Report: Device industry sees solid performance in 2010, but challenges remain

Ernst and Young released its report this week in conjunction with AdvaMed's annual meeting on the medical device industry's performance. It found that while the sector delivered a solid perforance last year, challenges, including lower venture capital funding, remain.

VC investment fell 13% in 2010 versus the prior year. In the U.S., funding fell by 15%; in Europe it was actually up 4.7%. But there is some good news, especially in the area of IPOs, which saw an uptick after two slow years. However, IPOs are coming at a significantly slower pace than in the years prior to the recession.

As emphasized at the BIO conference this year, we have entered a new normal. Industry now must demonstrate health outcomes as patients become engaged and empowered "super-consumers" to whom companies will need to target their offerings rather than simply focusing on physicians, according to the E&Y report.        

Johnson & Johnson's ($JNJ) Alex Gorsky agreed with this assessment in a panel that took place at AdvaMed, saying with this new emphasis comes the need for a new skill set. For example, social media is also increasing in importance, as it is a tool for reaching consumers. 

Gorsky remains hopeful about the industry's future, especially with an aging population and rising middle class in places like India where formerly rare diseases like diabetes are on the rise.

In his remarks, GI Dynamics Stuart Randle emphasized the capital markets are becoming more global, pointing to his company's going to Australia for its IPO. Such actions might help firms grow in the new normal. GI recently raised A$80 million through an IPO and U.S. private placement. It will use the funds to expand the global commercialization of the EndoBarrier gastrointestinal liner (pictured here), a non-pharmaceutical, non-surgical alternative for reducing blood glucose levels and encouraging weight loss in diabetic and obese patients.

- see the E&Y release