Friday Five - The medtech week in review

ResMed inhales Propeller into respiratory business; Auris Health's robotic endoscopy tech highlights healthcare digitalisation acceleration; Medtronic forks out to settle DOJ probe; Axonics eyes 2019 approval for overactive bladder neurostimulation approval; and in search for medtech unicorns.

 

The year might be drawing to a close, but the medtech M&A wheel keeps on turning, as ResMed kicked off the week with news that it was buying Propeller Health, a specialist in digitalising management of patients with chronic obstructive pulmonary disease and asthma. The $225 million all-cash deal will give ResMed a platform comprising sensors that attach to inhalers and transmit data on the patient's medication use to a mobile app. The app uses this data, together with other patient feedback and insights, to help improve medication adherence and thereby improve clinical outcomes.

Propeller is ResMed's second acquisition in as many months and its third this year to date. All three have been of companies with digital or digitally-enabled offerings, although MatrixCare and HEALTHCAREfirst fall within ResMed's software-as-a-service business, which provides the necessary software for remote patient monitoring between different care settings such as at the patients' home and hospices and the hospitals.

Propeller will be operating as a standalone business, but it falls within ResMed's respiratory business. Scaling up the connected capabilities of its respiratory care portfolio is the second stage of ResMed's growth strategy, which aims to change 20 million lives by 2020, as the company outlined in a September investor meeting.

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Helping to further accelerate the digital transformation of healthcare is Auris Health, which bagged itself one of the biggest venture financing deals of the year. The company's Monarch robotic bronchoscopy system, cleared by the FDA in March, has had a limited roll-out in the US and the $220 million that the firm raised at the end of last month will support full commercialisation of the technology.

Monarch is the second-generation system of ARES (Auris Robotic Endoscopy System), which was cleared in 2016. Monarch allows continuous visualisation as the flexible endoscope is manoeuvred through the bronchial pathways by the physician using a game controller-like interface and a sample of the suspicious tissue can be taken using Auris' proprietary biopsy tool kit.   

According to Auris, Monarch is "the first of its kind"; in its FDA 510(k) application, the company had used as comparison predicate devices, traditional manual endoscope systems and the first-generation ARES, it told FirstWord MedTech.

[See One To Watch: Auris brings robotics into bronchoscopy]

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Moving from a robotic lung probe to a different type of probe altogether, Medtronic has forked out over $50 million to settle an investigation by the US Department of Justice into claims of business misconduct by Covidien prior to its merger with the medtech giant in 2015.

One of the claims was related to alleged kickback payments by Covidien to physicians to induce them to use the Solitaire mechanical thrombectomy device; Medtronic denied any wrongdoing here and paid $13 million to settle this claim. Another charge concerned Covidien sales representatives encouraging physicians to use the ev3 Onyx liquid embolic system for off-label indications outside the brain; for this claim, Medtronic agreed to plead guilty and adopt new compliance and reporting terms for three years, as well as pay $17.9 million.

Medtronic also paid $20 million to settle further claims of misconduct in market-development and physician engagement activities.

Medtronic commented that the settlement was "a compromise of disputed claims" and that it has made no admission that any of the alleged activities were improper of unlawful.

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Axonics Modulation Technologies is hoping it will be getting the green light next year from the FDA for its r-SNM system for treating overactive bladder. The company this week re-submitted its premarket approval application to the US regulatory watchdog and if everything goes smoothly, Axonics could see its implantable, rechargeable sacral neuromodulation system approved as early as June 2019.

The firm made its first bid for a PMA in January this year, but the FDA had requested more information. Unlike a typical PMA application, Axonics' is "literature-based," which means it can submit literature-based clinical evidence of the product's safety and efficacy. Axonics had used existing literature from Medtronic's InterStim II, the only approved SNM device to date; InterStim is not rechargeable like the r-SNM system.

The r-SNM system is already CE-marked and approved for sale in Australia and Canada. Axonics has had its first orders from UK hospitals for its device. The uptake of the product in the UK could be further boosted by its recent listing on the NHS Supply Chain online catalogue.

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And as we are approaching the end of 2018, FirstWord MedTech took a look at the year's biggest venture investment deals, $100 million-plus financings that enable these medtech companies to attain unicorn status.

Leading the top 15 biggest deals - many of them growth equity rounds - is Illumina spin-out Grail, which raised $300 million in a series C round. Auris Health, mentioned in this week's Friday Five, is also included in the chart as are companies like Outset Medical, which is developing a haemodialysis system that can be used in both acute and chronic care settings.

The markets that these unicorns target are diverse, but what are the common traits that they share that make them so attractive to investors? See our analysis The Wider View: Which are the medtech unicorns of 2018 to find out more.

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