BURLINGTON, VT--Speakers at a special session on commercialization and marketing of clinical devices and systems--presented during the Advances in Optics for Biotechnology, Medicine and Surgery XI conference (see “Optics for bio conference reveals market drivers, opportunities” at www.laserfocusworld.com/articles/366290)--had particular advice for entrepreneurs.
“The bar is higher now than it’s ever been” for startups seeking capital, said Bill Colston, CEO of QuantaLife (Livermore, CA). Colston has direct experience as a result of running the nucleic acid testing technology startup, and he emphasized that fundraising must be an ongoing concern.
In an effort to help innovators properly frame their thinking concerning technology and funding, Babak Nemati of Strategic Intelligence (La Jolla, CA) challenged attendees to determine--based on some details concerning management, funding, market opportunity, technology platform and so forth--whether a technology provided sufficient basis for formation of a company, or whether it was better offered as product by an already established company. Nemati says that frequently, first-time entrepreneurs aren’t skilled at making the distinction, which is important because venture capitalists often pass on early-stage opportunities because they think the product concept is not large enough to warrant institutional funding. So, entrepreneurs sometimes waste one to two years working to launch a company when they would be better off pursuing a more appropriate path for commercialization of their product. For instance, he said, a product could be integrated into the portfolio of a large medical device player.
One of the examples Nemati presented was optical coherence tomography (OCT) technology (see www.laserfocusworld.com/articles/316650). Following the first publication of the technique in 1991 and recognition of its application to diagnostics, some of the original collaborators formed a company (Advanced Ophthalmic Devices) “but quickly realized the daunting task of developing and launching this product,” Nemati explained. So after building a functional prototype, they sold the technology rights to Carl Zeiss, which as a large company was much better able to withstand the modest sales throughout the first several years of its availability. Today, Zeiss has sold more than 10,000 systems, but it has taken roughly two decades to do so. Nemati says, “In the final analysis, the inventors are happy with the money they received, even though they did not form a venture-backed startup.”
Capital funding was on the list of top ten factors affecting product development priorities for member companies participating in a 2003 survey by AdvaMed, a trade association of medical technology innovators. Nemati shared with the audience the study’s findings, which also included issues related to customer demand for technology. The prioritized list of concerns is as follows:
- FDA regulatory requirements
- Issues related to intellectual property protection
- Customer demand for cost-saving or cost-effective technology
- Price sensitivity of customers
- Medicare coverage and reimbursement requirements
- Private payer coverage and reimbursement requirements
- Overseas market opportunities
- Changes in revenues
- Availability/cost of capital funding
- Payer demand for evidence of clinical effectiveness and/or cost
But Nemati issued a caveat regarding that number-three concern: he pointed out the reluctance of practitioners in training for new tools that change their existing practices. In fact, he said, a new customer mentality has arisen, which involves persistent questions regarding the incremental value and benefit of new technology, adoption obstacles as clinicians grow price wary, and skepticism of the claims of new technology. He said, “Buyers and payers ask a new question: “Is this worth the cost?” The mentality also encompasses increasingly difficult reimbursement debates, he noted--supporting items five and six on the AdvaMed survey results list.
Meanwhile Colston sounded a wake-up call for would-be entrepreneurs hoping their technology will carry a new company. He said that on the one hand their innovation must be new or significantly disruptive (offering an order of magnitude performance increase) within a large market segment--but on the other hand technology accounts for just 20% of the value of a new company. “Intellectual property has much more significance,” he said. And, he warned, successful companies will address regulatory issues as early as possible.
Looking toward the future, Colston identified five market drivers for diagnostics instrumentation in the coming months and years: simplicity; cost (inexpensive tools are needed for infectious disease screening, for example); the ability to enable point-of-care decision making; increased accuracy; and multiplexing (enabling more measurements per dollar).
--Barbara G. Goode