Warren Granger


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  • Whereas biopharma innovation is typically represented in alinear “funnel chart”, medtech is illustrated in a cyclical and iterative processMedtech’s long-standing innovation model has included these characteristics:Short development times based on engineering: closer to the 18-month product development cycles of IT, than the decade-long one of bio / pharma – allowing it to move from the laboratory bench to the production shop quickerCollaborative and iterative innovation: innovation is done at bedside, not bench – physicians are a valuable source of feedback on product effectiveness and design; iterative improvements occur post-marketing with new generations of slightly improved products
  • Innovation cycle is under strain as it faces new challenges in the form of:Venture funding: Even though capital is constrained, funds are still available but the distribution has been skewed towards later stage investments; VCs are having to carry portfolio companies further – means less money for new investmentsR&D: Less access to capital to fund; process of obtaining market approval is becoming more challenging (new 510(k) restrictions expected); device taxExits through acquisition: Buyers now more risk averse and requiring companies to commercialize their operations, adding time and costs to exit; is inefficient use of scarce capitalIterative innovation with physicians: Some worry connection (and subsequent innovation) between company and doctors will be hurt by too much clarity – Sunshine Act in the USBusiness concerns – time to profitability and necessity of ongoing improvements remain an issue
  • But in order to capitalize on these opportunities, medtechs will also need new ways of doing business and executing transactions.The real opportunities may be to experiment through pilots and to partner – including with non-traditional players.As an industry who’s deal space has traditionally focused on M&As, medtechs would be smart to add strategic alliances to the mix, especially with non-traditional players
  • Offer service capabilities or forming JV’s with non-traditional players
  • A graphic that Microsoft created showing how the new health ecosystem could evolve and the key players in that transformation, whereby the application programming interface will play a central role in communicating data.An IT driven answer, but interesting in how the view to health care will change in the future
  • And as we all should know that during “change”, there are tremendous opportunities.
  • Warren Granger

    1. 1. Pulse of the industryMedical technology report 2010<br />
    2. 2. Headlines<br />The big picture<br />
    3. 3. Global medtech headlines<br /><ul><li> With revenues flat, medtechs focused on bottom line growth and preserving cash
    4. 4. Healthcare reform, hospital consolidation, austerity measures & increased regulatory hurdles are increasing uncertainty and risk
    5. 5. Fundraising up – propped up by a few large US debt offerings
    6. 6. VC funding model under strain – longer runways, higher bar for exits, diluted returns, fewer investors and less capital available
    7. 7. Transactions were down significantly as many strategic acquirers sat on sidelines
    8. 8. Buyers sought maturity and required sellers to share risk
    9. 9. Increased clarity on healthcare reform, healthy cash balances and affordable credit terms should increase M&A activity</li></li></ul><li>A confluence of trends …<br />US 510(k) reforms<br />Comparative effectiveness research<br />Consolidation of purchasing at hospitals<br />Slowdown in product approvals<br />Regulatory opaqueness<br />IOM list <br />Sunshine Act<br />IPOs all but disappear<br />M&A buyers want commercialized products<br />Slower growth in mature markets<br />Device tax in US<br />has high burden <br />for emerging companies<br />Electronic health records adoption<br />Lower P/E ratios<br />Capital crunch<br />Hospitals under strain<br />Health care <br />reform measures enacted<br />Pricing pressures<br />Regulatory reforms in many markets<br />Rapid growth opportunities in emerging markets<br />Safety concerns grab limelight<br />Risk aversion<br />
    10. 10. … is creating three fundamental challenges<br />US 510(k) reforms<br />Comparative effectiveness research<br />Sustaining innovation<br />Delivering value <br />and outcomes<br />Fueling growth<br />Consolidation of purchasing at hospitals<br />Slowdown in product approvals<br />Regulatory opaqueness<br />IOM list <br />Sunshine Act<br />IPOs all but disappear<br />M&A buyers want commercialized products<br />Slower growth in mature markets<br />Device tax in US<br />has high burden <br />for emerging companies<br />Electronic health records adoption<br />Lower P/E ratios<br />Capital crunch<br />Hospitals under strain<br />Health care <br />reform measures enacted<br />Pricing pressures<br />Regulatory reforms in many markets<br />Rapid growth opportunities in emerging markets<br />Safety concerns grab limelight<br />Risk aversion<br />
    11. 11. 1. Sustaining innovation<br />
    12. 12. A unique innovation model for a unique industry<br />Source: Ernst & Young<br />
    13. 13. Medtech’s long-standing “cycle of innovation” …<br />Physicians<br />Idea<br />Coverage<br />VCs<br />Payors<br />Idea<br />Funding<br />Commercialization<br />Startup<br />Big medtech<br />R&D<br />Acquisition<br />Approved technology<br />Source: Ernst & Young<br />
    14. 14. … now faces new challenges at every stage<br />Physicians<br />Idea<br />CER<br />VCs<br />Payors<br />Increased transparency requirements<br />Capital crunch<br />Pricing pressures<br />Big medtech<br />Startup<br />Device tax,<br />Regulatory hurdles<br />Buying later<br />Approved technology<br />Source: Ernst & Young<br />
    15. 15. 2. Delivering value and outcomes<br />
    16. 16. Increased scrutiny is coming to medtech<br />Hospitals consolidating purchasing decisions<br /><ul><li>Fewer medtech suppliers in each product category
    17. 17. Demonstrating superiority to competition is critical</li></ul>Increased focus on comparative effectiveness and health outcomes<br />Comparative effectiveness research<br /><ul><li>Medtech products clearly being targeted</li></ul>Possible changes to FDA clearance process<br /><ul><li>More products subject to PMA instead of 510(k)
    18. 18. Higher bar to bring products to market</li></ul>Source: Ernst & Young<br />
    19. 19. No coincidence: the shift to health outcomes<br />Managing patient outcomes<br />Expanding access<br /><ul><li>Driving compliance
    20. 20. Healthcare delivery
    21. 21. Patient stratification
    22. 22. Underserved markets
    23. 23. Emerging markets
    24. 24. Uninsured populations</li></ul>Healthoutcomes<br />Meeting unmetmedical needs<br /><ul><li>Complex indications
    25. 25. Underserved medical fields</li></li></ul><li>The health outcomes ecosystem<br />Balance of power shifts<br />New entrants<br />New drivers<br /><br /><ul><li>eHealth
    26. 26. IT
    27. 27. Social media
    28. 28. Telecom
    29. 29. Retail trade
    30. 30. Food & beverage
    31. 31. HC reform
    32. 32. EHRs
    33. 33. Health IT
    34. 34. e-Health
    35. 35. m-Health
    36. 36. Social media</li></ul>New opportunities created<br /><br /><br />New approaches needed<br /><br />Source: Ernst & Young<br />
    37. 37. The potential is tremendous<br />New <br />technologies<br />Health care<br />Boosting health outcomes<br />+<br /><br />Medtech’s “sweet spot”<br />Source: Ernst & Young<br />
    38. 38. Success will require partnering with non-traditional players<br />IT<br />e-health<br />Health outcomes ecosystem<br />Traditional deal environment<br />Co 1<br />Bio tech<br />Tele com<br />Alliance<br />Med tech<br />PE<br />Payor<br />Acquisition<br />JV<br />Acquisition<br />Pilot<br />JV<br />Provider<br />Payor<br />Pilot<br />JV<br />Med tech<br />Govt<br />Partnership<br />Co 7<br />Med<br />tech<br />Co 3<br />Acquisition<br />Acquisition<br />Partnership<br />IT<br />Med tech<br />Alliance<br />JV<br />Partnership<br />Payor<br />Alliance<br />Acquisition<br />Alliance<br />IT<br />Social media<br />VC<br />Co 5<br />Commercial/business model risk<br />Tech & market adoption<br />M&A risks:<br />M&A <br />competencies:<br />Simultaneous co-creation of value with partners, experimentation, decision making under uncertainty<br />Analysis, valuation, <br />post-merger integration<br />
    39. 39. Examples are already emerging<br />Lifescan (J&J)<br />Bayer Diabetes Care<br />GE / Intel<br />Glucometer for children with diabetes that connects to Nintendo gaming systems<br />Formed new company that will focus on telehealth and independent living<br />iPhone app for uploading and sharing glucometer data.<br />Medtronic<br />Stryker/Capsule<br />Cellular accessory sends information from implanted cardiac devices to clinics<br />Connecting patient data from smart beds to hospital electronic medical records (EMRs)<br />Source: Ernst & Young, company press releases<br />
    40. 40. The health outcomes ecosystem<br />IT<br />Providers<br />Informationcompanies<br />Physicians<br />Socialmedia<br />CROs<br />Health records<br />Academia<br />Medical <br />technology<br />Patients<br />Pharma<br />Telecom<br />Biotech<br />Med device<br />Governments<br />Food<br />Consumer<br />electronics<br />Insurers<br />Retailers<br />
    41. 41. 3. Fueling growth<br />
    42. 42. Growth from diversification:product diversification<br />Emphasis on <br />health outcomes<br />Source: Ernst & Young<br />
    43. 43. Growth from diversification:geographic diversification<br />“Whittle-down” innovation<br />Mature-market product<br />Emerging-market product<br /><ul><li>Latest technology and features
    44. 44. Fewer features
    45. 45. Efficacy at attractive price point</li></ul>“Trickle-up” innovation<br />Source: Ernst & Young<br />
    46. 46. Growth from diversification:offer diversification<br />1<br /><ul><li>Reduce inventory holding/management costs across supply chain, sharing gains with hospitals and payers
    47. 47. Customer needs addressed: Just in time supply, reduced total cost of care, supply chain visibility</li></ul>Sharing supply chain benefits<br />2<br /><ul><li>Support hospitals and ASCs in improving the efficiency of their procedures in the OR and beyond
    48. 48. Customer needs addressed: Increased number of procedures / revenue, decreasing total cost of care</li></ul>Efficient clinical operations<br />3<br /><ul><li>Collaborate with practitioners to develop an end-to-end solution for the care of patients, emphasizing prevention, quality patient outcomes (documented with data), and recovery
    49. 49. Customer needs addressed: Focus on outcomes, right device for right patient, holistic care solutions</li></ul>Leading with outcomes<br />4<br /><ul><li>Lead the industry in taking an active approach to managing spending in conjunction with hospitals and payers
    50. 50. Customer needs addressed: Improved alignment with payers, cost savings, working capital benefit, total cost of care</li></ul>Managing device benefits<br />5<br />Partnering for shared market success<br /><ul><li>Develop go-to-market campaigns in partnership with hospitals
    51. 51. Customer needs addressed: Share of voice/ market awareness</li></ul>Source: Ernst & Young<br />
    52. 52. Outlook: rules of the road<br />A buyer’s market<br />
    53. 53. Rules of the road<br />
    54. 54. Potential healthcare ecosystem of the future …<br />
    55. 55. Finalthought…<br />If you don’t like change ...<br />you’re going to like <br />irrelevance even less.”<br />- General Eric Shinseki, Chief of Staff, US Army<br />
    56. 56. Thank you<br />Stay tuned:<br />ey.com/medtech<br />