Originally Published MX May/June 2006

EDITORIAL ADVISORY BOARD

Newly appointed members of the MX editorial advisory board discuss the market data and technological innovations driving the medtech industry.

In the high-stakes realm of medical device development, few moves are made without numbers to back them up. In plotting a company's path as well as its product pipeline, medtech executives rely on market research and business intelligence not only to gauge customer needs, but also to track the progress and course of their competition. Market data derived from multiple sources help companies determine which technologies are ripe for industry adoption—and which need to stay on the vine a while longer.

Just as companies often look to outside experts to guide their growth and development, MX looks to trusted industry professionals to help to steer the overall direction and content of the publication. Throughout 2006, MX is announcing members of its new editorial advisory board. Members of the board will include a variety of experts drawn from industry, government, finance, legal affairs, and academic organizations, each with specialized expertise in the business of medical technology.

The overall advisory board will encompass a series of councils, each dedicated to a separate area and including several experts in the field. In this issue, MX is pleased to present the newly appointed members of the advisory councils for two areas of critical importance to medtech executives: market intelligence and technology development.

Market Intelligence

Patrick Driscoll is founder and president of MedMarket Diligence LLC (Foothill Ranch, CA), a source of market intelligence and insights in the medical technology industry. He has 25 years' experience researching, analyzing, and advising within the medical device, biotech, and biopharmaceuticals industries.

"In this information age, there is clearly no shortage of medical device information sources," Driscoll says. "There are few hurdles preventing low-quality sources from flooding the market with device information. There, nonetheless, remain many qualified sources, but the challenge for manufacturers is in clearly matching the specific intelligence needed with the information source and the source's methodology.

"Current or future market success is dictated by myriad considerations, which vary in their significance from one device company to the next," he adds. "What Ethicon Endo-Surgery needs is very different from what Aragon Surgical needs. To find the right intelligence, device companies need to know their own needs critically well, and they need to judge intelligence sources on their experience, intimacy with specific device markets, and reputation."

Driscoll cofounded Medtech Insight LLC (Newport Beach, CA), now a division of Windhover Information, and was a principal at Medical Data International. While with these organizations, he built syndicated-reports businesses and directed the companies' custom-consulting activities.

According to Driscoll, market intelligence is strongest when it provides the user with a clearly competitive edge by revealing market opportunities and challenges well ahead of general market awareness. "Recognizing the distinction between strong and weak information demands an evaluation of the suitability of sources and methodology toward revealing where the market is moving, not where it has been," he says.

Driscoll says that information management varies widely among medical device companies. "The onus on companies of all sizes and executives of all types is to improve their access to, awareness of, and use of information to drive their businesses toward competitive advantage."

Driscoll received a BS from the University of Dallas and an MBA from the University of New Hampshire's Whittemore School of Business and Economics.

Thomas J. Gunderson is a managing director and senior research analyst at Piper Jaffray & Co. (Minneapolis), where he follows cardiology and other medical device companies.

According to Gunderson, the quality of intelligence available in the medtech industry varies greatly by sector. "For markets like drug-eluting stents, with two players and a limited number of cath labs, intelligence can be gathered regarding adoption, procedures, contracts, etc.," Gunderson says. "But for many other device areas, markets are decentralized and it's difficult to pick up quality information. In neurology, urology, gynecology, and endocrinology, the device areas are more dispersed, and information flow is in its infancy."

Gunderson was named a Wall Street Journal all-star analyst for medical stocks in 1996 and 2000. He holds a bachelor's degree from Carleton College, a master's degree in cell biology from the University of Minnesota, and a master's degree in business administration from the University of St. Thomas.

Emerging companies sometimes base their planning—and their appeals for funding—on limited or uncritical intelligence. "Investors only hear good stories," Gunderson says. "The markets are huge, the unmet need desperate, the solution perfect. . .at least on paper or an Excel sheet. In my experience, the investment community is well aware of the limits of general market information and research. The larger venture capital and institutional investors demand critical thinking in their market assessments."

Dale Hagemeyer is a research vice president for the manufacturing sector of industry advisory services at Gartner Inc. (Stamford, CT). His area of expertise is in customer-facing processes and applications for the consumer goods and life sciences industries, including the biotech, pharma, and medical device sectors. His work includes vision and strategy development, business case development, vendor evaluation and selection, and implementation and support strategies.

According to Hagemeyer, the intelligence currently available to device companies does not yet provide sufficient information on which to base their business decisions. "Understanding the market is a long continuum," he says. "Once you understand things on a transactional level, there is always the need to use predictive modeling to better understand outcomes. There is also the potential to be more real-time in performing analysis. A lot of the data in this industry has inherent lags. A great deal of innovation will be required to speed up the receipt of data, but consider Wal-Mart in the retail arena: it captures and publishes point-of-sale data by stock-keeping unit (SKU) by store every seven minutes. While this isn't yet possible in the device world, it is an interesting objective on which to fix our sights."

Hagemeyer says the ability to understand practitioner behavior through data sets, such as those provided by Health Market Science, has been a great leap forward. "However, when you consider the massive amounts of data available to the pharmaceutical companies, as an example, there is clearly room to glean more insights and do so more frequently," he says. "So the relative strong point is that the base of intelligence is growing. The weakness is the latency and inability to cover the entire practitioner waterfront.

"The most exciting thing about the medical device industry is its growth," Hagemeyer adds. "Pick up any business publication, and you will see an amazing number of medical products companies with meteoric growth. What I find, however, is that many of them are so busy just producing and distributing their highly innovative products that their need to focus on analytics as a competitive differentiator is low. Regardless of the experience of the executive management, it is hard to focus on everything at once. If I had a hot product that was selling like wildfire, I would find it hard to be digging for customer and competitor insights. As a company matures, it becomes more critical."

Hagemeyer has 17 years' experience in sales, marketing, and finance, including an international assignment in Mexico from 1995 to 1996. He holds a bachelor's degree in finance and in Spanish from the University of Utah and an MBA from the University of Chicago.

Manfred Scholz, PhD, is president of Scholz Consulting Partners (Medford, MA), a strategic planning and business development consultancy for diagnostics and life sciences firms. Scholz has more than 20 years' experience in general management, strategic planning, corporate intelligence, business development, and related activities.

According to Scholz, business intelligence serves three key functions: determining existing and future market sizes, competitive benchmarking, and strategy mapping for individual products and portfolios. "Pharmaceuticals and some pharmaceutical-like medical devices such as stents, pumps, and pacemakers are distributed through channels that are well-monitored by organizations such as IMS Health," he says. "Market-size information for the highly fragmented remainder of the medical device and diagnostics industry is more difficult to find. While competitive benchmarking services are available from experts, the increasing reliance on internal personnel to collect data from Web searches alone is likely responsible for many failed developments. Widely available market estimates do not address the margin structure of making and delivering a particular product. Additionally, industry market reports that often sell for a few thousand dollars generally lack detail to be sufficient for strategic decision making.

"There is no substitute for knowing your industry and reading financial statements of your competitors," Scholz adds. "Development-stage ventures often gain intelligence from their investors and security analyst reports. Off-the-shelf market reports are a starting point to learn about fashions in the medical device industry. To understand and forecast the success probability of a new, derivative, or substitute device comprehensively, a detailed strategic road map from patents to regulatory processes, from manufacturing to sales channels, requires expert analysis. Large corporations often have those functions in-house, while smaller competitors and new market entrants should find part-time expertise."

Scholz previously served as vice president for business development at Iquum Inc., as president and COO of Stem Cell Preservation Technologies Inc., as senior director of business development for Large Scale Biology Corp., and as senior consultant for Boston Biomedical Consultants Inc. He began his career as a systems engineering scientist at Dade Behring Inc., where he later served as technical product manager for global marketing.

According to Scholz, competent business intelligence in the medtech industry determines the constraints and opportunities of a new product. "It identifies the best industry practices," he says. "It identifies competitive strength and weaknesses. It can help predict future competitive moves and help with adaptive business planning.

"For example, customers may pay $100 for a device—that's what market research provides to you. Delivering your gadget to your customer costs $50 and your competitors can deliver a competing one for $20—that's what business intelligence provides to you," he adds. "If you threaten to outsell your competition, they will lower prices and spoil your margin. Unlike consumer products, medical device pricing is closely tied to clinical outcome and measurable cost. Think about the differences of marketing an iPod and iTunes versus a glucose meter and test strips. Competent business intelligence can make the difference in understanding and quantifying those differences."

Scholz currently serves as an advisory board member for Tomophase Corp., a company developing fiber optics for lung cancer detection systems. He holds BS, MS, and PhD degrees from Goethe University (Frankfurt, Germany) and an MBA from Babson College (Wellesley, MA).

Technology Development

Dale Bevington is cofounder of Product Innovation Partners (London), a group that specializes in product design and development for consumer and industrial products, and has wide-ranging experience in the development of medical devices.

The Product Innovation Partners team has achieved recognition for its product design work in numerous competitions, including the Design Effectiveness Awards, the PRW Awards, and the Horners Awards for Plastics. Product Innovation Partners' work has been featured at the Design Museum (London), Europe's premier museum dedicated to design.

"A technology area that we think has great potential for improving medical products and patient care is radio-frequency identification (RFID)," Bevington says. "Already, strides have been made in the technology for patient ID systems and asset management. The ID systems will clearly help to reduce clinical errors related to patient identification, but further benefits could also be derived to track patients' progress through a treatment or therapy. Asset management in hospitals can be a headache; RFID used in these circumstances can lead to better equipment utilization and reduced equipment losses. Clearly, keeping track of biological samples, blood transfusion logistics, and medication safety are all areas where RFID technology could reduce risk and improve efficiency.

"On the level of patient ID and asset management, there are not that many technological obstacles relating to passive RFID devices," he adds. "Larger retailing and logistics applications have pushed devices in the right direction in terms of cost and availability. Probably greater problems exist in developing readers and data management systems that are financially viable, reliable, and tuned to the medical environment. Beyond passive systems, more work will be needed to develop read-write devices—from the perspectives of both cost and battery or power technology. Research is moving in these areas, and volume-type applications of a logistics nature will attract sufficient development investment."

According to Bevington, developing industry standards for information stored in a patient ID system could become problematic. "For companies pursuing RFID in the medical arena, the standards obstacles really are going to take perseverance," he says. "In the UK, with its national healthcare system, the National Patient Safety Agency is taking a lead role in helping to establish standards for patient ID systems. Adoption of asset-management applications will be more straightforward, as they have been pioneered by a number of companies around the world, so a variety of workable hardware and software models are in existence."

Bevington is an active member of the United Kingdom design community and previously served as director of the Design Business Association (DBA; London), where he chaired the information technologies task group, initiated the first DBA Web site, and helped to develop the DBA's professional indemnity insurance plan.

Bevington studied industrial design at the University of Alberta (Edmonton, AB, Canada), undertook postgraduate studies in design at the Royal College of Art (London), and studied polymer engineering at Brunel University (Uxbridge, UK).

Bevington served as jury chair for the 2004 Medical Design Excellence Awards competition.

Charles F. D'Agostino is the founder and executive director of the Louisiana Business and Technology Center (LBTC) at Louisiana State University (Baton Rouge, LA). He currently serves on the board of directors of the Association of University Research Parks, and previously served for seven years on the board of the National Business Incubation Association (NBIA). D'Agostino founded the Louisiana Business Incubation Association in 1990, and subsequently served as chairman of the organization.

NBIA selected the Louisiana Business and Technology Center as its 2005 national business incubator of the year in North America. The LBTC has also been ranked as a top 10 incubator for the last five years by the U.S. Department of Commerce. In 2005, the center won the state of Louisiana's Lantern Award for its role in economic development.

Under the umbrella of the LBTC, D'Agostino directs the LBTC small-business incubator, the LSU small-business development center, and the Louisiana technology-transfer office.

According to D'Agostino, translational research, which moves technology down the pathway from discovery to therapeutically useful products, is critical to efforts to improve patient care. "Neuromedical devices, cancer-medication delivery systems, stem-cell regeneration devices, and nonintrusive diagnostic devices are in demand and can greatly improve patient care," he says. "I believe that these areas offer huge markets for the companies able to develop cost-effective applications in these areas.

"The major obstacle, in my opinion, is the slow process of getting technology out of the labs, through trials, and into the marketplace," he adds. "Many large corporations are turning to small businesses to shorten these product development cycles. However, in many cases, small and emerging companies generally lack the financial resources to complete the process. The small-business innovation research (SBIR) grants and small-business technology transfer (STTR) programs can play a major role in this effort. Universities also need to become more active and supportive of commercialization of their research and be willing to partner with the private sector to move these technologies to the market."

D'Agostino says that funding issues are often the reason technology commercialization is blocked. "Big pharma and medical technology companies have begun to shift developmental risk to small companies," he says. "These companies can provide flexibility and speed but must be funded to take the discoveries through the proof-of-concept phase. The regulatory process is also an obstacle to timely commercialization of leading-edge technologies." D'Agostino holds a bachelor's degree in chemistry and a master's in business administration from Louisiana State University.

Juin-Jet Hwang, PhD, is the chief technology officer of SonoSite Inc. (Bothell, WA), where he is responsible for developing corporate technology strategy, as well as overseeing the development of ultrasound system architectural, beam-forming, digital-signal, and image-processing technology suitable for handheld system implementation.

Hwang joined ADR Ultrasound in 1980. He was involved in the development of the ADR 4000 system, a portable array imaging system. In 1983, ADR Ultrasound merged with ATL Ultrasound.

Since October of 1995, Hwang has been involved in the development of handheld ultrasound devices. He served as chief scientist in ATL's handheld systems business group until its spin-off as SonoSite in 1998.

"It is technologically feasible to develop a handheld ultrasound imaging device the size of a cellular phone," Hwang says. "The challenge is to implement a number of new image processing algorithms in the form of a battery-driven handheld device."

Another obstacle to technology development is the issue of reimbursement, as well as insufficient physician training, says Hwang. "Most physicians today lack sufficient training in reading diagnostic ultrasound images," he says. "Therefore, ultrasound imaging data must be presented in such a way that it greatly resembles the natural human anatomy."

Prior to joining ADR, Hwang taught at several universities and did industrial work on telecommunications, radar, and computed tomography imaging systems.

Hwang holds 35 patents and is the author of more than 30 scientific publications. He was named an ATL technical fellow in perpetuity in 1988. He holds a master's of science from the National Taiwan University, Taipei, and a doctorate from the University of Tennessee, Knoxville, TN, both in electrical engineering.

Kathy Odell is cofounder and chief executive officer of Inogen Inc. (Goleta, CA), a manufacturer of advanced oxygen therapy devices for treatment of chronic obstructive pulmonary disease.

Prior to joining Inogen in 2002, Odell served as vice president of enterprise services for Agility Communications, a venture-backed photonics start-up engaged in the development and manufacture of tunable lasers. Agility was recently acquired by JDS Uniphase (Milpitas, CA).

Preceding Agility, she was cofounder and COO of Medical Concepts Inc., which over a five-year period became the world's leading designer and manufacturer of video systems for minimally invasive surgery, resulting in its acquisition by Karl Storz Endoscopy GmbH (Tuttlingen, Germany). Following the acquisition, she served the Storz organization as managing director of Karl Storz Imaging and president of Karl Storz Veterinary Endoscopy.

Odell says that the area with the greatest potential for improving medical products and patient care in the near term is information technology. "The advances in patient monitoring and information management systems will change how and where we diagnose, treat, and monitor patients in the future," she says. "Leveraging information technology will be key to delivering quality healthcare in the face of the escalating demand for services and the shortage of healthcare professionals."

Odell says that the most serious challenge facing the development and adoption of new medical technologies is reimbursement. "Both Medicare and the private sector are struggling with escalating costs and are often unable, or unwilling, to recognize new technologies that could improve standards of patient care or reduce costs in the system," she says. "Technology is frequently evaluated narrowly—for example, by the cost of a specific device, procedure, or service—without an analysis of entire system effect.

"Unfortunately, overcoming this obstacle is time consuming and costly, and it gets more costly the longer a company waits to start the process," she adds. "The Centers for Medicare and Medicaid Services can take 15 months to five years to add new technologies to Medicare. While companies are aware of the need for a regulatory professional to assist in FDA approval, they frequently don't address coverage, coding, and reimbursement until shortly before product launch."

Odell says that companies should start considering such issues early in their development processes and cooperate with other companies that are producing a similar product or service. "They should present evidence on the total cost of care and meet with both local and national CMS offices," she says. "Most importantly, companies should make sure their reimbursement strategies are embedded into core research and development, marketing, clinical, and sales processes."

Odell has been honored several times for her entrepreneurial achievements. In 2005, she was selected as the Ernst & Young emerging growth entrepreneur of the year for the greater Los Angeles area and received the Venky Narayanamurti Entrepreneurial Leadership Award from the technology management program at University of California, Santa Barbara.

Odell also serves as a director of Pacific Capital Bancorp NA, a $7 billion regional community bank, where she serves as chair of the compensation committee and a member of the governance and nominating committee. She is a graduate of Stanford University.

Rhall E. Pope, PhD, is vice president of research and development at Smiths Medical MD Inc. (St. Paul, MN), a manufacturer of infusion pump and vascular access devices.

Pope has more than 25 years' experience in the development of high-tech products for both the medical device and aerospace industries. His area of expertise is electronic systems and related hardware, software, and sensor technology.

"Since most of our products use commercial electronics and power sources, the technology is really being driven by other industries," Pope says. "Our issues then become ensuring that we have high-quality component sources and reasonable lifetimes before obsolescence.

"For our products, low-power electronics and electronic miniaturization are key technologies for reducing the size of infusion pumps," he adds. "Though ease of use is sometimes not viewed in terms of technology, it can be a critical component in improving patient care."

Pope says that there are two major obstacles hindering the adoption of new technologies, particularly at smaller companies: litigation related to medical device adverse events and intellectual property litigation. In both cases, he says, no easy fix is within sight.

Pope holds a BS from Duquesne University and an MS and PhD from Purdue University. He has served on FDA's science review board and is a member of the University of Minnesota Biomedical Engineering Institute's industry advisory board.

Samuel Prabhakar is director of the medical solutions practice for IBM Technology Collaboration Solutions (Rochester, MN).

Prabhakar joined IBM in 1984. His work has included VLSI chip design and diagnostic software programming for workstation controllers. His work on a diagnostic tool for the AS/400 resulted in a U.S. patent for the design. Prabhakar moved into management in 1989, and his responsibilities have included leading teams in North America, Japan, India, Canada, and Germany.

Most recently, Prabhakar has focused on developing customized solutions for customers. Drawing on IBM's extensive patent portfolio and technologies, Prabhakar's team identifies solutions where IBM technology can enhance or differentiate customers' products and services.

Prabhakar graduated with a BS in electrical engineering from the College of Engineering Guindy, Madras, India. Following graduation, he worked for Philips India as its training officer for the southern regional audio-video service centers. After moving to the United States, he earned an MS in electrical engineering from Ohio State University. Upon leaving the university, Prabhakar served as an assistant professor at Sinclair Community College (Dayton, OH) in the electronics and electrical technology department.

Prabhakar has served on the board of directors of United Way of Olmsted County and is currently on the board of directors of the Minnesota High Tech Association as vice chair.

MX looks forward to the contributions of these editorial advisers and will continue to announce members of additional councils throughout 2006. In upcoming issues, MX will present its advisory board members in the areas of corporate governance, governmental and legal affairs, and sales and marketing. To nominate medtech industry experts in these or other fields, contact MX editor-in-chief Steve Halasey at 310/445-4274 or via e-mail at [email protected].

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