ARLINGTON, Virginia – Guy Nohra, founder and general partner of Alta Partners (San Francisco, California), spoke at length during the annual meeting of the Medical Device Manufacturers Association (MDMA; Washington) on the challenging roller-coaster ride predominating in the current investment sector for medical devices.

Tracing the history of the medical device industry from its inception in the 1970s to the beginnings of more tightly controlled government regulation in the early 1990s, Nohra listed four primary factors that influence today's medical technology investor: clinical need, regulatory and reimbursement issues and factors he lumped together as socio/economic/ political.

From 1998 until 1Q00, only seven medical device companies had launched initial public offerings, compared to 15 in 1997 and 40 in 1996, Nohra said, citing greater reimbursement restrictions imposed by the Health Care Financing Association's (HCFA; Baltimore, Maryland) Medicare program and tighter regulation by the FDA, as two primary reasons for the falloff.

Despite these and other problems, however, Nohra predicted an increasing pace in the investment market. "Drivers for this enhanced market," he said, "will be clinical needs, cost pressures, an aging population and availability of venture capital." And baby boomers will be important in spurring this market: "Baby boomers are accustomed to a high quality of life; they are well-informed about new technology and will insist upon having it," he said. Additionally, the political climate should shift significantly to accommodate new technology, with fewer government restrictions and more reimbursement at the insistence of this same aging population, according to Nohra.

On a less-positive side, he voiced concern that during the scramble for new technologies, many small- and mid-size companies could be squeezed out by the large competitors. "I hope that this does not happen," Nohra said, "because it would greatly stifle innovation and competition and create fewer new investment opportunities within the sector."

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