On November 1, I wrote a blog post about what seemed like an exciting new therapeutic market for medical devices, renal denervation to treat hypertension and lower high blood pressure:
Fast forward to the present. Just 11 weeks later, it appears that this hot new market is in trouble.
First, this negative news from Medtronic:
The failure occurred in a large, randomized study being conducted at 87 medical centers in the U.S.
And then the company statement:
followed by competitive reaction from St. Jude Medical:
Most recently, Covidien has decided to exit the market. Covidien spent $60 million to acquire Maya Medical and additional millions on clinical studies. They stated that the market in the European Union was developing too slowly and that they would be taking a $20 million writedown on their assets:
Medtronic famously spent $800 million to purchase Silicon Valley startup Ardian. Early clinical results were promising but when Medtronic tried to scale up the clinical studies for FDA approval, the results were disappointing. The company is in full “reboot” mode and is planning to convene a blue ribbon panel of experts to determine what went wrong and what to do now. I think I would have my resume updated and on the street if I were involved in this unpleasant set of circumstances.
Yet to be heard from are two other renal denervation market competitors: Boston Scientific, which spent $425 million to acquire Vessix in late 2012, and VC-funded startup Kona Medical which is developing a noninvasive ultrasound-based technology.
Takeaways: There is enormous pressure on medical device companies these days to identify, enter, and dominate new markets. Unproven therapies and technologies will always engender risk. Since most innovation is done at startups now, it will be interesting to see how risk mitigation occurs in future acquisitions or if there were any mitigations included in the Medtronic or Covidien deals.
If you are a startup executive or founder, you can look forward to more stringent diligence and a longer wait before investment or acquisition by strategic partners. There may also be more contingencies requiring technical and clinical milestones to be achieved before milestone payments are made. Make sure you have a good general counsel attorney and CFO. You are going to need them.