2005 Outlook: Med Tech –

Dr. Carl Goldfischer has been increasingly active in the medical device field as a managing director at Bay City Capital. The San Francisco-based firm recently invested in EnteroMedics, a device company developing a minimally invasive implant to treat obesity. Goldfischer sees new opportunities for smaller device companies in the increasingly larger and homogenized world of life science and health care corporations.

Q What medical device developments will be significant in 2005?

A From a technology point of view I find this [Johnson & Johnson move to buy Guidant] quite interesting. They feel the need for huge critical mass for control and to get adequate pricing, to maintain market share. They’re from the school of if you’re getting bigger, you’re getting better.’ For us, that raises some interesting challenges. For us who invest in smaller companies, the focus has to be on real innovation.

There have been an increasing number of investments in device companies targeting obesity. How significant is that market?

This is a disease where surgical treatments (like the gastric bypass) undoubtedly work and drug treatments have persistently failed to deliver clinically meaningful results and have limiting adverse effect profiles. Device treatments that can produce clinically meaningful results without the risk profile or the side effects associated with the surgical treatments will create an enormous new market. … Also, work on the regulatory and reimbursement front is advancing, making way for such new treatments to be approved and reimbursed. The increasing interest by large medical device players in the area-for example, J&J is entering the market with its gastric band-driven by the large market potential and the clear need for better tools are driving interest in new device treatments for obesity.

Will the obesity market become the dominant sector in the medical device market?

A large patient population, lack of other treatments, well documented co-morbidities and increased payer awareness of the increased cost of health care for obese people are factors making a case for a lucrative medical device opportunity. Significant technical and clinical risk remains, but lessons learned form earlier attempts are guiding current approaches, and newer clinical data reflect that. It seems we are at a new inflection point. Better tools in development, a clearer understanding of the patients’ needs and behaviors, and experience from earlier trials could potentially result in a more effective treatment sooner than expected.

Where are new opportunities for medical devices?

An area we think a fair amount about here is that area where drugs and devices start intersecting. Can you use novel devices to deliver drugs to parts of the body where they’re very hard to deliver now? Are there biodegradable technologies that you can implant and can be chemotherapeutic in an area like the liver? There may not be a lot of low-hanging fruit there, but there hasn’t been as much activity in those spaces.

To what extent will advancements in device/drug delivery technology increase VC in 2005?

It may pick up a lot. We probably won’t close a deal on this space in the first couple months of the year, but beyond that perhaps. We are looking at a lot of novel technologies that are not companies we think we can make into them. What we do on the pharma side is look at smaller products that are either niche products or things that are too small for them but are perfectly adequate for a whole host of companies under them.