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Trilogy Tidings
December 2010
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in this issue
The Case of the IP Landmines
FDA: A Money Pit?
Resources from our Archives
What does Trilogy do?

     Innovation requires not only cleverness, perspiration, dedication and single-mindedness - it can require a great deal of money.  Two recent stories in the news highlight this fact with extraordinary clarity.  That's the topic of this month's newsletter.

     Avoiding company-killing costs along the way just might require - well - more innovation.

Regards,
Joe

Change Ahead
The Case of the IP Landmines
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     Forbes.com recently published the fascinating story of Nova Biomedical.  That company, a supplier of benchtop clinical lab analyzers and personal blood-glucose meters, has been in a fight for survival since 2003 when they were threatened by multiple lawsuits dealing with patent infringement and trade-secret appropriation by the likes of Abbott, Roche and Medtronic.

     I was in the business, developing new products for Corning Medical (now part of Siemens Diagnostics), when Nova Biomedical came into being.  From the start the company was very innovative, a disruptive force in the market for sure.  Great scientists and engineers.  Savvy marketers.  Today the company's sales revenues are about $165 million.

     The trouble started when Nova invented and brought to market a blood-glucose meter and associated disposable test strip with performance superior to the incumbents in that $8 billion market.  The incumbents did not take kindly to this upstart and unleashed their lawyer tribes, peppering the firm with multiple lawsuits.  The good news for Nova is that they have prevailed in every instance in court and with the USPTO so far.  The bad news?  The owners of the firm have so far spent $31 million, laid off 60 employees, and taken out $15 million in bank loans defending the company.  You have to admire their dedication, but some might question their sanity.  Will it all be worth it in the end?  Who knows?

     One can second-guess Nova management's decisions all day long.  Should they have caved in, settled and partnered up much sooner?  Should they have taken some short money early on and gone ahead to invent and commercialize other stuff?  Should they have avoided such a large market with powerful competitors in the first place?  Should they have been more considerate of their employees?  The answer to every one of these questions might be yes.

     Then there's the principle of the thing!  What would you have done?
FDA: A Money Pit? 
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     Another fascinating report has hit the streets.  Stanford University researchers, led by Dr. Josh Makower, surveyed more than 200 medtech companies about U.S. regulatory processes.  Their lead conclusion: These processes today are unpredictable, inefficient and expensive.

     No news in this office.  But the most startling findings to me were these:

  • The average cost to bring a "low-to-moderate" 510(k) product from concept to market is $31 million.  More than 77 percent of that - $24 million - was spent on "FDA-dependent or related" activities.
  • The corresponding figures for PMA-track devices were $94 million and $75 million, respectively.

     While I found the report and its associated research methodology to be excellent, it's important to take note of several things.  First, the research was funded primarily by industry trade groups, folks with a vested interest in pushing back at the FDA.  Second, and more influential, is the fact that most of the survey respondents represented innovative public and venture-backed firms offering leading-edge clinical solutions.  It's important to point out that routine, albeit economically important, line-filling products and upgrades represent the great majority of 510(k) applications and clearances.  And they require far less investment in regulatory activities than $24 million.  Finally, while the average costs were reported, I wonder what the distribution of regulatory costs looked like among all respondents.

     Still, this report convinced me that FDA presents a huge financial roadblock to significant medtech innovation today.  It's hard to argue otherwise.

     Do we need to alter the availability/safety/effectiveness tradeoffs?  Or does FDA simply need to do a better, more efficient job?  What would you do?
Resources from our Archives 
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     Check out our Reading Room to view my published articles, presentations and white papers on a variety of topics.
 
     And, you can examine an archive of my prior newsletters (since February 2007).
 
What does Trilogy do? 
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     Trilogy Associates facilitates business growth and renewal through commercialization of new products, providing the following services:
  • Opportunity assessment
  • Business planning and enterprise growth strategies
  • New-product conceptualization, commercialization and marketing
  • Market research and competitive assessment
  • Business development and partnering
  • Market and technological due diligence
  • Assessment of the therapeutic and diagnostic potential of novel technologies
  • Design of efficient and effective development strategies for early-stage biomedical products
  • Business and technical writing/publishing

     Inquiries to establish whether and how we might support your business initiatives are always welcome.  Contact us.
Contact Information
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ContactInfoJoseph J. Kalinowski, Principal
919.533.6285
LinkedIn Profile: www.linkedin.com/in/trilogy
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