The Best of Years, the Worst of Years

As 2002 comes to a close, the neurotechnology industry can look back on another paradoxical year—a year filled with exceptional triumphs in technology developments and depressing financial and economic news from the commercial enterprises in the field. This issue’s Financial News [p3] offers an example: staff reductions at Aspect Medical and Axon, flat sales at Bio-logic Systems, and the demise of Symphonix.

Of course manufacturers of cochlear implants may see the latter development as good news, since Symphonix’ middle-ear implant may have been competitive with cochlear implants had that product survived. But to the extent that Symphonix’ failure impacts the perception of medical device start-ups in the minds of venture capital firms, reimbursement organizations, and the media, this is not good news for neurotechnology firms in general.

Other recent examples of bad news in the industry are microHelix’ decreased revenues and 4-D Neuroimaging’s failed merger with Neuromag [NBR Nov02]. And the functional electrical stimulation field is still reeling from NeuroControl Corp.’s decision to discontinue marketing its FreeHand hand-grasp stimulator [NBR May02].

But 2002 was not without bits and pieces of good economic news. Several start-up neurotechnology device firms received first- or second-round infusions of venture capital at a time when other technology industries are hard-pressed to get attention from VCs. The most noteworthy examples: Vertis Neuroscience received $37 million in funding [NBR May02], Optobionics Corp. received $20 million [NBR May02], Sleep Solutions, Inc. received $7 million [NBR Apr02], and Cyberkinetics Inc. received $5 million [p3].

Several public companies also showed improving financial results—some with record performance—including Advanced Neuromodulation Systems, Cyberonics, Cochlear Corp., and Integra NeuroSciences. Neurotech merger and acquisition activity during the year included Compumedics’ purchase of Neuroscan Labs [NBR May02], Bionic Technologies’ merger with Cyberkinetics [NBR Nov02], and Encore Medical Corp.’s purchase of Chattanooga Group [NBR Jan02].

Significant FDA product approvals reported during the year were Vertis Neuroscience’s percutaneous stimulation system [NBR Feb02], Medtronic’s Activa deep-brain stimulation therapy for Parkinson’s [NBR Feb02], and ANS’ Genesis implanted pulse generator [NBR Feb02]. Some good news also came on the reimbursement front, including favorable Medicare decisions or recommendations on magnetoencephalography [NBR Aug02], functional electrical stimulation [NBR Jun02], and implanted stimulators [NBR Nov02].

Still, the overall financial picture for the neurotechnology industry in 2002 was not as favorable as was the technology development outlook. Significant progress was made in a number of early-stage and more mature product categories, including microstimulation systems, electrode development, cortical control systems, visual prostheses, and stroke rehabilitation devices. We can only hope that the latency period from outstanding technological demonstration to commercial success will be shortened in the year to come.

James Cavuoto
Editor and Publisher