The involvement of Josh Makower, MD, in the med-tech sector takes many forms – entrepreneur, innovator and investor. Asked how his interests in medicine and its enabling technologies evolved, he said, “I went to medical school because I wanted to help people and solve medical problems, and that’s what I’m doing today. Solving big clinical problems is what we love to do.”
His comments came as part of a lengthy interview conducted for the April issue of industry publication Biomedical Business & Technology.
Makower teaches part-time at Stanford and co-founded the university’s Biodesign Innovation Program with Dr. Paul Yock. He described that program as being “focused on teaching medical, engineering and business students a reproducible process that they can use to innovate in med-tech."
“My expertise is in the process, and that allows me to be confident about being able to deliver solutions to important medical problems; the key is always to understand the problem properly.”
Apparently aiming to boost its profile in the healthcare information sector, software colossus Microsoft has hired a veteran FDA official as part of its lobbying force in Washington. Donna Bea Tillman resigned as director of the Office of Device Evaluation after having served with the agency for 15 years. Her new post is as director of regulations and policy for the Redmond, Wash.-based company’s health information unit.
In an interview with the Health Blog, Tillman said of her new job: “This is a match made in heaven.” She noted that while in graduate school for biomedical engineering at Johns Hopkins University, she moonlighted writing software programs for engineering and biomedical experiments.
Microsoft, Google and other big computer technology companies have targeted healthcare information technology as a growth sector, especially in the wake of some big-time ($20 billion) impetus from last year’s federal economic stimulus package.
Contract research firm PPD, of Wilmington, N.C., has opened a new facility in Athlone, Ireland. The facility includes an 18,000-square-foot analytical testing laboratory and clinical supplies business. In all, the facility represents an investment of some $19 million.
According to PPD, the facility will help meet the growing client demand for its services in Europe, the Middle East and Africa. The company will offer integrated product and analytical development services, along with global clinical supplies services, from the new location.
The analytical testing lab conducts testing for clinical programs and marketed products spanning all phases of drug delivery.
As of March 1, PPD already had hired 21 employees at the new facility and planned to create some 250 jobs in all, including PhD-level scientists, analytical laboratory staff and other clinical development professionals.
In a recent report, Dublin, Ohio-based Research and Markets said the global market for spinal surgery devices will reach $11.2 billion by 2016 after a compound annual growth rate of 10% from 2009.
The report said the growth will be driven primarily by the demographics of an aging population, an increasing incidence of spinal diseases, and technological advances. The sector is marked by a strong pipeline of product innovations and a broadened acceptance of such new products, especially by a growing number of younger patients opting for such surgery.
Global Spinal Surgery Devices: Market Analysis and Opportunity Assessment says that the pedicle screws segment is the primary driver for spinal fusion devices worldwide. Spinal fusion includes pedicle screws and interbody cages, and is forecast to grow to $10 billion by 2016 from $5.2 billion in 2009.
Contract research firm PPD, of Wilmington, N.C., has opened a new facility in Athlone, Ireland. The facility includes an 18,000-square-foot analytical testing laboratory and clinical supplies business. In all, the facility represents an investment of some $19 million.
According to PPD, the facility will help meet the growing client demand for its services in Europe, the Middle East and Africa. The company will offer integrated product and analytical development services, along with global clinical supplies services, from the new location.
The analytical testing lab conducts testing for clinical programs and marketed products spanning all phases of drug delivery.
As of March 1, PPD already had hired 21 employees at the new facility and planned to create some 250 jobs in all, including PhD-level scientists, analytical laboratory staff and other clinical development professionals.
In a recent report, Dublin, Ohio-based Research and Markets said the global market for spinal surgery devices will reach $11.2 billion by 2016 after a compound annual growth rate of 10% from 2009.
The report said the growth will be driven primarily by the demographics of an aging population, an increasing incidence of spinal diseases, and technological advances. The sector is marked by a strong pipeline of product innovations and a broadened acceptance of such new products, especially by a growing number of younger patients opting for such surgery.
The state of Indiana has been awarded a four-year, $10.3 million grant under the American Recovery and Reinvestment Act program to spur improvements in healthcare information technology (HIT). The grant, part of the State Health Information Cooperative Agreement Program, is aimed at enhancing both the quality and the reach of the state’s existing HIT delivery system.
The grant will be made to a new, non-profit entity created for the purpose, Indiana Health Information Technology. IHIT will serve as a governance and contracting structure to extend HIT technology throughout the state.
Last October, the Indiana economic development program BioCrossroads led a cooperative effort between state agencies and Indiana’s five independent health information organizations to submit an application for federal stimulus funding.
Moody’s Investor Services, of New York, said in early March that it sees the medical products sector as being set for stable growth, although it said the sector may not fully recover to pre-recession levels. It said device companies should be helped by a plethora of new-product launches.
Diana Lee, a Moody’s senior credit official, said, “We foresee generally stable business fundamentals for the medical products and device sector over the next 12 to 18 months.
Moody’s said hospital supply companies should be among the most resilient, adding that it doesn’t expect a significant decline in hospital admissions over the near term, despite the winding down of COBRA health benefits to those who have lost their jobs in the past couple of years.
The financial service said it foresees a gradual recovery in equipment spending by hospitals, which for the most part have stayed away from big-ticket purchases during the period of economic decline.
Kennesaw, Georgia-based CryoLife has bought a substantial stake in Medafor, a Minneapolis company that makes HemoStase, a technology for use in cardiac and vascular surgery. The 1.6 million shares purchased represent an 8% share of ownership in Medafor and makes CryoLife the company’s largest shareholder, as well as its largest distributor.
The Georgia company has made several attempts to but Medfor, but has been rejected in those efforts. With the stock purchase completed, CryoLife has asked Medafor’s management and board to hold discussions on possible acquisition of the company.
CryoLife President/CEO Steven Anderson said the HemoStase technology “serves as a perfect complement to our BioGlue technology, allowing us to offer surgeons a full range of products to assist them in controlling and preventing bleeding.”
Trod Medical, a Paris-based medical equipment manufacturer, has opened U.S. headquarters in the Lakewood Ranch area of Manatee County, Florida, near Bradenton on the Gulf Coast. The company’s Encage surgical device uses radio frequency energy to halt the growth of diseased tissues lining the prostate, liver and kidney. The U.S. is the largest market for the FDA-approved device, which Trod plans to release from the Manatee location this coming summer. |
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By JIM STOMMEN
Healthcare Syndicate Editor
Noting that he and Yock recently collaborated with Stefanos Zenios and several other authors to publish a book, Biodesign: The Process of Innovating Medical Technologies, Makower said, “that is the exact process that I use.”
He said he is not a “domain” expert per se. “After I work in it, I can become an expert, but I don’t enter with a single domain expertise,” Makower said. “My expertise is in the process, and that allows me to be confident about being able to deliver solutions to important medical problems; the key is always to understand the problem properly.”
Noting that the book lays out “a sequence of steps that one ideally should pursue, which starts off with a very thorough and deep understanding of the problem,” Makower said, “I get a certain amount of enjoyment out of learning a new specialty and making good friends and relationships with physicians in that specialty, understanding their challenges, and working collaboratively with them to come up with new solutions.”
Those solutions often come via medical technology incubators such as ExploraMed Development, which Makower founded and heads up as CEO. “We’re fortunate to have a lot of good medical device incubators and entrepreneurs out there who are passionate about what they’re doing and really want to improve the quality of life of people,” he said. “In the U.S., we’re fortunate to have a number of organizations like that. ExploraMed is one, but there also are The Foundry, Innovation Factory and several others that are fantastic.”
Makower said each incubator “is as different from one another as are the individuals that constructed it. We all have our own slight variations on theme. Some take ideas from academia and translate that into new companies, others have kind of a resident set of inventors that continuously produce the innovations and then they build teams to go execute on them.”
He said the ExploraMed model “is a little bit different in two ways. One is that we build the business around a special individual that we call the project architect. This person really serves as the co-founder of the business and tends to be an engineer who has the capacity to not only dream and invent, but also lead.”
In the case of Acclarent, a company that was sold to Johnson & Johnson earlier this year for $785 million, that person was John Chang. “John was my co-founder there, and he has stayed with the business, and is there today,” Makower said. “That is really an important part of the model – to have an embedded individual, along with the project who is responsible for many of the early choices helps solidify the company’s culture and history. That’s a very important element.”
He said that the second differentiating factor is that “because we are focused on a set process, we truly do start with a blank piece of paper. We don’t start with a solution, or something that has been invented already or comes out of a university. We start with an area of medicine that has a big problem that we are particularly interested in and we dive in and deeply understand the need, and from there we invent. That’s where it starts."
Makower added: “To us, the process is the one consistent theme that is the same throughout all of the ventures that we have pursued. It works.”
On the subject of medical technology innovation overall, he said it is important for the U.S. to keep the edge it has enjoyed during the so-called “golden age” that has marked technology developments over the past several decades. “I believe the Golden Age of med-tech is absolutely sustainable and compatible with our goals of reducing healthcare costs and bringing high-quality medical solutions to patients,” Makower said. “All of us in the industry share the view those are the goals that gets us to work in the morning. We want to deliver better care for patients and we want to lower healthcare costs. Every single company that I am aware of in this space has that as part of its mission.
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He added: “It is very important that we as a community understand the key fundamental things that are necessary to sustain the Golden Age of medical technology that we have enjoyed for the last 50-some years and that I hope will continue to enjoy well into the future.”
Makower said essentials include 1) a strong patent system “:that allows the innovations that we create to be protected and strongly defensible;” 2) a predictable and reasonable regulatory process “that allows us to know what is coming, raise the appropriate amount of funding and execute upon it, and then ultimately deliver products to the marketplace;” 3) a clear, consistent and easily accessible reimbursement system that allows people to receive the therapies that we create, in a reasonable amount of time, and provide for a pathway for payment for early, new technologies even though they haven’t been around as long as existing therapies.”
He said, “If we do all of those things, then we will have the ability to retain the top talent and to attract the top engineers into the med-tech industry, retain investors’ interest in our space, improve the quality of life for millions of people and will preserve the very valuable asset that we have in the U.S. as the leader of med-tech well into the future.”
Expressing concern over the direction being taken by the FDA to toughen the 510(k) path to product approval, Makower said, “The system we had before was for the most part working. There are always examples of where things did not work, but a wholesale change of the med-tech regulatory system is not necessarily required to address some of those issues. As a public, we need to recognize that anytime there is a technology that is new, there is uncertainty. But they should be allowed to have the opportunity to make that choice. We cannot avoid all possible risk if we want to see innovation continue in this space.”
He acknowledged that “some small changes could be done to improve the system, but for the most part, what we had was working. What is most important is that we keep our position globally as a place where people have access to the very best medical technologies in the world. These technologies were created here, and we should keep the jobs here, and allow our own people to benefit rather than solely transporting all of this overseas. It would be a shame to lose our competitive advantage in a market we currently lead.”
Makower said that because healthcare consumers are very well-informed right now, “there really isn’t a need to tightly constrict the flow of new therapies and technologies that reach patients. It’s a new consumer healthcare economy that we are in. Patients are better-informed today than they ever have been, and many of them are now seeking therapies overseas that actually have been created in the United States. That’s because of the delays in access to these technologies here, either through the reimbursement process or through the regulatory process.”
Saying that it is “definitely a challenging time for small companies and the med-tech industry overall,” he added that venture capitalists “have become much more conservative and concerned about cash burn and timelines, and unfortunately the new conservative direction that the FDA is taking, the increased challenges to navigate the Centers for Medicare & Medicaid Services and our private reimbursement system, and the delay in obtaining patents have combined to result in a great deal of uncertainty for medical technology companies. It is a challenging time.”
Makower said the problem is that many venture capitalists “have been put in a situation where they have had to do inside rounds to ‘feed their own,’ and that has stretched them in their ability to support the mid to late stage of companies that they haven’t worked with before.”
He said, “There is an increasing number of companies that are running out of their lifeline from their existing investors. And I’d say that probably applies to the venture capital industry as well – there is a small group of firms that have been able to finance and raise new funds, but the more common story is that many funds have quite a full portfolio of medical investments and are finding that liquidity is not coming as soon as they had hoped, and their ability to raise their next funds is therefore delayed. Many of these funds are finding themselves pretty stretched out.”
Makower said, “There are a lot of good companies out there that have technologies that work, that are really improving patients’ lives, but for some reason or another -- the FDA delays being a big part of it, but also other issues such as challenges obtaining reimbursement – these issues combine for that so-called ‘perfect storm.’”
He added: “We have to be able to have a system that allows for new technologies and new procedures to find their footing and their place amongst the array of existing alternatives before we subject them to comparative assessment. Otherwise we will wind up validating that the way we have always done it is the way we should always do it, and we will see no improvements in therapy.”
By JIM STOMMEN
Healthcare Syndicate Editor
In one sense, the year-long healthcare reform debate is over. Passage of a bill along strict party lines means that changes in the American healthcare system – and particularly in the health insurance system – will begin to be made over the next several months.
But, as the late radio great Paul Harvey used to remind us, that doesn’t cover “the rest of the story.”
The ink wasn’t even dry on the bill that would go to President Barack Obama for signature when the attorneys general of no fewer than 11 states – Republicans all – announced that they would be filing suit over the soon-to-be-law on constitutional grounds.
And most assuredly, the Republican opposition to the bill is not going away. Sen. John McCain, perhaps still smarting from Obama’s reminder during last month’s healthcare reform summit that the campaign for the presidency was past, said the morning after the vote that his party would work steadfastly to repeal the tenets of the newly passed legislation.
In other words, expect the partisan bickering to continue, and in fact to intensify as the Republicans take the battle to individual House and Senate races in hopes of wresting control of Congress away from the Democrats.
At the very least, we can anticipate that the Dems have absolutely no hope of returning to the so-called “super majority” they held in the Senate before Republican Scott Brown was somewhat surprisingly elected to fill the late Sen. Ted Kennedy’s seat from Massachusetts. And if the majority of Americans truly are as disenchanted with the reform legislation as the Republicans – and many opinion rolls – indicate, the GOP could make unprecedented gains in this fall’s mid-year elections.
For now, at least, the reality is that the biggest transformation of the U.S. healthcare system since the original creation of Medicare under Lyndon Johnson in the mid-1960s will get under way over the next several months.
Its impact on companies doing business in the healthcare sector will be mixed. For medical-device companies, the expected sizable increase in the number of potential patients using their products will be offset by a 2.9% excise tax on sales, decried by many in the field and the investors who back them as a serious detriment to innovation. For instance, Medtronic CEO Bill Hawkins said his company may have to cut 1,000 or more jobs to absorb the costs of that tax.
The major provisions of the legislation address the availability of coverage for millions of uninsured persons, along with insurance industry practices such as widespread denial of coverage to pre-existing conditions.
The bill marks a first step toward controlling healthcare costs that have risen on a runaway basis over the past couple of decades. The nonpartisan Congressional Budget Office said a week before the vote that by its estimates the federal deficit would be $143 billion lower over the anticipated 10-year life of the healthcare reforms than would be true otherwise.
Whether true cost savings can be accomplished may take years to be seen, but a number of economists have hailed the plan as being important even if for no more than psychological reasons.
Nonetheless, whether savings bear fruit clearly is secondary to partisan considerations, with the likelihood that we’ll need to become accustomed to hearing invectives be spewed on an ongoing basis as party-line politics continue to be the order of the day.
OrbiMed Advisors, a New York-based fund manager with some $5 billion in assets under management, said it has raised $550 million for what will be its largest healthcare fund. General Partner Jonathan Silverstein told med-tech industry publication Medical Device Daily that OrbiMed started raising money for the Caduceus Private Investments IV venture fund last summer. About 80% of the new fund’s capital is from existing investors.
Silverstein said that OrbiMed’s investments are roughly 60% in biotech, 25% to 30% in medical devices and the remainder in diagnostics.
He added that, while it has been a difficult financial climate over the past two years in which to raise funds, he thinks things may be starting to look up. “The climate has changed significantly in the last quarter,” he told MDD. “We saw a lot of interest in the end that helped gain momentum and we think the financing climate has turned around.”
With the new fund, said Silverstein, “We will be seeking novel technologies in medical devices and biopharmaceuticals, anywhere in the world and at any stage of development.”
OrbiMed partner Carl Gordon, PhD, who helped found the firm, said the diagnostic space “is a hot area now, and we continue to do a lot of work there to identify some more diagnostics companies to do in our fourth fund. I think that is going to be an important area of focus for us.
“We are grateful for the strong support from our existing and new investors, which allowed us to exceed the fund’s original target of $500 million,” he said. “This is particularly noteworthy given the relative paucity of available credit for new venture capital funds due to the recent credit crisis.”
VentureWire reported that the new fund is among the largest healthcare-only venture funds.
$1.9 billion invested in 4th quarter
Online venture capital database VentureDeal reported that U.S. life sciences companies secured $1.9 billion in venture funding in the fourth quarter of 2009. Biotechnology recived $871 million, split among 69 companies, while 78 medical device firms received $572 million in the quarter and 45 pharmaceutical companies raised $460 million.
The total number of companies, 192, represented a 10% increase from the previous quarter, although the total dollars invested was essentially unchanged. Medical device investing fell by 20% in the quarter, while biotech investing was up by a colossal 65%.
New $10M fund in Minnesota
Triathlon Medical Ventures of Cincinnati and Affinity Capital Management of Minneapolis reported the launch of a $10 million venture fund intended to make seed investments in life sciences firms, primarily targeting Minnesota-based companies.
Initial investments are expected to be between $250,000 and $500,000 in each start-up firm funded. Affinity venture partner Serafin Samson will lead the fund along with Barbara Nelson, former associate director of the University of Minnesota’s Office of Technology Commercialization.
Massachusetts sets $5.5M loan program
In another regional investment effort, the Massachusetts Life Sciences Center plans spend $5.5 million in the second year of an investment program that provides accelerator loans to early-stage biotech and device companies. Loans of up to $750,000 per company will be available, up from $500,000 in the first year of the program.
The center was established in 2008 as part of the state’s 10-year life sciences initiative.
Transmedics draws $35.4M in financing
Transmedics, an Andover, Mass.-based company that is developing organ transplant technologies, has closed on a $35.4 million financing round in which 26 unidentified investors participated. The transaction involved the conversion of about $9 million in debt into equity shares. The company’s lead product is a mobile organ-care system designed to maintain human organs in a functioning state outside the body prior to transplant.
In all, Transmedics has raised more than $125 million in venture and other funding sinch its founding in 1998.
$32 million for Pulmonx
Pulmonx, a Redwood City, Calif., company that is carving out a significant position in the interventional pulmonology market, said it has completed an agreement for a new round of equity financing totaling $32 million. The round was co-led by new investors HealthCap, of Stockholm, Sweden, and Kleiner Perkins Caufield & Byers, of nearby Menlo Park, Calif. Also participating were existing investors DeNovo Ventures, Latterel Venture Partners, MedVenture Associates, Montreaux Venture Partners and POSCO BioVentures.
The company said it planned to use the new capital to support the international commercial launch of its Zephyr Endobrachial Valve and recently approved Chartis Pulmonary Assessment System, both of which are CE-marked and cleared for sale in Europe and other international markets. Pulmonx said it expects the latest financing to carry it through until it reaches profitability.
Pulmonx is particularly pushing into the European market, where it launched the Chartis system – which provides pulmonologists with lobe-specific information about a patient’s lung -- this past December. It plans to invest “significantly” to grow both direct and indirect sales, marketing and clinical activities throughout the European Union.
Benefits management firm raises $25M
Implantable Provider Group, of Alpharetta, Ga., said it raised about $25 million from Sequoia Capital. IPG is involved in the nascent medical device benefit management sector, buying medical implants such as knee replacements and pacemakers for hospitals and surgical centers and later filing reimbursement claims with insurers.
IPG said that its business model saves medical providers from tying up capital they would spend on such devices, and also allows them to avoid the complexity and financial risks inherent in the billing/reimbursement system.
IPG said it expects the new funding to allow it to create some 150 new jobs.
$20M for Carticept Medical
Another Alpharetta firm, Carticept Medical, said it has completed a $20 million Series B financing round involving new investor SonoSite, of Bothell, Wash., and existing investors Domain Associates and New Enterprise Associates.
The company said the financing will support the expected launch of its Navigator system, a computer-controlled fluid delivery system designed to automate the delivery of medication to individual patients. The funds also will help complete patient enrollment in the ongoing clinical study of the firm’s Cartiva synthetic cartilage implant.
Other financing activity
• The Irvine, Calif.-based Tech Coast Angels angel investment network reported that it completed seven rounds of new investment deals and 17 follow-on deals last year. TCA said it raised $4.7 million in direct angel investment from its members and another $57 million via other venture and angel investment sources. Healthcare and biotech firms were among those receiving funding.
• Dallas-based Phytel, a provider of services designed to help physicians better manage their patients, has attracted $14.2 million from Caris, LAH Investments and Polaris Venture Partners, to be used in part to advance product development efforts.
• Awarepoint, a maker of real-time location systems for hospital equipment and personnel, said it has raised $10 million for acceleration of its product development efforts. The round was led by existing investor Jafco Ventures of Palo Alto, Calif., which was joined by Cardinal Partners of Princeton, NJ, and Venrock Ventures, also of Palo Alto. The San Diego-based company’s products provide real-time remote monitoring of both people and equipment in hospitals, covering location, status, condition and movement.
• Saladax Biomedical said it closed on an $8.4 million preferred offering led by Boston-based Excel Venture Management. The Bethlehem, Pa.-headquartered company will use the funds to accelerate development of its MyCare line of diagnostic tests, including expanded clinical support. The MyCare tests measure blood levels of cancer and central nervous system disorder drugs to help guide dosing for optimal effectiveness. The goal is to reduce toxicity and improve treatment efficacy.
• Austin, Tex.-based MicroTransponder, which is developing a wireless neurostimulation platform for the treatment of chronic pain and other neurological conditions, reported beginning a planned $7 million Series B round of funding from both existing and new angel investors. The firm also has been awarded a $2.6 million grant from the ational Institute of Neurological Disorders and Stroke to support pre-clinical evaluation of devices for treatment of neuropathic pain and to scale up manufacturing.
• Eureka Genomics, a Hercules, Calif.-based company that provides advanced bioinformatics analysis services to diagnostics and biotechnology/pharmaceutical companies, among others, said it has closed on $3.7 million in a private financing round, with proceeds earmarked for further discovery research and growth of the firm’s service business. The round involved undisclosed private individuals and angel investors.
• Burlington, Mass.-headquartered Rhythmia Medical said it has raised $2.7 million from 14 unidentified investors. The company’s lead product is a tool for mapping cardiac arrhythmias. It has raised a total of $15 million since its founding in 2004, with Norwich Ventures among the investors.
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