Experts explore the state of M&A in medtech

At DeviceTalks West 2018, a panel of experts gathered to discuss the state of M&A in medtech and the forces driving startups to seek an exit.

Buyouts like Medtronic‘s (NYSE:MDT) $1.7 billion acquisition of Mazor Robotics (NSDQ:MZOR) dominated the headlines in 2018, but industry veteran Shayan Bhattacharyya found himself intrigued by the smaller deals that didn’t make the press.

“The things that keep me interested are the deals that are the tuck-in, bolt-on acquisitions,” he said at DeviceTalks West 2018 in Costa Mesa, Calif., last month.

“The classic medtech model has been to go into a new therapeutic area,” he added. “But now we’re seeing complementary plays. Now that you have the product, how can you help a hospital or a practice manage patient flow better? I’ve seen a number of those smaller plays and that’s not to be ignored.”

Fellow panelists Josh Copp, a partner at McKinsey & Co., noted that while 2018 was a slower year for M&A in terms of value, it was on par with past years in volume. Much of that was driven by explosive growth in the digital health sector.

“The reason to highlight digital is if you look at the volume of deals in 2008 to 2012 versus 2013 to 2017, the fastest-growing subcategories are the digital or software-oriented ones, and also care services,” Copp said.

Alongside the growing digital health market, companies are also experiencing increased quality and regulatory requirements. This puts pressure on startups looking to be acquired, he added.

“It increases the difficulty for new products – particularly hardware and implantables – to get funded and get to market, because you have a much higher bar that you have to meet in terms of what you file for regulatory-wise and also the infrastructure you put in place to manage that product,” he said.

“It makes funding more challenging and that can push a company to have to be acquired sooner than they would otherwise ideally go,” noted Matt Arens, CEO of First Light Asset Management.

Arens also noted that he’s seen a change in the path that companies take to get to an exit. That path used to be very straightforward, he said.

“Almost every company followed the same path – you get an idea, you develop it, you move forward. You need funding, so you go to the capital markets. You go public. If it was a big victory, you remain public for a while. You hit your bumps in the road but you grow the business. You grow towards profitability and then the large company would come in and buy the company,” he explained. “Now it’s different. You don’t see the celebrations oftentimes the day companies go public because they realize they’re changing one set of headaches for a new set of headaches.”

Now, according to Arens, companies stay private for as long as they can and sometimes skip going public before being acquired.

Although that’s beginning to change, he acknowledged.

“Now, public markets have been pretty good and people are wading back into the water and that’s good,” Arens said. “There are stair steps in value creation for a company. You want to figure out what you need to get to that next stair step. If your plan includes four stair steps and one of them is going public, how confident can you be that you can hit each one of those steps in the value creation?”

Combined, these trends can present a challenge for cash-strapped startups, Copp said.

“We’ve highlighted increasing potential capital requirements and a less-willing public market. That creates a bit of tension. It’s a lot harder to get to an exit of some form,” he said.

Having worked for medtech titans like Boston Scientific (NYSE:BSX) and Medtronic, Bhattacharyya said that companies have to answer one crucial question for large organizations when they’re looking to be bought out.

“The question is not just, ‘Why should we invest?’ but, ‘Why now?’ Because the null hypothesis, when you’re sitting in the [business development] seat, is do nothing because the deal is going to be there,” he explained.

Arens supplied his own tip to companies hoping to be acquired.

“If you’re 5% market share in 20 different markets, who cares? If you can show with your limited resources that you can drive depth of adoption, then the larger company can look at it and say, ‘With our resources, we could do this on a broader scale,’” he said.

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Medtech veteran Reggie Groves on leading with ‘patients first’

Reva Medical CEO Reggie GrovesIn guiding Medtronic through the Fidelis lead recall, medtech veteran Reggie Groves always took a “patients first” perspective. At DeviceTalks West 2018, Groves explained how her time at Medtronic influenced her as a leader and how she has brought those lessons into her role as CEO of Reva Medical.

Once the world’s most popular defibrillator lead, Medtronic’s Fidelis leads were in hundreds of thousands of patients in the U.S. So when the device began delivering random, painful shocks to people about a decade ago, Medtronic officials were worried. That included Reggie Groves, who was charged with running Medtronic’s regulatory and quality business.

“It was in so many patients that even a very, very low rate of failure was pretty visible,” Groves told the attendees at DeviceTalks West, held December 2018 in Orange County, Calif.

“The challenge was that we had a lead that wasn’t statistically any different, but the failure mechanism was worse. So what do you do? If you want to stop selling and you want to take something off the shelves in the hospital, you must recall it.”

A recall concerned Groves, who was worried that physicians would misinterpret the recall and put patients through the dangerous procedure of extracting leads. But she also understood that the company needed to act.

“Ultimately we made the decision that we didn’t want anybody else implanted with it until we knew for certain whether the lead was going to have a higher ultimate failure rate or not. So we did the recall,” she said.

Groves was asked to testify in front of a congressional committee. She was called to speak to the FDA. Doctors and folks within the industry challenged Groves, telling her that she should have pushed for a recall sooner.

Medtronic lost billions in market cap after it declared a recall for Fidelis, Groves said. But one phone call from Medtronic founder Earl Bakken assured her that she did the right thing.

“Earl Bakken called us that day. He was probably the single biggest loser of value that day, but he thanked us for doing the right thing for the patients,” Groves said.

“Patients come first,” she added. “If you think what you’re doing is better for patients, whatever roadblock, whatever challenge comes in front of you, it’s easy.”

The challenges of bioresorbable tech

With years of experience at the world’s top medtech firm under her belt, Groves now serves as CEO of Reva Medical – a publicly-traded, commercial-stage company that makes bioresorbable devices.

The firm touts its proprietary Tyrocore polymer as the only bioresorbable, X-ray visible product on the market. This year, Reva launched its third-generation coronary scaffold, Fantom Encore. The company also has CE Mark clearance for a bioresorbable device for below-the-knee peripheral artery disease. Groves noted at DeviceTalks West that the company is also moving forward with bioresorbable, X-ray visible embolic beads to treat vascularized tumors.

While drug-eluting stents remain the gold standard in interventional cardiology, studies have shown that leaving a permanent metal stent inside the body presents its own challenges, according to Groves. It would be ideal to create a product that delivered an adequate dose of drugs to a patient, kept the patient’s vessel open throughout the healing process and then dissolved away, she said.

Companies around the world have tried to tackle bioresorbable devices, and many have failed. Most notably, Abbott pulled its bioresorbable Absorb device off the market in 2017, reportedly due to low commercial sales. But long-term trial results have indicated that Absorb had an increased risk of target lesion failure and scaffold thrombosis compared to Abbott’s Xience everolimus-eluting stent.

After Abbott’s stumble with Absorb, European Union regulators wrote new guidelines encouraging doctors to limit the use of bioresorbable devices to clinical trials.

“My view is that Abbott correctly saw that bioresorbable scaffolds are a major disruption to the coronary space and are the right thing for patients,” Groves said. “I think the mistake Abbott made was to believe that first mover advantage was what was important.”

Reva’s chief executive said that Abbott’s challenges represent an obstacle to convincing doctors and potential investors to buy into bioresorbable technology. But winning the hearts and minds of clinicians is all about showing them the value of Reva’s devices with solid clinical data, she added.

“The average interventional cardiologist understands completely that bioresorbable, if we can get one that does as well as metal while it’s there, is going to beat metal when it’s gone. And so they want it. Now the question is, ‘Can I get it through my hospital administration? Can I get it through my chief? Will the payer pay for it because of these guidelines?’ We have a series of headwinds that are certainly a challenge,” she said.

“The good news is we don’t have a lot of competition.”

Having the patience for disruption

Whether it was managing the Fidelis lead recall or navigating the challenges of a technology’s bruised reputation, Groves has learned to endure through challenging work environments.

“Disruption takes time,” she said. “You’re probably going to fail. There are very few technologies that the first iteration is going to be a home run.”

“So be prepared for the fact that it isn’t going to work the first time out of the gate. Don’t drink your own Kool-Aid about how perfect you are and how perfect the technology is and how it’s going to change the world in 60 days,” she added.

For people just breaking into the medical device industry, Groves advised that they lean into difficult situations and try to take the road less traveled. She also noted that young people, particularly women, who are working to advance their careers shouldn’t underestimate the power of speaking up.

“Make sure that you are reaching out and networking with folks who can help your career. I didn’t do that. I thought if I did my job well, I’ll be noticed. Don’t believe that,” Groves said. “That’s just not true. You’ve got to speak up. I remember one time, while I was in a smaller company, I went to my boss and said, ‘I think all my male peers are making more money than I’m getting.’ I got a $100,000 raise. Gee. You think I was making less money?”

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What should the Mann Foundation do next?

Brad Perriello, executive editor – Medical at WTWH Media (left), interviews Dr. Robert Greenberg of the Alfred Mann Foundation at DeviceTalks West in Costa Mesa, Calif. [Image by WTWH videographer Graham Smith]

Dr. Robert Greenberg, the Mann Foundation’s new executive chairman, has ideas about where to take one of medtech’s top research and development outfits. He explained more at DeviceTalks West in December.

The new executive chairman of the Alfred E. Mann Foundation for Scientific Research sees the foundation continuing its mission of developing devices for unmet medical needs. The foundation for the first time is also inviting outside companies to use its resources.

Founded in 1985, the Valencia-Calif.–based foundation has launched several innovative companies, including Second Sight Medical Products (NSDQ:EYES), which makes devices for the visually impaired; cochlear implant manufacturer Advanced Bionics, now a subsidiary of Sonova Holding AG (SIX:SOON); and MiniMed, developer of a hybrid closed-loop insulin delivery system, now part of Medtronic (NYSE:MDT).

“It was essentially an incubator before the term ‘incubator’ even existed,” said Dr. Robert Greenberg, who took over as executive chairman in June 2018 after serving as non-executive chairman since 2004. (John Petrovich leads AMF as its CEO.)

Get the full story on our sister site, Medical Design & Outsourcing.

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DeviceTalks West exhibitors: Expertise you need to know

From electronic components for neurostimulators to the E.U.’s MDR to security concerns connected medical devices, there was a great deal of expertise to be among exhibitors at DeviceTalks West in December 2018.

Medical Design & Outsourcing managing editor Chris Newmarker spoke with experts at Valtronic, WuXi AppTec and Green Hills Software.

Get the full story on our sister site, Medical Design & Outsourcing.

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Here are 5 medtech industry trends you need to know

Whether it’s the slew of mergers and acquisitions or tighter regulation, developments of recent years are having some surprising effects on the medtech industry, according to experts.

medtech medical devices medical device industry healthcare surgery

[Image from Unsplash

Money is tight, the largest medical device companies are merging and it’s hard to see where regulation is going – medtech insiders have heard about such trends for years. But at a hot topics panel sponsored by law firm Greenberg Traurig at DeviceTalks West this month, it became increasingly clear that such developments are producing unexpected effects.

Here are five new medtech industry trends that are changing the game in the industry:

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(DeviceTalks returns June 5–6, 2019 in Boston – now co-located with the Robotics Summit & Expo.)

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Diabetes tech execs talk patient-centric design, device development & trust

Generic diabetes image - updatedJohn Timberlake has been commercializing diabetes drugs and devices for 25 years. Over the course of his career, one theme has always stood out: if you want people to use your product, it has to be made with the end-user in mind.

“It’s really [about] understanding the patient first and then designing the technology around the patient,” the Valeritas CEO said this month at DeviceTalks West.

The mantra of patient-centric design also rang true with Timberlake’s fellow panelist, Dr. Stephanie Habif of Tandem Diabetes Care – a California-based company that makes the t:slim X2 insulin pump.

“Taking a patient-centric approach is a critical part in understanding how to develop your products and the interaction you want your users to have with those products,” she said.

‘Patient-centric design’ is a catchy phrase in today’s medtech ecosystem, often tossed about with little action to ground it. But Habif and Timberlake emphasized repeatedly that beginning the device development process with the end user’s needs in mind is fundamental.

“There’s a lot of great technology out there looking for a patient indication. That’s not really the way to do it,” Timberlake said.

Get the full story at our sister site, Drug Delivery Business News.

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Here’s how Intuitive Surgical is innovating to stay competitive

Intuitive Surgical da Vinci SP

During his DeviceTalks West keynote, Intuitive Surgical CEO Gary Guthart touted the da Vinci SP robot-assisted surgery system and the expanded clearance Intuitive would like to achieve for the single-port device. [Image courtesy of Intuitive Surgical]

Intuitive Surgical (NSDQ:ISRG) isn’t resting on its laurels when it comes to the surgical robotics field that it dominates. The Sunnyvale, Calif.­–based company is seeking to stay competitive through technologies including computer-controlled navigated robotic catheters, contrast agents to improve imaging during procedures, and intelligent surgical interfaces.

That was a big message that hundreds of attendees heard during Intuitive Surgical CEO Gary Guthart’s evening keynote discussion on Dec. 11 at DeviceTalks West in Orange County, Calif.

“Payers are constraining total costs per treatment episode, so we have to do all of this innovation and lower the total cost to treat per patient episode,” Guthart said. “There are a bunch of people who think that the way to do that is to make things as cheaply as possible. Product cost matters, but innovation is going to be a lot more important.”

Get the full story on our sister site Medical Design & Outsourcing.

(DeviceTalks returns June 5–6, 2019 in Boston.)

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How Reggie Groves reinvented Medtronic’s atrial fibrillation biz

Reva Medical (ASX:RVA) CEO Reggie Groves got her start in the medical device industry at medtech titan Medtronic. In her upcoming keynote interview at DeviceTalks West, Groves will discuss how that experience has shaped her as a leader and an innovator. Here’s a preview:

When Reggie Groves joined Medtronic (NYSE:MDT) in 2002, she didn’t know very much about the medical device industry. That was by design, she told MassDevice – the company was looking for somebody outside of the medtech world to launch their CareLink Network. It was the world’s first remote monitoring system designed to link the data in patients’ implanted devices with physicians.

Reggie Groves“I knew that (Medtronic) was a big company that was well respected and that was about all I really knew about them,” she said. “I saw what they were doing in remote device check as the start of a complete transformation of the medical device industry – moving away from being the implant to being the data managers.”

After commercializing CareLink and then moving to the regulatory and quality side of the business, Groves stepped up to build Medtronic’s atrial fibrillation ablation business. At the time, according to Groves, Johnson & Johnson (NYSE:JNJ) held a sizable lead in the AF space, followed by St. Jude.

Medtronic’s AF unit “basically didn’t exist,” Groves said – the company had previously sold its electrophysiology business. It was Groves’ job to determine how the company could build an AF division that would stand out among fierce competition.

Catch Groves’ keynote interview at DeviceTalks West on Dec. 11 – register today!

She decided to rethink the way that the company’s sales force was selling its newest technologies to electrophysiologists.

“Most companies would have said, ‘We’ve got this great big sales force, here’s another product in their tool bag. Give it to them and let them sell it.’ And I said, ‘That’s the worst thing we could do because it’s a disruptive technology and we don’t want every customer to have it.’ If you’re the sales rep who’s also selling CRT devices and ICT devices, you’re going to bundle,” she said. “Something is going to be given away and the easiest thing to give away is the new novel thing. You’ll never make any money in AF, which is why Medtronic walked away from it the first time.”

Groves set up her own sales team and told them to only sell Medtronic’s AF technology to early adopters.

“When you walk in the door for the sales meeting, if you get the ‘Oh, it’s too expensive, oh it’s not flexible enough, oh it doesn’t do enough,’ – turn around and walk out the door. That’s not an early adopter. You need to find the customers who get the value proposition,” she explained.

At the time, competitive devices from St. Jude and J&J were designed to allow the very best doctors to perform an ablation anywhere in the heart. At Medtronic, Groves was positioning the company’s AF device as usable by any electrophysiologist who was looking to isolate the pulmonary vein.

Her plan was not without pushback, according to Groves.

“It wasn’t easy, even within Medtronic. I had lots of naysayers and it took the CEO stepping in, listening to the argument and making the call,” she said. “But I got really lucky that I believed in a different approach to launching a product compared to most big companies and Medtronic let me do it my way.”

Don’t miss out on the rest of Groves’ exciting story – see her at DeviceTalks West on Dec. 11-12.

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Alfred Mann Foundation chairman looks outward to extend founder’s legacy

Alfred Mann Foundation chairman Dr. Robert Greenberg

When medtech pioneer Alfred Mann died in February 2016, he left behind a rich legacy of pure innovation and patient impact spanning the breadth of healthcare, from cardiology to hearing impairment, blindness and diabetes that will improve the lives of patients for decades to come.

Extending and advancing that legacy is now the mission of Dr. Robert Greenberg, who took over as the foundation’s chairman in July. Speaking ahead of his appearance next week at MassDevice.com’s DeviceTalks West event in Costa Mesa, Greenberg told us that he’s looking to expand the foundation’s reach into the early-stage medical device ecosystem.

Don’t miss Dr. Robert Greenberg’s keynote appearance Dec. 12 at DeviceTalks West!

“One of the recognitions that Al Mann had was that there are tons of physicians, and specifically academic physicians, that have great ideas, therapies that could help patients, but are not so well placed to get those products developed and into companies that could commercialize and make those therapies available to patients. That was the philosophy behind [the foundation],” Greenberg told us.

That insight led to numerous successful spinouts that became some of the biggest names in medtech. The cochlear implant technology developed at the Alfred Mann Foundation became Advanced Bionics and eventually the cornerstone of the neuromodulation business at Boston Scientific (NYSE:BSX).

More recently the organization spun out Axonics Modulation Technologies (NSDQ:AXNX), which raised $138 million this month in an initial public offering for its r-SNM sacral neuromodulation system.

The foundation was also behind a glucose sensor and insulin pump business that’s now Medtronic (NYSE:MDT) MiniMed. And the Alfred Mann Foundation also spun out Second Sight Medical (NSDQ:EYES) and its “bionic eye” technology, helmed by Greenberg, that’s in clinical trials for its Orion cortical implant technology – a potentially revolutionary device that could bring eyesight to the blind.

And the company that started it all, PaceSetter, was the cardiac rhythm management business that grew into St. Jude Medical and eventually Abbott (NYSE:ABT).

All of those spinouts originated within the foundation. Greenberg said he’s turning the focus outward, seeking very early-stage enterprises that could use a leg up from the AMF.

“One of the reasons why so many of our startups have been successful is that they’ve been able to leverage the sort of back-end infrastructure, where the foundation has kind of acted as an incubator. We’re now opening up that incubator to allow other companies to rent space, rent time on our equipment, and even get access to our team as well. That’s a fairly new model for us, where we’re trying to contribute to the local infrastructure more,” he told us.

“That’s one of the things that’s the hardest for me, is that there are tons of amazing, great ideas and projects that can have a significant impact on people’s health,” Greenberg said. “Trying to focus down on the ones that are going to have the highest impact and make the best use of all these limited resources is really the bigger challenge.”

Hear the rest of Bob Greenberg’s story Dec. 12 at DeviceTalks West. Register now!

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6 exhibitors at DeviceTalks West you should know

DeviceTalks-West-2018DeviceTalks West is an annual event that allows some of the best minds in medtech to exchange ideas, insights and technologies.

Medical Design & Outsourcing’s parent company WTWH Media holds DeviceTalks annually in Boston, Orange County, Calif., and the Twin Cities in Minnesota. It is hosted by MassDevice and attendees can plan to enjoy networking with people in medtech, in-depth interviews with leaders in the industry, panel discussions about medical devices and more.

The event also houses a number of exhibitors who will be showcasing some of their hot technologies and services at the event. Here are six exhibitors at DeviceTalks West this year that you should check out.

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