Neurotech CEOs Make Their Case at Subdued J.P. Morgan Healthcare Conference

by James Cavuoto, editor

The CEOs of several neurotechnology firms were on hand at the 27th Annual J.P. Morgan Healthcare Conference, held in San Francisco, CA earlier this month. In contrast with prior years, conference organizers and participants scaled back on some of their extravagence—and their financial pronouncements—in light of the subdued economic climate.

To highlight the situation, Medtronic CEO Bill Hawkins said the current economic climate reminds him of the early days of 1993 when then first lady Hillary Clinton outlined the new administration’s healthcare proposal. Still, he was optimistic that the new Obama administration would increase funding for healthcare.

Hawkins highlighted Medtronic’s emphasis on maintaining profitability by reducing cost of goods sold by $1 billion over five years. And he pointed to new neuromodulation therapies for markets such as epilepsy, migraine, and obsessive-compulsive disorder as drivers for growth in coming years.

In an interview with NBR, Hawkins said he didn’t think that Medtronic’s presence in the epilepsy market would impact Cyberonics dramatically. And he said he expected that a new clinician base of implanters would allow the coexistence of several competitive devices in new neuromodulation markets.

Two days later, Boston Scientific Corp. CEO James Tobin also highlighted profitability and cost-cutting measures to investors at the conference. He highlighted the simplified business that currently exists at the company with a streamlined portfolio and revitalized pipeline of new products in the years following the Guidant acquisition.

In neuromodulation, Tobin seemed to relish his company’s stronger position now that they “own and control” the business after divesting Al Mann’s influence a year ago. “They did what they wanted,” he said. Tobin pointed to the multielectrode Bion as a key device for penetrating new markets in coming years. While acknowledging that competitor Medtronic holds a significant advantage in market share, Tobin pointed out that it will be difficult for that company to maintain their market share, and the acquisition of even a few points of incremental market would yield double-digit profitability gains for Boston.

Cochlear CEO Chris Roberts highlighted his company’s ongoing strength in the neural prosthesis market. The company sold 18,000 new cochlear implants last year and is developing new hybrid devices that incorporate stimulation in the high frequencies while augmenting natural residual hearing in the low frequencies.

Roberts said that Cochlear’s longevity represented a key selling advantage over competitors since users would want a company that will be around the rest of their life in addition to high reliability. About 15 percent of the firm’s new sales are upgrades in existing customers, he said, and the current move toward bilateral implantation in children would be an important driver for new business. Highlighting the need for consumer advocacy, Roberts said that lack of awareness and fear of surgery are the two greatest impediments to new business.

EnteroMedics CEO Mark Knudsen gave attendees an update on the company’s new 18-month weight-loss data [see article p5]. He also described the company’s efforts to develop new indications for the VBLOC technology for hypertension and diabetes.

In addition to the VBLOC-RF2 study, the company’s Maestro system is being used in the pivotal EMPOWER clinical trial, a randomized, prospective, double-blind, placebo-controlled study being conducted in the U.S. and Australia under an Investigational Device Exemption approved by the U.S. Food and Drug Administration. The trial was fully enrolled at 15 Centers of Excellence with 294 patients in September 2008. The study blind, which remains in place for 12 months after activation of therapy in the experiment arm, is expected to lift in the second half of this year.

EnteroMedics developed VBLOC vagal blocking therapy to offer bariatric surgeons and their patients a less invasive alternative to existing surgical weight loss procedures that may present significant risks and alter digestive system anatomy, lifestyle and food choices. VBLOC therapy is delivered via the Maestro system through laparoscopically implanted leads to intermittently block the vagus nerves using high-frequency, low energy electrical impulses. VBLOC therapy is designed to target the multiple digestive functions under control of the vagus nerves and to affect the perception of hunger and fullness.

Thomas Kirk, CEO of Hanger Orthopedic Group, told attendees about the Center for Medicare and Medicaid Services’ recent decision on FES foot-drop devices for spinal cord injury and how that would impact the WalkAide device from their Innovative Neurotronics subsidiary. Kirk said that although the CMS decision will benefit all players in that market, Hanger representatives were particularly proactive in changing the government’s position.

Other neurotechnology companies presenting at the conference included Cardinal Health, Integra LifeSciences, and Tengion Inc.