MedTech VC: Big Pharma, device firms more interested in early stage deals

Mike Carusi

Early stage medical device and biotech venture capitalist Mike Carusi with Advanced Technology Ventures (ATV) had a busy conference schedule at the J.P. Morgan Healthcare Conference in San Francisco earlier in January.

What was different this year was the number of meetings the big “strategics” — the large medical device and pharmaceutical players — were willing to take with Carusi.

“There is a lot more receptivity to not only do meetings but also in figuring out an innovation road map and how to do creative deal structures earlier on,” Carusi said, in a phone interview Wednesday. “What it says to me is that they are worried that their pipeline of innovation is drying up.”


So what types of technologies or companies are the big dogs interested in?

Not so fast, says Carusi. That information he is not ready to divulge. The only clue he was willing to provide was that these companies are not interested in incremental advances to solving a particular therapeutic problem. They are looking for “transformational ideas in new, sizable” categories.

That’s somewhat ironic given that the likes of Medtronic have historically made their millions by often tweaking an existing product and then charging a premium for it. But those days are pretty much over.

Now, however, they are looking at big ideas that can demonstrate clinical efficacy, safety data and cost-effectiveness, with an extra focus on this latter element.

Carusi knows about big ideas, especially in their infancy. In fact, he has particular disdain for many late-stage deals. (Do I hear early stage startups cheering?)

ATV was an early investor in Ardian, the company that developed an implantable electrical stimulation device for resistant hypertension, which was bought by Medtronic for $800 million in late 2010.

Another ex-portfolio company, GI Dynamics, is also doing some amazing things in the type 2 diabetes and/or obesity space, Carusi said. GI Dynamics, which trades on the Australian Stock Exchange, has come up with a nonsurgical, minimally invasive, temporary implantable device that acts as a physical barrier to food in the intestine.

Startups like Ardian and GI Dynamics that are looking at solving global problems in new ways are the ones that will thrive even in a challenging healthcare investing environment. And the good news from Carusi is that device startups are not just attractive to larger device companies any more.

Even Big Pharma is paying attention to taking a device approach to solving these intractable health problems.

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