drug-eluting (DES) stent market, a momentous event for the firm that launched the first DES and created a new multi-billion-dollar medical device sector. Cordis is also shutting down its Conor MedSystems DES business, which it acquired for $1.4 billion in 2007. My reaction: Wow!

Meanwhile, the same week, the NY Times reported that metal-on-metal hip implants may become “the largest product liability cases of this decade.” The FDA website states that “on May 6, 2011 the FDA issued orders for postmarket surveillance studies to manufacturers of metal-on-metal hip systems. The FDA sent 145 orders to 21 manufacturers.”

Two long-term implants. Two medical device sectors. One critical difference.

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The Looming Impact of Healthcare Service Consolidation

St. James' and Murray Hospitals, Butte (1915) — Image by Butte-Silver Bow Public Library via Flickr

Last week, the Boston Globe reported that Lahey Clinic and Beth Israel Deaconess Medical Center held early discussions on a possible merger.

Last November, Cereberus Capital, a private equity firm, bought Caritas Christi, a group of six hospitals in the Boston area. In December the newly named Steward Health Care System bought two more hospitals in the region. This April, Steward added its ninth local hospital. In June, Steward offered to purchase Landmark Medical Center in Rhode Island. More acquisitions are planned.

In January, Northeast Hospital Corp (owner of Beverly Hospital, Addison Gilbert Hospital in Gloucester, BayRidge psychiatric hospital in Lynn, and a Danvers outpatient clinic) began exploring a merger or sale to a larger regional player. By June, Lahey Clinic, Beth Israel Deaconess, Steward Health Care System, and Vanguard Health Systems had all made offers to buy.

In April, Beth Israel Deaconess Medical Center and Milton Hospital announced plans to merge in six months.

Provider consolidation isn’t just a Boston phenomenon. Healthcare services M&A is heating up all across the US. What’s going on, and what does consolidation mean for medical device companies?

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Caution: Physician-Owned Distributorships Ahead

Payments to physicians always raise conflict-of-interest issues for medical device companies (see my post on When Is It Okay to Pay Physicians?). These issues never go away. Today, the Wall Street Journal reported that five US Senators have requested an investigation into the legality of Physician-Owned Distributorships (PODs).

Not being in the spinal implant business, this is the first I’ve ever heard of PODs. What are PODs and what are the implications for medical device companies?

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David Weekly’s Introduction to Stock and Options

I have strong opinions about stock options, and my posts on the subject have been among my most popular (“Stock Options – Wilson’s Rules” and “Stock options – everybody in the pool“). For those of you who want a more basic introduction to stock and options, David Weekly just wrote a great primer on the subject. Check out his Scribd document: An Introduction to Stock and Options. It’s everything you need to know.

“The Dwindling Allure of Building Factories Offshore”

Interior of the 3m Co.(Minnesota Mining and Ma... — Image by The U.S. National Archives via Flickr

A recent article in The Economist describes “The dwindling allure of building factories offshore.” The article concludes that “Increasingly, it makes sense to make things in a variety of places, including America.”

I agree. Medical device companies face the same global opportunities and challenges as other manufacturers. While moving medical device manufacturing to a low-wage location sounds like a no-brainer, it takes real skill and experience to make it work well. Sometimes it makes sense, and sometimes it doesn’t.

How do you decide?

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Monitoring NE Medical Device Startups

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.

I was surprised by what I found.

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The Medical Device Matrix

Medical imaging systems have been talking to PACS systems for years, saving costs and improving care. I’m always impressed that my children’s doctors can access current and historical x-rays and MRI’s at the drop of a hat. Integration of devices with PACS enables medical images to be captured, backed up, transmitted, analyzed, and reviewed in other care sites and at other times. The age of the standalone medical imaging system is long gone.

Other medical devices are beginning to follow suit, interfacing with electronic medical records (EMRs) and hospital inventory management systems. Networked devices are on the way, and the age of the standalone medical device is heading to a close.

The era of networked medical brings challenges and opportunities. Are you ready?

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Fresh Money: 2011 Q1

Old Beggar, 1916, by Louis Dewis, painted just... — Image via Wikipedia

According to the Boston Globe, the top New England venture-funded sector in Q1 2011 was medical devices and equipment, at $145 million. That’s great news and a testament to the local medical device innovation economy.

On the other hand, life science venture capitalists in New England closed no new funds in Q1. That’s not great news. There has been some fund-raising activity, so we can hope for a better Q2. In fact, Bessemer Ventures closed a $1.6B fund in early April, which will include medical devices as a target investment sector, so Q2 is off to a good start.

If you’re raising money, you should know which life science funds actually did raise money in Q1 2011. How do you find out? Continue reading “Fresh Money: 2011 Q1” →

Customer-Facing Metrics for Product Launch Assessment

Adoption Curves — Image by Nathan Laurell via Flickr

Medical device product development is justifiably hard. Innovative devices push technical and clinical boundaries. Before being used for patient care, new devices must undergo rigorous analysis and testing. It takes months or years to bring new medical devices from concept to reality. So it’s a big milestone when the last signatures finally authorize product release, and the first units ship to the first customers. Time to celebrate? Not so fast.

Your first customers decide if you should celebrate. Initial shipments are just steps towards the ultimate objective – satisfying unmet customer needs and building a great business. How well have you really done? A couple of weeks ago I wrote about the need for metrics to be customer-facing. Here are a few suggestions for quick-and-dirty customer-facing metrics to help you assess your product launch.

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