Joe Jancsurak

A bad-news-good-news message for medical device manufacturers was delivered by Boston Scientific President and CEO Jim Tobin during a luncheon at last week’s Innovations Summit at the Cleveland Clinic.

The bad news:
* Initial Public Offerings (IPOs), the first sale of stock that takes a company public, have gone away and no one knows when they’ll come back.
* Investment banking landscape has changed drastically, with Behr Stearns gone, Lehman Brothers assets frozen, and Merrill Lynch now a division of Bank America.
* Venture capitalists are holding their cash because their “exit strategy” (IPOs) is gone and banks aren’t lending.

The good news:
* Start-ups with need-driven technology and cash reserves will survive and prosper.
* Financial opportunities will remain for start-ups that are willing and able to provide more “up front” value in terms of manfacturability and assembly.
* Tougher regulatory environment will provide opportunities for start-ups that are willing to do more in the way of clinical trials as they seek investors.
* Traditional sources of funding will eventually return.

Tobin said his advice to new medical device companies for the short-term is to hang on. “Figure out how to make your cash last and if you have enough cash to get to market, do it as expeditiously as you can.”

As for the long term, Tobin says BSC continues to invest $1 billion annually on R&D and another $1 billion on capital and acquired technologies. “We’re investing in the future because we believe this is the best time to invest. Times of economic stress provide unique opportunities. Companies that successfully navigate through this economy will find themselves in a better position, long-term.” That is, leaner and more efficient.

And as simplistic as it may sound, the path of innovation is the key to turning things around. “Innovate and create value, and the system will pay for that value. Then use profits to create even more value.” Tobin added, however, that guideline will be continually challenged in the short-term by the current economy and a changing regulatory environment.

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