Medical device companies have always faced technological, regulatory, reimbursement and market risk, and a new risk has been recently added to this existing set of challenges: financing risk. Longer product development cycles mean sustained funding requirements, at a time when venture funds are less numerous and smaller, and syndicates have become difficult to assemble. These dynamics have sent many companies scurrying to Europe, in search of a more predictable regulatory environment and alternative sources of funding, according to a panel of European venture capitalists that spoke at the IN3 (Investment In Innovation) medical device conference sponsored by Elsevier Business Intelligence, which was held in Paris in March 2011. We queried the panelists to find out if they're optimistic or pessimistic about medtech investing for the future, what kinds of deals they find attractive now, whether medical device investments still have merits relative to pharmaceutical deals, what advantages Europe might offer to the US as a field of investment, and how companies can survive among a scarcity of funds.
Where device investments once hedged biotech portfolios, because
of the relatively short product development cycles relative to
drugs, now regulatory and reimbursement risk mean that it can take
eight to 10 years for devices to get to the market. Indeed, the FDA
process is a major risk factor for medical device investors, not
only in terms of uncertainties surrounding 510(k) reform (the
regulatory pathway to approval for 90% of devices), but also
because of increasing demands around clinical trials that are
difficult for small companies to meet.
Regulatory risk is often mentioned as one of the biggest challenges facing companies and their investors today. Many companies in...
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