50 COMPANIES TO WATCH
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A lot of factors go into a company getting noticed by doctors, payers, and Wall Street. Device industry analysts Gregory Aurand of Chicago-based Zacks Investment Research Inc. and Thomas Gunderson of Piper Jaffray Companies (Minneapolis) reflect on some of them.
Q: What characteristics make a device company worth keeping an eye on?
Aurand: First, have competent, previously successful product development management. Second, have an innovative product that targets an unmet need and has the potential to improve outcomes and reduce costs.
Gunderson: The standard answer is that you need a big market with unmet demand. But these days you also have to have a good answer as to who will pay for it. And if you make your devices more user-friendly and lower-cost, that will lead to better results for the company.
Q: What can firms do to ensure that product potential translates to potential for growth and financial success?
Aurand: Product potential may not be realized given insufficient funding. In many cases, failure occurs because the company underestimates what time and financial needs exist to steer the product development through regulatory hurdles. Also, improper or wasteful development, including incorrect trial protocols, can sap a young company's resources. A great product idea may not succeed simply because, given manufacturing, selling, and compliance costs, it is priced too high in the cost-conscious healthcare marketplace. A company can increase its chances by using highly experienced and capable management. Experienced manufacturers and marketers can produce a more viable material, production, and finished product plan that meets a marketplace need with competitive pricing.
Gunderson: You have to get your message out there faster than you used to. The competition has gotten so much faster and better at jumping on new ideas. And you need to have a message that's well honed from both the doctor standpoint and the payer standpoint. You have to have a solid argument from an evidence-based medicine standpoint. The clinical trial data needed for FDA are sometimes not sufficient for the data needs of the marketplace.
Q: What advice would you give to start-up device companies on how they should build their business?
Aurand: Know the marketplace requirements, particularly what would be attractive to current market participants. In all cases, make sure the business model accurately assesses the marketplace. Then establish a realistic timeline development and cost budget plan. Next, know the competition and its strengths and weaknesses. Larger firms have stronger marketing and development efforts that can be difficult to overcome, but also may miss or ignore niche opportunities. Smaller firms may be more focused but not have financial or marketing resources to be able to broadly expand their product lines to encompass your niche. But they can also be more adept or find it more rewarding at developing smaller markets. Lastly, as much as possible, protect your product innovation.
Gunderson: Think like a payer. Payers control all the dollars. Make a cohesive argument that will override the suspicions of even the most negative payer.
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