
The odds may seem stacked against med-tech start-ups, but don’t count Insulet (NSDQ:PODD) CEO Duane DeSisto among doubters of the long-term health of the industry’s innovation pipeline.
"The entrepreneurial med-tech business will exist forever because Johnson & Johnson (NYSE:JNJ), if they invent a product, it will be their first," told gathered industry stakeholders at panel hosted by Boston law firm Goodwin Proctor yesterday. "If Medtronic (NYSE:MDT) invents a product that actually gets to market it will be their first….The big med-tech companies, these guys can’t invent anything," he said.
“Every one of my competitors is 3 years and then moving on to the next," DeSisto added. "If you’ve got a 3-year mindset in the business, you’re not dealing with building a really great product. All you’re worried about is hitting a number."
DeSisto knows the challenges of running a medical device company from the ground up. He’s been with the Bedford, Mass.-based insulin management systems maker since its founding in 2000 and has served as its CEO since 2003, where he has led the firm through several rounds of venture financing before bringing the company public in 2007.
As a self-described "start-up guy" DeSisto painted a less-than-rosy picture about the current funding climate.
"You have to be close to a milestone to raise VC money now," he said. "It’s a very, very difficult business to raise money. If you’re starting up now, I think you have to be very clear, very articulate about exactly what the milestones are. It’s tough, these guys aren’t putting money out there and you have multi-million dollar funds out there saving money to put more into [existing investments]. You’ve got VC firms out there making 2% to 3% on $500 million or a $1 billion. It’s very difficult. I know 2 successful funds that are out there struggling to close the next round."
He added that what is out there for start-up funding comes from venture arms of the big medical device companies. While he praised the existence of these funds as important support for new technology, DeSisto also called the development "a little scary."
“The money is there but you’re kind of getting in bed with the devil…You need a good lawyer because you don’t want to inadvertently sell the company." he said. “What I will give the industry credit for is that these big companies are putting money and time to start sticking their toe in the water and start helping these companies because [the money] is not out there.
DeSisto, however, is no stranger to working with the big boys. In February Insulet inked a deal to incorporate JNJ’s LifeScan’s OneTouch technology into a new personal diabetes manager that patients use to control the OmniPod. Insulet already has a deal with Abbott (NYSE:ABT) and its FreeStyle BGM, but that pact is set to expire in 2013. The OneTouch agreement with LifeScan runs through 2017 and has a trigger that would make it exclusive at Insulet’s discretion, according to a press release.
The Insulet CEO did not give any indication on the status of its next generation Omnipod, which is still waiting on word from the FDA.
The company is expected to bring in between $210 and $225 million in sales in 2012. The firm said this winter that it wasn’t providing any timelines on a green light from the watchdog agency for the next Omnipod. Insulet is still hoping for a launch in the 2nd half of 2012.