The legacy of Boston Scientific for medtech entrepreneurs
Being based in Boston, with a locally rooted professional network, it was entirely unsurprising to discover that nearly all of our clients were at one point employees of Boston Scientific. If you are a leader in our chosen city and industry, it’s not even 7 degrees of separation to Boston Scientific; it’s 1 or 2 at the most. Then we looked in the mirror. Our S2N Health team has it’s own strong ties to the company. In the pre-Guidant-acquisition era, my salary at a device company was paid by BSC through one of the many VC-like deals that proliferated under the former CFO Larry Best (and later got deep-sixed when cash became king). Another colleague carried the bag for BSC in Australia and fondly remembers the first boxes of Taxus stents arriving, to the sounds of private jets landing and champagne corks popping.
Though this may sound like the beginning of a corporate eulogy, the intent here is not to speculate if, when, by whom and for how much BSC might be acquired (though our bets have been recorded). Nor do we wish to craft a morality play from BSC’s tumultuous corporate history (this July 2011 Boston Magazine article did a fine job, Greek chorus and all). Our mission in life is to work with the small-fry companies who aspire to become (or more often be bought by) the BSC’s of the world, so we set out to mine the Boston Scientific story for nuggets of wisdom for the emerging med tech community.
BSC Nugget #1: Medical devices can be blockbusters (but not very often)
BSC’s core focus on minimally invasive devices placed the company squarely in a hot market that was growing rapidly and enticingly replete with high priced, high margin disposables (especially back in the 80’s and 90’s). But device revenues really broke the sound barrier with drug-eluting stents as a category, and Taxus in particular. Total DES market revenues peaked at $5 billion in 2007, and BSC’s share at $1.8 billion, before the whole market declined under pricing and other pressures; J&J’s recently announced exit from the DES business bears witness to the descent. Prior to DES, any single medical device that topped the magical $100M sales mark before flattening and becoming a commodity was considered a blockbuster product. The whole notion that a medical device could attain pharma-like revenues and margins was revolutionary back in the early 2000’s. The success of DES and Taxus inspired aspiration, invention and investment in the med tech space, but stratospheric DES revenues may have set expectations too high. The world is still waiting for another product like Taxus. As I heard Jim Tobin say at an event the year before Taxus launched (and I liberally paraphrase), “What worries me most is what the heck we do next.”
BSC Nugget #2: Start with a great product; a great customer helps, too
BSC made many of its early and best bets in the emerging (at the time) field of interventional cardiology. Whether luck or business acumen, the focus on minimally invasive cardiovascular devices got BSC in on the ground floor with one of the most aggressive specialties out there, formed by the segment of cardiology attracted to the clinical and monetary gratification of therapeutic procedures. The hospitals gained, too, from this profitable new revenue stream, allowing the interventionalists to demand and receive the new gadgets they desired. For BSC, it was a “right product, right customer, right time” scenario.
The take-away point for development-stage companies today is that the “psychographic” profile of your target clinician will impact the commercial path for your device in all sorts of important ways you need to understand. While inventors may be blinded to the business attractiveness of their future customer segment, investors certainly are not. By no means should all new technology be aimed at only the most go-getting specialists; an important product with great data will get noticed. And there is certainly a downside to cowboy customers and rapid adoption, for example when safety problems emerge. With the ascendancy of cost concerns over physician preference, the influence of even the most influential departments is beginning to wane.
BSC Nugget #3: The BSC diaspora has arrived to lead another day
In its heyday, BSC attracted and promoted many talented, ambitious professionals across functions, particularly in R&D and sales. Many of these BSC-ers have since moved on and are filling the management ranks of med-tech companies big and small. Some notable alumni have become prominent med-tech investors and are actively funding new device companies. BSC may not have generated many entrepreneur-founders of start-up med tech companies, which some attribute to concentration of wealth creation at the top and others to the general New England risk-aversion. In any case, a formative BSC experience has infiltrated the leadership ranks of countless emerging med tech companies in Boston, Minneapolis and all over the world. See our attempt at a “Boston Scientific Family Tree”, by no means exhaustive but indicative of the breadth of influence BSC will continue to have regardless of its ultimate fate.
We want to hear from you, ex-BSC-ers! Who did we leave out? We know you are out there!
Credit: Tim Kofol for the awesome interactive graphic