Nuts and bolts

Unsexy no more, the medical-device industry is revving up.

The medical device industry has never enjoyed the same cachet as the drug-making business. Used in the diagnosis and treatment of disease, medical devices include everything from medical, surgical and dental equipment and furniture to orthopedic appliances, prosthetics and diagnostic tests. But the industry's reputation has long been saddled by its relatively low margins and lack of blockbuster potential. Now, though, advances in genomic and proteomic science are fuelling growth, particularly in the diagnostic device arena, which uses gene-based methods to identify disease targets. This, along with an aging population, means increased opportunities for Canadian device makers. In 2004, for example, Canada's medical device exports totalled $2.2 billion–an increase of 6.3% from the previous year.

Justin Stephenson, senior life sciences analyst with Vancouver-based investment dealer Haywood Securities, points to several Canadian companies that recently jumped into the space. Burnaby, B.C.-based Response Biomedical Corp. (TSXV: RBM), for example, has developed a portable device that can tell a doctor whether her patient has suffered a heart attack in less than 15 minutes — as opposed to the hours traditional lab tests can take.

Another device maker to watch is DiagnoCure Inc. (TSX: CUR), a Quebec City firm that has developed a non-invasive urine test for the detection of early-stage prostate cancer, which Stephenson says is significantly more accurate than many other tests on the market. With an estimated 230,000 new cases diagnosed in the United States alone in 2005, and an annual market size of 45 million tests, DiagnoCure's gene-based uPM3 test, which it markets in collaboration with U.S. partner Gen-Probe Inc., is poised for significant growth. “Cancer diagnostics is something that's very big in Canada,” Stephenson adds. “I think we can expect to see more players in this arena.”

Jackie Csonka-Peeren, a business consultant with BioAlliance Consulting Inc. — a Kingston, Ont.-based firm that helps medical device companies commercialize technology — recently conducted a study to analyze Canada's key strengths in the sector. She identified three categories of devices — medical imaging, respiratory or gas-delivery, and implantables such as drug-delivering stents — where Canada has strong intellectual property rights in the United States, which is both the Canadian industry's largest competitor and export market. Csonka-Peeren points to companies such as Barrie, Ont.-based Southmedic, whose core strength is in gas delivery technology, and Toronto's Interface Biologics, which has seen early success in the drug-coated stent business (a global market worth an estimated US$5 billion in 2005), as examples of promising device makers.

Compared with pharmaceuticals, the “medical and diagnostic devices have a unique advantage,” adds Csonka-Peeren, “in that clinical trials, if required at all, are usually less costly and time-consuming.” That's one reason venture capitalists continue to be bullish on medical device makers, and why Csonka-Peeren believes it's only a matter of time before the investment community latches on, too.