William J. Link, PhD, managing director of Versant Ventures, gathered the leaders in imaging to outline what’s ahead for retina. Participants were Ralf Kuschnereit, PhD, senior vice president, Carl Zeiss Meditec; KesterNahen, PhD, managing director, Heidelberg Engineering; Heinrich Dreyer, PhD, vice president medical division, Leica Microsystems; and Ryan Bouchard, director of medical devices, Ora.
“What are some of the key drivers in diagnostics?” Dr. Link asked.
The “simplest way” to interpret diagnostic drivers is “to talk to our customers,” said Dr. Kuschnereit. “Only 10% or so say they’re adequately served by their current equipment.” From a device manufacturer’s perspective, he would like to see more recommendations from physicians.
“For us, the second drive is simplicity, which translates to efficiency,” Dr. Kuschnereit said.
Dr. Dreyer noted both workflow efficiency and patient outcomes are currently, and will continue to be, the main drivers of this industry.
“When surgeons start using intraoperative OCT, they change their surgical plans. Not every time, but at least once per surgical day people do something different because they look at the OCT image during the procedure,” he said. Surgeons who are used to high-tech gadgets in their personal lives “want that same level of technology in the OR.”
At Heidelberg, “innovation drivers are two-fold,” Dr. Nahen said. First is the technology itself, but second are the needs of the pharmaceutical industry as it brings new therapies to market.“ The pharma industry is in need of new biomarkers, and we try to jointly develop those with pharma,” he said.
Ora is “a little bit different” in that it also sees a “close correlation with our pharma partners who are looking for novel imaging technologies and new ways to identify patients earlier or sooner who may be progressing with disease,” Bouchard said.
With it taking “years and years and a lot of money to develop sophisticated equipment,” the normal capital equipment business model may not provide “enough energy behind your innovations,” Dr. Link said.
While the business model is limiting, it’s also correlated to reimbursement, Dr. Kuschnereit noted. “There must be an income stream, which then limits the business decision of any practice to make it acquire capital equipment.” That may be why there are so many disposables attached to the various devices, he added.
Leica “only sells capital equipment,” and it’s a small, small margin, Dr. Dreyer said.
Most companies “rely on the therapeutic consequences of the diagnostics,” Dr. Nahen said.
“We’re really relying these days on the therapeutic consequences when using these diagnostics.” If diagnostic tools can save even one to two minutes of OR time, over the course of a year, that’s a substantial number of additional surgeries that can be provided, he stated.
The US regulatory landscape is also changing, the panelists said. For one, there is “a lot of continuity now from the FDA in terms of guidance,” Bouchard said. “We also see manufacturers taking advantage of the pre-submission process with the FDA. At that stage, we’re allowed to provide full protocol and full information to the agency and really get some really robust feedback.”
The pre-submission pathway “really makes a difference,” Dr. Nahen said. “When you bring new technologies to the market, the FDA doesn’t know what questions to ask. By having that dialogue, we’re creating a more robust pathway and a faster time to market.”
To keep the innovation machine rolling, Leica has developed internal development programs to foster novel means of creating better images, “stretching the boundaries as we know them in optics,” Dr. Dreyer said. Far from a need to acquire companies, Leica partners with smaller companies that have a greater ability to be flexible.
Zeiss has also fostered internal innovators and partnered outside with smaller companies, with acquisition being more common in the European cataract space, Dr. Nahen noted.
With the “immense revolution and evolution of technology” that is quickly changing, “how does that pair with the methodical development of a medical instrument?” Dr. Link asked.
Dr. Nahen relies on “technology scouts” who work much like pro-sports scouts do – evaluating the earliest-stage ideas for viability, but Heidelberg also prioritizes what it believes its customer base will need. For now, that means both structural imaging and molecular imaging.
Entrepreneurs approach Ora directly, Bouchard said, which works with these groups to introduce them to partners who can help the vision materialize.
Looking at the next five to 10 years, Dr. Nahen believes “looking at early disease risk factors to treat patients earlier” is where diagnostics is heading. Dr. Dreyer said new procedures and gold standards will be in place “because the data is now based on the real effects as seen by diagnostic and imaging tools.”
Dr. Kuschnereit summarized: “Until we can provide one report about the retina that gives all the facts that the doctor needs to make a good treatment decision, I think we haven’t done our job.”
William J. Link, PhD
Bill was Founder, Chairman and CEO of Chiron Vision, sold in 1997. Bill founded and served as President of American Medical Optics (AMO), sold in 1986.
Mr. Bouchard has been leading the Medical Device division at Ora, Inc. since 2010 and serves as a trusted advisor and clinical/regulatory strategist for clients, having been involved in numerous FDA clearances in this time.
Heinrich Dreyer, PhD
Heinrich Dreyer joined Leica in May 2012 as Vice President Medical. He brings over 18 years of professional experience to Leica Microsystems.
Ralf Kuschnereit, PhD
Dr. Ralf Kuschnereit became Head of the Ophthalmic Systems Division of Carl Zeiss Meditec AG in April 2011, subsequent to assuming the office of President & CEO, and Member of the Board, of the US subsidiary, Carl Zeiss Meditec, Inc., in January 2010 where he oversees U.S. operations.
Kester Nahen, PhD
Kester Nahen is a medical device industry executive with over 15 years of business experience. From 2001 to 2006 Kester Nahen worked at Lasercope Inc., a Silicon Valley based medical laser company.
Bill Link: Maybe we’ll start at my right and if you’ll introduce yourself, and then make some comment about drivers of innovation in diagnostics.
Ralf Kuschnereit: Sure. I’m Ralf Kuschnereit. I’m responsible for the diagnostic business at Carl Zeiss Meditec. And while I think the simplest way to see that is the drivers are mainly customer needs, and we do our internal research and talk to customers. And what we found out is when you talk to doctors that only about 10% saying that they’re adequately served by the equipment they get today. And it’s about 90% who want more help from us. And if you look into more detail there for drivers, the biggest driver is actually the need for recommendation or the information to make the right treatment decision. It’s the fear based on not adequate data to make not the right treatment decision. That’s the biggest driver. And the second one is actually, I think, simplicity, which translates to efficiency.
BL: Yeah, very nice. Please.
Heinrich Dreyer: Yeah, I’m Heinrich Dreyer. I work for Leica Microsystems and I’m in charge of the medical business over there. I think the drivers are really patient outcome and workflow efficiency. And what we experience is that, for example, when surgeons use the IOCT that the change their surgical plan. Not every time, but if you spend one day in surgery, there’s at least one surgery where people do something different because they look at the OCT image during the procedure. I think the second point is that surgeons are used to use high tech in their private life everywhere. And they want to have the same kind of equipment also in the OR, and yeah, and want the best in class equipment also when they do their daily work.
Kester Nahen: Kester Nahen, I’m one of the managing directors of Heidelberg Engineering. Drivers in innovation for our company are sort of twofold. One is the technology, so new diagnostic methods become available and become manufacturable. So that’s more the technology side. But then the other very important driver for us are the needs of the pharma industry to bring you therapies to market. Very often, your need of innovative new biomarkers, and we try to jointly develop those with you so to merge up hopefully 5, 10 years later a new drug makes it to market and the regulatory agencies are happy and accepting those endpoints.
BL: Yeah. Right.
Ryan Bouchard: And I’m Ryan Bouchard from Ora. I head up our medical device programs. So Ora being a little bit different than the three other gentlemen on the floor here with me, one of the drivers that we see just adding to what Kester mentioned is the close correlation that we have for our pharma partners looking for new, novel imaging technologies or new ways to identify patients earlier or sooner that may be progressing with disease. And this is a huge aspect of the work here that we do at Ora in trying to help identify those things and work with manufacturers to make those partnerships and those connections with our pharma partners as well.
BL: You know, one of the headwinds I’ve always worried about in the diagnostics area is the business model. It takes years and years and lots of money to develop sophisticated diagnostic equipment. You sell it, you make money that month, and then you’re on your own after that. And so kind of the capital equipment business model sometimes doesn’t give us enough energy behind innovation. So how has that impacted diagnostics in the retinal area, the business model itself? Any thoughts?
RK: Well, that is a problem. If course it’s limiting us. And if you think about it, it’s mainly – it’s correlated to reimbursement, right? So only – so there must be an income stream somewhere, which is the reimbursement that then limits also the business decision of any practice to acquire capital equipment. There might be one or the other devices where there’s a disposable coming with it, but if you’re in the capital equipment, the business is strongly correlated to the money a practice can make through reimbursement. So reimbursement is driving a lot of the business.
HD: For us, we – I mean we basically said only capital equipment. And there’s a very, very small constant revenue stream. We look for opportunities also to create this, but I think we have not found the solution for that yet. It’s still really moving boxes today. I think with software it will be more, go out to 10, 15%. But it’s an evolution.
BL: Any other thoughts on that?
KN: Yeah, I think we’re really depending on the therapeutic consequences that the diagnostics have. If there is no money at the end, yeah, being made with therapies, then nobody will look into some imaging technologies.
RB: I think that the ancillary that was mentioned before with the software, I think there’s additional opportunity there. And I think that’s where some of the innovation will come here over the next 4 to 5 years. We see that already at Ora with some of the clients that are accessing us and asking questions. That delivery of new software platforms on hardware that may be already in the practice could really, I think, spawn sort of that additional business model for these manufacturers.
RK: Also want to build a little bit on what Kester said. So if you look not just at the diagnostic step, but at the whole, if diagnostic helps saving one minute of OR time, that’s a lot of value, right? If it helps predicting therapy more precisely so it saves more circles, more loops in the process, so there is a lot of value to gain that can be value in the system that is money that can be spent. But it will be then be spent somewhere in the system, right? The question where does it go.
BL: Yeah. So it’s an interesting thing. In some areas and using sophisticated equipment there is a use fee for every time it adds value, you know, the patient wins, the physician and institution wins, and the manufacturer wins. We haven’t done that in very many places related to equipment and diagnostics. And so I’m always looking for where is the value and how do we correlate delivered value for appropriate reimbursement. And it can be capital equipment that works, or it can be a per use fee or a continual upgrading of software as an example, and so forth. What about regulatory pathway? How – what’s up? What are the impacts and issues related to regulatory FDA pathway in the diagnostics area? Maybe Ryan, thoughts?
RB: Yeah, sure, thank you. So Ora, on the device side, a lot of people know us traditionally for our pharma work in retina, glaucoma, etc. But on the device side and specifically on OCT, we’re involved in at least 5 programs to date in various interactions, levels with the FDA. And there’s always an opportunity on the clinical regulatory front to look and see how those things are progressing. And we see a lot of continuity now from the agency in terms of guidance that’s being given, but we also see, and I applaud the manufacturers on the floor today with me, that they are taking advantage of the pre-submission process that FDA has talked about for so much. And specifically in this space, we’re allowed to provide full protocol and full information to the agency and really get some really robust feedback. And we’ve seen that over the past 2 years really result in actionable items from the manufacturers and be able to drive those regulatory programs more quickly and actually start to see some better turn in terms of getting products onto market and reducing that regulatory burden.
BL: Other thoughts on regulatory pathway?
RK: I want to echo that. I mean this pre-submission pathway really makes a difference. When you bring a complete new technology to market, the agency doesn’t really know about what questions to ask. And just through that dialog definitely helps to have a more robust pathway and faster time to market. In early years of SD-OCT we’ve seen a lot of crosstalk, looked like from the different submissions that the US manufacturers have made, and now it’s much more consistent.
BL: Yeah. Very good. Another thing that’s so intriguing relative to innovation is where. Where does it happen? You are sizeable, well established, high performing corporate leaders. How do you view internal innovation, external innovation? How do you blend the two? So anyone that would like to share your thoughts?
HD: I think we do both. I agree we have a couple of internal development programs where we build on the heritage of Leica and look into better image quality and stretches the boundary of optics. Then there are also new areas where we – when it’s about digital. And that’s an area where smaller companies, where startups are really helpful because they are sometimes faster than we. And then we like to add those kind of components to our business. So I think it’s saving the right mix. It’s also understanding that you don’t need to develop everything yourself. You also do not need to acquire every company. It’s also kind of open innovation, working with partners. It’s really about the right mix.
RK: Yeah. So I think at Zeiss, if you look at across the board of all products, we’ve done both. Of course a traditional company, we’ve done a lot of developments, we have done acquisitions more in the cataract space in Europe. In the classical diagnostic field, we’ve done much in house. But I want to just point out it’s a technical part of doing it in house. We’re always very, very much depend on the cooperation with the clinical partners. So because that’s the part, of course, we – we have some competency, but not to that extent. And diagnostic depends on the cooperation of building the technology working with clinical partners. And the latest step you might have heard about, I’m not sure, is that we also, talking about open innovation, create these advanced retina imaging network where we cooperate with researchers worldwide in an early stage in our product development to jointly develop something that creates clinical value. So that’s a new approach we want to try.
BL: Very good. Let’s talk about the future. There is this immense revolution and evolution of technology. It’s changing so rapidly. By the time we develop something on the instrumentation side, something else has changed. How do you balance this amazing, rapid evolution and advancement of technology with what needs to be pretty thoughtful, nimble, but methodical development of a medical instrument? How do we handle the balance?
KN: I think you need a lot of different scouts in the company. You need the technology scouts that look out for these new methods and technologies so early that they’re not even ready to mass market them. But on the same side, you also need to look at your customers, the clinicians, the pharma companies, and see what their needs are. So we’re sort of standing on two legs at Heidelberg Engineering. We do the structural imaging with OCT, but we also do a lot of molecular imaging. And so structure being the method that – or structural imaging being the method that shows you once the damage is done; molecular imaging perhaps being a little bit early in the disease process, so we bank a lot on pushing that field forward in the future.
RB: We see a lot of entrepreneurs approaching Ora and coming after Ora to talk about early generation things. And what we view our role in that is sort of helping them, introductions to the manufacturers, introductions to the pharma partners, and helping them get an early read on what may be the regulatory pathway, and being able to make some of those early decisions and present better when talking with a potential partner.
HD: I think it’s also important to look at the product architecture to understand what are the parts that last long, 5, 7, 10 years, and what are the parts where you need to bring in innovation every year, every 2 years. And then organize the teams in a separate way so that the fast moving teams, they are consisting of different kind of people, and we expect different kind of things from those teams where the teams that are working on the longer cycle items.
KN: A lot has been said. I think that the scouting and looking outside is a very important part of that. And this is where also looking at small companies, startups, entrepreneurs becomes very, very important because there’s already ideas matured to a certain level that we could assess and then potentially incorporate instead of starting a long advanced development program that might lead to something or not, right? So that’s, especially in the age of the digital world, I think this is something we are looking more at now.
BL: So as we wrap up the session on innovation in the diagnostics area, thinking forward, what’s the most amazing thing that we can imagine in the next 5 to 10 years in terms of the impact of diagnostic, the contribution that diagnosis can make and diagnostic technology can make in treating the retina? What could we imagine?
RB: I personally think that it’s going to be the pushing of these diagnostics to a much closer front line view of where our patients are actually treated. So auto-reading DME, auto looking at DR and understanding early diagnoses and being able to funnel the right patients to the actual retina specialist, and have the right person in the chair at the right time. I think that is really where this market space has an opportunity to really expand and increase its scope so that it actually changes the reimbursement model for these companies.
KN: I think you’re looking at early risk factors to treat earlier. I think that is the dialog with the therapeutics, where we’re moving. But at the same time, also bringing the diagnostics out into the community, shared care models and even bringing diagnostics tools to sites where they’re not being used today, and then using data management and automated reading software to sort of speed up the process of diagnosing early.
HD: I think it’s measurement and evidence. The decisions are made based on clear facts and less on experience, and that you can create also a new kind of procedures, new kind of gold standards because more data is available to look for the right standards.
RK: Coming from the customer request that we heard, that we figured out earlier is so I think my vision would be so until we can provide the one report about the retina that gives all the facts that a doctor needs to make the good treatment decision, I think we haven’t done our job. And that’s probably multi-modality that requires data management and everything. And then that can also be then shadowed or brought into the OR. I think that’s kind of the vision. Until we’ve done that, I think the job isn’t done.
BL: Yeah. So it’s a work in process. Diagnosis has made an amazing impact on guiding retinal treatment. Fair? If you look back a decade or 15 years ago to where we are today, my sense and my hope is that it’s going to have the same impact in the coming decade or so. So thank you very much.