CDU Contributing Writer
ZURICH, Switzerland — “Medical devices are hot,” said Carola Schropp, managing partner with the EBD Group (San Diego) in the opening address at BioDevice Partnering 2007 here in mid-June.
“The smart money is pouring into medical device companies at the expense of past favorites like computer-related start-ups or drug-development companies,” she said.
Schropp cited an article published in the New York Times that said some $1.1 billion in seed money was invested in medical device companies in the first quarter of 2007, a 60% increase over the same period last year.
That number is far more significant for the med-tech sector than for biotech, she told Cardiovascular Device Update, adding that “$3 million is a big number in med-tech, where it is small change for biotech and it reflects the changed nature of product development that is coming as companies begin to move into combination products.”
The convergence of mechanical devices for the delivery of pharmaceutical therapies is heating up the dealmaking action in the med-tech sector. Inspired by the success of drug-eluting stents (DES), executives and investors are re-examining inventories of products in both sectors to find opportunities. Oncology is the largest target on the horizon, but not all opportunities have yet been identified.
In the lead panel discussion at the conference, Tim Haines with the venture capital firm Abingworth Management (London) said biology and not pure mechanics “is going to drive developments in areas of diagnostics, therapies and the area I find the most interesting, which is monitoring the progress of disease and the progress of therapies on the patient.” Abingworth holds some $1.25 billion in funds and has underwritten 90 life science businesses with investments up to $25 million.
“What we like in this convergence are the opportunities to reduce timelines for product development and to reduce risk to investment,” he said. “If a drug is already proven with well-characterized molecules, then this can potentially cut the time scales to market.”
Another panelist, Crispin Simon, CEO of Biocompatibles International (Basingstoke, UK), said “Investors draw comfort that product convergence worked in DES and believe that it can work elsewhere.”
However, he urged caution in the rush to enter this sector, saying, “where bare-metal stents were mechanically straightforward, with drug-eluting devices you are playing a card game where five of the seven cards are face down.
“In the case of Abbott Laboratories [Abbott Park, Illinois] and Medtronic [Minneapolis], there were thin margins of difference in the coatings applied to a stent but this decided the difference between success and failure.
“Oncology products are calling for a drug delivery to a tumor that is 200 times greater than what is used today for DES,” he said. Chemotherapy pharmaceutics drugs are already toxic, and no one yet knows the effect of using such concentrations in the close proximity to tissue that a mechanical device can deliver.
Medtronic was introduced as the one company that has the strongest hands-on experience in product combinations and Erik Baas, director of medicine and technology for international operations, agreed that the industry is entering a new level of play but compared it to a three-dimensional chessboard.
He told CDU, “A drug by itself is one thing, but combining a drug and a device is still unknown territory, and it is not trivial. There are immense opportunities in time-controlled, placement-controlled and concentration-controlled delivery of drugs, but we have only started to scratch the surface.”
Currently Medtronic generates about 20% of its revenues from combination devices that are straightforward, he said, such as wearable insulin pumps, implanted pain medication delivery devices and steroid-eluting leads.
But the idea that there will be a rush to market in oncology such as the industry saw with DES is not possible, he said, because cancer is a category containing multiple diseases and not a single indication such as a blocked artery. Each application will require a trial for each disease.
Baas said he was at the partnering event to seek out ideas for “leveraging our platforms and seeking growth.”
Herbert Köntges, a co-owner of start-up Medical Device Works (Brussels, Belgium), presented a product for targeting chemotherapy for liver cancer that is nearing completion of development and is expected to begin animal testing next year.
“For combination products, you need the development time and clinical trial effort,” said Schropp. “That is the point to this partnering event and many med-tech companies still have not learned the idea of partnering.”
“We are seeing strong medical and market reasons for these players with different backgrounds in med-tech, biotech and pharmaceuticals to collaborate and cooperate,” she said. “But in medical devices, they still tend to buy each other and do not always work together.”
“Partnership is going to become more critical when the nanodevice companies start to make very specific delivery devices for chemotherapies. The whole diagnostics business will evolve from simply identifying a disease to monitoring it as it progresses or the condition changes with the effects of a therapy.”
Haines said the low-hanging fruit for drug delivery by devices will go quickly, and, increasingly, device makers will face “more sophisticated agents, more difficult molecules.”
He also cautioned company executives that progressively “in combinations of existing products the pharmaceutical companies will be driving the deals. Med-tech companies need to look closely at their competencies.”
Moving into combination products requires “a change in the mindset of device makers vs. pharmaceutical companies,” Simon added. “For device makers the pre-clinical development stage is something you need to get done quickly to move on to the regulatory stage,” he said.
“But for pharmaceutical companies the pre-clinical phase is where you must spend time and effort to identify what is right and what is wrong to reduce the risk of surprises.”