BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT

In 2007, market growth and technological advances in the medical device arena show no signs of slowing. Established sectors such as cardiovascular and orthopedics continue to see new growth engines on their horizons. Meanwhile, sectors such as neurotechnology—which is receiving unprecedented levels of attention from physicians and industry alike—are only beginning to realize the potential of emerging technologies. All the while, robust mergers and acquisitions activity continues to reshape the competitive landscape of the medical device industry as a whole.

As in years past, medtech executives will face new opportunities—as well as unprecedented challenges—in 2007. This article takes a look at what's on the horizon for some of medtech's key sectors this year and beyond.

Radical Change in IVDs

The global market for in vitro diagnostics (IVDs) is estimated to have exceeded $30 billion in 2005 and was on course to reach $32 billion in 2006 (see sidebar). Although overall growth remains in single digits at around 7%, the IVD market is entering a new era in which new technologies and new players will radically change the industry landscape and drive sales to more than $40 billion by 2010.

In 2006, the IVD market saw the entry of a new major player with the acquisition of Diagnostic Products Corp. (DPC; Los Angeles) and the diagnostics division of Bayer HealthCare (Leverkusen, Germany) by Siemens AG (Erlangen, Germany). The medical imaging giant paid ?4.2 billion (US$5.3 billion) for the Bayer business and $1.86 billion for DPC. The newly created Siemens Medical Solutions Diagnostics will be number two in the worldwide immunodiagnostics market. With leading positions in near-patient testing, laboratory automation, and hematology, the company will be competing for third place in the global IVD market, behind Roche and Abbott.

DPC's 2005 sales of $481.1 million, led by its Immulite immunoassay product line, placed it just outside the top-10 IVD companies, while Bayer ranked a joint third with revenues of $2.5 billion for its diagnostics and diabetes care units. Bayer retains its diabetes care division, which manufactures blood glucose- monitoring tests, but Siemens will get the diagnostics division, which generated sales of about $1.8 billion in 2005.

In 2005, Roche Diagnostics (Indianapolis) had an estimated 20% market share, followed by Abbott (Abbott Park, IL) with about 12% (see Table I).

Although Siemens dominated the mergers and acquisitions news in the industry in 2006, another deal completed during the year saw Becton Dickinson (BD; Franklin Lakes, NJ) expand its presence in the cancer diagnostics market through its $350 million acquisition of TriPath Imaging (Burlington, NC). The deal followed the completion of BD's acquisition of GeneOhm Sciences (San Diego) in early 2006, which gave BD a foothold in the emerging field of healthcare-associated infections. BD also decided to quit the increasingly competitive blood glucose-monitoring market. Its monitors and test strips generated revenues of about $105 million in fiscal 2006.

In line with its focus on infectious diseases, cancer, and cardiovascular diseases, as well as industrial applications, bioMérieux Inc. (Marcy l'Etoile, France) sold its hemostasis range to Trinity Biotech (Dublin, Ireland) for an estimated $60 million.

The acquisition of Lumigen Inc. (Southfield, MI) by Beckman Coulter Inc. (Fullerton, CA) for $185 million gives Beckman assured access to Lumigen's chemiluminescent technology, which is used in Beckman's Access family of immunoassay systems.

Meanwhile, Tm Bioscience Corp. (Toronto) will have a new owner in 2007. In December 2006, Luminex Corp. (Austin, TX) announced that it had signed a definitive agreement to acquire the genetic testing company. Having developed the first multiplexed human disease genotyping test (for cystic fibrosis) to be cleared as an IVD for diagnostic use in the United States, Tm Bioscience is developing a number of tests for human genetics, infectious diseases, and pharmacogenomics. However, the company saw losses widen from $11.8 million in 2004 to $15.2 million in 2005.

Pharmaceutical giant Novartis (Basel, Switzerland) views its April 2006 acquisition of Chiron Corp. (Emeryville, CA) as a potential platform on which to develop molecular diagnostics. The deal highlights the convergence of the diagnostics and pharmaceutical industries in the development of personalized medicine. Pharmacogenetic tests will provide the key link in personalized medicine, identifying patients most likely to respond to a particular drug, develop resistance to treatment, or require dosage modifications.

Accounting for an estimated 7% of the global IVD market in 2005, molecular diagnostics is the fastest-growing segment of the industry (see Figure 1). From a base of $2.6 billion in 2005, it is projected to grow at a compound annual growth rate (CAGR) of 14% over the next five years. New technologies are moving molecular diagnostics beyond infectious-disease testing, tissue typing, blood screening, and genetic testing to molecular oncology, pharmacogenetics, and pharmacogenomics.

FDA and the European Medicines Agency are encouraging pharmaceutical manufacturers to incorporate pharmacogenomic tools into the drug development process. FDA has also produced a concept paper to provide a regulatory framework for tandem approval of companion drugs and diagnostic tests.

More genetic tests for personalized medicine are emerging from development. In May 2006, biotech company Jurilab (Kuopio, Finland) achieved CE marking for its DrugMEt pharmacogenetic test for clinical diagnostic use. The test will be made available by Jurilab's commercial partner, Nanogen (San Diego), for stratifying patient populations in clinical trials.

Point-of-care tests are also driving market growth. Accounting for a third of the global IVD market at almost $12 billion in 2005, tests used at the patient's bedside, in doctors' offices, and by the patient at home are forecast to grow at a CAGR of 7.8% over the next five years. Micro- and nanotechnologies promise to revolutionize point-of-care testing, provided the technology addresses market needs for simple-to-use devices, rapid results, better diagnostic data management and connectivity, robust quality controls, and affordability.

The entrance of new players such as Siemens and greater synergies between pharmaceutical manufacturers and diagnostic companies will blur the boundaries between in vivo diagnostics, IVDs, and pharmaceuticals. Technology innovations are increasing the pace of change, producing tools that enable earlier and more-accurate diagnosis of disease, improved clinical decisions, and better monitoring of treatment. Adoption of innovative technologies in the marketplace, however, will need to overcome hurdles in reimbursement and regulatory policies, which are not keeping pace with the development of innovation.—Jeanette Marchant, principal, JM Communications

Orthopedic Opportunities Still Robust

Despite the fact that the orthopedics sector continues to post year-over-year gains that would be the envy of most manufacturing industries—including some medical device sectors--many medtech analysts have focused on the declining rate of growth of the orthopedics market. But while annual growth rates for the orthopedics sector have decelerated somewhat from the near-20% levels of a few years ago, the sector is still setting a robust pace. Worldwide sales of orthopedic products in 2005 generated revenues of $25.9 billion, with every major segment reporting double-digit growth. Such growth was led by the spine segment with an 18.9% increase over 2004. Overall, 2005 sector revenues topped year-earlier performance by 12.7%.¹ Market estimates placed 2006 global revenues for the sector around $28.2 billion.

The United States accounts for 70.2% of the global orthopedics market, followed by Europe (17.1%) and Asia-Pacific (12.8%). The Asia-Pacific market for orthopedics is dominated by Japan, which has a near-80% share in the region.²

Worldwide there are more than 200 orthopedic manufacturers, with about 80 firms posting annual revenues of $5 million or more.¹ Accounting for about 75% of the global market, the top-10 companies rang up revenues of $19.5 billion during the 12-month period ending on September 30, 2006—a 9.2% increase over the year-earlier period.

DePuy Inc. (Warsaw, IN), a Johnson & Johnson company, led the industry during the period with a little more than $4 billion in revenues. In addition to DePuy, six other companies dominate the industry: Zimmer Holdings Inc. (Warsaw, IN); Stryker Corp. (Kalamazoo, MI); Synthes Inc. (Solothurn, Switzerland); Medtronic Inc. (Minneapolis); Biomet Inc. (Warsaw, IN); and Smith & Nephew plc (London). The remaining three companies on the top-10 list—DJO Inc. (Vista, CA), Encore Medical Corp. (Austin, TX), and Wright Medical Group Inc. (Arlington, TX)—generated combined revenues of $1.07 billion, or just 5.5% of the total revenue generated by the top 10 companies (see Table II).

Merger and acquisition activity in the orthopedics sector was down in 2006 compared with the previous year. Nevertheless, the sector's major players produced a big surprise at year's end. Shortly after Smith & Nephew acknowledged that the company had made a bid for Biomet in early November, offers from other suitors apparently upped the ante, causing Smith & Nephew to exit negotiations. A group of private equity investors—including Biomet founder and former CEO Dane Miller, who was forced out of the company in March 2005—emerged as the new buyers. Shortly after the deal was announced, industry analysts flagged Smith & Nephew as a possible takeover target.

Although the reconstructive-device and joint-replacement implant segment has experienced slowing growth over the past two years, it continues to lead the orthopedics sector with 2005 sales of $9.6 billion and a 37.1% share of overall revenues.

"More than 2 million joint- replacement procedures took place in 2005," says Shirley A. Engelhardt, president and founder of Knowledge Enterprises Inc. (Chagrin Falls, OH), publisher of the OrthoKnow and Bare Bones industry newsletters. "The world's six largest joint-replacement companies—Biomet, DePuy, Smith & Nephew, Stryker, Wright Medical, and Zimmer—control 89% of the global market. Yet there are more than 100 other companies that have built respectable joint-replacement franchises by focusing on particular geographic regions or specific types of implants."

Spinal implants and instrumentation accounted for 16.7% of the global market, while fracture repair took 11.6%, orthobiologics took 9.3%, arthroscopy and soft-tissue repair took 8.5%, and other orthopedic products took 16.7% (see Table III).

Growth in the orthopedics sector is intrinsically linked to significantly increased life spans in populations around the world. Often a product of the aging process, osteoarthritis is a leading cause of joint deterioration and a key driver in the demand for knee, hip, and other joint replacements. While the joint-replacement market is still dominated largely by the age 60-and-over population, orthopedic surgeons continue to report a small but discernible increase in middle-aged and younger patients who are seeking relief from the pain and debilitation of joint disease. The rise of sports medicine, typically focused on younger populations, is also driving industry growth. Such growth is occurring on the surgical front, due to bone breaks and fractures associated with injuries, as well as on the nonsurgical front, which includes external bracing and immobilizing devices.

With back pain affecting an increasing number of patients around the world, the orthopedics industry continues to introduce an array of innovative devices and surgical instruments to both ease the suffering associated with the condition as well as return the patient to a greater range of functional mobility. Spinal fusion surgery is increasingly benefiting from less-invasive procedures that result in smaller incisions, less blood loss, shorter hospital stays, fewer postoperative complications, and faster rehabilitation and recovery times.

Artificial spinal disks also offer promise for back-pain patients. Although the Charité disk from DePuy Orthopedics has met with reimbursement resistance from Medicare, private insurers, and some orthopedic surgeons, new products are expected to overcome some of the problems associated with first-generation devices. The ProDisc from Synthes, which has both FDA approval and favorable reimbursement coverage, has been generally well received by industry analysts. Hoping to build a solid base of support, the company has established clinical centers around the country to train orthopedic surgeons on the proper technique and procedure for disk implantation.

The spine sector continues to be orthopedics' hottest segment. While it too has slowed from the torrid pace of a few years ago, when year-over-year growth was pushing 30%, "It's still the place to be," says John McCormick, medtech analyst and a managing director at Healthpoint Capital LLC (New York City), an investment banking firm specializing in orthopedics.

Consolidation is also going on in the spine segment, as larger players seek to tap into newly emerging technologies. At the end of 2006, Kyphon Inc. (Sunnyvale, CA) announced plans to acquire spinal device manufacturer St. Francis Medical Technologies Inc. (Alameda, CA) for approximately $525 million, plus future revenue-based contingent payments of up to $200 million. Later that month, the company signed two definitive agreements to acquire all of the spine-related product assets and associated intellectual property rights of privately held Disc-O-Tech Medical Technologies Ltd. (Herzeliya, Israel) and its U.S. subsidiary for approximately $240 million. With these additions, Kyphon is likely to break into the top-10 list of orthopedics sector players in 2007.

While reimbursement rates from government and private insurers continue to squeeze profits—particularly for large-joint replacements such as total knee and hip arthroscopies—cuts in reimbursement rates have not caused a cutback in procedures. "Check the data," McCormick says. "Assuming you have a clinically viable device embraced by the surgeon community, the correlation between reimbursement and gains or losses in orthopedic procedures just isn't there. Many industry watchers confuse volume with prices. Pricing pressures from hospitals are squeezing manufacturer profits and surgeon fees, but that's really a separate issue. The volume increases in the orthopedics space continue to be constant—and typically growing year after year. Due to favorable demographics that are not going away, growth is basically built in to the fundaments of the orthopedics market."

With knee and hip replacements no longer commanding their premium prices, the small-bone segment is showing increasing promise as a new growth area for joint-replacement technologies. According to John Viscogliosi of Viscogliosi Brothers LLC (New York City), an investment banking firm centered on specialty orthopedics, the small-bone segment is an underserved market that is generating significant surgeon and industry interest. "Since we launched Small Bone Innovations in early 2005, about 25 to 30 new companies have been formed that focus on this area, which was formerly referred to as extremities."

In addition, gainsharing continues to spur discussion in the orthopedics sector. Under some models, gainsharing arrangements provide financial incentives to doctors who agree to use preapproved medical devices, equipment, and supplies that have been standardized by hospitals to control costs through volume buying. The U.S. Department of Health and Human Services Office of Inspector General (Washington, DC) initially ruled such arrangements illegal, but it has recently approved a number of gainsharing demonstration projects on a carefully controlled basis. To date, the impact on the orthopedics sector has been minimal.

Direct-to-consumer (DTC) advertising is making steady inroads in orthopedics and is generally considered to be a growth driver, albeit on a relatively small scale at the present time. While patients reportedly see such campaigns as information resources, many surgeons are concerned that the ads present only the positive aspects of orthopedic procedures and risk compromising the doctor-patient relationship. While both FDA and the Federal Trade Commission continue to monitor the situation, DTC advertising looks as though it will play an increasing role in orthopedics marketing in the years ahead.

Despite their frequent preoccupation with the diminishing rate of growth in the orthopedics sector, most industry analysts remain bullish for both the near- and long-term future of the sector. By 2010, the sector is expected to produce $44.7 billion in global revenues, an increase of more than 166% over the seven-year period beginning in 2003. Growth in 2006 was estimated to be about 12%. Going forward, an uptick to a 15% annual growth rate is forecast through 2010.³

The orthopedics sector benefits from favorable demographics, including more than 70% of the world's population remaining as prospective new customers. And companies in the field have created a dynamic product pipeline that is turning out a steady stream of advanced design materials, precision surgical instruments, biologics, and innovative reconstructive devices. On the basis of such strengths, the orthopedics sector is poised to continue its enviable financial performance record for the foreseeable future.—Art Kerley, president, Fairfield Factor Inc.

Cardiovascular Opportunities and Obstacles

With a global valuation of about $27 billion, the cardiovascular market is currently growing at an annual rate of 16%.⁴ In the North American market, cardiovascular devices generated revenues of $17.88 billion in 2005. With an aging population that has a greater incidence of cardiovascular disease as a key driver, the North American cardiovascular market is expected to reach $40.46 billion by 2011.⁵ The American Heart Association (Dallas, TX) estimates that 64 million Americans have some form of cardiovascular disease.

The cardiovascular sector includes coronary stents, cardiac rhythm management (CRM) devices such as pacemakers and implantable cardioverter-defibrillators, prosthetic heart valves, vascular grafts, ventricular-assist devices, self-contained artificial hearts, angioplasty catheters and balloons, and other clinical support devices. Accounting for nearly two-thirds of the sector, coronary stents and cardiac rhythm devices by far dominate the category.

Stent Evolution. The coronary stent was introduced to the U.S. market in 1994. Although effective in restoring adequate blood flow through the diseased artery and relieving angina and other symptoms, first-generation stents were subsequently linked to restenosis, which is the buildup of scar tissue at the site of implant. Although stent geometries steadily improved, a major advance came in 2003 with the introduction of the first drug-eluting stent—Cypher, developed by Cordis Corp. (Miami Lakes, FL), a Johnson & Johnson company. A year later, Boston Scientific Corp. (Natick, MA) gained approval from FDA to introduce its Taxus drug-eluting stent.

In introducing the devices, manufacturers of drug-eluting stents claimed that the drug-device combination products reduced the occurrence of restenosis by slowly emitting a therapeutic drug. As the efficacy of drug-eluting stents was repeatedly demonstrated in clinical studies, cardiologists embraced the devices and the market took off. A number of medtech companies jumped into what rapidly emerged as a highly competitive and contested market characterized by an extensive series of patent infringement suits regarding stent designs. By 2005, drug-eluting devices had captured 85–90% of the coronary stent market. The worldwide drug-eluting stent market is currently valued at about $6 billion.⁴

The good times for drug-eluting coronary stents were seriously challenged last year following clinical presentations at the 2006 World Congress of Cardiology, in Barcelona, Spain. The findings, which suggested a significant risk of late-term thrombosis associated with the devices, were widely and prominently reported in industry, business, and popular media. As cardiologists and their patients grew concerned about the safety of the devices, usage reportedly declined and analysts expressed concern about the near- and long-term impact on the market.

However, clinical studies reported at the Transcatheter Cardiovascular Therapeutics (TCT) conference in October and a meeting of FDA's circulatory devices panel in December gave drug-eluting stents a new lease on life. Findings presented during TCT generally concluded that the devices showed no increased risk of thrombosis and resulting myocardial infarction or death when compared with bare-metal stents. Similarly, the FDA panel, while acknowledging an apparent increase in stent thrombosis, found that drug-eluting stents were generally safe when used as directed. The panel members expressed concern about reported extensive off-label use of the devices. They also called for increased postmarket studies and surveillance. But they did not recommend any significant changes in clinical trials or the premarket approval process for new drug-eluting coronary stents seeking entry to the U.S. market.

Other drug-eluting stents poised for FDA approval later this year or in early 2008 include Endeavor from Medtronic Inc. (Minneapolis); Xience, manufactured by Abbott (Abbott Park, IL); and CoStar from Conor MedSystems Inc. (Menlo Park, CA). Conor has recently agreed to be acquired by Cordis Corp. for $1.4 billion.

"The companies in this segment and the cardiologists who implant the devices both seem generally pleased with actions of the FDA panel," says Jan Wald, PhD, medtech analyst with A.G. Edwards Inc. (St. Louis). "Right now, they're as comfortable as they can be. The penetration rate for drug-eluting stents, which was as high as 88%, has reportedly fallen into the 70% range.

"But there are some innovative products in the pipeline, including the CoStar stent from Conor Medsystems, which has a unique drug-eluting technology, as well as a design that utilizes bioresorbable polymers that are absorbed by the body after the drug is released," Wald adds. "The stent has been well received by cardiologists, which explains why Cordis put Conor on its shopping list."

Wald says coronary stent development will continue to show innovation in design. Third-generation devices, such as Abbott's completely bioabsorbable drug-eluting stent, offer great promise for the sector going forward. The Abbott stent, made of polylactic acid, is designed to be completely absorbed by the body. In contrast, only the polymer coating on the CoStar is absorbed, leaving the metal scaffolding of the stent in the artery.

Wald also acknowledges that safety concerns regarding drug-eluting stents could provide an opening for cardiac surgeons to promote coronary artery bypass surgery, which has been in decline since the advance of interventional cardiology technologies. Meanwhile, new tools and procedures have also made open-heart surgery less invasive. The beating-heart procedure, also known as off-pump surgery, is not new, but it is gaining renewed attention. The procedure does not require placement on a heart-lung machine and is generally regarded as being less traumatic for the patient.

CRM Potential. On the cardiac rhythm management front, 2006 proved to be a stabilizing year. Following extensive recalls of Guidant's implantable cardioverter-defibrillators and cardiac pacemakers in 2005, a task force of manufacturers, regulators, cardiac care providers, and patient advocacy groups was organized by the Heart Rhythm Society (Washington, DC) in cooperation with FDA. The group developed comprehensive recommendations for the surveillance, analysis, and performance of CRM devices. Industry stakeholders uniformly embraced the resulting recommendations.

The U.S. cardiac rhythm management market produced revenues of $5.99 billion in 2005. The U.S. CRM market is forecast to reach $16.79 billion by 2012.⁶

CRM devices are thought to have significant potential for market growth outside the United States. In Europe, where adoption rates have lagged, markets for the devices are now poised for significant growth. Asian markets—China, in particular—are expected to see gains as well.

CRM devices are increasingly incorporating advanced pacing and programming technologies, which ensure adequate levels of electrical stimulation while minimizing unnecessary shocks. Less-invasive implanting and device removal procedures are expected to provide greater patient comfort and confidence, which will further grow the rate of adoption worldwide.

Leading CRM manufacturers include Medtronic, St. Jude Medical Inc. (St. Paul, MN), and Guidant, which is now a wholly owned business unit of Boston Scientific.

Valve Stability. In the heart valve segment, biological technologies continue to make inroads in the $1 billion market.⁷ Yet mechanical prosthetic devices still dominate the market with a 60% share—a trend that MedMarket Diligence principal Patrick Driscoll says is not likely to change despite the advances in biological valves.

"The durability of mechanical valves, which can be for the lifetime of even a younger patient, comes at the expense of hemolysis and the requisite use of anticoagulants," he says. Driscoll cites a number of advances on the mechanical front, but adds, "No innovation has had an appreciable impact on the coagulation caused by mechanical valves."

Percutaneous heart valve technology, which enables the interventional implantation of devices without the need for major surgery, is currently one of the most intensely researched product development areas in the cardiovascular sector. By opening the replacement valve market to patients deemed unsuitable for open-heart surgery, percutaneous and other novel valve technologies are expected to provide significant growth opportunities going forward.⁸

Leading players in the prosthetic heart valve market include Edwards Lifesciences Inc. (Irvine, CA), St. Jude Medical, Medtronic, Sorin Group (Milan, Italy), ATS Medical Inc. (Plymouth, MN), CryoLife Inc. (Kennesaw, GA), MedicalCV Inc. (Inver Grove Heights, MN), and Evalve Inc. (Menlo Park, CA).

Continued Assistance. Heart-assist devices represent one of the smallest segments of the cardiovascular sector. While a great deal of the activity in the segment is experimental, there are a number of commercially available ventricular-assist devices on the market, which is expected to reach $350 million in the United States by 2009.⁹ By extending or replacing the pumping function of a damaged heart, these devices can sustain patients' quality of life while they await the availability of suitable transplants.

New advances in cardiovascular therapies have also enabled heart-assist devices to take over for a potentially recovering heart. Since the number of patients with failing hearts far exceeds the supply of transplants, one of the goals of this segment is the development of a completely self-contained artificial heart. Such a device—the AbioCor, manufactured by Abiomed Inc. (Danvers, MA)—was approved by FDA in 2006 under a humanitarian device exemption for limited and highly controlled use. Abiomed also manufactures ventricular assist devices. Other companies producing heart-assist devices include Thoratec Corp. (Pleasanton, CA), World Heart Corp. (Oakland, CA), and MicroMed Technology Inc. (Houston).

Overall, the cardiovascular sector continues to evolve. New advances in materials, biocompatible coatings, and drug-delivery technologies are expected to spur the advance of more-innovative coronary stent designs. In addition, steadily improving imaging techniques will provide cardiologists with enhanced image acquisition and analysis for in-stent visualization and more-accurate diagnoses and recommended treatment. Increasing use of onboard electronic sensors will monitor the programming and safety performance of CRM devices while providing enhanced arrhythmia management.

With cardiovascular disease accounting for the greatest outlay of healthcare expenditures, the sector presents a dynamic opportunity for medtech manufacturers to develop diagnostic and therapeutic devices that are less invasive, enable shorter hospital stays, and speed patient recovery—all while reducing costs for patients, payers, and providers.—Art Kerley, president, Fairfield Factor Inc.

Significant Potential in Neurodevices

The neurodevice market is one of the fastest-growing sectors of the overall medical device industry. Global neurodevice sales in 2005 were approximately $3.4 billion, representing growth of about 21% over the prior year.¹⁰ Neurodevices include medical devices, electronic implants, surgical equipment, and software systems designed to treat brain and nervous system illnesses. Currently approved devices include deep-brain stimulators for Parkinson's disease, spinal cord stimulators for pain, and cochlear implants for deafness.

The neurodevice sector consists of four segments: neuroprosthetics, neurostimulation, neurosurgery, and neurofeedback (see Table IV).

Neuroprosthetics are electromechanical devices that interface with the nervous system to compensate for a sensory deficiency or motor deficiency. Sensory deficiencies like deafness and blindness can result from damage to the sensory organ, the sensory nerve connecting the organ to the brain, or the sensory cortex in the brain. If the damage is in the first two areas, neurodevices can be used to directly stimulate the sensory nerve or even the sensory cortex. The neuroprosthetics market is currently dominated by cochlear implants, which had estimated worldwide sales of $450 million in 2005, representing 21% growth over 2004.¹⁰

Neurostimulation devices generated sales of $1.2 billion in 2005 with 16% growth.¹¹ Neurostimulation devices are electrical and magnetic stimulation devices that include deep-brain stimulators for Parkinson's, spinal cord stimulators for pain, vagus nerve stimulators for epilepsy, and peripheral-nerve stimulators for urinary incontinence and obesity. Currently, most revenue in this sector comes from patients with chronic pain, movement disorders, and epilepsy. In the next three years, patients with severe depression, migraine headaches, and obsessive-compulsive disorders can expect neurostimulation devices to be approved by FDA. New neurostimulation treatments for patients with chronic anxiety, obesity, bulimia, and Alzheimer's disease are a bit further out on the horizon (see Table V).

The market for neurosurgical medical devices totaled roughly $1.75 billion in 2005, and is projected to grow at a rate of 20% annually.10 This category includes minimally invasive surgical tools, surgical navigation devices, neurovascular interventions, and other medical supplies for neurological diseases—such as shunts for hydrocephalus and peripheral-nerve repair guides.

The convergence of software, imaging, and brain research is leading to new neurofeedback and software-based solutions for a wide range of cognitive, emotional, and sensory disorders. If companies in this space can demonstrate efficacy and connect with customer concerns about side effects from neuropharmaceuticals, they have the potential to become first-line treatments for disorders like attention deficit hyperactivity disorder (ADHD) and mild cognitive impairment. There are strong drivers for rapid growth of this sector, including the following.