The second day of Biotech Showcase™ 2016 began with a focus on medtech. The Medtech Showcase State of the Industry Report was moderated by Vicki Anastasi of ICON with panelists Patrick Daly of AdvaMed and Cohera Medical; Andrew Fish of AdvaMedDx; and Bill Murray of MDIC.
The focus of the session was on value-added technologies, patient choice, and strategies that engage patient groups in getting a product or technology to market. The industry has come far over the last 20 years, and there are some game-changing medical technologies out there. But the question is whether the public is willing to pay for them? Having an excellent product execution strategy is key, as well as early consideration of reimbursement issues combined with flexible revenue-sharing business models. Sensors, eHealth, apps, and diagnostics all need to come together and connect despite different business plans. Some best practices for medtech companies are getting their products to market; always remembering that reimbursement is a challenge; a shift in innovation paradigms to get new tech through the FDA; and an unwillingness of the culture to accept inadequate care in exchange for a cost discrepancy.
You have to be able to sell the clinical utility of a given medtech product. There are a lot of unknowns in the application and regulation of diagnostics, wearables, and digital health, to name a few. But a tremendous amount of work has been undertaken by the FDA in trying to regulate these technologies. These are the things that are going to break current paradigms. Recent success came with the aggressive campaign for repeal of the Affordable Care Act tax of 2.3% on medical devices that resulted in a two-year suspension of the tax from 2016 to 2017. This was a significant win brought about by collaboration across multiple associations. Overall, it’s an exciting time for the medtech industry, for patients, and for new paradigms in treatment modalities and diagnostics. The road ahead will not be easy but it presents a great opportunity to create value.
Lunch plenary: What’s different?
Today’s lunch plenary was one of my favorites of late. “State of the industry: It’s different this time,” was moderated by Ben Bonifant of Triangle Insights Group and featured panelists Tim Herpin of AstraZeneca; Philippe Lopes-Fernandes of Merck KGaA, Darmstadt, Germany; Diego Miralles of Johnson & Johnson Innovation; Dennis Purcell of Aisling Capital; and Luke Timmerman of Timmerman Report. Gathered to debate what the differences really are, the panelists engaged in lively banner that made me feel like a fly on the wall in a candid conversation that covered everything from pipeline, modalities and new players on the investment scene to big picture issues and yet again, the pricing debate.
Pipelines are better, the FDA is on board being more communicative, collaborative and receptive, and investors are tuned in to these positive changes, said Timmerman. Add to that the new investors in the sector over the past couple of years that have brought new life to the old cast of characters, and 2016 is looking like it will be a “show me” year to temper the hype about areas such as immuno-oncology, said Purcell. In the third quarter 2015, ETFs have made up one-third of the volume of the stock market, topping out at USD 22 billion. Today they are at USD 14 billion. Some of the new investors left in the fourth quarter but there are plenty of investors who still want to invest in the sector, said Purcell. The big, sophisticated investors are giving to VCs directly, which is changing the whole ecosystem.
At J&J, the focus used to be on R&D, said Miralles. But at the turn of the century the industry changed how they source innovation to join and connect with the larger world to access innovative and outstanding potential. Pharma now wants to leverage outside capital and partner with VC investors, therefore dismantling the old model.
Lopes-Fernandes added that it is important to broaden sourcing of opportunities, to share more value. Traditional VC efforts and early stage financing as a model has been very successful for J&J.
But when you ask “is it different this time?” you have to consider that the perception of the industry has gone down. “We used to wear the white hats—the biotech industry—and now we’re getting painted with the pharma industry,” said Purcell. “Can we change what we’re doing? All anyone ever talks about is price. God willing,we’re going to come up with cures for disease but the public discussion is all about price,” said Purcell.
Herpin added, “We’ve talked about funding for small early stage companies but funding options for companies at all stages has improved.” There are more options. The latest trend, said Herpin, is that young biotechs compete for early innovation. They are much more competitive. “On the pharma side we have become more flexible and diverse in the types of deals we do,” he said. The trend is that there are many more options for biotech.
By limiting investment, you’re limiting potential, said Lopes-Fernandes.
Yet, said Timmerman, there are a lot of new industry investors who are drawn by positive returns. At the first sign of trouble, some of them left. “People got a little twitchy,” said Timmerman. Five years ago there were 400 companies of consequence to follow, said Timmerman. Now there are 550.
The big picture, according to Miralles, is that never in history have we had eight years of no interest rates. Money is incredibly cheap, and there’s no inflation, so growth has to come from real growth, he said. “What’s unique about our industry is it’s a long-term industry with a long-term future, said Miralles. “We are in an industry where the tolerance of the the investor is long-term, high-risk. It’s like a candy store,” said Miralles. “So many things we can do that we couldn’t do.” The industry is blooming.
Timmerman quipped that it’s a shame that the industry is now on par with big tobacco and Congress. “The industry has just done a really bad job—comically bad—of explaining what it does to the public,” said Timmerman. What would Timmerman do if he could change that perception? “Agree to inflation protection,” said Timmerman.
More important than pricing debates, Lopes-Fernandes said that the industry needs to ensure that they have a future. “We need to be proactive and get our act together regarding our image, and how we explain what we’re doing,” said Lopes-Fernandes.
Timmerman added, “There’s a long-term system price creep that the industry hasn’t dealt with. Purcell added, in the past we operated in silos. “I think we have to bring insurers and health systems into the game. We’re going to start seeing health systems be the payers,” said Purcell. “I thought my job was innovation. Turns out that’s just one part of the equation,” said Purcell.
To watch the full plenary, in addition to onsite interviews and program sessions, check back on partnering360:Insight.
Check out some media coverage from Biotech Showcase below: