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What’s Ahead for Healthcare?

Alternative Funding for Medtech

Fundraising continues to be difficult in the device space. There is a yawning gap between angel and venture capital (VC) funding and an even bigger gap between VC funding and IPOs, leaving a merger and acquisition as the one viable liquidity exit. Bill Hambrecht, formerly of Hambrecht and Quist, gave a lunch talk at OneMed about moves toward a “Tier 2” Reg A where a company could raise up to $50 million and have a company public listing, but without the restriction on solicitation required by the SEC rules dating to 1933 and the more recent high expenses and capitalization requirements under the Sarbanes-Oxley rules. This is receiving some bipartisan traction, even in the current polarized political environment.

Hambrecht mentioned that while an M&A is a viable liquidity option, it reduces net jobs. By his estimate, the absence of the small cap IPO market that existed in the 1990s has cost the economy about 20 million jobs due to the consolidation that typically takes place with M&As. Also, many innovative companies could not obtain capital in the public markets to pursue an independent growth path.

Anne DeGheest, veteran healthcare VC, in a recent Wall Street Journal article described a developing “Series B Crunch” in the health IT sector, where there is difficulty gaining funding from sophisticated Series B investors after the less-sophisticated angels and private equity investors fund the new companies. She mentioned that some have built demonstration-level interesting technology on seed funding. They lack solid growth business plans and face attacks from companies with similar opportunities.

Some large players, such as Google, Apple, Qualcomm and Samsung, also are entering the space. Add these to the ecosystem of small companies and you have the makings of a disruptive environment.


Observing this tale of two cities shows how consumer tech/healthcare IT and the therapeutic device industry operate in different worlds.

Consumer medical technology and healthcare IT seems to be about fitness monitoring, giving more data to the “worried well,” setting up monitoring and feedback to manage “wellness,” Big Data and data mining of EMRs to identify and attack cost drivers. Some players want to provide health record data to the consumer; however, it’s not known whether most consumers will be able to do much with this data.

Most consumer and IT products and services have carefully avoided FDA regulation and scrutiny, especially after FDA dropped an anvil on the tech darling 23andMe. Though, there are several companies that are venturing into the regulated diagnostics space.

The hands-on activity of actually providing therapies to patients by human providers who are extensively (and expensively) trained, who use products built by companies requiring specialized and manufacturing expertise and regulatory compliance remains the same, and that part of the equation is being squeezed by FDA, the medical device tax and reimbursement margins for innovative therapies.

What does the future hold? Looking at the trends from these conferences, one sees two different cultures emerging, mixing and permuting, addressing healthcare with different approaches, different expectations and different levels of experience dealing with the ever-present pressures of regulation. Add to this the shifting landscape of the healthcare market and the rapid expansion of sensor technology and Big Data, aggregation and mining of EMRs. Add to this healthcare regulation that is fundamentally disrupting the traditional relationships of doctors to hospitals, patients to doctors and both of these to payers. These are the ingredients of a turbulent future where there are sure to be big winners but also some inevitable losers. There will be disruption, and the disrupted.


Ted Kucklick is co-Founder and CEO of Cannuflow Inc., San Jose, California, and the author of the best-selling title, Medical Device R&D Handbook Second Edition (2012 CRC Press/Taylor and Francis). He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Cannuflow Inc.

Photos Courtesy of Ted Kucklick.