Panel Examines Changing Medtech Business Climate

Start-up companies seeking funding for traditional “incremental” medtech ventures beware: Funding may not be as forthcoming as in the post.

According to Rick Anderson, managing director at PTV Healthcare Capital, simply designing a better trocar is not as attractive to investors as it once was.

Conventional medtech companies have recognized this fact and are looking to form nontraditional alliances, he said. Anderson spoke with other investment experts at AdvaMed 2015 in San Diego.

Leslie Bottorff, managing director for healthcare at GE Ventures, agreed with Anderson’s assessment, noting that the business model is evolving and more devices are incorporating drugs or software.

Nick Manusos, vice president for global business development at Baxter International, cautioned, however, that when innovative outsiders such as Qualcomm partner with traditional medtech companies, they often are frustrated with the plodding pace of innovation and product development. Devicemakers need to learn to be more nimble, he said.

“In this changing world, not partnering is not an option,” Manusos emphasized. He stressed the need to be open-minded and consider partners that might not have been considered a decade ago.

“Partnerships can’t be stressed enough,” James Woods, principal of deals and valuations at PwC, tells IDDM. In the past, GE, Medtronic and other big players have not had to compete head to head with the likes of Google, Facebook and Samsung. Rather than trying to beat them, many are now trying to join them.

Woods says companies are recognizing that they must look outside the industry, as they aren’t as agile internally. Devicemakers are looking for tuck-in acquisitions — deals that bring smaller companies into a division within the company.

Another change is the consumerization of healthcare. Anderson worries that medtech companies may be falling behind.

One trend that the panelists aren’t keen on is crowdfunding. While Bottorff said GE Ventures had worked with Ourcrowd, a platform for accredited investors looking to invest in Israeli and global early stage companies, her group largely is shying away from unstructured funding.

Anderson struck a similar tone, noting that investing is for the long haul. Relying on people who invest a few thousand dollars at a time, then bail when times get tough, isn’t a sound business strategy, he said. — Elizabeth Hollis