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Silicon Valley vs. Twin Cities: Your Questions Answered

MD&M Minneapolis panelists answer MD+DI reader-generated questions about which U.S. medtech hub is the leader of the pack, and why.

  • At MD&M Minneapolis 2019 a panel of experts tackled the question of whether or not Silicon Valley will eclipse Minneapolis as the largest U.S. medtech hub. Prior to the discussion, MD+DI readers weighed in on which U.S. metros they considered to be the top hub of medical device innovation. As recently reported, most (44%) of the 100 survey respondents said the San Jose, CA region (aka Silicon Valley) is the top U.S. metro for medtech innovation. Minneapolis - St. Paul, MN came in second with 33%, followed by Boston - Cambridge, MA with 18% of the votes, and Austin, TX with 2% of the votes. The remaining 4% of survey respondents said "other" but did not specify a region, aside from one respondent who said Phoenix, AZ because, "I live here, of course."

    The survey respondents also provided questions for the panelists, several of which appear in the following slides, along with the panelists' responses.

    The panelists were Nikhil Murdeshwar, a senior principal research engineer at Olympus Surgical Technologies America; Dave Saunders, chief technology officer at Baltimore, MD-based Galen Robotics, and Cristin Moran, CEO at Growth Science.

  • “One of the first things necessary is to have a clinician-driven invention process that understands the clinical capability of an invention or new idea, but also have a strong technology transfer team that knows how to license and not just to big companies with really deep pockets … so licensing costs and things like that need to really be tailored to encourage entrepreneurs," Saunders said. "Without naming names, one of the technology management groups covering a very large hospital network has a million-dollar signing fee … that barrier right there is going to shut down most innovative [startup] companies, and that leaves only the really large medtech companies who, at the moment, are a little bit risk-averse just because of the downward pricing pressures and things like that. So you really need to have strong technology offices that have aggressive pricing programs to make sure that entrepreneurs have an incentive to be out there."

    Murdeshwar said it's important to have a university or academic institution that can act as the center of gravity for the region's medtech activity, but he added that it is equally important for there to be strong collaboration between the engineering school and the medical school. He was among the first class of fellows who went through the University of Minnesota’s medical device innovation fellowship program 10 years ago.

    “When they were looking around for where they could have a program like this there were only three places in the country that they could have this sort of a program in," Murdeshwar said. "One is in the San Jose area with Stanford, the other place was Boston with Harvard and MIT, and the third place was the [University of Minnesota] in the Twin Cities. It’s no surprise that all these three places are key medical device hubs. There’s a third component and we tend to ignore it, which is common sense, practical politics… all these three places – Massachusetts, California, and Minnesota – have relatively healthy economies, diverse economies, people are health conscious, and medical devices fit into all of that. … I can’t tell you how important that is."

    Moran approached the question from a different perspective. "You would be surprised, perhaps, to know that almost every industry is interested in medtech," she said. "I’ve got raw materials suppliers, oil and gas companies, they are interested in what’s going on in med device. They are seeing possibilities for growth, they are seeing possibilities for them to be a part of that growth in some form or another. The message I would give you is even with all these amazing characteristics and facilities that we have here, every large company that I work with is struggling with what they’re going to do, how they’re going to grow. And they’re worried about organic innovation, and they’re worried that some little startup somewhere is going to take their lunch."

    Moran emphasized the importance of inorganic growth in today's medical device environment. "It's no longer acceptable to just invest in yourself and hope that you’re going to invent something, you’ve got to buy your way in. You just have to," she said. "I’ve seen more of these corporations become more active in investments, whether it’s through corporate venture or it’s through purchase, and I think that’s a really positive thing. That means they don’t necessarily need to find that solution in their own backyard, they can find that anywhere. The world is moving so fast that those interesting solutions can pop up in unexpected places."

  • "I’ve worked with some other people at Olympus and Mayo Clinic and I see the talent there, everything is available … there are lots of simple medical devices that are going to remain important," Saunders said. "… But [for things like] software embedded systems right now for better or for worse the top talent tends to be moving to either coast. So there’s a little bit of a brain drain here."

    That doesn't mean there is necessarily something missing from the talent pool in Minnesota, Saunders added, it's just a matter of who is driving those particular paradigms.

    Moran added that there is a different culture in the software development world than there is in what has traditionally been the medical device world. "And although they are coming together, there still may be a cultural shift," she said.

    "Medical devices stretches from [bandages] to x-ray machines and everything in between. Technology is stretching too," Murdeshwar said.

    He talked about how the hot technology trends in the industry used to center around mechanical systems and companies were rapidly hiring mechanical engineers to develop those devices. In some ways, he said, surgical robotics as the industry knows it today is even becoming "old news," despite the fact that everyone in the industry seems to be excited and talking about it. The question we should, perhaps, be asking, he said, is "where is all this headed?"

    "I won’t tell you the answer – I know where all this is headed, or at least I think I know where all this is headed – but if you know the answer to that, then I will tell you that that’s not available in Minnesota today," Murdeshwar said.

  • "First, we need a clear regulatory path from the FDA to put AI in medical devices," Saunders said, which is something FDA is actively working on today. "AI has been around for quite a few decades and it’s essentially a prediction technology … and it’s become super cheap to apply, but at the same time, you have to think about what it’s doing."

    Saunders held up his wrist and pointed to his Apple Watch as an example. "I still don't know why I wear this thing, and yet I now wear the fifth generation of it because I can't seem to leave the house without it," he said, and he talked about the magnitude of the 400,00-participant Apple Heart Study at Stanford that "provided real-time heart rate data for the first time ever."

    "From sun up to sun down, every single heartbeat was recorded by Apple Watch and fed into a massive study that went into a machine learning algorithm that was able to then weed out people who were potentially having heart events," Saunders said. "Now, it turned out that there were quite a few misses in that initial pass and the media jumped all over that, but that wasn’t the point. Because if you’re going to teach, say, Google Images, how to recognize a cat, you have to have “not a cat.” You have to teach Google Images ‘that’s not a cat, that’s not a cat, that’s not a cat…' So this 400,000-person dataset showing the machine learning algorithm that ‘hey here’s something that we thought was a heart event but really wasn’t’, that just makes the machine learning better for the future, and then there are lives that … their physicians are telling them ‘had you not gotten this alert from your physician you probably would not be alive.' That’s amazing technology."

    On the flip side, Murdeshwar pointed out that many medical device developers may be jumping on the AI bandwagon for all the wrong reasons. "It reminds me of the time, years ago when I started my career and companies were moving into China, and I asked one of my friends, a supplier, ‘why are you going to China?’ and he said, ‘I have no idea but I think it’s the politically correct thing to say and probably do'," he said. "So it’s the same thing with AI. It’s the politically correct thing to say and do, but like Dave said, AI has been around for a long time, the challenge is what are you going to do with AI? I think I know exactly what I’m going to do with AI, but I don’t think everyone else knows.”

  • Saunders emphasized the importance of scalability and he said he has been networking with a major healthcare network in China and talking to ophthalmology surgeons there who are performing as many as 18 back-to-back procedures a day. "If my technology or my medical device solution slows them down, everybody suffers. It can't work because it's not a scalable solution when you start to look at that," he said.

    Pricing pressures in global markets is also a crucial point of consideration for any U.S. medical device company looking to expand outside the United States. "I think it's pretty amazing that the [National Health Service in the United Kingdom] has actually built an economic model that has shown that because of the trickle-down of getting more surgeons to do laparoscopy because of [Intuitive Surgical's] da Vinci, that ultimately the da Vinci does, potentially, save money. It's a very complex economic model but they've been able to show that and that's why the da Vinci is selling in the NHS now]," Saunders said. "If you go in there with a medical device that only costs more money, they're going to shut you down. They will not buy a single one. It's a really major issue that needs consideration from anybody." 

    Being from Olympus, Murdeshwar had a unique perspective to add on this question because Olympus is a Japanese company that expanded into America, rather than the other way around. "The largest device market in the world is the U.S. so obviously it is very tempting [to focus on U.S. healthcare needs] but why [Olympus] has restructured around global lines is we realize that the OUS market is tremendous, but comes with the challenge of tweaking our devices," he said. "A long time ago when I joined Olympus someone was saying that we should go into the Indian market and I said, 'how are you going to do that?' and they said 'well we take our device, it costs $500 and we take that device that's two generations old and we'll sell it there for $100' and I said 'good luck, that's not going to work'. We never made it into the Indian market."

    Murdeshware went on to explain that the medical device markets in India, China, and other parts of Asia are sophisticated markets that just require a completely different thought process. "When I interact with people in these markets they look at me and say 'Nikhil, you're thinking like a first-world guy,' because I'm thinking WiFi and wireless and they're thinking cell phones and iPads and they don't need a 4K screen and all that," he said. "So companies like mine are beginning to get alerted to what the opportunities are overseas."

    He added, however, that expanding into emerging markets does come with the challenge of realizing you can't just take a legacy device and sell it in Asia in the same way that you are selling it in the U.S. market. "But with challenge there is opportunity," he said. "I'm tremendously excited that we have restructured along some of these lines and we're thinking seriously about going after some of these markets."

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