I don't directly invest in med-tech, but attending Transcatheter Cardiovascular Therapeutics for five years makes me wonder how an investor separates winners and losers. I know TCT 2011 has both, but which are which?
Asking about the patient population is just the start of the investor conversation, but in an age in which indications for use are becoming increasingly narrow, it's probably the last question, too. After all, we have radio-frequency ablation devices approved for paroxysmal atrial fibrillation, but not for persistent or long-standing afib.
I have no clue how different an ablation device has to be to treat these different conditions – it's all in the wrist for all I know – but its clear that a stent designed to address a branched coronary artery is a different animal than a single-axis stent.
It's not hard to top that, either. Just add the question of whether the patient is diabetic and you have a whole new world. What if the efficacy of elution drugs is different for type 1 versus type 2 diabetes?
You see where I'm going. We are supposedly headed for an era of personalized medicine, but when the cost of device development is rising and reimbursement is tightening, who can afford to sweat a patient population of 5,000? At the moment, Edwards Lifesciences can. The conventional thinking about the Sapien TAVR aortic valve is that the U.S. market offers about 5,000 patients per annum. I haven't the foggiest what Edwards is charging for these things, but I guarantee they're not cheap.
Edwards' CEO Mike Mussallem is no dummy. If Edwards can't make its money back in five years, it will in 10 when the Sapien XT and more patients are available. Still, you can't discount the possibility that someone will invent some amazing biotech goo that can be dabbed onto the aortic valve to dissolve the calcium, shrink the stenosis, and prove that pixie dust really does exist.
That's quite speculative, but what if FDA tells Mike, "you need a new PMA for these patients who are less sickly and less stenotic"? We're all aware that Wall Street likes a sugar buzz a lot more than it likes real food these days, and while we understand why, that doesn't change the windsock behavior of stock traders. Don't think they wouldn't get the news about FDA and those somewhat different indications for use.
Sean Salmon of Medtronic said something at TCT 2009 that stuck with me. He was discussing bioresorbable stents and said "it's not compelling to be the first in this technology," although he also said it's a good idea to assemble a developmental program "in case you're wrong." But someone has to be the first on the dance floor or Mom and Dad never meet and get married and all that rigmarole.
I don't pretend to have any answers other than "a healthy economy" and "investors with nerve." I'm not sure how much we have of either of late, though, and the troubles in Greece and Italy make me wonder if this global malaise will persist.
I can say this, however: If the bigger ideas of the future apply only to ever-smaller numbers of patients, we're going to need some fundamental technological advances to make devices cheap, or the effort to expand indications will have to be a bit more seamless than I believe it is at present here in the U.S. Otherwise, Wall Street will join venture capital in the 510(k) game and leave the PMA-type stuff to other nations, and being there first will entail being there, not here.