Devices of industry

By Melissa Trudinger
Friday, 04 October, 2002

Outside the industry, the words 'Australian biotechnology' immediately conjure up three names in particular -- CSL, Cochlear and ResMed. The irony is that none of these companies is strictly a biotechnology company.

CSL's business activity puts it into the pharmaceutical company camp, and Cochlear and ResMed are developers and manufacturers of medical devices.

Globally, the medical devices sector is huge, perhaps even bigger than the pharmaceutical industry. Covering everything that is not a drug, from needles and Band-Aids to medical instruments and equipment, drug delivery vehicles, and even beds and hospital gowns, the definition of devices even includes diagnostic tests.

As with the pharmaceutical industry, there are a few major players in the global devices industry, including Baxter Healthcare, Tyco Healthcare, Medtronic, Johnson & Johnson and Boston Scientific. Furthermore, in Australia 85-90 per cent of medical devices are imported. This contrasts sharply with the approximately 50 per cent of drugs imported into the company.

While Australia is unlikely to ever compete in the devices market on the scale of these companies, there are very good options for competing in specialised niche markets.

Australia has a good track record with device development, with innovative products in many areas including development of laser technology for surgical purposes, and for therapeutic and cosmetic uses, several optical products including biocompatible, implantable lenses and other devices. In Australia, the devices industry is often considered by the government and investment community as part and parcel of the biotechnology industry, even though it is a separate sector.

"In other countries, devices are usually excluded from the biotech definition but a number of countries are moving towards including devices in the sector," said AusBiotech executive director Dr Tony Coulepis. The issue had been raised in talks between AusBiotech and the US biotechnology organisation BIO, which is one of those considering the idea, Coulepis said. And increasingly, the lines are being blurred between the sophisticated device technology being developed and biotechnology, with the development of biocompatible materials, specialised drug delivery devices, artificial organ technologies and nanotechnology.

"Maybe five to 10 years ago biotechnology was not very significant, but that has changed a bit," said Derrick Beech, the chairman of the newly formed Medical Devices Network and a consultant to the devices industry. "The interface between all of these things is blurring, and boundaries are being crossed."

Many in the devices industry believe that Australia has more future in commercialising devices than in therapeutics. For one thing, the cost of developing a device is often significantly lower than therapeutic development costs. Luke Whelan, one of Mondo Medical's directors, noted that the cost of developing a device was often less than $1 million. The trade-off is that devices may not be as capable of bringing in the super high returns expected from the pharmaceutical sector. "The interesting thing about devices is that you don't have to be big, there is no need for massive infrastructure," Beech said. Many Australian device companies were small, specialised operations, often private rather than public, he noted. The time to get to market is also significantly shorter for devices compared to most therapeutics. Beech explained that a company can often go from the prototype to the market in just a couple of years, with merely weeks required to get regulatory approval from Australia's Therapeutic Goods Administration (TGA), or the US Food and Drug Administration (FDA)."It's an order of magnitude different to the time taken to develop a pharmaceutical product," said AusBiotech's Coulepis.

Coulepis noted that there were around 600-700 devices companies in Australia, including the "garage" and virtual companies. Of these, he estimated about 400-500 were involved specifically in medical devices.

"It's a very vibrant and switched on sector," Coulepis said. "A large proportion of income coming into the biomedical industry is device-related income. It's a terrific opportunity for Australia to get short to medium term returns to the industry while we're allowing pharmaceuticals and agribusiness to move forward with products."

A recent development has been the formation of the Medical Device Network, an industry organisation that is currently being nurtured as a program by AusBiotech. The Network, which attracted more than 500 expressions of interest in the lead up to its launch in late June, has been set up to facilitate the commercial development of the devices industry. "The reason we got the Medical Devices Network going is to get all of these people together to talk to each other," explained Beech, who was instrumental in getting the Network up and running. Enthusiasm for the program has been high -- both the Sydney and the Melbourne launches attracted over 100 people -- and involved many of the key companies in the sector. The Network plans to hold launches in Adelaide, Perth and Brisbane later this year.

The Network's objectives include improving the success rate of start-up devices companies, fostering R&D and manufacturing advances, lobbying and public relations for the sector and professional development and training. Beech said that the devices industry had people with diverse multidisciplinary backgrounds in engineering, science, high technology fields like software development, and clinical medicine as well as business and commercialisation, but often there was not a lot of cross-talk between people in different areas, and this was one of the reasons for setting the Network up. The other motivator was a need to raise the profile of the sector.

"Devices have been lost in biotech somewhere and we have to drag it out of there and give it a higher protocol," said Mondo Medical's Whelan, who is actively involved with the Melbourne node of the Network. With the convergence of devices and biotechnology, there are a number of new technologies that look set to make an impact on the two sectors. The biomaterials field is getting a lot of attention these days as more biocompatible and even biologically functional materials are developed. Nanotechnology is also a hot topic, and both of these areas are one of the "priority areas" earmarked by the Australian Research Council as fields of emerging research strengths. Artificial organs and tissue engineering overlap with biomaterials as an area of interest as more researchers start to look at ways of replacing diseased organs. This highlights another area of overlap between devices and biotechnology, as the combination of cells, artificial scaffolding and even genomics and proteomics might be required to develop organ replacement technology.

Niche markets

The niches that Australian devices companies are exploring are varied. Cochlear of course is well known for its bionic ear technology, developed initially by Prof Graeme Clark at the University of Melbourne. ResMed is equally prominent for its innovative sleep apnoea prevention masks.

But there are a host of smaller companies that are just starting to make a name for themselves in a variety of areas, including:

  • Optiscan -- developing endomicroscopes for diagnostic and disease management purposes,
  • Norwood Abbey -- using laser technology to deliver drugs through the skin,
  • Ellex -- developing laser technology for treating optical conditions including glaucoma and cataracts,
  • Ventracor and Sunshine Heart companies -- both developing artificial heart technologies,
  • Southern Dental Industries -- making innovative dental products,
  • AorTech Biomaterials -- developing synthetic polymers for use in a variety of devices including catheters and heart valves,
  • X-Cell and Polartechnics -- both developing skin cancer diagnostic devices, and
  • Acrux -- working on a unique topical drug delivery system.

Mondo Medical is a small private Melbourne-based devices company that has already developed an intensive care unit device for self-administered pain control analgesia (PCA). According to Luke Whelan, one of the founders and directors of the company, Mondo will soon be launching a new product on the market -- a device for monitoring and levelling blood pressure transducers to make them more accurate and less labour-intensive.

Whelan said the company has been around since 1996, although some of the projects had been around for longer that. They have received several R&D style grants from the government, and matching investor funds to help them develop their products. Most of their work is sourced through contacts they have in the medical sector.

"We try to work with Australian research institutions, like Monash and Melbourne University," said Whelan. He noted that typically the company would get involved in the development of the product, and the role of the research institute in the process would diminish as the project got closer to the market.

Whelan said that Australia had an environment conducive to the development of medical devices, with a high level of expertise and technical ability available. Mondo has plans to move into the US market with their products, a prospect Whelan said might be challenging. "But, if your device is good enough, it shouldn't be difficult," he said.

Another up-and-coming devices company with an excellent outlook is Ventracor (formerly MicroMedical Industries), a company that has designed a heart assist device that will be going into human clinical trials in the near future.

CEO Michael Spooner is enthusiastic about the prospects for the device, which allows long term relief for end-stage congestive heart failure, a condition that affects 800,000 people worldwide every year. At this point, the only definitive treatment for CHF is a heart transplant. Spooner said that the potential market for a device of this kind is between $US7-12.5 billion, so even a small fraction of the market would provide significant returns to the company.

"We're leading the race in terms of long-term heart replacement technology," he said. He noted that the company was relatively mature, and had the in-house business experience to commercialise overseas.

While the current focus of the company was on the heart assist device, the technology used has potential for other uses, and Spooner said that the company was planning to explore some of these options as part of their longer term strategy.

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