February 23, 2010
In recent weeks within the pharmaceutical industry there has been much talk of both downsizing – GSK and AstraZeneca shedding 11,000 jobs – and outsourcing of research and development, with a whole range of licensing or partnership deals designed to pad out faltering product pipelines. Once again I was prompted to think about the prospect of the lay observer suggesting that what happens in pharmaceuticals today will hit medical technology tomorrow.
Those in the know will, of course, immediately refute any suggestions of a read-across between the two sectors. The medical technology industry has always been characterised by outsourcing of research and development. Individual technologies and even single products are often the basis for start-up companies which bear the risk of early stage development via investors who have an appetite for high stakes. The reward for these investors is invariably a trade sale to a large existing corporation. A recent example of such a transaction is Medtronic’s acquisition of Italian heart valve technology company Invatec. This sort of transaction is almost a weekly event and is not a sign of industry consolidation but more a reflection of the fundamental nature of the structure of the industry.
This model plays into the essential difference between medical devices and pharmaceuticals. The pharma model is built around delivering new molecules that can have a transformational effect on patient’s lives whereas the medical technology model sees the majority of value being generated by multiple iterations of any technology by a vibrant set of competitor companies. Large medical technology companies are very focused on this iterative development process as they build strong and reliable product portfolios over many years. The end point is equally or even more transformational as far as patients and health systems are concerned but the way of getting there is very different.
Long may this model persist as it is the most efficient way of moving a plethora of ideas, often derived from the minds of practicing clinicians, into successful global technologies within reach of most citizens of the world. The current down-turn threatens to dent the productivity of that pipeline as seed funding is more scarce but it will not change the nature of the industry and the way that it innovates.
John WilkinsonAuthor : MedTech Europe