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Gamma Center Launches in Quebec

Sterilization services provider Nordion Inc. (Ottawa, Canada) has launched the Gamma Centre of Excellence (GCE), the goal of which is to advance gamma sterilization science. Formerly known as the Canadian Irradiation Centre, the GCE focuses on applied research and development, training, and specialty gamma processing for medical device, academic, and other customers in Canada and around the world.

The GCE offers R&D, specialty contract irradiation services, and training to Nordion's customers and partners, in addition to developing gamma irradiation processes for new or challenging products and materials. It also provides gamma processing, application development, and training, giving companies and researchers the tools, services, and expertise they need to achieve their irradiation and sterilization goals. The GCE offers both a full-scale irradiator and small-scale testing systems; experts in physics, chemistry, dosimetry, calibration, and dose delivery; dedicated capacity for research projects; and hands-on training and courses, from basic to advanced, for a range of industry professionals.

Of particular interest to medical device manufacturers is the center's sterilization science offerings, enabling Nordion to work with medical device companies to research and develop sterilization processes for challenging materials.

"A facility that can provide the gamut of necessary services like R&D, material compatibility, and radiation physics guidance as well as sterilization support is invaluable to manufacturers," remarks Martell Winters, senior scientist at Nelson Laboratories. "As a gamma industry professional, Nordion's vision behind the GCE is exciting to me."

For more information about Nordion's gamma sterilization services and the medical device industry in Ontario, Canada, see my Regional Focus article in the May issue of Medical Product Manufacturing News. --Bob Michaels

Despite Challenges Ahead, Global Medical Device Market to Reach $415 Billion in 2016

Despite such potential upcoming challenges as cost-cutting trends, the impending U.S. medical device tax, and austerity programs in several major healthcare markets, the global medical device market is predicted to grow from $322 billion in 2011 to $415 billion in 2016, according to a new report by healthcare market research publisher Kalorama Information. "The Global Market for Medical Devices, 3rd Edition," examines the current medical device market in addition to evaluating the potential impact of major obstacles for the industry as well as the revenues and activity of several market-leading medical device manufacturers.

"2011 was a year of cost control," according to Bruce Carlson, publisher of Kalorama Information. "Governments implemented policies unfavorable to medical device makers and hospitals took steps to reduce device pricing. These trends are likely to continue." In the face of a troubled economy and challenging business environment, however, the medical device industry managed to experience 5% growth between 2010 and 2011, according to the report. Among the key drivers of this modest increase were the substantial aging population, the development of innovative technologies, and sales to emerging markets.

Increased sales to emerging markets during the next several years, in fact, are expected to help offset some of the anticipated cutbacks in major developed healthcare markets. And while the United States remains the largest medical device market, coming in at $142 billion in sales, companies' sales outside the country edged out domestic sales. European medical device sales, on the other hand, account for approximately 29% of the market and are bolstered by what is viewed as an easier regulatory environment in which to launch new products.

Market-leading 'bellwether' companies in the medical device sector exhibited several interesting trends in 2011, the report found. For example, major medical device companies increased R&D spending by 8% in 2011, on average. "It's an indication of long-term optimism and a signal that the strategy is to find new products and product innovations in order to get around the lower reimbursements," Carlson comments. Furthermore, dominant companies such as Johnson & Johnson, Medtronic, and Siemens experienced growth at lower levels in 2011 than the medical device market as a whole, the report states. Many medical device powerhouses, the report notes, also maintained aggressive acquisition strategies in 2011, led by J&J's purchase of Synthes.

Five Factors to Success in Product Development

No one ever said product development is easy. Medical device development in particular is a very complex and variable process with threats to success emerging at many points along the way. However, there are components you can put in place to ensure the smoothest path possible.  
 
1. Wait Until the Technology is Really Ready
A common mistake is to move a technology out of research and into development before it is ready. Having a technology working on the bench is far different than proving it can be commercialized while still maintaining adequate performance. Take the time up front to turn a proof-of-technology breadboard into a proof-of-commercialization breadboard. Use this breadboard to analyze critical performance areas.
 
For example, if the technology is going to be used in a small, hand-held product, perform power consumption calculations so an estimation of battery life can be determined. Also perform an initial volume study that estimates the size of the product. It is far better to determine the product may be too big to be hand-held and only has a battery life of one hour instead of the required six hours early in the project rather than months into product development. Refining the technology early on to achieve product requirements is far less costly than when deep in the product development process.
 
2. Choose the Right Team
An average team will have average performance. In development, this means schedule, budget, and overall product viability may be compromised. If a team with average performance develops the right product, it may be late and cost more than was planned; a great team, however, has the ability to develop the right product on time and on budget.
 
There is no formula for putting together a great team. Instead, assess the team you have to understand individual strengths and weaknesses and identify the team’s gaps – lack of technical skills in a particular area, inadequate resources, low level of experience, etc. Identify and execute on plans to leverage the team’s strengths, strengthen the weaknesses, and fill in the gaps.
 
Don’t hesitate to call in the cavalry. Strategically utilized experts can quickly enhance the capabilities of a team while significantly increasing the probability of project success.
 
3. Use a Systems Approach
Teams make hundreds, sometimes even thousands, of decisions throughout product development. The full, extended team makes some decisions; more are made by the core team, and most by individuals. Every day individual contributors are making decisions. Most are little decisions that seemingly don’t affect other team members. However, in product development it is more typically the case that decisions do affect others. Product development is often treated as very task-based, creating silos of disciplines working independently of each other. By encouraging consistent communication across disciplines and applying systems thinking, a systems approach to product development is created.  A systems approach will arm the team with the information it needs to make good daily decisions. Some of these will be critical decisions, and the system-level perspective will end up saving the project from unexpected delays.
 
4. Use a Risk-Based Approach
Product development schedules are typically very aggressive, often requiring teams to move more quickly than they are comfortable with. Taking time throughout the project to assess the technical and project risks is a great way to address the team’s concerns and raise their comfort level. Invite the whole team to participate and brainstorm risks that affect technical aspects of the product as well as those that may affect safety, cost, schedule and quality goals. Next, identify appropriate mitigations. Don’t forget to review the risks and mitigations throughout the project, identify new risks that may have cropped up, and assess the adequacy of mitigations.
 
Establish an appropriate cadence to review risk for each project. For most development efforts, a monthly meeting to brainstorm risk and identify mitigations will suffice, but consider reviewing project risk more frequently during difficult or stressful times.
 
5. Dedicated Project Management
Assigning a team member as product manager is a common mistake in product development.
Organizations that practice strategic project management have discovered the importance of having dedicated project managers. When the going gets tough on a project, the team needs all hands on deck. Each team member is required to focus their attention on the critical path. However, a project manager that also has another role on the team will need to peak their performance in both areas simultaneously. This is almost impossible to accomplish and typically results in the project management duties getting thrown aside. However, this is when the PM is needed most – to help guide the team through the critical time in the project, ensuring everyone is working toward the common goal, facilitating communication with stakeholders, troubleshooting, and prioritizing workflow. The PM is the lighthouse guiding the ship through the storm, without which the ship may crash into the rocks. Don’t let your teams be vulnerable – practice strategic project management with dedicated project managers.
 
- Jessica Urban is the Director, Program Management at Stratos Product Development

Relying on In Silico Trials, FDA Approves Outpatient Testing for Smartphone-Based Artificial Pancreas

Relying on In Silico Trials, FDA Approves Outpatient Testing for Smartphone-Based Artificial Pancreas

The incidence of type 1 diabetes is surging worldwide. As Scientific American reported in January, the incidence of the disease has been growing internationally at rates ranging from 3–5% annually. In the United States, as many as 3 million people have the condition, according to the Juvenile Research Diabetes Foundation (JDRF).

Enter the artificial pancreas, a technology now in development that could be a near cure for type 1 diabetes. “The artificial pancreas can read continuous glucose monitoring data, make a complicated calculation, and calculate the precise dose of insulin delivery,” explains Boris Kovatchev, PhD, who, with Patrick Keith-Hynes, PhD, is leading a research team at the University of Virginia to advance artificial pancreas technology. The device would revolutionize treatment of the disease, which involves lifelong measurement of blood glucose levels and administration of insulin, by essentially automating treatment and tightly controlling insulin levels.

The artificial pancreas uses a reconfigured smartphone as a hand-held device to monitor a diabetic's insulin pump and continuous glucose monitor.

An Important Milestone

FDA has recently approved the first U.S. outpatient trial for the artificial pancreas, which marks an important step towards the commercialization of the artificial pancreas in the United States. “Conducting the first U.S. tests of a portable artificial pancreas running on a cell phone in a real-world setting is an important step toward evaluating its effectiveness and how it may impact treatment for type 1 diabetes patients in the United States,” says Kovatchev.

The trial in question will investigate the use an artificial pancreas that relies on a smartphone that serves as a hand-held monitor for the patient’s insulin pump and a computational platform to calculate the insulin dose. The technology was developed at the University of Virginia School of Medicine research team led by Kovatchev and Patrick Keith-Hynes, PhD.

Earlier inpatient trials at the University of Virginia have been promising, as have ongoing outpatient trials in Italy and France. “Inpatient trials of a contemporary artificial pancreas began in 2008,” explains Kovatchev. “Since then, there have been a couple of hundred trials done around the world, so we have established a track record and some understanding of the system and how to control it over the course of the last four years of study.”

In Silico Trials Eliminated Need for Animal Testing

The artificial pancreas developed at the University of Virginia was tested using in silico clinical trials. “This is basically a new way to develop medical devices that we have pioneered about four years ago,” Kovatchev says. “We replaced the animal trials [conventionally used in medical device development] with computer simulation and that accelerated the process of development very much,” he adds. The in silico trials were accepted by FDA, which is unprecedented. 

Brian Buntz is the editor-at-large at UBM Canon's medical group. Follow him on Twitter at @brian_buntz.

You're Hit with a Medical Device Recall—Now What?

Peaking with the spectacular recall of metal-on-metal orthopedic implants in 2010, the flood of news about medical device recalls has become a staple of the business and mainstream media alike. And the news just keeps coming. Now we learn that medical device recalls increased more than 160% in the first quarter of 2012, affecting more than five times more units than in the previous quarter. According to the ExpertRECALL Index, a report that aggregates and tracks cumulative recall data from the Consumer Product Safety Commission and FDA, medical device recalls documented in FDA's first-quarter enforcement reports affected nearly 82 million units, representing a 508% increase over the previous quarter--a five-quarter high. Products impacted by the increase included alcohol prep pads, catheters, needles, latex gloves, and other medical device products.

The question is: What do you do when you're company is hit with a recall? How do you confront the crisis? Answering these questions is Mike Rozembajgier, vice president of recalls at Stericycle ExpertRECALL (Indianapolis), which publishes the ExpertRECALL Index. And hear from FDA experts on how to prevent and manage product recalls at the MD&M East Conference, May 21-24, Pennsyvania Convention Center, Philadelphia. --Bob Michaels

MPMN: What types of medical devices have contributed to the spike in the recall rate in the last quarter?

Rozembajgier: We have been monitoring the industry since we launched the ExpertRECALL Index a few quarters ago and have been at this for quite a while dealing with recalls. The types of devices that have contributed to the recent increase in recalls span a pretty wide range of products, including such implantables as stents, defibrillators, and guidewires used in the OR and material and physical capital equipment used in the hospital setting, where there are monitors and other equipment. But the recent recalls also include such orthopedic implantables as hips, knees, and joint-replacement technologies.

MPMN: So what's going on here? What factors or manufacturing practices are contributing to this spike in recalls?

Rozembajgier: We can pinpoint a few factors when determining how it is that we got into a situation in which we are seeing a lot of recalls. Certainly, what is going on in Washington, DC is a part of it. We see the FDA cracking down on all industries--in particular the medical device industry--and we can expect this trend to continue. And I think the impact of this trend will only continue as time goes on, since doctors, caretakers, and patients are keeping a closer eye on devices and reporting concerns earlier.

The rise in recalls and the number of repeat offenders is a little troublesome, given the increasing volume of medical devices that patients rely on to maintain and improve their health. One of the facts I learned when we began looking at the recall situation is that one-third of the companies that faced recalls in the first quarter were involved in more than one recall event. And we've seen this trend over the past five quarters. Thus, each and every quarter, we're seeing one-third of companies--not the same ones every quarter, however--that are experiencing multiple recalls. Thus, you have to ask, is the government doing all it can to make sure that we're performing appropriate testing upfront to approve devices? Are companies doing all they can to ensure that their quality groups are well aligned? Are manufacturers working closely with their source suppliers to ensure that they're doing all the right things to put good products into the marketplace? But more importantly, once a recall hits, do they take the right steps and follow the right procedures to conduct a probe in a fast, effective manner?

MPMN: What are right steps?

Rozembajgier: Here's the key for medical device firms: The components manufacturers are critically important. Surely, manufacturers want to put good products into the marketplace, and they do so each and every day. But there are situations in which they have products that need to be recalled. How do they go about working with their own quality, regulatory, and risk departments to determine the appropriate measures before putting products out on the shelf and making sure that they're effective? Above and beyond that, a lot of what we talk to firms about when they're doing recall planning and testing, mock recalls, and recall preparedness is whether they are performing those tests with their source manufacturers. Do they have a good feel for the types of procedures and testing that the suppliers go through as they bring complex components together to create a medical device?

MPMN: If you're a supplier company, what should you do to reduce the risk that the product you're working on will be hit with a recall? If such companies aren't doing the right thing, what should they be doing?

Rozembajgier: There are a couple of factors that come into play here. Certainly, suppliers are going to want to feel good about the current quality measures that they have in place to perform trend analyses. They're going to want to maintain close contact with the OEMs they supply to ensure that the appropriate quality tests and recall preparedness drills--or mock recalls--are being followed so that there are no surprises if and when they are faced with a crisis such as a recall. They should ensure that the recall is handled in an effective manner.

MPMN: Do you think that there is perhaps a dearth of proper quality control measures in place?

Rozembajgier: We look at recall situations on a case-by-case basis. I would not want to say that all companies lack proper quality controls because there are many good life-saving devices that help people stay active and healthy. Particularly in the case of complex devices with many components, OEMs have to continue to keep a close eye on them so that they feel confident about the processes and procedures they and their suppliers maintain. Because a recall situation is going to vary from case to case, it's necessary for the companies involved to determine what the specific recall danger or health risk is and what caused it to occur. For example, they must ask themselves, is the recall the result of a medical device component malfunction? Is it related to the manner in which the device is being implanted or used? Is it the result of manufacturing equipment malfunctioning? A variety of drivers can cause a recall to occur, and you need to isolate the causes to determine how to take preventive measures down the road.

For medical device suppliers and OEMs alike, recall preparedness is crucial. How well are companies prepared to handle a recall if and when it hits? Have they been through the paces? Have they performed the appropriate analyses? Have they identified their core teams for dealing with the situation? By ensuring that they can effectively manage the crisis when it is upon them, companies can ensure, first, that their customers are protected and, second, that their medical devices and brands are protected.

What Manufacturers Can Gain from Understanding the Physician Network

MD+DI: How did the founding of Qforma come about? What were the unmet market needs?

Kelly Myers, president of Qforma

Kelly Myers: When we first started the company, we concentrated in financial services. We were doing interest rate forecasting and black-box trading. All along, we were “teaching” machines to be more right-brained to look for patterns – patterns that humans would not be aware even existed. The period we spent doing this helped me really understand the pattern recognition technologies that were out there. I was thinking about the direct applications of this technology in healthcare even though at that time, we were concentrating in financial services.

 
When 9/11 happened, the financial services industry really took a hit. Understandably, very few were interested in breakthrough technologies; they were more interested in shoring up their core businesses. A lot of what we were doing for financial services was drying up. So I went back to my old relationships within healthcare and pharmaceuticals and started looking for work. One by one we bridged into projects, first getting into traditional data analytics for pharma looking at who the most important physicians are from a volume perspective, and how you organize around them. We thought there was likely a better way to look at identifying how value is created within healthcare for pharmaceutical companies. So, instead of looking at physicians who prescribe the most, we dove into the questions: What influences them? How did they reach that decision? We then developed a hypothesis that physicians influence each other. To test that hypothesis, we started looking at data in a way that revealed the connections between physicians. Once we understood those connections, we wanted to know if we could infer how physicians may impact each other. We were successful and found some good data that showed that physicians are influencing each other. Many of the most influential physicians weren’t the busiest physicians; they weren’t seeing the most patients; they weren’t doing the most procedures, nor were they writing the most prescriptions.
 
That was interesting for a lot of reasons. Biotech, pharma, and medical device companies tended to concentrate on the high-volume physicians. We were changing how physicians could be valued, and we began to advance this idea of the network of physicians versus individual physicians from a targeting perspective.
 
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MD+DI: Talk about the technology you’re using at Qforma. What was its point of development and how has it changed?
 
Myers: We developed a hypothesis. The hypothesis was that physicians work together at a local level, and there are small networks of physicians that work with each other in the care of a patient. They help each other diagnose and treat patients. They develop areas of expertise, and they refer patients to other physicians. Medicine is becoming more specialized—that’s the fact.
 
The hypothesis was, if that’s the case, these physicians have to network together to deliver effective care. If they’re working that closely together at a local level, they’re probably impacting each other’s behavior. There’s probably an 80/20 rule at work here—20% of the physicians are probably impacting the behavior of the other 80%; but it’s probably on a topic by topic basis, or a disease by disease basis, because of this focus on specialization. That was one driver in the development of the technology.
 
The next driver was that there has to be a better way to value physicians given the fact that the value historically was just based on how busy they were. If a physician was really busy, then he or she was valuable; but, we wanted to know who influenced that physician and what influenced practice patterns. Roger Jones [co-founder and COO of Qforma] and the team pointed out that there were a number of techniques that we could use to analyze claims data to infer these relationships between physicians. If we can infer these relationships, we could get a sense for who’s leading the behavior change, who’s responding, and what is the impact at the local level of these behaviors.
 
MD+DI: How have client needs changed since the founding of Qforma?
 
Myers: When we first introduced this approach leveraging data analytics, clients that responded the most were the Davids who were fighting the Goliaths. These were the small and mid-sized pharma, biotech, and device companies that couldn’t afford to call on every physician. The idea of helping them identify the 20% of physicians that had a big impact on the other 80% was very attractive to them. It gave them a mechanism by which to compete with the large manufacturers of the world. As we were starting to build a track record, a whole sea change was occurring in healthcare—in and around pharma, biotech, and devices—including the patent cliff and more price pressures. Then, larger companies started developing an interest because they had to now transition from a “do more-with-more” culture to a culture of fewer resources, while still needing to grow their top and bottom lines (a “do more-with-less” culture). In 2008, the larger companies began taking a significant interest in what we were doing, because they too had to now take an interest in identifying the leverage points. That was a response to the market dynamic shift at that time.
 
When we first started, the world was still interested in identifying individual physicians, which we were able to deliver. We used a connection of networks between physicians to help value the individual physician. The questions we can address now include: If we’re identifying the network of physicians, why would we still act on the individual physicians? Can we start to implement against an entire network instead of just targeting individual docs? Now, clients are looking at the networks we’re identifying and acting on the entire network instead of the individual physician within the network.
 
MD+DI: How are you working with your medical device clients and meeting their needs?
 
Myers: Medical device companies were our first clients. We had this mutual “ah-ah!”moment in looking at networks. They were one of the first to realize the opportunity of identifying the network and the potential of what you can do with this information. A lot of medical device solutions have to involve a number of different physicians and a number of different relationships—primary care physicians that refer patients to specialists, etc.
 
It provides medical device manufacturers the opportunity to distribute disease awareness messaging, solution awareness, and for a subset of physicians, differentiation of their solution. Understanding network and patient flow helps device marketers identify the entire network and segment their messages for the most appropriate part of the network based on that physician’s role in the care process.
 
MD+DI: Based on market trends, where do you see Qforma headed?
 
Myers: During the last several years, we have concentrated on understanding how physicians work with each other and how decisions are made amongst physicians. We’re evolving that model now revealing that yes, physicians are involved in healthcare decisions (they’re the driver in most cases), but there are two other big drivers—payers and patients. More and more, they are all a big part of decisions. And in some decisions, payers play a bigger role in the decision than the physician does; in others, the patient will play a significant role
 
Currently, the decisions are still physician-driven. The shared-decision model is where we’re evolving, to merge all data—social media data, healthcare data, consumer demographic data, transaction data—to help reveal how each healthcare decision is made, and what each of the three stakeholder’s role is in a healthcare decision. This is where Qforma is concentrating right now.
 
We’re along the lines of a social media-meets-Moneyball-meets-healthcare data analytics. Put them together and you have a completely different perspective of how healthcare decisions are being made. This is where we are focusing our efforts going forward. It’s our belief that new and emerging datasets like social media data, connect patients to each other and potentially connect physicians to patients in a HIPAA compliant manner, and address the role of payers as well. We’re in the business of understanding and making sense of all of these interconnected relationships.
 

Maria Fontanazza is managing editor at UBM Canon. Follow her on Twitter @MariaFontanazza.

Women in Medtech: FDA’s Christy Foreman Urges Students to Find a Mentor

Christy Foreman, director of the Office of Device Evaluation at CDRH
As director of the Office of Device Evaluation (ODE) at CDRH, Christy Foreman is responsible for one of the most critical departments at the center. She has been with FDA for 16 years, gaining extensive experience as a reviewer in ODE’s Anesthesiology and Defibrillator Devices Group, a deputy director in the Office of Compliance, and then the deputy director for science and regulatory policy at ODE.
 
Foreman has an impressive resume, but her advice to young professionals is simple and straightforward—find a mentor, someone who can serve as a guide before you navigate into the complex world of “the rest of your life.”
 
MD+DI: How did you get your start in the medtech industry?
 
Christy Foreman: In high school I always had an interest in math and science, so that influenced my college major, which was biomedical engineering. I chose biomedical engineering over one of the more traditional engineering fields because I saw it as a blend of math and science in a way that included biology—I really liked biology. I had a coop opportunity when I graduated from high school with the Naval Medical Research Institute, so they paid for my education. I worked for them while I was in college. That started my interest in medical research. We did some animal and human studies, and that helped formulate my scientific thought process and science development. I worked there for several years after I graduated, and I started looking for other jobs. It was time to do something different, and that’s how I ended up at FDA as a reviewer.
 
MD+DIWhat important challenges does the medtech industry face in the next 5 years?
 
Foreman: The challenge is actually [that] technology is moving at a very fast pace. We’re seeing more and more combination products. It’s not just the device anymore. It’s the device plus a drug or a device plus a biologic. It’s far more complicate to understand the performance of that product than typical bench testing. We need more clinical experience, and in many cases, we’re developing new science and new theories. Merging devices, drugs, and biologics is where companies want to go in the future, and it’s going to be increasingly challenging from both a company and FDA perspective to figure out how to appropriately regulate those products.
In addition to combination products, personalized medicine and companion diagnostics will be confronting the medtech industry.  Healthcare decisions will be increasingly managed by patient specific genetic information and companion diagnostics will be used help select patient therapies.  This is an area with significant potential for advancing healthcare.
 
MD+DI: How can more women get involved in the medtech industry?
 
Foreman: I think it does start back in middle school and high school in terms of taking math and science, and choosing majors that will support a medtech career. When I was in college, one of the things I noticed is that my biomedical engineering class was actually 50% women, which I thought was pretty high at the time. Now I’m hearing that some classes are even higher. Biomedical engineering tends to attract more women than other engineering disciplines. Having those early opportunities and knowing its ok to like math and science even if you are a girl, and following those interests.
 
MD+DIAre there barriers to women entering the medtech field? How can they be overcome?
 
Foreman: At CDRH we have a very high percentage of women. I don’t know that I necessarily see a barrier. I would say that it can be challenging to manage a career and family life. You have to figure out how to prioritize that. With that, it makes great multitasking in terms of managing projects, complex portfolios, and file submissions. In the medtech industry, I haven’t seen a barrier. In fact, I think it’s very attractive to women.
 
MD+DI: What advice would you give to women who want to enter the medtech industry?
 
Foreman: When you’re first choosing your major, I know it’s difficult to decide what you want to do for the rest of your life. I’ve always advised people in high school and college to find a good mentor who can open up the possibilities and let you know what’s out there and what’s available. [Then] when you make a decision, you’re actually making an informed decision, and you can balance your skill set and interests to choose a career that will give you the most satisfaction.

Maria Fontanazza is managing editor at UBM Canon. Follow her on Twitter @MariaFontanazza.

Venture Capital Is Not Dead…Just Resting!

Venture Capital Is Not Dead…Just Resting!

For years, critics, and even some VCs themselves, have been saying that the venture capital model isn't working. Now, the Kauffman Foundation, a supporter of entrepreneurship and a long-term ally of the VC industry, has published a report titled “We Have Met the Enemy and He is Us” adding weight to that argument. Drawing on the twenty years of the organization’s VC investing experience, it concludes that the limited partner (LP) investment model is broken and condemns LPs for supporting underperforming VC funds that often have terms that are unfavorable for them.

As the report explains:

The most significant misalignment occurs because LPs don’t pay VCs to do what they say they will—generate returns that exceed the public market. Instead, VCs typically are paid a 2 percent management fee on committed capital and a 20 percent profit-sharing structure (known as “2 and 20”). This pays VCs more for raising bigger funds, and in many cases allows them to lock in high levels of fee-based personal income even when the general partner fails to return investor capital.

The report stops short of suggesting that venture capital investment be scrapped entirely and it offers suggestions on how to fix the model—among them are changing VCs’ compensation structure to pay them for their performance and measuring VC fund performance using a public market equivalent. The report also suggests shifting investments to smaller funds. 

Lisa Suennen
 Lisa Suennen 

Venture capitalists, of all people, should be up to the task of fixing the venture capital model, says Lisa Suennen, a co-founder and managing member of Psilos Group, a healthcare-focused venture capital firm in an interview conducted before the release of the Kauffman report. “If a bunch of people whose job it is to help companies fix problems and grow, can’t fix their own problems, than all is lost,” she quips.

Summarizing her thoughts on the venture capital model, she jokingly quotes Monty Python's Dead Parrot sketch: “It is not dead... it is just resting!” 

“Every industry needs to evolve,” she explains. And the venture capital industry is no different than any other in that respect. And venture capital continues to play an important role in the economy. ”Venture capital is rocket fuel for the innovation economy in our country. It is very difficult to create significant innovations without investment of venture capital,” she says.

Summarizing her thoughts on the venture capital model, VC Lisa Suennen jokingly quotes Monty Python's Dead Parrot sketch: “It is not dead... it is just resting!”

Speaking at in a panel discussion at Calbio annual conference in March, Camille Samuels, managing director, Versant Ventures had similar thoughts about the continued relevance of the venture capital model, while also agreeing that the model needs to adapt to the needs of current markets. 

At Calbio, Samuels expresses concerns about the VCs habit of investment companies that are engineered to be acquired rather than becoming public companies through an initial public offering. “Unfortunately, one of the things that we are doing as an industry is starting to build companies exclusively to sell. Certainly, when I was first brought into this business—and it was very much an apprenticeship business—I was taught you have to build a company so that it could stand on its own,” she said. “Now, because there is so much time pressure on VCs and entrepreneurs as a result, there has been this push to build to buy. And I think that is unfortunate long-term for the industry.”

Challenges Specific to Healthcare Investing

In addition to the challenges facing the broader venture capital investment industry are several unique troubles facing the healthcare industry. For one thing, VC investing in the tech industry continues to greatly outshine the life sciences: in terms of dollars returned, valued created in the global market, etc.

An additional challenge is the fact that it is difficult for healthcare startups to iterate new problems as in the tech industry—particularly as is the case with the software industry, where startups routinely “pivot” and shift their focus from one idea to another more-promising alternative. 

Healthcare companies are not usually so flexible. And investing in healthcare can take a lot of time before it is profitable—on the order of 10 or more years to grow to a company to a significant size. “It is hard work. You have to be patient, committed, rationale, and reasonable about what it takes,” explained Camille Samuels. “That lends itself to a different type of venture capital in terms of expectations for returns, timeline-wise, etc. And some people have the stomach for hat and some people don’t.“

And then there are concerns about the FDA and its recent low tolerance for risk. “Venture capitalists are being very careful with the type of investments they are making in the device and diagnostic space because of the relative uncertainty that they are running into at the FDA with the approval process,” said Tracy Lefteroff, global managing partner of PricewaterhouseCoopers' venture capital practice. “And they will likely continue to be careful with the types of deals that get funded until they see an improvement in the visibility of the regulatory pathway to approval for these types of products.”

Brian Buntz is the editor-at-large at UBM Canon's medical group. Follow him on Twitter at @brian_buntz.

New Biosensor Could Aid in Early Detection of Cancer

A new biosensor could be several hundred times more sensitive than other biosensors. (Image courtesy of Purdue University)

Researchers at Purdue University (West Lafayette, IN) have developed an ultrasensitive biosensor that could eventually be used for early detection of cancer. The technology could also find its way into personalized medicine, in which it could be used to record an inventory of proteins and DNA for individual patients, improving diagnostics and treatment decisions.

The new biosensor combines the attributes of two distinctly different types of sensors, making it several hundred times more sensitive than other biosensors, according to Muhammad Alam, a Purdue University professor of electrical and computer engineering. "Individually, both of these types of biosensors have limited sensitivity, but when you combine the two, you get something that is better than either," he remarks.

Known as a flexure-FET biosensor, the technology combines a mechanical sensor, which identifies a biomolecule based on its mass or size, with an electrical sensor, which identifies molecules based on their electrical charge. Because it can detect both charged and uncharged biomolecules, it is capable of performing a broader range of applications than either type of sensor alone.

The technology consists of a vibrating cantilever on top of a transistor. While other mechanical biosensors require the use of a laser to measure the vibrating frequency, or deflection, of the cantilever when it is struck by a biomolecule, the new sensor uses the transistor to measure this vibration. The sensor's sensitivity is maximized by the use of an electric field that biases the cantilever and transistor, pulling them downward.

In the early detection of cancer, the sensor could detect small quantities of DNA fragments and proteins deformed by cancer long before the disease is visible using imaging or other methods, Alam notes. In addition, the sensor can be configured to detect almost any molecule.

Rikei offers pair of epoxy products

A pair of epoxy products offered by Rikei are designed to make the medical device designer’s task easier. First is EPO-TEK H20E, a two-component, 100% solids silver-filled epoxy system. It’s designed specifically for chip bonding in microelectronic and optoelectronic applications. Due to its high thermal conductivity, the product is also suited for thermal-management applications. EPO-TEK H20E is also available in a single component frozen syringe.

The second product, EPO-TEK 353ND, is a two component, high-temperature epoxy that’s also available in a single component frozen syringe. It offers a reasonable pot-life that allows for low-temperature curing to be realized (with an amber color change upon cure). EPO-TEK 353ND passes NASA low outgassing standard ASTM E595 with proper cure. Potential applications include potting fiber optic bundles into ferrules for light guides and endoscopes (it’s can resist several sterilization techniques including ETO, gamma, ION beam, and H202 plasma, and adhere to most surfaces); and as an adhesive for catheter devices including stents and guide wires. The epoxy is certified to USP Class VI and ISO 10993 biocompatibility standards for medical implants and is compatible with CIDEX OPA sterilization.

Richard Nass