This was presented at the UK MedTec 2014 event by Dr. Dror Nir, managing partner in RadBee. Dror analyses the financial eco-system of the UK MedTech segment based on data that was published in reports by the department of Business Innovations and Skills (BIS) in 2013, E&Y and KPMG. The bottom-line outcome of his analysis is that the majority of UK MedTech companies, particularly the startups, are straggling to survive with very little opportunities to carry on innovations. New approach for sustaining long-term innovation is suggested.

1. Analysing the current state of R&D in
the UK and global MedTech
markets: how do start-ups cope with
capital pressure?
Dror Nir, PhD
Dror.nir@radbee.com
www.radbeeqms.com

2. •The UK MedTech arena
•Coping with hurdles
•Summary
Agenda

4. 67% of the life-science companies in the
UK are MedTech companies
Source: The “Strength and Opportunities” governmental annual report by the department of Business Innovations and Skills (BIS) for 2013, reviewing the UK life science industry
3309
1073
121
477
Companies

5. UK’s life-science cluster is the largest in Europe

6. In Europe, UK is presenting the highest number
of life-science products that are in development.
Source: KPMG - European Life Sciences Cluster 2013 Report

9. USA & UK – global MedTech trends

10. The National Health Service directed the Clinical
Commissioning Groups, which manage 65% of the
NHS budget, to be cautious in budget planning
across the board in order to meet a £30 billion
budget shortfall by 2020/21.
NHS budget cuts

11. ….. is born…..

12. 2013: 3096 MedTech companies in UK
Source: The “Strength and Opportunities” governmental annual report by the department of Business Innovations and Skills (BIS) for 2013, reviewing the UK life science industry
3309
1073
121
477
Companies

13. Largest employer in the life-science segment
Source: The “Strength and Opportunities” governmental annual report by the department of Business Innovations and Skills (BIS) for 2013, reviewing the UK life science industry

14. 99% SME’s, 62% have micro status (≤ 10)
0-4
46%
5-9
16%
10-19
12%
20-49
15%
50-99
7%
100-249
3% 250+
1%

15. £0-49,000
7%
£50-99,000
8%
£0.1-0.249m
16%
£0.25-0.499m
17%
£0.5-0.999m
12%
£1-4.9m
23%
£5m+
17%
MedTech companies distribution by turnover;
~40% presenting annual turnover in the range
of £0.1m - £0.5m
Source: The “Strength and Opportunities” governmental annual report by the department of Business Innovations and Skills (BIS) for 2013, reviewing the UK life science industry

17. Essentials for a MedTech company
•Technology
•Funds
•People

18. No longer just a
TECHNOLOGY
Needs a
SOLUTION
To an important health problem
Typical to UK

19. Funding
In the last years, the number of UK based VCs that are
specialised in MedTech has dramatically declined.
For UK investors, revenue and margins have much greater
importance than technology in establishing a valuation.
Source: EY Pulse of the industry 2013 Report
Typical to UK

20. Funding support
Investment-boosting tax breaks are offered by the
government to encourage investors to plough money
into early-stage companies:
Incentives for R&D expenditure
Seed Enterprise Investment Scheme (SEIS)
10% R&D tax credit of qualifying expenditures
etc…
Source: KPMG - European Life Sciences Cluster 2013 Report
Typical to UK

21. Funding support
Ongoing R&D support schemes: SMART (for industry), MRC
(academies), Charities.
Source: BIS- 2013 Report
Typical to UK

22. Funding support
Government (TSB and MRC) is investing £310m of non-
dilutive grants, matched with private funding, to support
R&D and commercialization of technology:
• £180 million for the Biomedical Catalyst
• £130m for Stratified Medicines
Source: BIS- 2013 Report
Typical to UK

23. 90% of the interviewed entrepreneurs say that the UK
fundraising environment is challenging:
• UK investors prefer to invest in advanced stage companies.
• Access to government grants is overly restricted.
YET
Source: EY & KPMG 2013 Reports
Typical to UK

24. People
Executives of UK MedTech startups are looking primarily for
workers with STEM (Science, Technology, Engineering, and
Math) skills.
UK is considered to have a very good education system and
is second best in Europe regarding labor market flexibility.
However: Nine in ten say it is “challenging” to find workers
with the skills needed to grow their businesses.
Source: EY & KPMG 2013 Reports
Typical to UK

25. Balancing the flow
Cash (in-out)/Time

26. Time…

27. Regulations
Dogmatism of the market

28. Navigate around increased regulation complexities.
Pacemakers need to be verified for accuracy and safety to much higher
standards than electrical switches installed in household appliances.

29. Navigate around increased regulation complexities.
Pacemakers need to be verified for accuracy and safety to much higher
standards than electrical switches installed in household appliances.
Unlike general-purpose technologies, IVD kits and medical-imaging devices
needs to be validated in lengthy clinical trials.

30. Available solution to shorten time to market
UK Health Technology Campuses in collaboration with the NHS: The
goal is to accelerate the development of innovative medical
technology solutions and their adoption by hospitals.
Transparent benchmarks to drive improved performance of clinical
research by the NHS: the NIHR (National Institute for Health
Research) made the 70-day benchmark, from receipt of a valid
research application to the recruitment of the first patient for trials, a
condition of new contracts with providers of NHS services.
Fast track for regulation: Developing and implementing together
with the MHRA (Medicines and Healthcare products Regulatory
Agency) of a workable Early Access Scheme. This is currently on hold
for budgetary reasons.

31. Legacy of hundreds of years of established
protocols, processes and procedures

32. Novel products are no longer reimbursed without
also proving that they are contributing to better
health care at a reasonable cost.

34. PLANETARY ALIGNMENT WITH THE GIZA PYRAMIDS
IT ONLY HAPPENS ONCE IN 2,737 YEARS

35. What UK MedTech startups do?
•Delegate fundamental R&D problems to universities.
•Partner with university hospitals to perform the
clinical studies required for products validation
1.Universities do not follow regulations and quality procedures
2.In practice, operational processes and administration related to
running clinical studies by universities are very heavy.

36. What UK MedTech startups do?

37. What UK MedTech startups do?
Earliest possible commercialisation
 Reach self-sustainability
 break-even
 profitability
EXIT

38. Going beyond the classical business approach of
selling innovation: MedTech companies expand into
services and solutions.
What UK MedTech startups do?

40. Sales has a cost: time and resources….
Can startups sell enough to maintain their R&D momentum?
Changes in management focus?
Investors’ focus?
How does all that influence innovation?

41. Typical budget
• Average gross annual salary – 50K£ + cost of salary
10% - 15%
• R&D & Infrastructure – From ~30% of the initial budget decreasing to
few percentages of sales (8% - reported)
• QA/RA – Typically adding 20% - 30% to the global costs of R&D
• Manufacturing – Depends…
• Cost of marketing & sales - From several Ks >>>>
• Legal (e.g. agreements, IP) – From several Ks >>>>
• G&A – ~10% of the total budget

42. Distribution of MedTech companies by turnover.
Source: The “Strength and Opportunities” governmental annual report by the department of Business Innovations and Skills (BIS) for 2013, reviewing the UK life science industry
£0-49,000
7%
£50-99,000
8%
£0.1-0.249m
16%
£0.25-0.499m
17%
£0.5-0.999m
12%
£1-4.9m
23%
£5m+
17%
31%

43. Distribution of MedTech companies by turnover.
Source: The “Strength and Opportunities” governmental annual report by the department of Business Innovations and Skills (BIS) for 2013, reviewing the UK life science industry
£0-49,000
7%
£50-99,000
8%
£0.1-0.249m
16%
£0.25-0.499m
17%
£0.5-0.999m
12%
£1-4.9m
23%
£5m+
17%

44. Summary

46. Solving big health care challenges - in a highly
regulated industry with numerous parties and
conflicting interests - is likely to take much
longer than the relatively straightforward
task of building a new product.

47. UK Government Supports
• R&D grants
• Tax incentives

48. What UK MedTech startups do?
•Strive to generate early revenues
•Delegate fundamental R&D to universities.
•Partner with university hospitals to perform the
clinical studies required for products validation.

50. Help universities provide better support
to the MedTech segment
• By incentivising:
• Timely delivery of R&D results
• Running high quality and cost-effective clinical studies
• Adherence to MHRA regulations

51. • Over 20 years experience in development and commercialisation
of medical-imaging devices comprising machine learning.
• Expert consultant:
• Management
• Business & technology development
• Access to market
• Clinical studies
• PhD in Nuclear Physics, TAU, Israel.
Dror Nir

52. Thank you!