And you thought tech startups had problems in this market.
Makers of medical devices are smarting, too, I learned this morning at a conference put on by law firm Cooley Godward Kronish in San Francisco. Deals involving medical-technology companies raised just $13 billion last year, down from $35 billion in 2008. (Those figures include only disclosed deals of more than $100 million.) And of the top five med-device IPOs since 2007, all priced significantly below the midpoints their original, expected range, according to Jon Hammack, a Morgan Stanley executive director who addressed the group. Only one of those companies is now trading up. “2010 is going to be another slow year” for device IPOs, Hammack said.
There were plenty of healthcare VCs milling about the confab, including Dana Mead of Kleiner Perkins. Mead confirmed what most people in the Valley already know about the VC fundraising situation: It’s tough out there. He said one Kleiner LP, an endowment, recently told Kleiner it has investments in 35 different venture firms but wants to pare that number back to 15. “We hear a lot of dialogue like that from LPs,” Mead said.
Jonathan Norris, of Silicon Valley Bank, said there traditionally have been about 50 venture funds very difficult for new investors to penetrate; now, there are perhaps 15.
More interesting was the striking vitriol expressed by many panelists and attendees against the Food and Drug Administration, which approves new devices. Dan Lemaitre, the CEO of White Pine Medical and a longtime industry executive, called the FDA’s view on some new regulatory changes “insulting”. I’m assuming he meant the agency’s major review of the so-called 510(k) decision-making process, which allows the FDA to fast-track the approval of certain devices—without major clinical trials–if they are similar to earlier, existing products.
That process came under fire from Congress last year, particularly after a Wall Street Journal story detailed political influence and possible conflicts of interest surrounding the approval of a knee device called Menaflex, made by ReGen Biologics.
At the Cooley event, one attendee stood up during a Q & A session and urged others at the conference to work with industry lobbying and trade organizations to push back against the FDA and promote device companies’ interests in Washington. Others had a more measured view. Ferolyn Powell, who heads cardiac-valve repair company Evalve, now owned by Abbott Laboratories, said the FDA’s mandate should be changed to improving the public’s health, instead of simply protecting the public.
Perhaps. But I still think the FDA still has an important role in protecting people from bum devices. The recent stories in the New York Times about error-prone radiation machines used to treat cancer patients were simply chilling, in my view. Operator error caused some of the horrific problems experienced by patients. But doctors quoted in the articles also raised concerns about software glitches in the computer-controlled devices.
