2011 A global ambition

Medical Technology indusTry secTor BlueprinT 2011

A global ambition A thriving medtech economy

Medical Technology indusTry secTor Blueprinor BlueprinT 2011

A global ambitionA global ambitionA thriving medtech economyA thriving medtech economy

The Medical Technology Association of New Zealand (MTANZ) is the leading industry body representing medical technology manufacturers, importers and distributors of medical devices in New Zealand.

MTANZ aims to increase awareness of the medical technology industry in New Zealand and to ensure patients benefit from the innovative medical devices available today. MTANZ supports New Zealand researchers and manufacturers in developing medical devices for international markets.

MTANZ represents manufacturers and suppliers of medical technology used in the diagnosis, prevention, treatment and management of disease and disability. MTANZ promotes policies for a legal, regulatory and economic environment to advance access to innovative medical technologies.

The MedicAl TechNology AssociATioN of New ZeAlANd

Po Box 74116, greenlane central, Auckland 1546P + 64 9 917 3645F + 64 9 F + 64 9 F 917 3651

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A global ambitionA thriving medtech economy

The medical technology sector of New Zealandplans to hire over 165 full-time skilled workers in the next 24 months.

in the last financial year, the New Zealand medical technology sector earned over $578.8 million in exports.

The New Zealand medical technology sector spent over $65.3 million on research and development in the last financial year.

over the next 24 months, 22 companies in the New Zealand medical technology sector plan to raise $44.1 million.

www.mtanz.org.nz

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AckNowledgeMeNTs

execuTive suMMAry

1. The role of MedicAl TechNology iN New ZeAlANd’s ecoNoMy

1.1 National Prosperity and Medical devices1.2 increasing our share of the TiN1001.3 closing the gap with Australia1.4 Building a “healthy” healthcare system1.5 incubating growth1.6 what success looks like for Medical Technology

2. gloBAl MArkeT overview2.1 global Market size2.2 healthcare spending2.3 global economic recession2.4 growth Predictions for the Medical Technology industry2.5 how can New Zealand capitalise on the opportunities?

3. The MedicAl TechNology secTor iN New ZeAlANd3.1 company establishment and focus3.2 employment3.3 revenue and export focus3.4 innovation and Product development3.5 clinical Trials3.6 funding3.7 constraints

4. AcTiviTies siNce The 2009 rePorT4.1 Medical Technology Association of New Zealand (MTANZ)4.2 government initiatives4.3 commercialisation initiatives – A sector Perspective4.4 university commercialisation offices of New Zealand workshops4.5 Master of engineering studies in Medical devices

and Technologies

5. recoMMeNdATioNs ANd coNclusioNs5.1 coordinating initiatives5.2 Bridging funding gaps5.3 The road forward: Bigger, Better, Brighter5.4 what does the sector Need to grow?

refereNces



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AckNowledgeMeNTs

The conclusions reported in this sector blueprint result from an online survey and follow up discussions with various sector and research representatives. This research was conducted by the Medical Technology Association of New Zealand and appointed consultants. The authors would like to thank those who have generously contributed to this document. Thank you to all the survey participants for their insightful information and comments which created the basis for this document’s content. There are many others to be thanked and these include: The composition specialists; Advocacy works; dr stuart ryan; dr garry Nixon; dr Jonathan sackier; dr Mathieu Petitjean; New Zealand Trade and enterprise; Ministry of science and innovation; dr dan schultz; dr diana siew; rod ruston; keyresearch; Brightwall; and Brigid glass & Associates.your contribution towards the content of this sector blueprint has helped the your contribution towards the content of this sector blueprint has helped the yauthors produce a high quality review and in-depth analysis of the medical technology sector.

The Medical Technology Association of New Zealand would like to thank New Zealand Trade and enterprise and TechNZ part of the Ministry of science and innovation for the grants to support this project.

we have done our best to ensure that the data presented in this sector blueprint is as accurate as possible. The Medical Technology Association of New Zealand remains responsible for any errors of fact or interpretation.



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role of The MedicAl TechNology secTor iN New ZeAlANd’s ecoNoMy

New Zealand’s economic climate is currently challenging, highlighting the importance of the national growth strategy. raising export revenues, increasing high value jobs, cultivating new businesses in regional centres and encouraging expansion in inventive and high-tech industries are all fundamental activities that support economic growth. The medical technology sector in New Zealand has excellent potential to grow from its already strong foundations, and has a strategy in place to achieve this growth.

The healthcare system as a whole plays an important role in the innovation of medical technology. having the innovation of home grown technology champions alongside international ideas and breakthroughs from multinational companies gives the best environment to support innovative technologies being generated domestically for international use. converging technologies – such as the increased overlap between health iT and medical devices - is another important path for innovation in the healthcare sector as a whole. given that many innovations in medical technology result from clinicians using technologies, a fertile clinical trial sector in New Zealand will help the country continue to be a great market for innovation. The role of the professional relationships between clinicians, health boards and medical technology companies is also vital to the ongoing growth of the sector.

success for the sector will be found in a number of measurable ways:more new companies;•more niche ideas that can be exported;•more emphasis on using current innovations to chart a course for future •invention;continuing working with clinicians to maximise the impact of domestic •developments and explore new and better ways to use technology;cultivating a home-grown industry with good jobs and attracting great talent. •



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The gloBAl MArkeT

The global medical technology market is estimated at approximately us$350 billion. The largest market is the united states with the New Zealand medical technology market estimated at us$977 million – approximately 0.3% of the global market. while the long-term picture indicates growth in healthcare spending, including on medical devices, the ‘global economic recession’ has had an impact on businesses. The slow recovery of the capital markets in particular may affect the ability of new and younger companies to compete. research and development (r&d) spending cuts in large multinationals could see weakness in their pipelines in the future, perhaps opening up opportunities for partnership and acquisition. in addition, the shift in focus to emerging markets may change the dynamics in these markets and may result in greater competition.

The convergence of devices, pharmaceuticals, health information technology and diagnostics is creating new possibilities of prevention, treatment and cure of chronic diseases. This innovation, combined with an ongoing focus of healthcare improvement by governments – in the face of rising healthcare costs, aging populations, increasing consumer expectations and limited clinical capacity - indicates the medical technology market will continue to thrive.

Market dynamics are shifting, with the united states likely playing a less dominant role over the next 10 years. This shift, combined with solid growth opportunities gives New Zealand an opportunity to provide a breeding ground for globally-competitive medical technology companies. New Zealand already has some great success stories in this space; fisher & Paykel healthcare, orthopaedic synergy, dynamic controls and Triodent are all examples of success export-driven medical technology companies.

key figures froM The survey

The survey was conducted by the Medical Technology Association of New Zealand and was directed at New Zealand-based manufacturers of medical devices. sixty seven companies were identified that fitted this description. Two-thirds of the respondent companies indicated their company had begun as a start-up. only 17% of companies were established before 1990, reflecting the emerging nature of the medical technology sector.

while the sector is still emerging, it does have relatively high employment counts compared with average New Zealand businesses; in addition the sector also plans to hire at least 165 highly skilled full time equivalent employees over the next 24 months, indicating strong expansion plans.

revenue for the sector in the last financial year was conservatively estimated at $611.595 million, with $578.857 generated from exports over the same period. The top export markets for the sector are North America, followed by Australia, europe, Asia and the united kingdom. Asia was most commonly



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identified by companies as a region they are planning to expand into in the next 24 months. The difference in survey methodologies for assessing revenue makes direct comparison between this and 2009 surveys perilous.

The medical technology sector in New Zealand invests heavily in r&d, with the r&d spend for the previous 12 months reported as $65.383 million. companies also reported strong product pipelines, with 259 products in the sector’s cumulative pipeline (excluding fisher & Paykel healthcare). The sector has also filed 154 patents (excluding fisher & Paykel healthcare).

clinical trials are a critical component to medical technology development. A number of New Zealand medical technology companies have either completed, have trials in progress or plan future clinical trials. There has been a focus on clinical trials in New Zealand and this will continue; as companies focus more heavily on international markets the requirement for international trials will also increase.

The sector, excluding fisher & Paykel healthcare, has raised over $57.5 million to date, with twenty two companies in the sector indicating plans to raise funds totalling over $44.1 million in the next 24 months.

The current survey noted similar constraints to those highlighted in the 2009 sector survey. The constraints the respondents most strongly identified with were funding-related. skills shortages, compliance and regulatory systems and sales and marketing were also identified as potentially important constraints to growth. The sector also identified concerns and issues relating to purchasing policies in New Zealand and access to international markets. commercialisation models from district health Boards and revisiting government policies relating to funding and taxes were also identified. finally, supporting key value-creating milestones to prove the value of the industry and to help capital go further was also identified.

key AcTiviTies siNce The 2009 rePorT

since the last sector review in 2009, a number of initiatives have been set up to support the medical technology industry. The Medical Technology Association of New Zealand (MTANZ) has created a full time business development manager role within the Association, and has also delivered two very successful medical technology conferences. The Association has published a guide to market access for both local and international medical technology companies and has also established an on-line directory of medical technology manufacturers, importers and distributors, universities and research organisations, specialist manufacturers, professional services and both local and central government agencies. recognising the power of collaboration, MTANZ has also signed Memoranda of understanding with the New Zealand health iT cluster and NZBio.

There have also been a number of changes and initiatives in the government support infrastructure since the last review in 2009. The creation of the Ministry of science and innovation (Msi) – through the merging of



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the Ministry of research, science and Technology and the foundation for research, science and Technology - took place in february 2011. recognising the importance of innovation, the May 2010 budget introduced two new funding tools; the Technology development grant and Technology Transfer vouchers.

identifying the need to for greater collaboration between Msi and New Zealand Trade and enterprise (NZTe), the two organisations have embarked upon the initial phase to create Joint engagement Plans. The two organisations have also recently partnered in establishing a joint regional network in 14 regions across New Zealand to support early stage r&d projects and business capability and training. Aligned with the government’s economic growth agenda, NZTe has also set up the health strategic initiative. one of the major projects of the initiative was the focus on health challenge held in 2010, a six-month united states market readiness program, including mentoring, workshops, professional services support and a product roadshow in the united states.

in addition, the university of Auckland formally launched a new degree in 2011 – the Master of engineering studies in Medical devices and Technologies.

There are also a number of initiatives in progress including a health innovation hub, the centre for Medical device Technologies and a health select committee review on supporting innovation through clinical trials. NZTe is proposing to contribute to the proof-of-concept phase of a health innovation hub that it is likely to focus on early stage development and commercialisation of health technologies, including medical devices and health iT solutions. The centre for Medical device Technologies is being set up with a view to nationally link research activities focussed on medical device technologies and provide better collaborations. recognising that innovation through clinical trials is also a critical piece of a thriving industry for products like medical technologies, the health select committee will report back shortly on an inquiry on ways to improve New Zealand’s environment to support innovation through clinical trials.

recoMMeNdATioNs ANd coNclusioNs

The government has a focus on supporting the high-tech sector in New Zealand, which is advantageous to the medical technology sector. To maximise the efficiency of these initiatives, it is important that there is an equal and candid consultation process between the sector and government. This will minimise the risk of the various initiatives ending up being ‘shots in the dark’ and ensure that all those with a stake in the success of the sector understand how they can best add value to the medical technology initiatives being developed in New Zealand.

funding continues to be an issue for the medical technology sector – alongside other high-tech sectors. The gap between angel investment and the multi-million dollar cost of commercialising medical technologies internationally is likely to continue to be an issue for the medical technology sector.



for the sector to continue to grow, a number of activities would help: a continued emphasis on supporting high-tech sectors, while ensuring that •initiatives are focussed, strategic and linked-up; a willingness of the bureaucracy to work with the sector on policy issues to •help the sector expand while avoiding unintended consequences; reduced trade barriers to improve access will also be highly advantageous;•more investment in New Zealand endeavours to continue to support home-•grown champions would also be helpful;continued investment in relationships between the sector, health boards and •clinicians; national and multinational/international cooperation and joint projects and •greater resourcing for the sector and a greater appreciation of the value and potential of medical technology; retain the best and brightest science graduates in New Zealand to ensure •the medical technology sector in New Zealand continues to thrive.

with the core elements of an innovation infrastructure in place, the medical technologies sector has the potential to expand. New Zealand has a track record of developing and capitalising on unique intellectual property and the medical technology sector has examples of international success being achieved. The medical technology sector is strong and vibrant, and with the right support will play a significant role in contributing to New Zealand’s economy.

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1 → The Role of Medical Technology in new Zealand’s econoMy

The medical technology sector has an important role to play in New Zealand’s economy. As well as contributing to national prosperity through investment in innovation and through export earnings, the sector is a thriving part of the clinical trials market in New Zealand. it is critical to provide an environment to incubate growth of the medical technology sector in New Zealand, and how that may occur is readily identified.

The current economic climate in New Zealand is challenging. The ‘global economic recession’ has impacted jobs and investment and recent events such as the earthquakes in christchurch have compounded the pressure on New Zealand’s economy. All this adds urgency to the national growth strategy. The need to raise export revenues, increase high value jobs, cultivate new businesses in regional centres and encourage expansion in inventive and high-tech industries is fundamental. There is consistent rhetoric around the fact that innovation is a key driver of prosperity. yet what does this mean in practice? yet what does this mean in practice? y

in practice, to the medical technology industry, this means we need to:Build on the roughly $65 million dollars invested in research and •development last year to explore the development of new products and services. Partner with government and health stakeholders to position the industry •to expand export potential well beyond the $579 million in export revenues that were generated last year. Maintain a regulatory approach that fosters new ideas and prioritises access •to the newest and best technologies – without impeding progress or tying up ideas in red tape. capture the skills and enterprise that have already carved New Zealand •a niche in the global medical technology environment where the average salary is $80,000 per annum. That will help New Zealand keep the maximum number of science, health and technology graduates. in addition, the innovative environment in New Zealand can be used to attract skilled international people to help bolster our home-grown talent.

New Zealand has a number of mature export sectors – particularly in primary industries. The economy also needs growth from high tech industries. As an example of a high-tech industry, the medical technology sector is relatively new and is yet to explore its full potential. The sector is committed to growing and has a strategy in place to make this growth happen.

1.1 → naTional prosperiTy and Medical devices

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The TiN100 report is a quantitative study of New Zealand’s leading internationally-focussed technology businesses in the areas of high-tech manufacturing, information and communications technology and biotechnology. high-tech manufacturing companies are integral to the new generation of New Zealand innovators and exporters. The TiN100 is a good indicator for the success of the sector relative to other high-tech sectors – the goal is to increase the number and ranking of medical technology companies in this annually-produced list.

out of the nine healthcare companies in the top 100, a few medical technology companies stand out: dynamic controls; fisher & Paykel healthcare; orthopaedic synergy; and Triodent. each company is a niche player:

dynamic controls is a global leader in electronic wheelchairs and •scooters; fisher & Paykel healthcare is a global leader in respiratory care, acute care •and obstructive sleep apnoea; orthopaedic synergy, the parent company of enztec ltd and oMNilife •sciences, specialises in high quality orthopaedic devices; Triodent specialises in dental technology that makes the job of dentists •easier, alongside producing better patient outcomes.

These companies are great examples of the potential of the medical technology sector for New Zealand. They are developing and making products locally – utilising in some instances external partnerships - and are fully invested in the New Zealand market.

These companies are engaging with healthcare professionals to explore ways to improve or expand the use of the technologies they are producing. it is a complicated, often esoteric process that relies on the newest and most ground-breaking technologies being explored in New Zealand. This has been coupled with the number-eight-wire mentality that has kiwis being seen as globally competitive in creating niche technologies. some sector ideas have started small and grown to market dominance. This is the model that a number of New Zealand companies hope will also be successful for them.

1.2 → increasing our share of The Tin100

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1.4 → Building a “healThy” healThcare sysTeM

1.3 → closing The gap wiTh ausTralia

The business of medical technology is fast-paced and quickly evolving. competition to develop the next ground-breaking technology to advance a particular treatment is intense and often internationally-focussed. Both developed and developing countries are in a race to design the new generations of technology. one element of the innovation process that is particularly significant in terms of contributing to the pace of invention is clinical trials.

A number of New Zealand’s competitors, including Australia, have emphatic and concerted strategies in place to attract the maximum amount of investment in clinical trials. These trials are crucial because they generate revenue within the health system, provide an added incentive for researchers to remain in New Zealand and ensure that our clinicians are exposed to the newest concepts under development. Many improvements in medical technology are identified by clinicians in the course of using technologies, which further highlights the relevance of clinical trials.

in terms of New Zealand goals, the most pressing priority is to close the gap with Australia. we need to ensure that we remain competitive and that we continue to be a compelling destination for both domestic and international technology trials. in this respect the sector has a simple and clear goal: keep it local. The Medical Technology Association of New Zealand, working on behalf of the sector, intends to work with health policy stakeholders across the board. The intention is to ensure that New Zealand can hold onto and capitalise on the energy and entrepreneurship of those who are driving developments in the sector in cities around New Zealand.

it would be an unusual government that wouldn’t want look at ways to make the healthcare system more efficient and user-friendly for its clients. one of the ways in which the medical technology sector sees itself contributing to the perennial demand to ‘add economic value’ is through working with healthcare providers to ascertain how best to minimise the costs and maximise the benefits of new technologies.

in this sector, it is not necessarily a question of scale – but rather an issue of developing the right solutions to clinical challenges. when we are able to capitalise on the innovation of home grown technology champions and integrate international ideas and breakthroughs, we can support domestic technologies and develop the kind of new concepts that have put New Zealand into the ranks of the innovative elite. This is the advantage of having both domestic and multinational companies on the ground in New Zealand.

Trying to identify ways to gain efficiencies across the health sector is also a sector goal. That is why proactive efforts have been made to achieve convergence with other medical services providers such as those developing

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health iT. The ideal is an integrated approach where all new technologies work together exploring new developments. convergence is also being explored with respect to New Zealand’s agricultural sector – for example in designing nutraceuticals and devices such as honey wound healing dressings. it doesn’t matter where or how the technology has been developed, the goal is to refine it, maximise its efficacy and produce it as intelligently as possible.

Maintaining the right environment for growth and development has always been a challenge. Nurturing an idea from its inception to commercial reality is neither easy nor cheap. we are lucky in New Zealand in that we have the access and flexibility to work with health professionals and to assess the functionality of new concepts with the people most likely to use the end product. The choices that clinicians make and the ways in which they see creative or different uses for the technologies being developed in New Zealand are integral to research and development.

New Zealand is fortunate to have the involvement of many of the key multinational companies who are providing some state-of-the-art products. This ensures that New Zealand healthcare providers have access to the best technologies on the market. These companies, supplying the New Zealand market, make it possible for local providers to have access to the best and the newest technologies.

Medical technologies are seen by many as an extension of their competence to care. That is why so many clinicians have a close relationship with the technology providers they use in day-to-day practice. it is important that the medical technology and the broader healthcare sector maintain the sort of excellent working relationships that have already made medical technology an integral partner in healthcare delivery. having access to clinicians and health boards is vital. from experts providing advice about uses of various technologies, to support in operating theatres, to on-going client care and follow-up, medical technology experts and related professionals are part of the picture. The benefits of unbroken lines of communication and consultation are inherently mutual. clinicians find the input helpful and it is often through their feedback and desire to be able to address a particular problem that new ideas take form or different uses for existing technologies are identified.

1.5 → incuBaTing growTh


1.6 → whaT success looks like for Medical Technology

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what does the future hold for the medical technology sector in New Zealand? There is already a flourishing and functional export business. There is already a healthy import business to ensure that New Zealanders have access to modern technologies regardless of where they were developed. There are medical technology companies, based in New Zealand, exploring ideas that are the forefront of global innovation. The picture of success for the sector is simple:

More new companies. •More niche ideas that can be exported. •More emphasis on using current innovations to chart a course for future •invention. on-going work with clinicians to maximise the impact of domestic •developments and explore new and better ways to utilise technology.cultivating a home-grown industry with good jobs, attracting good people •who can continue to cause others in the international industry to ask “how on earth did they do that?”

2.1 → gloBal MarkeT size

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2 → global MaRkeT oveRview

The global medical technology market has most recently been estimated to be approximately us$350 billion. global industry data from 2008 show that the united states is the largest single market for medical devices and diagnostics, with sales of us$160 billion (47%). europe, valued at us$110 billion (33% of the market), includes the 3 largest markets of germany (us$30 billion), the united kingdom (us$18 billion) and france (us$15 billion). Japan was valued at us$30 billion, and the emerging markets of china and india both valued at us$5 billion.

New ZeAlANd

while there is no publicly available information confirming the value of the New Zealand medical technology market, an industry-led sector survey indicated local in-market sales of between NZ$1.3 – $1.4 billion. These figures include medical consumables, capital equipment, dental and in vitro diagnostics products supplied by both medical technology importers/distributors and the medical technology manufacturers from within New Zealand. Approximately 96% of these sales are generated by importers / distributors. in terms of the size of the New Zealand market compared to the global market, using current exchange rates, New Zealand’s medical technology market equates to approximately us$977 million, 0.3% of the world market.

global medical device and diagnostics market - us$335bn (2008)

other $65bn

usA $160bn

europe $110bn


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locATioN of ToP coMPANies

reflecting on the importance of the American market, 13 of the global top 20 medical technology companies - as measured by operating profit - are headquartered in the united states. six of the other seven companies are headquartered in europe and one company hails from Japan.

company location2009 Medical Technology operating profit (us$ M)

Johnson & Johnson united states 7694

Medtronic united states 2594

ge healthcare united states 2420

siemens healthcare germany 2016.63

covidien united states 1941

Becton dickinson united states 1650.35

stryker united states 1594.4

3M united states 1350

synthes switzerland 1162.73

st Jude Medical united states 1113.05

roche diagnostics switzerland 1106.5

Zimmer united states 1018.8

Abbott laboratories united states 963

olympus Medical Japan 861.87

Philips Netherlands 824.23

smith & Nephew united kingdom 723

cardinal health united states 669.6

carefusion united states 589

B Braun germany 572.59

varian Medical varian Medical v systems united states 474.15


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oNgoiNg growTh iN MedicAl devices ANd iMProveMeNT iN heAlTh

The combination of therapies becoming more effective, technology getting better, and life expectancy expanding provides a platform for medical technology companies to continue to innovate and grow. continuing innovation is a hall-mark of the medical technology industry globally – product lifecycles are much shorter than other healthcare industries, such as pharmaceuticals. Product turnover is rapid, with up to 50% of medical device products being replaced after only five years on the market.

Medical devices pharmaceuticals

industry composition

oover 80% small and ver 80% small and medium-sized companiesmedium-sized companies

vvery large multinationals dominateery large multinationals dominatevvery large multinationals dominatevv

active components

ggenerally based on enerally based on mechanical, electrical, and mechanical, electrical, and materials engineeringmaterials engineering

Based on pharmacology and Based on pharmacology and chemistry; now encompassing chemistry; now encompassing biotechnology, genetic engineering, biotechnology, genetic engineering, etc.etc.

Most act through physical Most act through physical interaction with the body or interaction with the body or body partbody part

Products are administered by mouth, Products are administered by mouth, skin, eyes, inhalation, or injection and skin, eyes, inhalation, or injection and are biologically active; effective when are biologically active; effective when absorbed into the human body. absorbed into the human body. ooften ften act systemically on the entire body.act systemically on the entire body.

product development

wwide variety of products and ide variety of products and applications – from thermometers applications – from thermometers and bandages and bandages to pacemakers to x-raysto pacemakers to x-rays

Products are usually in the form Products are usually in the form of pills, solutions, aerosols, or of pills, solutions, aerosols, or ointmentsointments

ddesigned to perform specific esigned to perform specific functions and approved on the functions and approved on the basis of safety and performancebasis of safety and performance

Product development by discovery, Product development by discovery, trial, and approved on basis of trial, and approved on basis of safety and efficacysafety and efficacy

Products developed by Products developed by engineers, in many cases engineers, in many cases together with doctors or nurses together with doctors or nurses in a clinical settingin a clinical setting

Products developed in laboratories Products developed in laboratories by chemists and pharmacologistsby chemists and pharmacologists

Description of How Medical Devices Innovate and How it Differs from Pharmaceutical Innovation



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The focus on medical technology innovation has been shown to produce significant impacts on health. According to the Advanced Medical Technology Association (AdvaMed), the American medical technology industry body, advances in technology from 1980 to 2000 have resulted in “a 15% decline in annual mortality, a 25% decline in disability rates, a 56% reduction in hospital days—and a 3.2 year increase in life expectancy.”

in addition, the convergence of devices, pharmaceuticals, health information technology and diagnostics is creating new possibilities of prevention, treatment and cure of chronic diseases. The combination of innovative drivers with the ongoing focus on health improvement by governments worldwide – the biggest healthcare payers internationally - for all countries in the income spectrum indicates the medical technology market will continue to thrive and contribute to healthcare efficiencies.

Medical devices pharmaceuticals

intellectual property

cconcerns continuous innovation oncerns continuous innovation and iterative improvements based and iterative improvements based on new science, new technology, on new science, new technology, and new materialsand new materials

eextensive research and development xtensive research and development of a specific compound or molecule; of a specific compound or molecule; takes several years for a new drug takes several years for a new drug to enter the product pipelineto enter the product pipeline

sshort product life cycle and hort product life cycle and investment recovery period investment recovery period (typically 18 months on market). (typically 18 months on market). llittle patent linkage possible. ittle patent linkage possible. ddata exclusivity is important.ata exclusivity is important.

iintensive patent protection, including ntensive patent protection, including data exclusivity and patent linkage, data exclusivity and patent linkage, needed due to extensive product life needed due to extensive product life cycle and long investment recovery cycle and long investment recovery periodperiod

Majority of new products bring Majority of new products bring added functions and clinical added functions and clinical value based on incremental value based on incremental improvementsimprovements

uusually large step innovationsually large step innovation

support provided

llarge investment in arge investment in manufacturing, distribution, and manufacturing, distribution, and user training/education; plus user training/education; plus need to provide service and need to provide service and maintenance (for many high tech maintenance (for many high tech devices)devices)

iin most cases, no service or n most cases, no service or maintenancemaintenance



healthcare costs, particularly in high income countries, are rising faster than economies are growing. Measuring national spending per country on healthcare as a percentage of gross domestic Product (gdP) shows great disparities between economic regions, and very high levels of growth in healthcare costs in developed countries. in 2007 high income countries - including countries such as Australia, the united kingdom, the united states and New Zealand - spent on average 11.7% of gdP on healthcare, this was up from 10.2% in 2000.

in 2009, the united states itself spent 17.3% of gdP on healthcare, up from 15.7% in 2007. conversely, lower middle income countries, including china and india spent 4.3% of gdP on healthcare in 2007, a decrease on the 4.4% spent in 2000. future economic drivers indicate there is likely to be increased spending on healthcare as countries deal with aging populations, increasing consumer expectations and limited clinical capacity. while a number of drivers indicate greater spending and potential market opportunity in the future, the past couple of years have been affected by the far-reaching ‘global economic recession’.

The most immediate impacts felt in New Zealand as a result of the ‘global economic recession’ for many companies have been fluctuating exchange rates and a much tighter capital market. globally, the impact of the global economic recession has not been as visible for the life sciences industry as it was for the automotive industry. however, despite many of the issues being under the economic radar, the effect of the global recession for healthcare companies has been significant. A survey was conducted at the end of 2009 of 281 senior life science industry executives, by the economic intelligence unit in collaboration with deloitte’s life science and healthcare industry group.

The survey showed over half of the respondents believed the medical devices area had been moderately or severely negatively affected by the global economic recession. The survey also indicated some of the areas that are likely to unfold over the next few years as the consequences of the global economic recession become more apparent. These include:

The slow recovery of capital markets likely to change the dynamic; lack •of access to capital is likely to shift successful entrepreneurial success to large well-capitalised companieslarge companies have reduced their r&d spending; in the short •term this has significant impacts on service industries such as clinical research organisations, and longer term it may result in potential gaps or weaker pipelines that may need to be filledThe focus has shifted to emerging markets as large, growing affluent •markets; they are viewed as likely to see faster economic recovery and so have become even more attractive.

2.2 → healThcare spending

2.3 → gloBal econoMic recession

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“while the immediate financial hit of the recession has been mostly absorbed, industry forces already in play will only be intensified by this most recent downturn and may permanently reshape the look of the industry,” the report concludes. This may prove beneficial for New Zealand-based companies which are sufficiently capitalised to continue on their development path, as there may be a greater opportunity for partnering and acquisition. however, the effect of greater focus on the emerging markets may translate to greater competition for New Zealand-based firms.

well before the recession became a reality, patterns had been developing, some of which have also been compounded by the recession. The dynamics of the medical technology market are changing, with the picture being painted in 2020 being very different from the current state.

while the united states continues to be the biggest market, it makes sense for companies to consider a focus there. however, the global market in another 10 years may change considerably. The recently published Medical Technology innovation scorecard, authored by Pricewaterhousecoopers, highlights three major trends facing the global medical technology industry:

The innovation ecosystem for medical device technology is moving •offshore from its historical united states base. innovators are looking outside the traditional base of the united states for clinical validation, product registration and initial sales.The united states is no longer always first choice for product registration •– companies are already heading to europe first and by 2020 will be more focussed on emerging markets rather than the united states.developing countries are becoming the lead markets for smaller, •faster and more affordable technology that supports better delivery of healthcare. while these markets may not be as appealing from an ease of doing business and intellectual property perspective, they also don’t have the same healthcare system infrastructural issues of more established markets.

uNiTed sTATes sTill firsT, for Now

The report assigns scores for countries based on their relative strengths in the areas of financial incentives, regulatory system support, resources available for innovation, demand levels and price sensitivity of patients and investment community support. A total of 86 metrics are used to calculate the score, with 56 metrics used for the historical score. The current (2010) rankings have the united states has the highest score, followed by germany

2.4 → growTh predicTions for The Medical Technology indusTry

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and the united kingdom second equal, then france, Japan, israel, china, and Brazil and india as eighth equal.

chiNA will cATch uP By 2020

china, which has shown the greatest improvement in innovation capacity in the past five years, according to the report, is expected to outpace other countries and is expected to reach a comparable situation to the developed nations of europe by 2020. The opportunity this represents should not be underestimated.

New Zealand is well positioned to capitalise on the growth of countries such as china, as well as the ongoing opportunities in the large established healthcare markets in high income countries such as the united states, europe, Japan and Australia. while the New Zealand local market is relatively small, it has the potential to provide a breeding ground for globally-competitive medical technology companies. This has been proved by the success of companies such as fisher & Paykel healthcare and the rapidly growing mid-sized companies such as orthopaedic synergy, dynamic controls and Triodent. New Zealand is well placed to develop a significant export niche in high-value medical technology products.

deNMArk

denmark’s success in the medical technology market internationally shows the potential for New Zealand to also carve out a multi-billion dollar export niche. New Zealand has a similar population size to denmark (approximately 4.39 versus 5.5 million inhabitants, respectively). however, denmark is home to over 1,000 companies that operate in the area of medical technology and over 220 which are dedicated medical technology companies, helping support denmark’s much higher exports per capita (NZ$26,400 versus NZ$9,200 for New Zealand in 2009). for the 12 months to August 2010, denmark exported approximately us$2.6 billion in medical devices, showing what is readily achievable for a small country like New Zealand.

2.5 → how can new zealand capiTalise on The opporTuniTies?

22 23


22 23

3 → The Medical Technology secToR in new Zealand

survey PurPose

The survey of the New Zealand medical technology sector was undertaken during the period of october 2010 to february 2011. The ultimate aim of this survey was to create a blueprint of the medical technology sector in New Zealand. The specific goals of the survey were four-fold.

firstly, the survey was undertaken to get an accurate picture of the current state of the New Zealand medical technology sector, building on the sector overview completed in January 2009. This picture includes:

key company information about the establishment of the company and •niche area of activity;employment figures; •revenue and export focus for the company; •innovation and product development activities; •past, current and future clinical trial activity; •past and future funding;•constraints that may affect growth.•

secondly, the survey was commissioned to help identify barriers to growth for the sector and provide guidance and recommendations for government research and development (r&d) spending and streamlining research efforts.

Thirdly, the survey was intended to provide a current sector landscape to aid in the development of business-focussed support strategies for all of the relevant industry agencies who are working together.

finally, the survey followed a similar methodology to the united kingdom government’s recent medical technology, medical biotechnology and industrial biotechnology landscape reports to provide an opportunity to both benchmark the New Zealand medical technology sector, and for international exchange in the future.

survey fuNdiNg

The Medical Technology Association of New Zealand (MTANZ) was supported by grants from New Zealand Trade and enterprise (NZTe) and TechNZ, part of the Ministry of science and innovation (Msi).

survey desigN

The survey consisted of 65 questions. companies were asked to complete the survey either via phone or on-line. follow-up discussions were also undertaken with various companies to validate responses.

The survey questions collected a combination of qualitative and quantitative data about each company. Quantitative questions were structured as one of four question types:

rating sets (where the participant was asked to rate values);•multi-choice (with one possible answer);•multi-choice (with more than one possible answer);•numeric values. •

24 25

All questions were optional (resulting in a “not answered” response if no response was given), and did not need to be answered for the survey to be considered complete by the survey system. where it was felt the total number of respondents for a given question is relevant to the interpretation of the answers, the number of respondents is indicated.

recognising the scale of fisher & Paykel healthcare relative to the other companies in the sector, the survey was designed to minimise the effect of skewing caused by the difference in quantum. Accordingly, the vast majority of the answers reported include all the respondents of the sector. where it was felt that inclusion of the fisher & Paykel healthcare figures would mask the progress of the other members of the sector, the data was reported excluding fisher & Paykel healthcare’s answers; where this is the case it is clearly indicated in the report.

survey PArTiciPANTs

The 2009 survey used a similar definition to the current survey and in total identified 89 companies. A number of these companies were no longer in business or had changed their business model to no longer include r&d.

The current survey identified 67 companies by comparing and then cleaning the databases of TechNZ, NZTe and MTANZ. companies were identified who were New Zealand-based manufacturers of medical devices. for the purpose of this survey and for consistency with the strengths and opportunities united kingdom-based work, the global harmonisation Taskforce (ghTf) definition was used.

Global Harmonisation Taskforce Medical Device Definition

`Medical device’ means any instrument, apparatus, implement, machine, appliance, implant, in vitro reagent or calibrator, software, material or other similar or related article:

a] intended by the manufacturer to be used, alone or in combination, for human beings for one or more of the specific purpose(s) of:

• diagnosis, prevention, monitoring, treatment or alleviation of disease,• diagnosis, monitoring, treatment, alleviation of or compensation for an injury,• investigation, replacement, modification, or support of the anatomy or of a

physiological process,• supporting or sustaining life,• control of conception,• disinfection of medical devices,• providing information for medical or diagnostic purposes by means of in

vitro examination of specimens derived from the human body;

and

b] which does not achieve its primary intended action in or on the human body by pharmacological, immunological or metabolic means, but which may be assisted in its intended function by such means.



24 25

several companies were also identified that do not manufacture in New Zealand, however they do have significant r&d activities in New Zealand. As they did not fit the classification of New Zealand-based manufacturers of medical devices, they were not included in the survey. from anecdotal sources and other New Zealand industry reports, we can identify over 40 full-time equivalent r&d staff based in New Zealand. There are also a number of multinationals who have operations in New Zealand; these were also excluded from the survey.

Qualifying companies were invited to take the survey. efforts were made to ensure all companies that were identified completed the survey; the final analysis reflects the 42 medical technology companies who completed the survey.

coMPANy esTABlishMeNT

Two-thirds (27 of 40) of the respondent companies identified themselves as beginning life as a start-up. A further four (10%) companies are the result of a spin-off from a university. spin-offs from a company or as a subsidiary accounted for the formation of 5% and 8% of companies, respectively. The

67 companies identified

46 response(69%)

21 No response (31%)

3 Non Medical Technology companies

42 Medical Technology companies

1 health iT company

Medical technology survey invitees and respondents


3.1 → coMpany esTaBlishMenT and focus



26 27

remainder (10%) did not identify with any of these categories, or the other available response options of merger or spin-off from a public institution /non-profit organisation.

The high number of start-up companies versus spin-offs from universities perhaps reflects the relative youth of the medical technology sector in New Zealand. if this trend continues as the sector develops, it may be an indication that the mechanisms for supporting research from start-ups need to be similarly aligned with research being commercialised from universities.

TiMe siNce esTABlishMeNT

of the respondent companies, 26 of the 41 (64%) were established since 2000, with 32% being set up in the past 5 years. A further 19% of companies were formed in the previous decade. only 17% of companies have been operating for more than 20 years, reflecting the emerging nature of the medical technology sector.

how was your company established?

other 10%

start-up 67%

subsidiary 8%

spin-off from university 10%

spin-off from company 5%


what year was your company established?

pre 199017%

1990 - 199919%

2000 - 200432%

2205 - 201032%




26 27

MedicAl device cATegorisATioN

over 3000 companies were identified as part of the united kingdom medical technology sector in the 2010 survey of their industry. The top five medical technology segments (excluding professional services) in the united kingdom as measured by the number of companies were: assistive technology, single use technology, re-usable diagnostic or analytic equipment, in vitro diagnostic technology, and hospital hardware including ambulatory.

despite the small size of the New Zealand market and the diverse categorisation that the united kingdom reports used, there is a strong overlap, with four of the top five categories for New Zealand overlapping with the united kingdom. The top five medical technology segments in the New Zealand as measured by the number of companies were: assistive technology, single use technology, re-usable diagnostic or analytic equipment, hospital hardware including ambulatory, and orthopaedic devices.

Analysis of the different focus areas across the sector indicates that there are no clearly established niches. however, the areas of focus do overlap strongly with the top market segments identified globally.

eMPloyees wiThiN New ZeAlANd

of the respondent companies, 40% (16 of 41) had ten or more full time equivalent employees. This compares with an across-industry figure for

3.2 → eMployMenT

which medical device categorisations does your company associate with?

Per

cent

age

of c

ompa

nies

Assis

tive

tech

nolo

gy

sing

le u

se te

chno

logy

re-u

sabl

e di

agno

stic

or a

nalyt

ic e

quip

men

to

rthop

aedi

c de

vices

hos

pita

l har

dwar

e in

clud

ing

ambu

lato

ry

Anae

sthe

tic a

nd re

spira

tory

tech

nolo

gy

wou

nd c

are

and

man

agem

ent

dent

al a

nd m

axillo

faci

al te

chno

logy

drug

del

ivery

educ

atio

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d tra

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gim

plan

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vices

in v

itro

diag

nost

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chno

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infe

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Med

ical im

agin

g/ul

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and

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car

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lar a

nd v

ascu

lar d

evic

es

opt

halm

ic d

evic

es/e

quip

men

tN

euro

logy

12%

10%

8%

6%

4%

2%

0%

12%11%

9%8% 8%

7% 7%

4% 4% 4% 4% 4% 4% 4% 4%3% 3%

1%




how many full time equivalent employees do you have outside nz?

how many full time equivalent employees do you have in nz?

0 - 436%

5 - 924%

>5010%

20 - 5015%

10 - 1915%

None 57%

>50 7%

5 - 9 2%

10 - 19 7%

1 - 4 27%



28 29

New Zealand of only 6%. A further 25% of companies in the medical technology sector had employee counts of at least 20, compared with only 3% of enterprises across all industries in New Zealand.

eMPloyees ouTside New ZeAlANd

The sector has 18 firms (44%) with at least one full time equivalent employee outside New Zealand. A further 27% of enterprises reported having between one and four employees internationally, with one company (2%) reporting between five and nine overseas-based employees. A total of six companies have more than ten full time equivalent employees outside New Zealand. Three firms (7%) had ten to nineteen employees. The other three firms each reported over 50 employees internationally.

hiriNg over The NexT 24 MoNThs

while total employment figures for the sector were not part of the current survey, 32 of the firms plan on hiring at least one full time equivalent




28 29

employee, indicating strong employment growth. The sector as a whole plans to hire at least 165 full time employees in the next 24 months – the vast majority of these roles would be considered highly skilled. This includes at least 65 new engineering, 42 sales and marketing, 19 regulatory and quality, 18 executive and 21 service and support roles.

in the next 24 months, the New Zealand medical technology sector plans to hire:

role conservative number of hires

engineer – Mechanical 20

engineer – software 21

engineer – other 24

sales and Marketing 42

regulatory/Quality 19

service and support 21

executive roles 18



please indicate your total sales revenue for last financial year (Medical technology products only)

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

32%

42%

10%7%

5%2% 2%

Pre-revenue < $2M $2-$4M $5-$9 M $10-$14M $15-$19M $20-$29M $30-$39M $40-$49M $50-$100M >$100M

0% 0% 0% 0%


30 31

reveNue

of the responding medical technology companies, 32% of the companies reported themselves as pre-revenue. Another 42% of companies indicated revenues of less than $2 million for the last financial year. A total of four companies (9%) had revenues of over $15 million – this equated to two companies in the $15 to $19 million band, one company reporting $50 to $100 million revenue, and one company reporting greater than $100 million in revenue last year. This picture clearly illustrates the emerging nature of the New Zealand medical technology sector.

secTor reveNue

To determine a total revenue figure for the sector, the following methodology was employed: the lower figure of the range nominated by the company was used, unless the export revenue (discussed later in this section) was greater than the lower figure. for example, if a company had nominated revenue of ‘$30 to $39 million’, and reported exports of $35 million, the revenue attributed to the company in the sector revenue calculation would have been $35 million. due to estimating using this approach, as well as the effect of the non-respondents, this approach will result in a total sector revenue value that very conservatively estimates the sector revenue. Based on this approach, the medical technology sector reported revenues in excess of $611.595 million in the last financial year.

exPorTs

The total export revenue for the New Zealand medical technology sector was reported as $578.857 million in the past financial year. As some of the companies within the sector did not respond to the survey, this figure under-represents the export earnings of the sector.

The TiN100 report estimates export revenues of $4.958 billion for the top

3.3 → revenue and eXporT focus

Top 5 export markets: current Planning to expand into


30 31

100 technology companies in New Zealand. This compares to total revenue of $6.729 billion for the TiN100 group. This equates to an average of 74% export revenue. with due consideration of the fact that the total revenue of the medical technology sector is conservatively estimated, the proportion of the export revenue of almost 95% suggests the medical technology sector has proportionally higher export revenue than a number of the leading globally-focussed technology firms in New Zealand. At the very least, the figures from this survey support the very strong export focus of the medical technology sector in New Zealand.

rural opportunities: a developing healthcare Market

Technologies developed for specialist units may have potential in other markets such as rural healthcare delivery, according to dr garry Nixon, Medical officer at dunstan hospital, in rural otago.

dr Nixon, who also holds the role of the course convenor of the Postgraduate diploma in rural and Provincial hospital Practice at the university of otago, reflects that the scattered population in New Zealand creates opportunities to develop technologies that would be useful here and in other similar markets such as Australia and canada. he also suggests that what works well in rural areas may also have applications in developing markets.

Accepting that many of the innovations that could be highly valuable in a rural setting are often developed for specialists units, one of the challenges, reports dr Nixon is identifying these technologies. he’s very supportive of a collaborative approach and willingly offers to be involved in discussions to identify needs and solutions for rural healthcare from a medical devices perspective.

dr Nixon believes New Zealand is an ideal ideas laboratory, and sees the rural healthcare market as playing an important role in the success of New Zealand’s medical technology companies. working with rural healthcare partners to develop healthcare solutions, according to dr Nixon, has the advantage that the rural healthcare community is tight-knit and very willing to try new things, with quick adoption of new technology. he also points out the integrated nature of providers with the health board, providing easy access for companies.


3.4 → innovaTion and producT developMenT

32 33

exPorT MArkeTs

The top five export markets identified by the medical technology sector are North America, followed by Australia, europe, Asia and the united kingdom. Asia was most commonly identified as a region companies are planning to expand into in the next 24 months. This is followed by North America, which remains an attractive market for companies not already exporting there. europe, the united kingdom and Australia were also identified as international markets of interest.

Market entry considerations

The united states is currently the largest player in the global medical technology market. “even given the recent difficult economic conditions in the united states, medical technology remains an attractive industry,” notes dr Mathieu Petitjean, President of MedNest. dr Petitjean reflects “it remains a difficult market to conquer and takes a highly focussed and planned approach, and a fair amount of patience to be successful.”

planning a calibration phase wisehighlighting the importance of planning, dr Petitjean strongly advocates that any market introduction plan includes a ‘calibration phase’ “that defines clinical and economic value propositions, and a comprehensive regulatory strategy including existing equivalent products (‘predicates’). The calibration must also identify target market segments, key opinion leaders and clinical evaluation sites in those segments, and a distribution strategy to reach those customers.”

evangelisation and adoption Takes Timedr Petitjean also cautions that entrepreneurs must recognise that evangelisation and adoption of new technology can take several years. for those who plan and execute well and where superior clinical performance and cost effectiveness can be demonstrated, entrepreneurs and investors “will be rewarded with a quicker return on investment in the technology.”

reseArch & develoPMeNT sPeNd

The medical technology companies who responded to the survey reported annual r&d expenditure of $65.383 million. of this, $59 million was spent by revenue-generating companies. Notwithstanding the comments related to sector revenue, the r&d expenditure of revenue generating companies equates to approximately 10% of revenues being invested in r&d. from a


what percentage of your annual r&d expenditure is supported by government grants?

>30%10%

11 - 30%16%

1 - 10%16%

0%58%


32 33

national perspective, this figure is considerably higher than New Zealand’s TiN100 companies, who spent an average of 5.5% of revenue on r&d.

The medical technology industry worldwide is heavily r&d focussed in comparison to many industries. The r&d intensity for medical technology companies (r&d spend as a percentage of sales) is approximately 8% in europe, while the united states has reported a historical average investment of 10-13%.

goverNMeNT grANTs for reseArch & develoPMeNT

The amount of government support through r&d grants varies considerably between companies. fifty-eight percent of companies reported receiving no grants in the previous year. sixteen percent reported support of 1-10% of r&d costs, with another 16% having 11-30% of r&d costs supported. Ten percent of respondents reported greater or equal to 30% of their r&dexpenditure for the last year was supported by government grants.

PATeNTs ANd PiPeliNe

As fisher & Paykel healthcare is on a different scale from the rest of the New Zealand medical technology sector, their relative contribution to the number of patents and pipeline products risks presenting a distorted picture. Therefore, the answers to the number of patents filed and the product pipeline have been reported excluding the figures collected from fisher & Paykel healthcare.

The medical technology sector, excluding fisher & Paykel healthcare, reported having filed 154 patents. The sector (excluding fisher & Paykel healthcare) also reported a strong product development landscape with 259 new products in their cumulative pipeline.


how many products do you manufacture in each of these classes?

8

7

6

5

4

3

2

1

0class i class iia class iib class iii

4 2 1 13 2 2 01 0 0 07 2 3 2

1

2

3

4 or more

Num

ber

of c

ompa

nies


34 35

QuAliTy MANAgeMeNT sysTeMs

fifteen companies reported manufacturing one or more class i devices, with seven of these companies producing four or more devices. four companies reported manufacturing only one device in this class.

of the six companies that reported manufacturing class iia devices, two reported making at least four devices, a further two reported producing two devices with the other two companies manufacturing one device each.

six companies also reported manufacturing one of more class iib devices. of these six companies, three produced four or more devices, two companies reported manufacturing two class iib devices, and one further company claimed manufacturing one device of this type.

Three companies reported producing at least one class iii device. of these two of the companies produced at least four devices in this class, with the other company producing one class iii device. No companies reported manufacturing any Active implantable Medical devices (AiMd).

classification of devices

Medical device regulations are based on risk. devices are classified according to risk to determine the level of regulation which will apply. while the specific terminology varies between different regulatory bodies, classifications follow this pattern:clAss i: These devices are considered the least complicated and failure poses little risk. examples of devices in this class include hospital beds and wheelchairs.clAss iia: These devices are classed as low to medium risk. examples include electrocardiographs and ultrasonic diagnostic equipment.clAss iib: These devices carry medium to high levels of risk. examples include non-implantable infusion pumps and intensive care monitoring equipment.clAss iii: These devices sustain or support life; the failure of a class iiidevice is life threatening. examples of devices in this class include prosthetic heart valves.


34 35

of the 30 companies who responded to the question of which system(s) they used to demonstrate compliance, ten companies reported iso 13485 certification, six companies have european union Medical devices directive certificates, three companies reported free sales certificates and twenty companies reported using other, not specifically identified systems.

Quality Management systems

The previous sector survey revealed that regulatory hurdles were a constraint on the sector and the news from the current survey is no different. The sector in New Zealand is characterised by a large number of companies at the start-up end of the range and few at the mature end. Both regulatory product approvals and the establishment of a quality management system (QMs) require resources - manpower, skills and funding. Accessing sufficient resources can present considerable difficulties to companies which are still at the pre-income stage, a stage which is often protracted in life sciences industries precisely because of the regulatory requirements and the need to demonstrate safety and efficacy of products.

Manufacturers of medical devices generally must establish a QMs. The New Zealand good Manufacturing Practices (gMP) requirements should be complied with in order to sell product in the New Zealand market. The favoured markets of the united states, Australia and the european union are heavily regulated. in order to gain access to export markets, it is usually necessary to establish a QMs that is compliant with either or both of iso 13485: 2003 ‘Medical devices- Quality management systems - requirements for regulatory purpose’ and the compatible us 21cfr Part 820 Quality system regulation, as well as complying with specific regulatory requirements of the export markets.

A particular difficulty faced by the sector is a shortage of skilled and experienced people available in New Zealand. while it is possible to recruit people with solid quality skills, often immigrants, they usually don’t have device experience. it is therefore necessary for them to learn the regulatory requirements, at the same time as educating their company and implementing a compliant system. for small start-ups, even someone with this level of experience may be unachievable, and the level of skills and knowledge required for implementing a QMs may not even be understood.

especially for start-ups, lack of experience and exposure to mature companies in the sector can make it difficult for managers to benchmark their QMsappropriately. Not all companies are aware of the rigorous expectations of the regulatory bodies in key international markets. such a company may gain approval to sell a product into the international market, self-declare compliance with the quality system requirements, but have only a basic QMs in place. it is not until they are audited by international regulatory authorities that some companies become aware of the thoroughness of QMs required by these authorities. for example, only ten companies have stated in the survey that they have iso13485 certification, and Brigid glass, of Brigid glass & Associates, points out that “this is still not a guarantee of compliance with the quality system requirements”. Ms glass notes that: “while time and the growth of the sector will bring development of infrastructure in this and other areas, a focus on developing the quality and regulatory capability of the industry is vital.”


36 37

regulATory APProvAls

The sector reported having obtained a total of 30 pre-market approvals to date. These were fairly evenly split – eleven united states food and drug Administration (us fdA) for either Pre-market Approval (PMA) or 510(k), nine european union (eu) ce mark approvals and another ten approvals from the Therapeutic goods Administration (TgA)’s Australian register of Therapeutic goods (ArTg).

sixteen companies reported they are currently seeking pre-market approvals. of the approvals being sought by these companies, eight are being sought for the us fdA PMA or 510(k) approvals, eight for the eu ce mark and four from the TgA ArTg approval.

united states approvals process

A 510(k) is the most common path taken to access the united states market. The experience of united states-based companies is that it takes, on average, 10 months from first filing of a 510(k) with the united states food and drug Administration to clearance.

A Pre-Market Approval (PMA) - the approval process required for high risk class iii products - takes on average 54 months from first communication to approval. A PMA submission may require thousands of pages, much of this being clinical evidence.

iso 13485 certification

companies seeking iso 13485 certification are usually doing so because they are seeking entrance to the european or Australian market. They will therefore seek certification, and also a certificate of compliance to the european union Medical device directive, from a european Notified Body. once the company has established a compliant Quality Management system, it is possible to achieve certification over three months, assuming arrangements have been made ahead. The cost is dependent on the Notified Body chosen, the country from which they will source auditors, the nature and risk of the products and the size of the company. for a small company, costs can be in the range of $30,000 to $100,000.


36 37

changes on the horizon: update on the regulatory landscape

The two regulatory bodies covering a large percentage of the medical device market have both heralded significant changes which may affect New Zealand companies applying for or with existing approval, in the united states and europe. Australia, a major market for New Zealand, is also considering reforms. These changes are with the backdrop of the ongoing efforts of the global harmonisation Task force (ghTf) to encourage global regulatory practice convergence.

europe

The european commission is considering a revision of the legal framework that governs medical devices in europe. There are a number of drivers that have been cited for this review:

implementation of directives has been hampered by national variation •resulting in the perception of different levels of protection of public health;The current texts are considered by some to be fragmented and difficult to •follow;Poor coordination amongst member states causing a perceived lack of •coherence and uniformity relating to market surveillance, vigilance, notified bodies, clinical evaluation and transparency;New and emerging technologies have challenged the framework, and •highlighted gaps and a scarcity of expertise in some areas;recognising the medical devices market is global, major trading partners •are increasingly aligning their legislation to the global harmonisation Task force for Medical devices model, and the european model needs to further converge on this model.

The review is currently underway, with an estimated adoption date for a proposal with changes to the directives of the first quarter of 2012. likely timing for any directives to be issued is not until towards the end of 2012, a transition period is likely for any changes that need to be implemented. At this stage it is unclear what the changes will mean for New Zealand companies, but the rhetoric suggests the directives issued may become simplified and easier to follow. reflecting on these changes, rod ruston, director of Priory Analysts and a uk-based european regulatory affairs expert, points out that the impact is likely to be some time away and suggests the New Zealand sector takes a watchful and participatory stance. “currently the in vitro diagnostic device directive is undergoing significant change. if past experience is anything to go by, there will be little measureable progress on revision of the other directives within the next year. The other point to remember is that no legislation of this type is mandatory ‘overnight’. There is always an introduction time. so keep an eye on events; contribute to the debate, even though you are not part of the eu.”

united states of america

The united states food and drug Administration (us fdA), following concerns raised both internally and externally, set up two committees in september 2009 to review the 510(k) program, and science at the center for devices and radiological health cdrh. The committees released preliminary reports for public comment in August 2010, and then the us fdA released a plan in January 2011 outlining 25 actions it intends to implement during 2011. The action plan covers three areas: guidance, internal and administrative matters,


38 39

and programme and regulatory matters. The action plan also identifies a further seven issues that need to be referred to the institute of Medicine, which is also currently conducting an independent evaluation of the 510(k) program. some of the key actions identified include:

creating a center science council to assure decision making is science-•based and occurs in a timely and consistent fashionclarifying timing on the presentation of clinical data for pre-market •submissions, and guidance that increases the transparency and efficiency of the review processstreamlining the review process (de Novo) for some lower-risk medical •devices that do not qualify for 510(k) but may not require PMA.

The impact of these changes for New Zealand-based manufacturers is currently unclear, though as the action items are addressed, it is hoped a clearer picture for engagement will appear. dr dan schultz, former director of the center for devices and radiological health (cdrh) at the food and drug Administration (fdA), and now senior vice President, Medical devices and combination Products at greenleaf health notes “The review process at fdA is challenging for us and foreign sponsors. keys to success include exquisite attention to scientific detail, a focused research and development program, understanding how to assess and address the regulatory requirements, and the ability to expect the unexpected and respond.”

Another area of change for the us fdA is the increased focus on foreign manufacturer inspections. The united states government Accountability office interviewed us fdA officials in 2008 and estimated that the agency, at that time, inspected foreign manufacturers of class ii medical devices once every 27 years and class iii manufacturers every six years.

As a result, the us fdA has increased the number of foreign inspections. 262 foreign inspections were conducted in the 2008 united states fiscal year, rising by over 25% two years later to an estimated 329 inspections in the 2010 fiscal year. The continued focus on foreign manufacturer inspections has already turned to New Zealand on a couple of occasions, with repeat inspections due later this year likely to also be used to start the inspection process with several more New Zealand medical device manufacturers currently exporting to the united states.

for the past two years, the us fdA has also been actively exploring requirements and needs for implementation of a unique device identifier (udi) for medical devices within the united states. it was signed into law september 2007, as part


38 39

of the fdA Amendments Act of 2007. when implemented the new system will require:

The label of a device to bear a unique identifier•The unique identifier to be able to identify the device through distribution •and useThe unique identifier to include the lot or serial number if specified by fdA. •

The udi is expected to improve patient safety, facilitate and improve the recall process, and create efficiencies within the medical system.

australia

The Australian Therapeutic goods Administration (TgA) released in october 2010 a discussion Paper for ‘reforms in the Medical devices regulatory framework’. This discussion Paper is in response to the government’s recommendations in the report of the review of health Technology Assessment in Australia. A number of the recommendations have a direct impact on the TgA, its interaction with other hTA agencies, and improvement of post market programmes to better inform pre-market regulatory decision making. recommendation 8 focuses on the role of the TgA in ensuring medical devices supplied to the Australian market are manufactured under appropriate quality controls, are safe to use and efficacious in their application.

The proposed changes to regulation of devices include:

reclassification of all hip, knee and shoulder joint replacement implants from •class iib to class iii medical devices; Australian medical device manufacturers would no longer be required to •hold TgA conformity assessment certification; increased pre-market scrutiny for implantable medical devices•increased third party assessment of devices through both Australian-•based assessment bodies issuing conformity assessment certificates to Australia manufacturers, and discussions with the european commission to include sharing of product assessments and joint audits of medical device manufacturers; Amend the way in which medical devices are included in the Australian •register of Therapeutic goods and enhancing identification of devices approved for supply in Australia; Publication of device product information on the TgA website.•

Previously coMPleTed TriAls

of the responding companies, 19 reported they had not completed any clinical trials. A further 19 companies had previously completed clinical trials and of those, 13 reported having conducted clinical trials in New Zealand. four companies have completed trials in Australia, the united states, europe and the united kingdom.


3.5 → clinical Trials

companies reporting clinical trial activity

25

20

15

10

5

0New Zealand Australia usA europe united kingdom canada other

13 4 4 4 4 1 37 4 4 5 2 1 1

20 6 9 6 5 2 2

companies with completed trials (n = 19)

companies with trials in progress (n = 10)

companies with planned trials (n = 26)

Num

ber

of c

ompa

nies


40 41

TriAls iN Progress

Ten of the respondent companies have clinical trials in progress. seven companies reported clinical trials in progress in New Zealand. five companies are currently conducting clinical trials in europe, with four companies undergoing trials in the united states and Australia at present.

fuTure PlANs for TriAls

Twenty-six of the respondent companies are planning clinical trials in the future. Twenty of these companies plan to undertake clinical trials in New Zealand, compared with six companies who plan to undertake clinical research in Australia. Nine companies plan to conduct clinical trials in the united states. six companies are planning trials in europe, with five companies planning trials in the united kingdom.


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clinical Trials in new zealand

There are number of benefits to undertaking clinical trials with multinational medical technology companies in New Zealand, reflects dr stuart ryan, general Manager of the centre for clinical research and effective Practice (known by many in the industry as ccrep) at counties Manukau district health Board (cMdhB). As well as the most tangible benefit of generating revenue, clinical trials also increase the workforce capability in the healthcare sector as they tend to be very well administered by the sponsoring company and provide an excellent learning environment for staff new to clinical research. Trials also provide academic and scientific interest to clinical staff, helping to keep them engaged and stimulated. in addition, one of the biggest spin-off effects for ccrep – which is set up as a Trust where any profits are reinvested into the healthcare system – is that the revenue generated from multinational clinical trials has provided the financial resources to invest in people, equipment and facilities and to allow them to also undertake non-commercial and investigator driven research. ccrep currently works with a large number of multinationals, with approximately 11 medical device trials currently underway (out of a total of 90 trials being conducted by ccrep). More could be done though, according to dr ryan. having worked for a number of years at fisher & Paykel healthcare, dr ryan is critically aware of the key factors for attracting multinationals, including having a supportive environment that allows companies to engage easily with the healthcare system, seeking feedback on new device ideas early in the development process and trialling new devices in market at a level of complexity that matches the market needs of the product.

The vast majority of the work ccrep undertakes is with multinationals, but they do also work with local companies. contrasting the multinational approach with what dr ryan sees of the younger medical technology companies in New Zealand, he notes a general lack of understanding by many companies of the function and position of clinical trials within the development of a medical technology. his advice for New Zealand companies is:

understand the value put on clinical trials and data in relation to funding •and company valuations if raising capital.identify your market niche. have a very clear understanding of the exact •problem you are solving and how you are solving it. clearly identifying your market niche is critical. dr ryan says have clear answers for a few simple, but key questions “is it going to be a hospital-based piece of equipment or is it going to be used in primary care? is it going to be a desktop-based device or is it going to be a big cabinet that sits in the corner of a room? is it a research device or is it a clinical device? what are you developing it for?”Prioritise getting your technology into your target market’s hands as •soon as you can. A technology assessment can cost as little as $5,000 and this includes getting the technology – literally – into the hands of representatives of your target market. it is very easy to spend a lot of money and time that ends up being wasted if the technology doesn’t work in a clinical setting, so early validation of concepts is critical.


have you been through funding rounds?

yes 74%yes 74%y

No 26%


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3.6 → funding

carefully consider the appropriate level of evidence that you need – not •every device needs big, expensive trials. you may not need to answer you may not need to answer yall the major scientific questions right now advises dr ryan, but more importantly identifying your development pathway and what evidence is needed to get you to the next step is critical. dr ryan notes it is possible to get some very good data in patients in approximately 6 months for between $20,000-50,000.Make sure you have access to capability to include trials as part of your •development pathway when undertaking strategic planning. Trials take time and need to be run in parallel with other development streams so that they don’t hold up approval processes. you may not have this you may not have this yexpertise in house, but there are a number of organisations that can provide it. it can be very costly and waste valuable time to repeat trials or have to wait to file regulatory applications because of a lack of planning.There isn’t any specific funding for technology validation or clinical •trials of this nature, says dr ryan. however, companies can talk to organisations such as the Ministry for science and innovation’s TechNZ programme about potential support.

fuNdiNg rouNds

of the medical technology companies who replied to the survey, over three quarters of them have been through funding rounds.

The sector, excluding fisher & Paykel healthcare, has raised a total of NZ$57.5 million to date.


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eArly sTAge coMPANies

for the purposes of this sub-analysis, companies reporting revenues of less than $2 million, including companies indicating they were pre-revenue, were classed as early-stage companies. of the respondent companies, 24 companies (of 34 companies in total, who responded to the funding questions) were classed as early stage. Twenty of these companies reported they have raised capital, with a total of $37.6 million raised to date (65% of the $57.5 million raised by the sector).

six early stage companies have raised funds through angels, with two of these companies going on to also raise venture capital. one other company has also raised venture capital. The so-called “fffs” (friends/fools/families) was part of the funding mix for four companies. other sources of funding included an initial public offering (one company), funding from a parent company (one company) and private investment (two companies).

of the companies reporting revenues of less than $2 million, seven companies reported they had raised funds from government sources, the total amount raised for all seven companies combined was reported as $652,000 to date. The majority of companies reported funding was through the foundation for research, science and Technology (now Msi) or NZTe, which administer grant programmes, rather than having equity funding.

esTABlished coMPANies

of the ten companies reporting revenues greater than $2 million, two companies reported venture capital funding, one reported angel funding and two reported fff as a source of funding. one company reported private funding. Three of the established companies reported government sources as part of their funding mix.

locATioN of fuNdiNg

Based on location, the majority of funds were accessed in New Zealand (32 companies). A few companies have raised funds offshore; these include Australia (1 company), the united kingdom (2 companies) and the united states of America (2 companies).


where have you raised funds?

35

30

25

20

15

10

5

0

32

14

New Zealand Australia usA united kingdom other canada europe

2 20 0


Num

ber

of c

ompa

nies

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given the current state of the investment market, it is worthy of note that 22 companies plan to raise further funds, totalling over $44.1 million, in the next 24 months. eight companies plan on seeking venture capital funding and eight companies plan on seeking investment from angel investors.


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The state of the new zealand investment Market

The Angel Association of New Zealand reported investments totalling $53.8 million from January to december 2010. of the investments made, $29.9 million was for follow-on investments into existing companies within portfolios. The association indicates that $5.3 million was seed investment and the vast majority - $39.2 million - was invested in companies at the start-up stage. A further $6.6 million was invested in companies at the early expansion stage and the balance of $2.8 million for companies to support ongoing expansion.

The Association reports that since 2006, 26% of funds were invested in software & services, 23% in pharmaceuticals/life sciences technology, 16% in hardware and equipment and 10% in food and beverage.

The New Zealand Private equity and venture capital Association’s 2009 full year results included angel investments made during the year. Noting the different reporting periods for the two reports, 93 ‘venture capital’ investments were made in the 2009 year totalling $56.2 million. Mid-market private equity invested $58.7 million over the same period (in 12 deals).

in the report, franceska Banga, NZvcA chair noted that much of the venture capital activity was driven by angel investor-led deals. she commented that angel investors have stepped up activity in the early stage market at a time where most of the venture capital managed funds are either close to or fully committed. looking forward, Ms Banga commented “the challenge is to make sure the best of these companies can get funded in the future” as the industry faces major challenges raising new funds.

while New Zealand is known for companies who ‘bootstrap’, Professor Jonathan sackier, a united states-based medical technology investor noted “there is a difference between a diet that keeps you trim and actual starvation”. Based on the indications of the medical technology sector in the current survey in light of recent amounts invested across all sectors in New Zealand, access to sufficient capital to fund growth is likely to continue to be a significant issue.

growth funding is an issue across all New Zealand industries. in the New Zealand venture investment fund’s 2010 annual report, Banga noted “The emerging picture is one of a growing pool of angel investors, willing to invest small amounts of capital, alongside other angel investors, into well priced opportunities. Typically they will together invest up to $2 million over early angel investment rounds. This investment activity is fundamental to the building of the pipeline of new high growth companies. But there must also be larger pools of capital available to provide follow-on investment, in the $2-$10 million range. That is the role of venture capital funds and institutional investors. without growth capital, New Zealand cannot expect new high growth companies to emerge and survive.”

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investors in pharmaceuticals, Biotechnology & life sciences and/or health care equipment & services

2009 (15 deals)

Breast cancer research Trustcorporatecure kids ventures*endeavour capitalice Angels*k1w1Manawatu investment group*MovacNew Zealand diagnostics*NZTe escalator service*Pacific channel*Private investorsseed co-investment fundseltecsparkbox*Trans Tasman commercialisation fund*uniservices limited

2010 (22 deals)

Bay city capitalBio commerce centre*cure kids ventures*endeavour capitalk1w1Manawatu investment group*MovacNZTe escalator service*osi PharmaceuticalsPacific channel*Powerhouse ventures*Private investorsseed co-investment fundsparkbox*Trans Tasman commercialisation fund*

(*indicates lead investor in at least one deal)

from New Zealand young young y company finance september 2010 and March 2011

“Access to capital for a company has a huge impact on

everything else. if you have capital then research, development,

commercialisation, regulatory issues and sales and marketing can

be resourced. in a thin capital market, all of these areas are an

issue and the importance of them will vary with the stage of the

company.”

dr Brian ward, chief executive officer, Mesynthes

3.7 → consTrainTs

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The 2009 medical technology sector survey devoted considerable attention to the issues and constraints affecting individual firms. The current survey identified that the same issues continue to act as potential constraints to growth.

The constraints most strongly identified by the survey participants were funding related, particularly development funding, marketing funding, access to capital and commercialisation. while research funding was also highlighted as a constraint, it was not rated as highly as the other funding areas.

A number of companies also identified skills shortages, compliance and regulatory systems and sales and marketing as potentially important constraints to growth. The other potential areas identified in the survey were procurement policies in New Zealand and overseas, product testing and governance structures. while these may be potential constraints to future growth, they were not identified as the most important by the majority of businesses surveyed.

Medical sector is very broad. Need to prioritise steps to be taken

to support the sector. Pointing us in the right direction, building

up networks is important for government involvement in growth in

this sector. we need “go-to” people.

Bruce Moller, chief executive officer, howard wright limited

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while a great deal of progress has been made over the past two years since the last survey was undertaken, similar themes are still being identified by the medical technology sector. The survey had several qualitative questions allowing respondents to reflect on the all of the topics highlighted in the survey. some of the topics highlighted that need to be addressed for the sector to succeed were:

Purchasing policies of New Zealand’s district health boards in relation to •medical devices;importing of illegal and/or poorly manufactured devices;•identifying and overcoming trade barriers;•Providing advice and contacts for exporting (including researching •overseas regulations);Availability of market research on specific medical technology/device •segments;supporting key value-creating milestones to prove industry value and •help capital go further;developing commercialisation models within district health boards that •support ideas coming from hospital-based scientists;identifying “can-do” people with the right knowledge;•revisiting government policies relating to funding and taxes.•

4.1 → Medical Technology associaTion of new zealand (MTanz)

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4 → acTiviTies since The 2009 RepoRT

since the last medical technology sector review the emerging Medical Technology group under the auspices of MTANZ has delivered several initiatives to help guide and develop the medical technology sector. These have included the appointment of a full time business development role, two conferences, resources for the sector and the development of strategic relationships.

BusiNess develoPMeNT role

The Association created a full time business development manager role to work with the emerging Medical Technology manufacturers in New Zealand. This position was introduced to support New Zealand medical technology innovation to ensure a high profile and successful industry sector. The role is also responsible for establishing an annual calendar of workshops and events that are relevant and support the development and commercialisation of innovative medical technology.

MedicAl TechNology coNfereNces

Two medical technology conferences have been held in the past two years. Providing a portal for educating the medical technology manufacturers and researchers, both of the conferences had international themes and looked at pathways to some of the key international markets. with the involvement of some very high calibre international speakers, the conferences also served as an opportunity to develop relationships with key international people, which has resulted in relationships being struck up in an advisory capacity as well as several Board appointments for New Zealand medical technology companies. Another conference is planned for 2012; this conference will have an Asian Pacific theme.

A guide To MArkeT Access iN New ZeAlANd

A guide has been published to introduce the landscape of doing business in New Zealand and is designed for both local and international technology companies. The guide includes information on the regulatory pathways in New Zealand and in the larger international markets, the landscape of our comprehensive public and private healthcare system, and doing business with various government agencies. Also included is information about fund raising, working with the universities and other research organisations, and performing clinical trials in New Zealand.

4.2 → governMenT iniTiaTives

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oNliNe direcTory

one of the constraints mentioned in the 2009 medical sector overview was a lack of knowledge of who is doing business in New Zealand’s medical technology sector. An online company directory has been established on the MTANZ website to showcase the medical technology sector and supporting infrastructure. Alongside the medical technology manufacturers are the importers and distributors of medical devices, universities and research organisations, specialised manufacturers, professional services and both local and central government agencies. companies are encouraged to maintain the integrity of the information by ensuring they maintain up to date company contact details and a brief company profile.

AligNed iNdusTry AssociATioNs

Another initiative worthy of note was the signing of two Memoranda of understandings (Mou) with closely aligned industry associations: New Zealand health iT cluster and NZBio. All industry associations will now (where appropriate) work on strategic initiatives together. There is an understanding that collaboration is something the industry bodies are all preaching about, so there is a strong need to also be practising it, and that a united voice is stronger than standing alone.

There have been a number of changes and initiatives created in the government support infrastructure since the last sector review. These changes include the creation of the Ministry of science and innovation, new funding tools and a commercialisation collaboration network, the launch of the health strategic initiative by NZTe and the development of health hubs.

MiNisTry of scieNce ANd iNNovATioN

The Ministry of science and innovation was created in february 2011 by bringing together the Ministry of research, science and Technology and the foundation for research, science and Technology (frsT). Msi has both the policy-creating and investment functions in one organisation. The intention behind the merger was to help the government to put its science and innovation priorities into action in a simpler, smoother and more efficient manner.

As part of the government’s recognition of the importance of science and innovation in lifting economic growth, two new business-focussed tools were


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introduced in the May 2010 budget. The first of these tools is the Technology development grant, with nearly $190 million in funding over the next four years. The Technology development grant is focussed on companies who already do significant amounts of research and development. in the first year, two medical technology companies were recipients:

dynamic controls – a global leader in electronic wheelchairs and scooters•fisher & Paykel healthcare – a global leader in respiratory care, acute care •and obstructive sleep apnoea.

The second tool is Technology Transfer vouchers. These are designed for vouchers. These are designed for vcompanies wanting to do research and needing additional research and development capacity. one of the areas of focus of the vouchers is health and medical technologies. The investment threshold for the vouchers vouchers vscheme has recently been lowered to $30,000. These two tools are administered by TechNZ and sit alongside the existing portfolio of TechNZ Project and capability funding and the global expert service.

Msi is also in the formative stages of creating the National Network of commercialisation centres (NNcc), which was also part of the 2010 Budget. recognising the need for better quality collaborations, the purpose of the NNcc is to build New Zealand’s commercialisation capability to allow better identification and exploitation of market opportunities from publicly-funded research. Building on existing resources and networks, the NNcc is expected to be up and running later in 2011.

identifying the need for greater collaboration and coordination of company support Msi has been working more closely with New Zealand Trade and enterprise (NZTe). starting in late 2009, Msi (at the time frsT) has been working with NZTe to identify clients the two organisations have in common. The initial phase identified 120 companies, and Joint engagement Plans were developed to ensure the two agencies understood the strategic plans of each of the companies and how they could best be supported. it is envisaged the company-based Joint engagement approach will be expanded to 250 companies in the next two years; broader sector-focused engagement plans will also be developed.

in addition Msi and NZTe have recently partnered in establishing a joint regional network in 14 regions across NZ. in each of these regions Msi and NZTe has appointed a regional partner to work on their behalf with sMes and emerging technology companies. support is available from Msi and NZTe to support early stage r&d projects and business capability and training.

New ZeAlANd TrAde ANd eNTerPrise

The health strategic initiative is one of three cross-sectoral, cross-regional programmes being driven by NZTe and is aligned with the government’s economic growth agenda. The health strategic initiative, started in 2009, is focused on increasing health technology export revenues and investment, enhancing the capabilities of the NZ health technology industry, strengthening the health innovation environment in NZ, and enhancing the international profile of New Zealand’s capabilities in health.


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recognising that current funding activities are at times not well aligned across the health landscape, NZTe is working with a number of partners in driving the initiative. NZTe is working with other government bodies (such as the health research council, Msi, the Ministry of economic development, and the Ministry of health), district health Boards, industry bodies (such as MTANZ, the health iT cluster and Natural Products New Zealand) as well as international health systems and New Zealand companies.

one of the major projects within the initiative was the focus on health challenge held in 2010. The challenge was aimed to help New Zealand companies maximise opportunities in the united states. 109 entries were received for the challenge, and nine finalists were selected. The finalists took part in a ‘us Market readiness’ program which involved six months of expert mentoring, workshops, professional services support and a product roadshow in the united states. The eventual winner was Mesynthes, a wellington based medical technology company that specialises in developing novel tissue scaffolds to stimulate tissue repair.

other export-focussed support provided by NZTe included delegations to AdvaMed in 2009 and 2010. The 2009 delegation included a two day workshop entitled ‘The future of Medical Technologies’ at the Alfred e Mann institute of Bioengineering, part of the university of southern california. other efforts have also been undertaken in the united kingdom, europe, canada, Australia, the Middle east, and the Asia Pacific area.

heAlTh iNNovATioN huB

A health innovation hub is under development which will include the district health Boards from canterbury, Auckland, waitemata and counties Manukau as core stakeholders. while the hub is yet to be officially announced, it is likely to be focussed on early stage development and commercialisation of health technologies including medical devices and health iT solutions. NZTe is proposing to contribute to the proof-of-concept phase, with other national and local government bodies likely to develop longer-term funding proposals. The hub appears to be designed as a one-stop-shop for ideas to be validated that have come from within district health Boards and also from industry (on a fee-for-service basis).


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recent initiatives

centre for Medical device Technologies (cMdT)

set up by founding Partners are industrial research limited and Auckland university

Major players - NZ universities- crown research institutes- companies- healthcare providers- regulatory bodies- industry bodies- National innovation hubs - National Networks of commercialisation centres

status Being set up (no specific timing available)

Aim • Nationally link research activities focussed on medical device technologies and regenerative medicine

• Provide a one-stop portal to access research providers• Boost University and Crown Research Institute

research collaborations • Assist in access to funding for project ideas• Make international connections between researchers & startups

university commercialisation offices of new zealand (uconz)

set up by eight New Zealand universities

Major players - eight New Zealand universities’ commercialisation offices- government- commercial research partners

status established 2005

Aim • unite the country’s university commercialisation offices • Develop closer links with commercially-based research

partners

national network of commercialisation centres (nncc)

set up by Ministry of science and innovation to build on existing structures and expertise

Major players - companies undertaking significant r&d- New Zealand universities & crown research institutes research

and commercialisation offices- Business incubators- Angel networks, high net worth investors and venture

capital companies- consultants for the innovation sector (local and

international)- New Zealand venture venture v investment fund- New Zealand Trade & enterprise- Ministry of science and innovation- local and international innovation experts, including the keA (overseas kiwis) network

status Announcements made 20 April 2011; funding starts 1 June 2011

Aim • Manage Msi’s pre seed funds• Improve commercialisation processes and capability• Facilitate more effective collaboration through a broad networknetworknetwork• Create a national database of commercialisation

opportunities, projects and intellectual property


heAlTh selecT coMMiTTee

The government has recognised that an active clinical trials system in New Zealand is good for patients and standards of health care. it is also good for attracting and keeping top talent in New Zealand, and for stimulating the wider healthcare community, including medical devices, pharmaceuticals, bio actives and natural products and therefore, the economy. As a result of this, the health select committee has conducted an inquiry into ways to improve New Zealand’s environment to support innovation through clinical trials. The inquiry was set up to consider ways to:

coordinate nationwide approaches to clinical trials;•streamline and simplify ethics approvals;•improve national patient referral networks;•remove unnecessary barriers;•improve the approval, establishment and conduct of clinical trials;•benefit New Zealand patients and the New Zealand innovation system, •health system and economy through clinical trials.

The inquiry was started in february 2010 and is expected to report back to the government in April 2011. The general themes are expected to be:

patient safety will continue to be paramount in New Zealand clinical trials •and that New Zealand must have an efficient and effective process that is attractive to multinational companies coming to New Zealand;a formal collaboration is set up between the Ministries of health, science •and innovation, and economic development/Trade and enterprise to ensure the government votes in these three areas are working together;votes in these three areas are working together;va national health research action plan is created that fosters innovation •and commercialisation throughout the health sector;a national dhB clinical trial framework is also likely to be introduced;•an infrastructure for science is developed;•using international benchmarking New Zealand is likely to establish long-•term r&d objectives.

from a sector perspective it is gratifying to see the number of broad commercialisation- focussed initiatives underway. for companies in the medical technology sector, for these initiatives to be useful, clarity is needed in the areas of:

coordination – are the right people and organisations being involved?•overlap and duplication – are the initiatives ensuring overlap and •duplication is minimised?industry engagement – is it clear how the companies within the sector •will engage?

4.3 → coMMercialisaTion iniTiaTives – a secTor perspecTive

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The eight New Zealand universities are undertaking a programme to further enhance their working relationships with the business sector by running a project dedicated to creating stronger university-business partnerships. This project has been undertaken to allow better access to the wealth of untapped research and consultancy services provided by universities around the country.

The university commercialisation offices of New Zealand (ucoNZ) have been showcasing products and research to the private sector in networking events throughout the country. The concept of these research showcase evenings is to stimulate collaboration and boost growth of these industries.

There were three research showcases that specifically targeted the medical technology sector and the themes were health services innovation and the high Tech innovation. These events were attended by approximately 250 people from the universities, research organisations and industry in both Auckland and christchurch.

for New Zealand to be known globally as a leader in medical technology innovation, there is an ongoing need for skills in medical technology development. recognising this need, a collaboration between the faculties of engineering, and Medical and health sciences at the university of Auckland has culminated in the formation of the Master of engineering studies in Medical devices and Technologies.

The university closely consulted with industry to provide the requirements for this Masters degree which is aimed primarily at engineers and health professionals. This exciting new course provides education and skills on various topics including regulatory processes, product development and the path to innovation required for the development of medical devices. The course commenced on the 3rd March 2011 and had 18 students attend the first lectures (eight of whom were from fisher & Paykel healthcare).

4.5 → MasTer of engineering sTudies in Medical devices and Technologies

4.4 → universiTy coMMercialisaTion offices of new zealand workshops

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The current medical technology survey illustrates a vibrant sector that forms an important part of the New Zealand economy. The sector plans to leverage its already successful export activities into new markets, is planning on hiring new highly-skilled workers and has plans to raise significant amounts of capital in the next 24 months. for the sector to continue to thrive and to reach its potential it needs support. This support includes the ongoing coordination of initiatives and the bridging of funding gaps, amongst other activities.

The government focus on developing the high-tech sector in New Zealand has been appreciated by those industries that have benefitted from funding and other forms of support. devising new medical technologies and competing with numerous international innovators involves significant resources. while the government has positioned itself as a supportive and committed partner, it is important as we move forward, to ensure that the various initiatives are linked up and form part of a concerted effort to develop the sector.

we need to avoid the risk of initiatives being ‘shots in the dark.’ This is not difficult to achieve. what is required is an equal and candid consultation process between sector and government to determine where the best investment of resources can be made. That way, all the agencies with a stake in the development of the sector can understand how they can best add value to the medical technology initiatives being developed in New Zealand.

in this respect, the industry bodies are also stepping up their efforts to work together – the Medical Technology Association of New Zealand, NZBioand the New Zealand health iT cluster are looking at ways to develop cooperative ideas and have signed ‘Memoranda of understanding’ to formalise the close and collaborative relationships.

The sector has noted with appreciation that some of the government agencies and organisations critical to the success of commercialisation activities are increasingly working more closely together.

5.1 → coordinaTing iniTiaTives

5 → RecoMMendaTions and conclusions

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5.3 → The road forward: Bigger, BeTTer, BrighTer

5.2 → Bridging funding gaps

The fact that New Zealand has developed a home-grown medical technology sector bears testimony to the level of technical creativity, drive and persistence of those involved in the sector. New Zealanders have always looked at challenges or gaps in product availability before setting out to devise something that will help. This process is not straightforward, it is not necessarily linear (ideas can evolve or end up completely changing according to results of tests) and it is certainly not cheap. The need to be able to raise capital and move quickly to secure investment for a potential development is critical to allowing New Zealand to maintain a competitive edge.

Medical technology companies have stated their intention to raise $44.1 million over the next 24 months. The medical technology sector faces the same challenges experienced by all high-tech industries in terms of raising funds because there is a big gap between early angel investing and the often multi-million dollar cost of developing ideas. it is important to establish and maintain the best systems and access to funding to support early validation of new concepts. This allows resources to be focussed on the areas where the utility and returns are going to be greatest. from the perspective of government support, the real goal is to ensure that navigating the bureaucracy is as efficient and user-friendly as possible. The more time and expense that can be saved in avoiding ‘reinventing the wheel’ allows maximum energy to be dedicated towards inventing new technologies.

The New Zealand sector now has core elements of an innovation infrastructure in place. with several state-of-the-art facilities and growing partnerships with universities and other hubs of research, the potential to expand is established. The sector has some goals in this respect. several New Zealand companies including fisher & Paykel healthcare and orthopaedic synergy have already demonstrated that kiwi companies can successfully go global.

The stakes are high – these are valuable products demonstrating a high return. New Zealand is unlikely to ever be a bulk commodity exporter of technologies. New Zealand’s track-record of developing unique and valuable intellectual property (iP) is well established. creation of such iP is integral to the sector’s development model. As well as allowing New Zealand to send products around the world, it positions New Zealand companies to develop alliances with other producers and innovators. That in turn will allow New Zealand to expand the scope and scale of areas within the sector that benefit from the involvement of kiwi companies.

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5.4 → whaT does The secTor need To grow?

The medical technologies sector is on the cusp of significant growth; here is what could help:

continued emphasis on the part of the government on the value of high-•tech, innovation focused businesses to the New Zealand economy and potential growth. And translation of that emphasis into more focused, strategic and linked-up initiatives to drive growth.

increased willingness on the part of the bureaucracy to work with sector •on the spectrum of policy issues that could help or hinder expansion of the current level of enterprise. it is crucial to avoid initiatives which could have the unintended consequences of impeding growth and diverting activities elsewhere.

Pressure on our international trading partners to reduce trade barriers •that compromise market access.

More efforts to cultivate confidence in investing in New Zealand •endeavours so that we can continue to support home-grown champions.

continued investment by the sector in relationships with health boards •and the clinicians working under their auspices. with developments in the medical technologies sector happening so quickly and with clinicians being so integral to the development of new technologies, interaction and collaborative relationships must be prioritised.

encouragement of national and multinational/international cooperation •and joint projects. integration of external ideas has just as big a role in growth as the innovation of domestic ideas.

greater resourcing the sector across the board. A better public and •political understanding of the potential of medical technologies to reward investment and an on-going pragmatic approach to dealing with sector-wide issues by engaging with industry bodies to identify and provide solutions and support.

whatever incentives can be produced to keep the best and the brightest •science graduates in New Zealand and to persuade students that science has a future in terms of high-paying domestic jobs.

with the core elements of an innovation infrastructure in place, the medical technologies sector has the potential to expand. New Zealand has a track record of developing and capitalising on unique intellectual property and the medical technology sector has examples of international success being achieved. The medical technology sector is strong and vibrant, and with the right support will play a significant role in contributing to New Zealand’s economy.

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References

Advanced Medical Technology Association. (2011). About our industry. retrieved March 28, 2011, from Advanced Medical Technology Association: http://www.advamed.org/MemberPortal/About/industry/

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