Medical Device Daily
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Move over, Bay Area. The emerging hotbed for med-tech innovation is Europe.

Breakthroughs in medical technology, from cardiac stents to orthopedic implants to medical imaging, have flowed out of Europe for years toward the golden promise of the American market.

According to executives from five med-tech investment funds based in Europe, this illustrious past is the key to Europe's future and the moment is ripe as money slows for biopharma ventures and investors turn toward medical devices.

The way forward for the Old World, they said, is not to build another Philips, but to churn out fresh companies with novel products and technologies and then exit through a trade sale to one of the American giants, or failing that, to go public and tap into the rich investment community in the U.S.

Speaking during a panel session at the Investing In Innovation-Europe conference in Paris last week, Dr. Olivier Litzka of Edmond de Rothschild Investment Partners said Europe offers distinct advantages for early-phase and start-up companies.

"But making a shift to the U.S. is essential," he said. "You have to look at things globally from the outset, because for the late stage development of a company or for an exit for investors, the U.S. is more positive."

Another Paris-based venture capitalist, Antoine Papiernik, managing partner for Sofinnova Partners, said flatly, "To make it big you need to be big in the U.S., and if you don't start with that premise, the business is not going to get very far.

"It is great to see the activity in Europe," he said, citing the number of technology innovations that are emerging and the ease of moving quickly from patents to first-in-man trials, "but from Day One you need to be able to get to the U.S. for the market dynamics."

European governments and regionally-focused business angels who provide the seed money for many start ups do not share the same goals, according to Thom Rasche of Earlybird Ventures.

He said Germany, where he is based, "is happy creating small- and medium-sized businesses who stay that way."

The German state fund dedicated to medical technology has invested from 1500,000 ($772,000) to 11 million ($1.54 million) as seed money for more than 120 start-ups.

e also said business angels in Germany like to go direct to an entrepreneur, and have provided as much as 15 million ($7.7 million).

"They are not looking at the same exit strategies as we are," Rasche said. "We want to build a company that is going to become big enough, with a sustained market opportunity, for us to exit.

The panelists were unanimously optimistic about the landscape emerging in European med-tech, yet shied away from an overly American-centric enthusiasm to declare that there is a "renaissance" for investing.

"It is more like a slow birth," said Papiernik. "The macro elements are fantastic and they are here to stay," he said, citing the more rapidly aging population in Europe, and a critical mass of technological innovations that continue to create multiple opportunities.

Yet there has not been a sudden shift in European funds toward med-tech, he said, and there remain few funds that specialize in the sector.

That could be changing, according to Yuval Binur of Accelerated Technologies Partners (Hackensack, New Jersey) who said the European venture capital landscape itself "needs an upgrade."

The powerful driver shifting global capital investment funds toward med-tech is "investors who are impatient waiting 10 years for a biotech company to mature. They are seeking faster returns and a higher rate of return. Medical devices answer these needs better than biopharma."

Rasch agrees, "The beauty of medical technology is the low cost to get to FIM, to move rapidly from paper and patents to validation. A couple million to get to FIM is what we like."

A clear trend, according to the panel, is the emerging class of entrepreneurs among European executives who recognize that holding a key position in a large corporation is not as risk-free as it has been in the past.

"The changes at Boston Scientific/Guidant (Natick, Massachusetts) have shown people the risks," said Rasche. "They look at Johnson & Johnson (New Brunswick, New Jersey) or Medtronic (Minneapolis) cutting and changing suddenly, and they are a lot more willing to consider alternatives."

Litzka said, "There are many people working in large European organizations who have built a division from $10 million to $40 million. They have the experience. Our role is bringing these people together, to act as a platform."

According to Binur, "There is plenty of talent in Europe inside the big companies. They know and increasingly see that making the move to a smaller company can make them a millionaire."

Binur also said there is a trend among Europe's physicians to consider a second career on an entrepreneurial track.

"What is important in this approach is that it makes a company market-driven rather than technology driven," he said. "Physicians are responding to an unmet clinical need and then seeking the right technology."

"This way we create companies where we recruit and hire the CEO instead of sitting across from the CEO-owner of a technology and negotiating with him," he said. "It puts a hired CEO on your side rather than across the table."

Czech, please SpectraScience signs distributor

SpectraScience (San Diego) said it has established a distribution partnership in the Czech Republic through the Almeda Company (Prague), a firm that has specialized in medical device sales in the region for almost two decades.

Michel Vaudry, SpectraScience's director of international sales, said, "the Czech Republic is attractive on many fronts as an entry point into the European market for our WavSTAT System, both for its aging population and its established $1.2 billion medical device market. In addition, the Czech Republic has one of the highest incidences of colorectal cancer in the world."

He added that SpectraScience is exploring additions to its export sales team in other European countries, including Italy, Germany and France.

The WavSTAT System uses light to optically scan tissue and provide a physician with an immediate analysis.