Local VCs more worried about FDA moves than healthcare reform

VC logo

Concerns in the investment community over changes in the 510(k) clearance process and other uncertainty over new regulation at the Food & Drug Administration outweigh worries about the healthcare reform act, according to a MassDevice survey of local med-tech investors.

The survey, conducted with the help of the New England Venture Network, polled a dozen VC professionals in the life science community. The respondents said that, overall, the climate for medical technology investment was “mostly negative.” The survey was kept small and anonymous to ensure open and honest responses.

The investors cited regulatory changes at the Food & Drug Administration as their primary concern.

“For now, we have stopped investing in any new med-tech companies with FDA exposure,” wrote one investor.

Another pointed directly to the agency’s proposed changes as directly affecting the investment climate.

“Fear of further FDA regulation, including 510(k) reform, is making it very difficult to manage risk and leading to fewer investments in devices,” that investor wrote.

In fact, most investors said major changes to the 510(k) process would be the most damaging to deal flow, even more so than the 2.3 percent excise tax imposed on American medical device makers as part of healthcare reform. An exclusive new MassDevice report shows that 510(k) decision times increased once again in 2009, to an average of 119 days — up 37 percent from 2005, when times to decision averaged 87 days.

“Early-stage medical device investment has already slowed considerably due to regulatory issues. The incremental effect of the tax will be small compared to the damage already done,” wrote one investor.

But that doesn’t mean the device tax will have no effect on deal flow. Investors were very negative on the impact of the tax. Here’s a sampling of what they wrote:

  • “To put it in perspective, 2.3 percent of revenues is approximately equivalent to one-third to one-quarter, or the amount that the big med-tech companies spend on R&D annually. The money has to come from somewhere, and I doubt all will come from profits (at least I doubt that is what their shareholders will want).”
  • “Price pressure is already squeezing margins. This means we have to invest more money for less gain. It is bad for returns. Median returns to healthcare venture capital are already poor, and this will only make it worse. In the short term it will raise revenue. In the long run innovation will suffer.”
  • “Currently, time lags to reimbursement and increased development timelines have increase the time and money [required] to invest in medical device companies to reach profitability. An additional excise tax on the medical device industry enhances this problem, while also impacting the [proft and loss] of potential acquirers for any early-stage med tech company.”

The attitude toward healthcare reform generally was negative as well, with the investors saying that the bill doesn’t fix inherent problems in the system. One investor wrote that the bill “appears to have been a misguided effort at bringing the uninsured into a highly inefficient and dysfunctional system, instead of developing a better one for all.”

Overall, investors felt that the pharmaceutical and biotechnology industries emerged as winners in the healthcare reform act, while medical device companies, health insurers and the American public were its biggest losers.

Download MassDevice.com’s “Eye on the FDA” report for a detailed analysis of the increase in 510(k) decision times last year.

RSS From Medical Design & Outsourcing

  • Teknor Apex to showcase wide range of PVC compounds for medical devices at Medtec China
    Building on its international leadership role as a supplier of medical-grade PVC compounds, Teknor Apex Company has developed flexible and rigid formulations that address the special needs of device manufacturers. The company will highlight these capabilities at Medtec China 2015. “Teknor Apex produces or markets medical-grade PVC compounds in China, Singapore, Europe, and the United […]
  • The Raspberry Pi eco-system goes interstellar with the new Raspberry Pi Sense HAT
    Newark element14 has globally launched the latest addition to the expanding ecosystem of Raspberry Pi accessories, the Raspberry Pi Sense HAT, as featured in the ‘Astro Pi’ space mission. The Sense HAT will enable enthusiasts to control the same hardware used in space. The Sense HAT attaches to the Raspberry Pi board, and can be […]
  • CommScope completes acquisition of TE Connectivity’s Telecom
    CommScope Holding Company, has completed its previously announced acquisition of TE Connectivity’s Telecom, Enterprise and Wireless businesses, a leader in fiber optic connectivity for wireline and wireless networks. The all-cash transaction, valued at approximately $3 billion, strengthens CommScope’s position as a leading communications infrastructure provider with deeper resources to meet the world’s growing demand for network […]
  • SPI awards IKO Prosthetic Creative System the Student Design International Design Excellence Award
    SPI: The Plastics Industry Trade Association congratulated IKO Prosthetic Creative System for winning the SPI Student Design Award, part of the Industrial Designers Society of America’s (IDSA’s) International Design Excellence Awards (IDEA) program. The award was presented to IKO, an innovative, youth-focused prosthetic design company led by Chicago-based designer Carlos Torres, by SPI’s Senior Director of […]
  • New assay could revolutionize diagnosis and treatment of life-threatening disease
    Invasive Fungal Disease (IFD) is an emerging global health problem associated with high mortality rates in severely immunocompromised patients, such as those undergoing intensive chemotherapy or stem cell transplantation, and in patients suffering immune compromising conditions such as AIDS. The most common causative agents of this disease have been identified as Candida and Aspergillus species, […]
  • Molex delivers ISO 13485-compliant, medical-grade surgical cables from its class 100,000 clean room facility
    Molex, LLC operates a fully ISO 146441-1:1999 Class 8-certified clean room, satisfying strict particulate contamination levels specified by ISO-compliant requirements. Located in Thailand, the facility has less than 100,000 particulates (≥0.5µm) per cubic foot of air and manufactures a variety of ISO 13485-compliant medical cables and surgical cables used in operating theatres, hospitals, laboratories and […]
  • Swept-Source OCT: Patent license agreement between Massachusetts General Hospital and Heidelberg Engineering
    Heidelberg Engineering has entered into a patent license agreement with Massachusetts General Hospital (MGH) in Boston. The agreement grants global and exclusive rights to 77 basic patents and patent applications which relate to swept-source OCT technology and its application in ophthalmology. Spectral domain OCT has become indispensable to eye care professionals worldwide to diagnose and […]
  • MIT’s MultiFab presents a stark challenge to incumbent 3D Printer manufacturers’ hardware, software, and business Models
    MIT’s Computational Fabrication Group recently announced the MultiFab, a low-cost 3D printer that can combine up to 10 different resins in one part and also includes a 3D scanning system to identify and fix errors during production. According to Lux Research, these capabilities are rare in commercial 3D printers today due to the manufacturers’ need […]
  • AVX releases Accu-P MP medical grade film chip capacitors for medical devices
    AVX Corporation, a leading manufacturer of passive components and interconnect solutions, has released a new series of thin film chip capacitors specifically designed to meet the demanding performance specifications for implantable medical devices. Delivering extremely tight capacitive tolerances, exceptionally repeatable performance, and remarkably low ESR and high Q at high frequencies—including VHF, UHF, and RF […]
  • RIVANNA commences manufacturing of its Accuro device
    Rivanna Medical announced that it has begun manufacturing its FDA-cleared Accuro device, a handheld and untethered smart-phone-sized device that is designed to guide spinal anesthesia with automated 3D navigation technology in addition to ultrasound imaging of abdominal, musculoskeletal, cardiac and peripheral vascular anatomies. The product will be launched at the ASA annual meeting in San […]
  • FDA seeks public input on Quality Metrics guidance
    by Oliver Wolf, Senior Product Manager, MasterControl In line with the general shift towards risk-driven approaches in the quality management world, FDA is now taking steps towards applying those same principles to its own auditing schedule. At the end of July, the Center for Drug Evaluation and Research (CDER) and the Center for Biologics Evaluation […]

Leave a Reply