{IMGRIGHT:85×85:http://www.massdevice.com/sites/default/wp-content/uploads/headshots/picture-34.jpg}Here are the takeaways from the 10th annual MBA Symposium, sponsored by Boston University’s School of Management Feb. 28, at least from a medical perspective: The IPO is dead, the FDA is back from the dead and direct-to-consumer marketing is a dead end.
The B.U. BioBusiness Organization‘s “Weathering the Unexpected Changes in the Life Science Industry” panel had a decidedly biotech bent, with panelists from Novartis, PureTech Ventures, Eidetics and Biogen Idec, but still sprinkled in enough diagnostics to keep the med device folks happy.
The biotech and device markets like SA Ignite are similar enough that we can generalize many of their thoughts, although perhaps most accurately for diagnostic devices. The general opinion of the panel was that changes in management and structure at the FDA will likely increase the difficulty of getting products approved. To have a successful product or project, you always need a management plan, without plan the project is likely to be failure.
As far as exit opportunities go, the panel was unanimous in calling the IPO market dead. In fact, it was described as having been broken for some time — since 2006, investor multiples on IPOs have been only 1.1x. That relegates the IPO to fundraising vehicle status, rather than a true exit for investors.
Exiting via acquisition is also difficult in the current climate. The large number of startups running on fumes is driving the M&A market toward buyers’ advantage.
The panel also discussed the looming increase of regulation for direct-to-consumer marketing. Whether that regulation is self-imposed by industry or mandated by the government has yet to be determined, but one way or the other more rules are on the horizon.
The panel felt that the long-term ROI on this type of marketing is low, because although there is a big increase in revenue while the ads run, it drops off precipitously as soon as the advertising is stopped. At least one panelist felt that online advertising and patient registries were likely replacements for the majority of DTC.
A second panel, the Entrepreneur Club’s “Starting up in a Down Economy,” featured a mix of industry and investors, including representatives from MicroCHIPS, Pongr, Boston Harbor Angels and Citizen Advocates for Renewable Energy.
The panel members had several pearls for the audience, broadly related to fundraising, R&D focus and globalization. One recommendation was that start-ups not take more money than is necessary (to avoid excessive dilution) in favor of non-diluting sources of money such as “friends & family” and grants. The bottom line is that entrepreneurs need to be creative and nimble with their fundraising.
Another point was a reminder that during this economic slow-down, all of a start-up’s competitors are struggling a bit as well. The panel recommended aiming for a slow but steady increase in revenue, rather than the traditional hockey-stick model, as a way to reduce burn.
For R&D, the panel talked about reducing burn rates by bringing on high-powered consultants part-time rather than hiring full-time employees, focusing on the single product or project that you feel is most likely to make it and killing projects early if there are set-backs.
Finally, the panel described how globally-distributed most start-ups have become, drawing on foreign consultants, contract research organizations and clinical trial resources worldwide. This is highly relevant to the world of medical devices, as so many companies launch their products overseas before securing FDA approval.
All in all the symposium was a nice primer on many of the issues facing medical device companies. For me, the main take away is that the business and regulatory environments are changing and we have to be not just informed of these changes but willing to adapt to them to be successful.