What A Small, Israeli Medtech Firm Can Teach Us About Entering New Markets

Home to approximately 700 medical device companies and boasting the most medical device patents per capita in the world, Israel is already a leader in medtech innovation, especially when it comes to diagnostic imaging. And analysts project significant growth ahead — Espicom Business Intelligence, for instance, expects the Israeli medical device market to reach nearly $1.6 billion in 2018, up over 40% from $1.1 billion in 2013.  The country has also attracted substantial attention from both international investors and global medtech firms seeking merger/acquisition opportunities, the latest example being Covidien’s impending purchase of PillCam maker Given Imaging (based in Yokneam, in northern Israel).

One Israeli company that has begun to make a name for itself in the medical diagnostics space is Itamar Medical. The company has developed a line of products based on its Peripheral Arterial Tone (PAT) technology, a non-invasive method for monitoring the cardiovascular system and the autonomic nervous system. Itamar’s PAT-based tools are used for endothelial function testing (EndoPAT™) and home-based sleep monitoring (WatchPAT™).

I recently had a chance to talk with Gilad Glick, CEO and president of Itamar Medical, to discuss his company’s technology, the key markets that will drive its expansion, and its role in helping achieve the objectives of United States’ healthcare reform. We also discussed why Israel has become a hotbed for medical device companies, along with other topics.

1. What are they key contributors to the growth of Israel’s medical device industry?

Israel’s medical device industry is unbelievable. I think it’s a combination of a few things. First is the whole Start-Up Nation phenomenon — you might have read that book. It really tells in great detail how different types of companies, from high-tech and computer manufacturers through manufacturers of medical devices, have been caught up in the innovation drive that Israel has been experiencing for many years.

The second key contributor is our supportive government. They’ve set up a benchmark type of environment that supports innovation in a great way, whether it is through funding, participation in research, or programs for education to support the talent behind the medical device industry.

Last but not least is the education levels between Technion, Tel Aviv University, and some of the other places that focus on medical devices. You’ve got the talent, you’ve got the ability to conduct the research you need, and it all comes together to form a very supportive environment for innovation and growth.

2. What are some of the major challenges you see in shifting Itamar from a historical research mode to now focus on commercialization?

As with any other breakthrough technology that has the potential to change major processes, awareness is the number one challenge. How do you make people aware of a simple, easy-to-use, non-invasive test that started with research, and then adequately work with the outcome to communicate how it helps to prevent recurrences of cardiac diseases such as heart attacks and heart failure to the world? That’s the number one challenge.

3. What key markets will drive your expansion? Why?

I think when you talk about geographic markets, there’s something very interesting in endothelial dysfunction. For historical reasons, the most advanced market in the world for knowledge and the practice of diagnosing and treating endothelial dysfunction is Japan. This happens to be the case because of another type of technology that was invented in Japan that performs similar functions as EndoPAT™ does. It’s called FMD (Flow Mediated Dilation) and it’s been strongly supported by the Japanese government. Both FMD and EndoPAT™ have become very well established among cardiologists and internal medicine doctors in Japan — it’s the most advanced market from that perspective. So, we’re obviously looking very carefully and working hard in that market now.

The second most important market is the United States. We’re now focusing on trying to launch the product in the U.S. and signing deals with large hospitals. We just struck a deal two weeks ago with a large New York hospital, and Montefiore embedded our technology in their systems just this morning. So, we’re making headway in this particular market.

4. Will the challenging regulatory landscape and healthcare reform in the U.S. hinder EndoPAT™’s growth there?

No. On the contrary, I think that EndoPAT™ and what it brings — and the associated data that has been researched and published — play right into what the healthcare reform is trying to accomplish. Working for Johnson & Johnson for the last 20 years in the cardiovascular division before joining Itamar earlier this year, I’m very familiar with the intent of the reform. And one of the larger factors it is trying to address is the overall reduction of wasted money. In particular, they’re looking at readmission rates. . And Itamar is right there. The data that we have and the clinical studies with long-term outcomes shows that if you diagnose, monitor, and provide optimal medical care to patients with dysfunctional endothelium, you’ll significantly reduce — and I’m talking about a factor of two to three — the readmission rates from very costly diseases like congestive heart failure, heart attacks and potentially atrial fibrillations.

5. How does Itamar address global regulatory differences?

Like any other medical device company, we’re dependent on regulatory bodies for approval and support. There’s really no way around addressing each regulatory governing body in the countries we sell our technology into. We’re working with them in making sure that patients are getting good care and that the companies they regulate are held accountable for high quality products. It’s a costly process, but that’s the way it is.

6. What do you see as the advantages and obstacles facing a smaller medical device company like Itamar? How does that compare to your previous employer Johnson & Johnson?

This is something that I think about a lot. I was very fortunate to work for close to two decades for the largest, most comprehensive healthcare manufacturer in the world. It’s truly the best practicing healthcare provider in the world. It was an unbelievable school to learn the best practices in sales, marketing, and integrity, and how to market to countries outside of our country of origin, which is Israel.

So to compare directly, in J&J I had the resources to do what I needed in an almost unlimited fashion. Itamar is a smaller company and is very restricted. I have to make smart choices with the resources I have at my disposal. On the other hand, I have a lot more flexibility — first as a CEO, and second as part of a smaller company where things can move a bit faster.

7. Consolidation continues to be the trend in most global industries. Why do you think the medical device market has been less affected?

I think that at the end of the day, it’s a fairly consolidated market already. If you look at the cardiologist space, there are around three to four companies that form an oligopoly in the cardiology medical device space. This would be Medtronic, Johnson & Johnson, Boston Scientific, Abbot Laboratories, Covidien, and that’s about it. So, consolidation between the bigger companies has already occurred, at least to a certain extent.

8. What is your vision for Itamar’s EndoPAT™ technology?

I think that the greatness of what EndoPAT™ can bring to the cardiologists is the ability to diagnose what has come to be known as the risk factor to almost all cardiac diseases, and really to allow monitoring of a therapeutic impact and patient compliance with the therapy through testing their endothelial function. And that pertains to almost any cardiac disease. So, you can call it a junction technology or a platform technology that will be part of any cardiac procedure — whether it’s a precursor to screening or a follow-up. There are probably close to 18 million cardiac patients in the U.S. today, and that number is growing.

9. Do you think the medical device industry will look substantially different 10 years from now than it does today? If so, how will it be different?

Yes, I think it will be different. I believe the first major trend we will see will be the medical device industry embracing the requirement for IT compatibility to support electronic medical records. Today there is no one-standard. Having one unified standard or protocol will allow the smaller companies to be compatible too.

Second, I think, will be companies adopting the Affordable Care Act mentality by developing devices to not only provide better care, but also be able to show the economics behind it over the long term. They will need to demonstrate that the new medical device can actually save money while providing better care, versus just extending life a little longer at any cost.