During a panel at LSI Europe ‘23, industry leaders convened to explore the intricacies of corporate venture capital and medtech investments within the medical device market. The panel, moderated by Lisa Carmel, highlighted six key points crucial for entrepreneurs and investors in the medtech space.

Investment Thesis and Strategic Focus

Each panelist emphasized the importance of a clear investment thesis and strategic focus. These strategies are tailored to support broader corporate goals while maintaining flexibility in investment types and stages.

Michael Ryan from Boston Scientific explained, "We consider ourselves a strategic investor. For us to invest in a company, three things need to be true: it needs to be an investment-grade asset with a great team and technology, it must be available at terms that provide the potential for financial return, and it needs to operate in a space that is a strategic fit for one of our six operating units."

Eric Schantz of Medtronic added, "We make both financial and strategic investments through our ventures arm. Our venture group has more freedom to take risks on early-stage technologies, while our operating units focus on strategic fits for potential acquisitions."

Balancing Strategic and Financial Objectives

Balancing strategic interests with financial returns is vital for sustaining both short-term and long-term goals. This dual focus ensures that medtech investments align with corporate strategies while delivering solid financial returns.

Julian Nikolchev from Intuitive Surgical noted, "Our venture group is focused on identifying new technologies and engaging with the entrepreneurial ecosystem, and structuring deals that are financially motivated but have a strategic aspect to them." Similarly, Michael Ryan highlighted that success for Boston Scientific includes "a strong pipeline of M&A targets coming out of our venture portfolio and a strong IRR in terms of financial performance."

Flexibility in Medtech Investment Stages and Sizes

Flexibility in investment stages and sizes enables companies to support a breadth of innovative projects, from early-stage startups to mature ventures.

"We'll do very small investments, a million dollars, and very large 50 million plus, all in one check. We'll go very early in company formation or very late," said Michael Ryan. Echoing this sentiment, Eric Schantz mentioned, "We have the ability to form startups, make investments between a million and 50 million dollars, and engage in creative ways to fund clinical trials."

Preferred Rights and Strategic Exclusivity

Approaches to preferred rights and strategic exclusivity vary, with some companies opting for fewer restrictions to foster stronger partnerships and greater flexibility.

Louise Warme from Werfen stated, "We decided not to put preferred rights in our agreements to avoid hindrances on the companies we invest in. We aim to support the companies in a way that we will organically become a preferred partner." Michael Ryan added, "We generally seek to be the exclusive strategic investor to avoid chilling the level of support that strategic investors might otherwise provide."

Managing Regulatory Environment Challenges

The evolving regulatory environment poses significant challenges for deal approvals, necessitating thorough planning and strategic engagement with targets.

Eric Schantz explained, "We're more cognizant early on with how we're defining things, ensuring that we frame opportunities correctly for smooth discussions when seeking approvals." Michael Ryan added, "In contracts, the outside dates to get deals done are longer, and public comments about expected closing times reflect this extended timeline."

Excitement about Digital Health and Emerging Technologies

There is significant enthusiasm for digital health and emerging technologies, which are seen as crucial for the future of the medtech market.

Louise Warme highlighted, "We're very interested in the intersection between diagnostics and digital. The rapid development of digital technology is starting to impact diagnostics significantly." Julian Nikolchev added, "The ecosystem around patient care and how technology can improve communication and outcomes is fascinating and holds great potential for innovation."

Conclusion

The full recording of the panel can be found in LSI’s resource hub at the link below:

• What Are Medtech's Corporate Development & Venture Leaders Pursuing in Today's Climate?

The panel discussion highlighted corporate venture capital’s dynamic and evolving nature in the medical device market. By balancing strategic and financial objectives, maintaining flexibility, and adapting to regulatory challenges, companies can effectively navigate the complexities of the medtech market. The panelists' insights highlight the importance of strategic thinking, adaptability, and a strong focus on emerging technologies in driving innovation and growth, particularly in medtech investments.