The Surge In The European Laparoscopic Devices Market. Will This Surge Trigger a Boom in Obesity Interventions?

Market competition and changing reimbursement rates are affecting procedure volumes, sales volumes, and market values of medical devices

Today, Europe’s move to a diagnosis-related group (DRG) based reimbursement system underscores the importance of developments in minimally invasive surgery. With the current state of healthcare funding and limited hospital bed access, there has never been more of an emphasis on decreasing postoperative patient recovery times. If a cholecystectomy procedure still required a four- to six-day hospital stay and a four- to six-week postoperative recuperation, the current volume of patients – not including the anticipated infusion of aging pensioners – would stretch the current European medical infrastructure to its breaking point. With superior recovery times, and decreased postoperative pain, laparoscopy is in a prime position to experience rapid growth over the next decade.
Growth In Laparoscopic Devices Market To Accompany Increasing Procedural Volumes
Over the last few years, procedural volumes have spiked in gynecology and obesity interventions across Europe. The market for bariatric procedures grew over 7% in 2013, greatly outpacing the 2.5% growth in the overall number of laparoscopic procedures. In tandem with these increases in procedural volumes, sales of laparoscopic devices in Europe have increased to almost €1.87 billion in 2013.
Obesity Treatments Soon to  Become #1 Treatment  in EU and Asia.
As is the case with many laparoscopic procedures, increases in bariatric surgeries did not correlate with country-specific obesity rates, but instead with the number and skill level of bariatric surgeons. For example, 23% of the adult population in the U.K. is obese, but the country has one of the lowest surgery rates in Europe. This is a trend that can be traced back to the poor development of laparoscopy in the country, a trend that forces many British citizens to go abroad to Belgium or France for surgery.

Ultimately, the main driver behind increasing procedural volumes is the combination of an aging generation of baby boomers who are demanding less invasive surgery, and surgeons who are receiving better training in laparoscopy than in the past however, the outlook for laparoscopy is extremely favorable.

Total Laparoscopic Procedures vs. Total Laparoscopic Device Market (2010 – 2020)

Trend Toward Multifunctional Devices Driving Growth
As the pressure of increasing obesity and the push to cut costs rises across Europe, every device entering a hospital needs to justify its cost with proven efficiency gains. New medical devices are attempting to meet these demands by providing surgeons with high-efficiency multifunctional devices that cut costs over time.
Obesity medical devices like Onciomed's GVS system in clinical evaluation in Latin America is getting ready for EU clinical sites and CE mark. Surgeons who were supporters of Sleeve Gastrectomy are seeing not only early complications but even late complications like chronic fistulas after  months of the surgery, patients cannot imagine the idea of cutting portions of the stomach. This is where Onciomed's GVS plays a role of a next generation technology. Experts believe GVS is the next big technology in the obesity and diabetes space.
Europe is certainly going to be the big user of laparosopic devices. 

This statement is best exemplified by the fastest growing market in laparoscopy, namely the market for direct energy devices. In 2013, the overall market grew by 5.6%, while the fastest growing portion of this market, the market for advanced bipolar devices, grew even faster. Advanced bipolar devices are multifunctional devices that allow surgeons to both seal and grasp vessels. They represent 61% of the overall market by value, and are expected to grow substantially through 2020.
Olympus’s introduction of the Thunderbeat device combines both ultrasonic and advanced bipolar energy, making it the only device in the world that can both rapidly dissect and seal vessels at the same time. Covidien and Ethicon Endo-Surgery are the other prominent competitors in this market and are market leaders in advanced bipolar and ultrasonic energy respectively.
These devices represent the marriage of multiple laparoscopic instruments into one, resulting in decreased operating times, and even greater surgical efficiency. While sales volumes of advanced bipolar devices are increasing, average sales prices (ASP) are decreasing, as Olympus, Covidien, Ethicon Endo-Surgery and a slew of smaller manufacturers compete for market share in this lucrative market. The overall market for direct energy and ultrasonic devices was valued at €453 million in 2013, and will be worth over €590 million by 2020.
Changes In The Competitive Landscape For Laparoscopic Devices Looming
The European market for laparoscopic devices has been contested by numerous major corporations for over a decade. Ethicon Endo-Surgery, Covidien, Karl Storz, Applied Medical, Richard Wolf, Olympus, and Stryker are some of the major market competitors that compete in this multi-billion dollar industry.
Ethicon Endo-Surgery was the leading market competitor in 2013. The company relies on its stellar reputation for high-quality products, especially in the ultrasonic and stapling devices market. The company generally prices its products well above the market average, avoiding competition-based pricing when possible. A large part of its revenue stems from its Harmonic ultrasonic instruments, which have monopolized the ultrasonic device market for years. Despite intense competition from Covidien and Olympus in the market for tissue management systems, Ethicon Endo-Surgery continues to dominate the market, a testament to the strength of its direct sales force, and the faith that end users have in its products.
Covidien was the other major competitor. Sales of its Ligasure devices allowed the company to gain a commanding position in the direct energy device segment. Covidien is working to enhance growth through research and development, as well as further acquisitions. Sales of its access devices have suffered over the last few years, a trend that is not representative of the whole market, but perhaps attributable to the aggressive sales strategies of Applied Medical – a prominent competitor in the market for access devices.
Over the next few years, competition in the market for direct and ultrasonic energy devices will ramp up considerably. Olympus’ entry into the market with its Thunderbeat device signals the company’s pivot to the medical device market. Olympus is best known for its diagnostic endoscopes, for which it controls about 70% of the global market, but the company is betting on growth in their medical businesses to help rebuild the firm after its 2011 corporate corruption scandal.

Leading Competitors, Laparoscopic Device Market

Obesity Treatment Act: This is an ignition to mega investments in obesity treatments and M&A deals

Exactly a year after AMA designated Obesity as a disease. The American Medical Association delegation today affirmed  Obesity Care Continuum for concrete dedicated to promoting access to, and coverage of, the continuum of care surrounding the treatment of overweight and obesity. The OCC is working on a variety of efforts to extend care, including the Treat and Reduce Obesity Act, which would take the first step to improve access to care by requiring Medicare to cover obesity counseling and medications.Proven obesity treatments range from bariatric Gastric bands, and surgery involving cutting and removing portions of stomach and intestine. The surgeons may use a minimally invasive laparascopic technique but the incidence of leaks and bleeds when you staple and cut portions of the stomach are grave. Obesity drugs which have been approved by FDA do no better than 10% or Excess Weight Loss they are essentially and adjuant to intensive lifestyle interventions and nutrition counseling. There are new companies like GI Dynamics and Onciomed which are very promising emerging technologies that can change the way we treat obesity and diabetes combines. Gi Dynamics product is targeted to GI doctors, while Onciomed GVS system is targeted to bariatric surgeons.

While the Affordable Care Act (ACA) requires insurance coverage for individuals affected by obesity and other related conditions like diabetes, insurers - including those participating in the health insurance exchanges - are not required to cover proven obesity treatment options. And while coverage for bariatric surgery for severe obesity is spotty, at best, coverage for obesity drugs and other evidence-based treatment options is excluded. This might change very quickly,  16 Million of the 70 Million obese Americans are very obese and suffer one or more comorbidities and need to lose over 100lb ASAP to reduce the health care burden due to conditions stemming from obesity like diabetes, stroke, heart disease, spine and orthopedic problems. According to CNBC, US spends over $140 Billion on obesity. 

China, India and other emerging countries are glaring at obesity crisis, while Canada, UK, Mexico, Saudi Arabia, New Zealand and Australia are already facing obesity in epidemic proportions. Patients have to be treated whether the payment occurs from pocket or insurance. The next generation of treatments mentioned above are going to be stars players in rescuing obese patients from deeper crisis.

The Obesity Society (TOS) looks forward to working with the AMA and our partners in the delegation who helped support the passage of the AMA resolution, including American Association of Clinical Endocrinologists (AACE), the American College of Surgeons (ACS), theAmerican Society for Metabolic and Bariatric Surgery (ASMBS) and the American Society of Bariatric Physicians (ASBP). We invite the AMA to take the next step by joining the Obesity Care Continuum, a group of the leading organizations dedicated to promoting access to, and coverage of, the continuum of care surrounding the treatment of overweight and obesity.

MEDTECH BUCKS!

The good news for emerging med-tech companies dealing with obesity and diabetes is hot, with the big guys still needing to look outside for innovations in obesity.

The nature of large strategic in obesity and diabetes is starting to steam up. FDA’s new take on considering un-met clinical needs on a fast track approval process have opened doors for med tech companies. Still the primary approach is out side USA for most of the med tech companies. M&A sector is soaring, the deals that use to be “fear based’ are now ‘value based’  exits. Historically, cash upfront deals with fairly token back-ends have been common, and needless to say much appreciated by the acquired company and their (often weary) investors. Increasingly, though, pharma-style “biobucks” are making their way into "Medtech Bucks" device deals, e.g. generous total deal values with a good portion of that value based on years-away regulatory and commercial milestones.

For the strategics, who see growing market adoption and payment risk, structured acquisitions make a lot of sense. Having returned to the M&A scene in the last couple of years, though with a devalued currency and lower risk appetite,  Boston Scientific  is leading the way in back-ended deals. Two companies acquired by Boston Scientific this year,  Rhythmia  & Orange County based  Cameron Health, were both pre-commercial, and they both got heavily backended deals from BSC. While the eye-catching Cameron Health headline read “Boston Scientific To Acquire Cameron Health, Inc for $1.35 Billion,” only $150M of that was upfront. Sounds like Biobucks to me. Rhythmia’s deal was a little less drastic, with $90M upfront and $175M in milestones, but the theme is the same. This might change very soon as more companies go public. The deals may be cash upfront for the most part with a less drastic milestone payment. One thing is for sure, both the IPO and the M&A market is starting to become hot.