Big Device Firms Focusing on Early Stage Opportunities

24 Apr

By Max Klietmann, VP of Research, LSN

It is no secret that venture capital firms are distancing themselves from early stage med-tech investments and are focusing more on later-stage opportunities. Interestingly, there is an emerging trend among the large, established players in the device space, whereby they are making strategic allocations to emerging device companies. What is especially interesting is that in certain indication areas, device companies are starting to see themselves as competitors to pharmaceutical products, meaning that we may be seeing the beginning of a new competitive landscape.

Medical devices were traditionally viewed as a distinct entity in the medical field, and not in direct competition with drug companies. However, as various major sectors in the space are converging, and the concepts of personalized medicine, companion diagnostics, and therapeutically-oriented devices are becoming mainstream, all this is changing. Take for example a major indication like cardiovascular disease – this is an area that has shown limited promise in terms of drug development over the past decade. However, devices might offer a solution for many patients that can be tailored on an individual basis. Consider the faster time to market and significantly lower risk surrounding devices, and you have a major new source of competition in the space.

Of course, the device firms recognize it, and have begun to outwit big pharma using their own strategy. Rather than develop devices in house or focus on later-stage products, many large device firms are investing in seed-stage companies or forging licensing deals early on in the R&D process to build a robust product portfolio. The implications are huge: Device companies may rapidly become the leading solution to many major indication areas, and pharma might be in even bigger trouble than anticipated. However, for the emerging biotechs and medtechs, this is excellent news – the emergence of a new industry-wide arms race means demand for product and a desire to invest capital, helping to accelerate the industry forward and bring cures to patients faster. Brace for impact!

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