Sector Spotlight: Wound Care

Wound care is one of medtech's broadest and most diverse markets, encompassing traditional dry bandages, tapes, dressings, and wound-closure products as well as newer therapies based on tissue engineering, stem cells, growth factors, and sophisticated electromechanical and computer-driven devices. Wound care affects a far greater patient population than many treatment modalities across the healthcare spectrum, and according to the Centers for Medicare and Medicaid Services (CMS; Baltimore, MD), 89 million Americans receive some form of wound care each year at an annual cost of $25 billion.

The field of wound care offers a wealth of opportunities that have so far remained untapped by medical device manufacturers. “ Although there has been a lot of progress in the wound-healing field—new antibiotics, high-tech bandages, and even skin substitutes for very problematic wounds—there is only one product on the market, a growth factor, that targets the biology of wound healing,” says Richard Ikeda, PhD, program director of the wound-healing research portfolio at the National Institute of General Medical Sciences (NIGMS; Bethesda, MD). NIGMS's research is directed toward an improved understanding of the process of wound healing, fundamental aspects of wound healing, and the process of biological repair and regeneration.

“When you think about cancer or infectious diseases, the task has been to target the biology, to look at what you would target to either cure the cancer or cure the infectious disease,” says Ikeda. “But in wound healing, we know a lot about it, but we haven't been successful at targeting the biology to improve wound healing.”

Wound care is both a mature and an emerging market. While traditional products are slow-growth performers, the increasing acceptance and integration of new and emerging technologies into hospital wound-care protocols is triggering a new round of interest and investment in the wound-care sector.

A report released earlier this year by Global Industry Analysts Inc. (San Jose, CA), projects a worldwide market for wound care products of $15.3 billion by 2010. 1 The United States is the largest and fastest-growing wound-care market—accounting for almost 40% of global outlays—and is projected to reach $6.1 billion within the next two years. Europe is both the second-largest and second fastest-growing market. Wound care market gains are seen around the world, most notably in Eastern Europe and Asia. The report pegs annual growth at 5.9%, primarily driven by the advanced wound-care sector, which is expected to post yearly gains of nearly 11%, reaching $5.4 billion by 2010.

Growth Sectors

Advanced wound care includes moist, often multilayer dressings to stimulate healing (films, foams, hydrogels, hydrocolloids, and alginates), antimicrobials that include substances like silver to fight infection, sealants, growth factors, and skin replacements. The sector also encompasses wound-treatment equipment and systems such as negative pressure wound therapy, electrostimulation, oxygen therapy, low-level laser treatment, therapeutic ultrasound, and others.

In the advanced wound-care sector, the subcategories of growth factors and skin replacements are the fastest growing areas, with projected annual gains of 17%. The sealants subcategory of the advanced sector market, is also expected to grow at a robust pace, reaching $1.4 billion in 2010.

In spite of the growth of the advanced wound-care sector, conventional products held a 70% market share as recently as 2006 according to the report from Global Industry Analysts. Historically, low cost and easy reimbursement have been key factors in favor of traditional products. Nevertheless, growth in conventional wound-care products going forward is expected to be tepid at best.

Advanced wound-care products may cost more, but they typically outperform their traditional counterparts in terms of faster healing times and shorter hospital stays. Such improvements in performance are contributing to cost savings and increased facility utilization rates.

Particular medical conditions, most notably diabetes, are also seen as a major factor in the growing demand for wound-care products. Diabetes-related wounds, such as lower-extremity ulcers, are often difficult to heal and pose a major threat to limb integrity while incurring an annual average cost of $130,000 per patient. With diabetes as the leading cause of nontraumatic leg amputation, critics of advanced wound-care management technologies note that the rate of leg amputations has increased over the past 10 years in spite of the increasing use of the latest product and treatment advances.

Increased trauma care, surgeries, and conditions associated with aging populations, and the ascendancy of home care, are also factors in the growth of the wound-care market.

Changing Players in Wound Care

Leading players in the worldwide wound-care products market include: 3M Co. (St. Paul, MN), BSN Medical GmbH (Hamburg, Germany), Coloplast Group, (Humlebaek, Denmark), Johnson & Johnson Co., Inc. (New Brunswick, NJ), Covidien Ltd. (Hamilton, Bermuda), ConvaTec Inc. (Skillman, NJ), C. R. Bard Inc. (Murray Hill, NJ), Derma Sciences Inc. (Princeton, NJ), Healthpoint Ltd. (Ft. Worth, TX), Kinetic Concepts Inc. (San Antonio, TX), Medline Industries Inc. (Mundelein, IL), Mölnlycke Health Care AB (Göteborg, Sweden), and Smith & Nephew plc (London).

Together, Johnson & Johnson and Covidien (formerly Tyco Healthcare) control about 30% of the worldwide wound-care market, primarily due to their dominant positions in conventional commodity products. Globally, there are hundreds of medtech manufacturers involved in producing a wide range of wound care products (see Table I).

In the business of wound care, the biggest news in recent months was the decision of Bristol-Myers Squibb Co. (New York City) to sell its ConvaTec unit to private equity firms Nordic Capital (Stockholm, Sweden) and Avista Capital Holdings LP (New York City) for $4.1 billion. ConvaTec, a leading manufacturer of wound therapeutics and ostomy care products, generated 2007 revenues of $1.16 billion. The unit has more than 3400 employees in nearly 100 countries.

Also on the private equity front, earlier this month Ethicon Inc. (Somerville, NJ), a Johnson & Johnson company, confirmed reports that it plans to sell its professional wound-care business to One Equity Partners LLC (New York City) for an undisclosed sum. The Ethicon unit had 2007 sales of $270 million. Ethicon was known to be shopping for a buyer of its advanced wound-care business for some time. News of the pending deal was initially reported last July, but J&J had no formal comment until a recent meeting with industry analysts.

In July, Uluru Inc. (Addison, TX) acquired BioMed Sciences Inc. (Allentown, PA) for $10 million. Uluru's wound-care business focuses on drug delivery systems using its hydrogel nanoparticle aggregate technology and transmucosal technology. BioMed Sciences has an established presence in the wound, burn-care, and scar-management business developed from its patented Silon film technology.

In March of this year, Kinetic Concepts Inc. (KCI) acquired Lifecell Corp. (Branchburg, NJ) for $1.7 billion. Lifecell focuses on tissue-repair products for use in reconstructive, urogynecologic, and orthopedic surgical procedures and will operate as KCI's new global biosurgery division. KCI is facing both increasing market challenges from competitors and resistance from insurance carriers regarding its negative pressure wound therapy (NPWT) business. The company received another blow late last month when an appeals court essentially ruled that KCI did not have a patent on NPWT. The court action was the culmination of a long-term legal dispute with rival NPWT manufacturer Blue Sky Medical Inc. (Carlsbad, CA), which was acquired by Smith & Nephew in May 2007.

Also this past March, Ossur hf (Reykjavik, Iceland), a medtech company primarily involved in the orthopedics sector, sold its advanced wound-care business to BSN medical GmbH.

In February, HemCon Medical Technologies Inc. (Portland, OR), which develops bandages and dressings that are used by military and medical first responders, announced its intention to acquire Alltracel Pharmaceuticals plc (Dublin, Ireland). HemCon plans to leverage the technical and technology commercialization resources of Alltracel to increase its market share in acute wound-care products developed from chitosan.

Conclusion

Although industry analysts generally do not foresee any wound-care transactions on the magnitude of this year's ConvaTec deal any time soon, it is widely anticipated that many small and emerging firms will continue to partner, collaborate, and consolidate to ramp up their product development initiatives. With healthcare professionals increasingly seeking ways to facilitate and hasten healing times, improve outcomes, and prevent the establishment and spread of infection, wound care is increasingly seen as a viable sector for investment.

Wound care is increasingly seen as offering one of medtech's optimal environments for realizing the successful integration of drug, devices, and biological technologies into safe, effective, and transformative products that could usher in a whole new generation of wound-care modalities.

Reference

1. Wound-Care Products: A Global Strategic Business Report, no. MCP-3230 (San Jose: Global Industry Analysts Inc., 2008).

© 2008 Canon Communications LLC

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