In the ever-evolving healthcare landscape, technological innovations continue to drive significant advancements. In this article, we delve into the realm of medical device investment, exploring key trends, opportunities, and strategies for investor success.
The Rise of Medical Device Innovation
The medical device sector is witnessing a remarkable surge in innovation. From wearable devices monitoring vital signs in real-time to sophisticated imaging systems enabling precise diagnoses, the breadth of innovation in medical devices is notable. Moreover, the convergence of medical devices with artificial intelligence, robotics, and telemedicine is opening new frontiers in patient care and treatment modalities.
Sometimes profound advancements are made from recognition of the areas of greatest need coupled with awareness of the underlying advancements in materials science, miniaturization, manufacturing technologies, and digital technologies. For example, VIC portfolio company Calxyo, Inc. was formed address the profound need for improved kidney stone treatment. Kidney stone disease is a common problem that is painful and consumes vast amounts of healthcare resources each year. Calyxo’s innovative stone removal device is likely to rapidly become the new gold standard in stone removal. See video below showing how it works.
Investment Opportunities Abound
Investors keen on tapping into the medical device market have a myriad of opportunities across various segments. Wearable health technology represents a rapidly growing market with immense potential for disruption. Similarly, the field of implantable devices, including pacemakers, neurostimulators, and orthopedic implants, continues to attract significant investment due to the aging population and the prevalence of chronic diseases.
VIC portfolio company SFC Fluidics provides an example of innovation in wearables technology. Over the last five years, the prevailing trend in the diabetes market has been the automation of blood glucose self-monitoring and insulin self-injection. The evolution of glucose monitoring has been swift, transitioning from manual three-times-per-day strip tests to wearable continuous monitors. However, advancements in pump technology have been relatively lacking. Existing insulin pumps on the market lack the convenience and dosing precision necessary to match the adoption rate of continuous glucose monitors. Moreover, these pumps are not well-suited for the emerging higher-concentration insulins currently in development. These new insulins hold the promise of improved clinical outcomes, particularly benefiting hard-to-manage pediatric patients with Type 1 diabetes and the broader population of Type 2 diabetes patients.
SFC is leveraging its patented drug delivery technologies to address the adherence challenges in insulin therapy and other critical treatments. SFC’s technology provides convenience, discretion, and precision, enabling patients to maintain active lifestyles without being hindered by their diabetes devices. The precision of SFC’s novel non-mechanical pump, along with its drug delivery confirmation system, facilitates the safe administration of higher-concentration insulins. This has led to the FDA granting Breakthrough Device Designation status for the company’s Panda™ interoperable pump. This advancement is even suitable for Type 2 diabetic patients—an extensive yet largely untapped market for wearable drug delivery devices.
Additionally, SFC is developing a wearable Gemini™ Dual Hormone Artificial Pancreas Pod (Gemini-DHAP) for the delivery of both insulin and glucagon. The Gemini system uses the same underlying technologies as the Panda pump but uniquely provides dual hormone delivery capability in a wearable device. It can address the prevalence of hypoglycemia in T1D management. Research trials have demonstrated that dual-hormone closed-loop treatments are superior to insulin-only treatments in reducing time below range. The Gemini-DHAP will be especially important for patients living with Type 1 diabetes who are hypoglycemic unaware, including adolescents, and for patients who wish to exercise, but don’t out of a fear of hypoglycemia.
Key Considerations for Investors
While the medical device industry offers promising opportunities, navigating the investment landscape requires careful consideration of several factors. Regulatory approval hurdles, insurance reimbursement uncertainties, intellectual property protection, and market dynamics all play crucial roles in assessing the likelihood of success of medical device investments. Moreover, investors should assess the competitive landscape, evaluate the strength of the company's management team, and scrutinize the scalability of the technology. VIC Tech’s due diligence also has a strong focus on market adoption drivers. It’s not good enough to just be a better technology; it must be compelling enough that busy doctors and other stakeholders are willing to invest in changing current practices.
Solenic Medical provides a great example of a company formed to address a compelling medical need for which wide adoption of the technology is likely to be rapid. Solenic’s SOLA2TM uses the same underlying physics as an induction stovetop but for a radically different purpose. Specifically, alternating magnetic fields (AMF) produced by external coils are used to eliminate biofilms from the surfaces of medical implants. This non-invasive approach targets a significant complication associated with various surgeries, including knee and hip replacements, as well as implants used in trauma cases such as plates and rods. These advantages hold particular significance given the aging demographic and the escalating number of such procedures performed annually. Solenic's SOLA2 device, grounded in AMF technology, has the potential to entirely supplant the costly and hazardous two-step revision surgical procedure, presently the established standard of care for chronic infections on medical implants.
Investment Strategies for Success
To maximize returns and mitigate risks, investors should adopt a strategic approach to medical device investments. Diversification across different segments of the medical device market can help spread risk and capture opportunities across various stages of development. Additionally, staying abreast of emerging trends and technological advancements is essential for identifying early-stage investment opportunities with high growth potential.
Individual investors may not have access to the best opportunities and they may suffer from unfair terms dictated by larger, later-stage investors. They may also not have the background needed to do thorough due diligence. One strategy for mitigating these risks while maintaining the high upside is to join a life-science focused investment group. Care must be taken in choosing one that has deep experience and a strong track record. VIC’s affiliated VIC Investor Network is one option. With a low minimum investment requirement, it provides members the opportunity to diversify investments across number of companies, sector, and companies stages of development. VIC Investor Network members co-invest with VIC Tech on same terms. Having a large shareholder with aligned interests (i.e., VIC Tech) helps protect VIC Investor Network member interests throughout the investment life cycle. This has translated to a combined 38% IRR across all investments made since inception of the network in 2013 (including both realized and yet to be realized investments where the latter IRR’s are calculated based on most recent investment round share prices) and illustrates the high upside available with these type of investments and with the right investment partner.
Concluding Thoughts
As the healthcare industry continues to evolve, medical devices are poised to play an increasingly pivotal role in shaping the future of patient care. For investors seeking to capitalize on the transformative power of medical technology, the medical device sector offers a fertile ground for investment. By understanding the key trends, opportunities, and challenges in the medical device industry, investors can make informed decisions to drive both financial returns and positive societal impact.
Investing in medical devices isn't just about financial gain; it's also about contributing to advancements that improve the quality of life for millions of people worldwide. With the right approach and a keen eye for innovation, investors can participate in this exciting journey towards a healthier and more technologically empowered future.