Rise of Life Science Industry: Start of Life Science Bubble

Private investor are jumping in to invest in Medical Device industry as it head for a health care boom in Asia by 2015. 
The increasing incidence of chronic diseases such as Obesity,  diabetes, cardiovascular disease, chronic wounds, immobility, pulmonary and vascular diseases is enhancing the need for patient care in hospitals, homes and other care facilities, thereby contributing to the demand for medical devices and diagnostics that are capable of enhancing the overall quality of life. The US leads the high-technology medical devices market, but faces fierce competition from emerging economies. Despite being way behind the US in terms of expertise or innovation, these countries compete on basis of production of low cost medical devices. Demand for medical devices in developing countries, especially China and India, is expected to grow at a faster rate than developed countries owing to factors such as rising disposable incomes, increase in patient population, growing waist lines, obesity on the rise and both India and China face an epidemic of diabetes and obeisty. Australia UK , US, Canada and Mexico are already declared an Obesity epidemic. The obesity device market will be the biggest in the healthcare sector.
Asia is seeing increasing healthcare awareness, improvements in healthcare infrastructure and increase in healthcare spending . In majority of the Asian, Latin America and the Middle East countries, government efforts are focused on improving healthcare services and infrastructure facilities, which is expected to fuel the demand for medical equipment in the next 3 years.
The medical device industry has not been totally insulated from the adverse economic conditions, as evident by the decline in admissions across healthcare facilities and hospitals. Owing to the high levels of unemployment, elective, orthopedic, and cosmetic procedures witnessed a significant decline, thereby affecting profitability of hospitals. Additionally, rising capital costs, declining patient volumes, and unfavorable reimbursement scenario affected revenue generation. With most surgical systems and equipment being capital heavy investments, tight liquidity, lack of credit availability, capital shortages, and high borrowing rates, triggered by the recession, forced hospitals and healthcare facilities to reduce capital expenditures on new equipment. Though developed countries such as North America, Japan and Western and Northern Europe witnessed subdued spending on healthcare services, level of healthcare expenditure in developing markets continued to increase thereby fuelling the demand for medical technologies, products and services. However, mounting healthcare expenditure presents a considerable challenge for most countries, particularly in developed countries that are already grappling with the volatile economic environment.
India and china face a problem of metabolic disease. Which is a mix of hypertention, heart disease and diabetes. The smokers in the region have increased the incidence of tobacco related problems.
Coronary stent shown below is one medical device that is implanted every 20 seconds in Asia.
There is a increased demand in consumables in the medical device sector. Implantables like the lap band will grow in Asia.
Technologies in orthopedics and spine are in great demand. Larger companies cannot compete with small and nimble manufacturers.
Spine surgery is reverting to posterior open repairs due to slower adoption of minimally invasive surgery. The outcomes show little difference between the traditional posterior fixation and minimally invasive surgery. It will take a decade for new technologies to be adopted.

Increase number of private investors are jumping into the space because the institutional investors have not raised new money to invest in early stage technologies. Private investors did not have this opportunity before. The only time they can participate in  the funding of such technologies is at the seed stage or Series A of the companies. Thereafter the institutional investors grab the opportunity. All the way to the exit of the company, which can be by virtue of M&A or IPO.

Changing Tide for Life Science Industry 2012-2015

Changing Tide for Life Science Industry

Innovation is a key differentiators in Life science industry—perhaps the key differentiators—in the marketplace, separating winning companies from the me too. It takes a wide array of forms, from new-product and product development to the reinvention of business processes and the launch of entirely new business models which included global markets. It is the subject of endless discussion among executives, How can we make our med tech company more innovative?

SEVEN: www.lifescienceinvestorsummit.com 

conducted a survey.

Our latest survey on the topic, to which executives representing all major life science companies , private investors and some VCs responded, sheds new light on how med tech companies are pursuing innovation—how they’re going about it, what they’re emphasizing, and what’s working and what isn’t. Among its key findings:

• Innovation remains a top strategic focus for the majority of medtech and life science companies, with 66 percent of respondents to our survey ranking Obesity/ Diabetes, Orthopedics/Spine and Cardiovascular of their top-three therapeutic areas of focus and strategic priorities.

• Consistent with that finding, 67 percent of respondents said their companies will increase spending on innovation in 2013. Either in the way of R&D or acquisitions.

• Simultaneously, many executives over half of those we surveyed remain unsatisfied with the financial returns on their company’s investments in innovation. More funds need to be infused, because there is more demand from China, Brazil, India, Russia, and the rest of the world.

·        A risk-averse VC culture, lengthy product-development times, and a lack of funds are the three biggest stumbling blocks facing companies seeking to improve their return on innovation.  

      But, this is changing; VCs are now looking at early stage, rather than later stage companies in the Obesity and Diabetes sector. “Investing in any obesity company is going to give us terrific returns” commented one VC.

3 Keys to Success of Innovaition: like Facebook

Making Bold Decisions:  May Be Controversial- As a CEO/Founder its your vision and decision, stick to it!

click the image


BJ Foggs Behavior Model shows that three elements must converge at the same moment for behavior to occur:

Motivation
Ability
and Trigger

When behavior does not occur, at least one of those three elements is missing.

SEVEN: Rules for Start up Entrepreneurs

SEVEN: Rules for Start up Entrepreneurs
See if you can qualify to join the Scientific Entrepreneur & Venture Capital Network on Linkedin.
Most VCs and entrepreneurs believe start-ups are inherently iterative, that a string of mistakes doesn't prevent success, but may even be the path to it. Generally, that view is correct, but there are a few choices made early on that have implications so deep as to be functionally irreversible, with profound implications for outcomes. Product and business models are evolutionary by nature, but we see four things a young company must get right:

• The founding structure, team and values
• Where the company is located
• Strong IP if possible
• The initial investors (and their terms)
• Learn from your early mistakes
• Keep team morale high
• Don’t stop to seek money for the company.

Good Founding Structure, Team  and Values
A good start up company usually begins with a solid founding team. The team can be small but all members of the team need to be extremely cohesive. Members of the team need to understand the vision and core value proposition of the founder for the company.
The company structure is key, it needs a lot of thought, the capital structure,  the amount of money to be raised as seed money, the use of its proceeds. Do not underestimate the process and the hurdles you may face.

Process and hurdles are small surprises, which will come more often as the company progresses fast, how you resolve small surprises is very important. If you think ahead, the there will be fewer surprises over time and the mean time elapsed between surprises increases. So the key is don’t assume plan, plan, plan.
Location of Company:
Location of company is very important to get funded. If you are a life science or medical device company you need to be in Orange County, Ca , or Silicon Valley or  in Boston to get funded and acquired. The VCs would like you to be where the talent is abundant. An IT or Social media company needs to be in the area where there is culture of social media eg in Palo Alto, Stanford not near Berkley or San Diego.
IP and IP Attorneys:
It is imperative to have a terrific patent attorney to file the IP for your great idea. Any mistakes in the filing of the IP can result in grave damage to the value of the company.


Initial Investors:

Make sure the value of the company is reasonable and you have solid initial investors. As you reach the 1^st round of funding , it is important who is the lead VC in the company

Learn from early mistakes:
Keep in mind we learn, we learn, we learn! Everyday as a start up team. Learn early and learn fast from your mistakes. Have frequent meetings with your team to discuss: “What we know, and what we don’t know”.

Keep team morale high:

Who says its easy, it’s not supposed to be easy, that is why you are the chosen few working on this project.  Make sure the morale is high, take breaks, encourage the team and think positive.  Get the team members off the project if they are overtly negative, you want the enthusiasm very high.


Don’t stop raising money:
Don’t stop, keep making presentations to investors and people connected with money. Build relationship with industry players that will endorse your product when you need it the most.

 

Golden Rule: Don’t give up! Success belongs to those who are persistent.

 http://lifescienceinvestorsummit.com/blacktie-overview.html

The Scientific Entrepreneur Venture Capital Network will be hosting a Life Science Executive Mixer at the Pacific Club in Newport Beach, CA. The one day Black Tie event is scheduled for Thursday May 24th 2012, and will start at 5:30 PM - with cocktails to be served, and presentations accompanied by hors d'oeuvres lasting until 9:00 PM.

Approximately 200 Life Science executives, investors, and startup entrepreneurs are expected to attend, with the event focused on bringing together Medical Device, Pharmaceutical, BioTech, and Healthcare IT executives, startups/entrepreneurs, and investors to boost the booming life science industry in Orange County, and the greater Southern California metropolitan area.

SEVEN is currently screening Medical Device, Biotech, and Healthcare IT startup companies interested in presenting at an exclusive CEO/Investor Black Tie Event for Life Science companies. Table tops are limited to 20, and are an excellent opportunity to pitch to investors / industry leaders. If you are involved in a startup that focuses on innovative technology and consists of a strong team with a great background, then contact us to qualify for the event.You could also mail us a copy of your presentation today, or call Raj at (714) 658-3039.

Health Care Bubble: Investment Opportunity

Investments in Obesity related technologies, Health Care IT, Orthopedics, Spine, Plastic Surgery seem like good bets!

Dot com bubble. Real estate bubble. Commodities bubble. Healthcare bubble? How can the US healthcare system be a bubble when tens of millions are uninsured and more people fall through the cracks daily? The media, public, and politicians alike have been more concerned with the inadequacies of the system than with its rapid growth. US healthcare spending has grown enormously, exceeding the rate of inflation for decades to become the largest sector of the US economy. The United States now spends over 16% of its GDP on healthcare, almost double the average for developed nations.

Perhaps Americans just demand the best and priciest healthcare, with the most modern technology and treatments. If Americans paid for healthcare themselves, this would simply represent a rational spending choice. But the federal government now incurs 60% of all healthcare spending, meaning that taxpayers, and not individuals, pay for most of our healthcare. Medicare, Medicaid, and other direct government healthcare accounts for 46% of healthcare spending, while tax breaks on healthcare subsidize another 10-15% of healthcare spending [1].

At current growth rates, government healthcare spending will exceed the entire Federal budget by 2050 [2]. Total spending on healthcare will near one-third of GDP by 2030. It’s unlikely that the US can devote 1/3rd of all productive capacity to healthcare without crippling other sectors of the economy and reducing overall economic growth. The healthcare bubble thus dwarfs all previous bubbles in size, since the technology, real estate, and energy sectors are all so much smaller.
How will the bubble pop, and what will its effects be? Since most healthcare spending is federal, the bubble will pop when the government can no longer afford its healthcare outlays. The US has been able to borrow freely by issuing debt for many decades, but this will eventually end once our debt exceeds GDP. With the current downturn, government debt may actually exceed GDP by 2015 [3]. Thus the reckoning may come sooner than many expect.
Will healthcare reform contain costs and deflate the bubble gradually? Most reform plans focus more on increased coverage than on cost control, so they may exacerbate the problem. Eventually the hard choices will have to be made, and they will include some combination of reducing Medicare benefits, cutting provider reimbursements, openly rationing government health care, and limiting the tax break on health insurance. I just hope that some of the hard choices are made before we are collectively up against a fiscal wall.

[1] $200 Billion in taxes are foregone as a result of the employer-based healthcare tax deduction, equivalent to 10% of all healthcare spending. When this subsidy is included the government’s share of healthcare spending rises to 56%. This analysis does not include the exemptions on property taxes and sales taxes that healthcare providers receive; adding these subsidies in would likely drive the government’s share of health care spending over 60%.
[2] The CBO predicts that Medicare and Medicaid will account for 14% of GDP by 2050. This figure doesn’t include healthcare spending through the VA system, SCHIP program, and other federal healthcare programs, which total $100 Billion in spending today. If these programs also grow commensurately, total government spending may near 18% of GDP in 2050, roughly equivalent to total government revenue.

[3] This projection of public debt growth shows that US government debt will exceed gdp by 2050. This only takes into account debt held by the public, however. Gross government debt is already above 65% of GDP, and may grow to 75% by the end of 2010 as a result of the recession and stimulus spending. With deficits of $500B+ per year possible for several year, US total government debt could exceed gdp in less than 10 years.

Jump in Life Science M&A

Jump in Life Science M&A

Though M&A activity took a sharp jump in April reaching $29.1 billion compared to just $6 billion in announced transactions in March, activity still lags the pace from a year ago. Overall, M&A activity through April lagged the pace of M&A activity through April a year ago as activity involving U.S. targets fell 25.1 percent and global activity fell 43.4 percent. That's attributable to outsized acquisition made during the first four months of 2011 including Sanofi's $20.1 billion purchase of Genzyme and Johnson & Johnson's $21.3 billion acquisition of Synthes.

The IPO market in April remained unwelcoming to life sciences companies. Osprey Medical, an Eden Prairie, Minnesota-based medical device company, bypassed U.S. exchanges to go public on the Australian Stock Exchange. The company raised $20.8 million through the sale of Chess Depository Receipts. It's the third U.S. medical device company in the past year to look to the Australian market to go public in part because of a more welcoming regulatory environment for medical devices than in the United States. Life sciences companies that went public since January 2011 are down 10.9 percent as a group through April 30, 2012.

On the venture front, U.S. companies raised a total of $698 million in April with bioindustrial financings leading the way with $261 raised. Algae-based biofuels developer Sapphire Energy raised $144 million, the largest venture financing of the month. The therapeutics sector was a close second with $251 million. Argos Therapeutics, which withdrew an $86.3 million IPO in March because of an unwillingness to cut its share price as steeply as public market investors demanded, completed a series D venture financing for $25 million to begin late-stage clinical testing of its personalized immunotherapy to treat kidney cancer.

April also saw the signing of the Jumpstart our Business Startups Act, or JOBS Act, legislation intended to provide easier access to public markets for emerging growth companies. The law lowers the cost and regulatory burdens these companies face in raising capital and being public by providing exemptions to existing securities regulations.

 The hottest subject continues to be health care cost and methods to reduce the health care expense. One of the biggest expense is the "cost of obesity"

US spends over $150 Billion on obesity and its consequences.  Obesity sector along with the Diabetes is getting a lot of attention. Investors, drug and device companies are starting to  explore strategic investments in treatments that can address obesity and diabetes.  GI dynamics,Satiety, ReShape, Onciomed, Enteromedics, USGI. BaraNova, Endo Gastric Solutions. Companies that can use minimally invasive methods to treat obesity. Clearly, with the presence of lap Band maker Allergan in Irvine, CA. Orange County, CA has become hub to such minimally invasive weight loss technology start ups seeking venture capital. OC is also well known ophthalmology hub and now a start up med device hub.

On the partnering side, activity still is off the pace of 2011, but April did see a number of notable transactions including Merck's potential $1 billion deal with Endocyte for its late-stage ovarian cancer therapy. Other transactions reflected the high prices early-stage therapeutic candidates are commanding today. This includes Celgene's potential $250 million deal with Epizyme for its pre-clinical epigenetic experimental cancer therapy and GSK's $223.5 drug discovery collaboration with FivePrime Therapeutics focused on respiratory diseases.