Healthy Indicators

Sometimes, a new industry like neurotechnology experiences a shot in the arm when new technology developments are unveiled. Other times, less earth-shattering events or combination of events can spur investment and interest in a technology sector.

Perhaps this is just one such time in the development of our industry. As we report in our article on page 1 of this issue, the U.S. Food and Drug Administration has recently approved a number of new devices for the U.S. market. None of these approvals, by itself, represents a major milestone for the industry. But taken together, the large number of approvals in such a short period of time could be a healthy indicator for the neurotech industry.

Like it or not, the FDA serves as a gatekeeper, not only for clinicians and patients, but also for entrepreneurs and investors. Public traders and private investors alike have made a career out of watching the agency for signs that an approval, disapproval, action, or warning might be imminent. (Of course, so too have many securities enforcement officials, but that’s the topic of another story.) When a string of device approvals in different product categories comes to pass like this, it helps sends a message—real or perceived—that there is an orderly and predictable route to market.

Apart from the apparent vote of confidence that FDA imparted to the industry, the approvals help in a more indirect way. In the areas of implanted spinal cord, brain, and nerve stimulators, there are now several competitors offering competition in a number of markets. Medtronic, the 800-lb gorilla of our industry, no longer presents the formidable obstacle to newcomers that it once did. Advanced Neuromodulation Systems, Cyberonics, Advanced Bionics, Neuropace, and others are now on the scene looking for more market share. And the race is on to use these existing stimulation systems for novel applications ranging from psychiatric disorders to migraine to obesity.

Competition is good, not only for the patients and clinicians who generally get treated with more respect when they have a choice, but also for investors. The presence of well capitalized competitors raises the likelihood of merger and acquisition activity downstream, a route that many VCs now prefer to public stock offerings as an end game for their ­investment.

And speaking of IPOs, Ernst & Young’s report that life sciences-related IPO activity more than quadrupled from 2003 to 2004 [see article, p7] can only be good news for entrepreneurs looking for venture capital. An industry that offers a reliable regulatory pathway, healthy competition, and ample opportunities for investors to cash out is one that definitely merits a second look.

James Cavuoto
Editor and Publisher