Information on Magnetecs CGCI Commercialization Strategy

An article from The Wall Street Journal discussing changes to the FDA process for approval of medical devices was highlighted and shared by Magentecs CEO Josh Shachar with the Magnetecs’ Shareholder.

A note from the Founder and CEO of Magnetecs

Dear Magnetecs Follower:

We would like to share with you an article that appeared on October 3, 2011, in The Wall Street Journal. The article discusses the current FDA process for approval of medical devices such as our Robotic Catheter Guidance Control and Imaging (CGCI) System. Written by Scott Gottlieb, former FDA Deputy Commissioner for Medical and Scientific Affairs and a leading investment consultant for growth strategies in the medical technology community, the article examines the differences in the regulatory environment that companies such as Magnetecs encounter in the United States in comparison with Europe.

As we have outlined in earlier communications, prior to submitting clinical trial results in pursuit of FDA certification in the U.S., Magnetecs, like many companies noted in this article, has been pursuing its CE Marking approval in Europe. This important certification is expected to be granted in November 2011, at which point Magnetecs will begin to commercialize its Robotic CGCI System in the European market as well as parts of Asia.

Our regulatory strategy to initially focus on the commercialization of CGCI in Europe is designed to achieve rapid growth and profitability for Magnetecs while we seek to ensure FDA certification through CGCI installations and clinical trials in North America. The article below provides the background for this phased global commercialization strategy.

Sincerely,
Josh Shachar
Chief Executive Officer
Magnetecs Corporation

HOW THE FDA COULD COST YOU YOUR LIFE

An aortic valve approved in Europe four years ago will soon be approved in the U.S. Meanwhile, thousands who may have benefited from the device have died.

By Scott Gottlieb

October 3, 2011 – When people age, the main valve carrying blood out of the heart becomes brittle. As this aortic valve narrows, it can cause debilitating heart failure and even death.

Fixing the problem in the United States requires open-heart surgery. In Europe, the problem can be repaired using a tiny catheter that introduces a replacement valve through an artery in the leg. In July, a Food and Drug Administration advisory panel said this device should also be approved for sale in the U.S. It is expected to reach patients by year-end—more than four years after it first hit the market in Europe.

This is an all too familiar story, the FDA impeding useful innovations in the U.S. Entrepreneurs here are forced to test promising medical devices in costly animal studies for years before they can advance their products into clinical trials. When clinical studies get started, the FDA is asking for longer and larger trials that increasingly mirror hurdles proposed for new drugs.

In response, American device makers are moving their business overseas. Between 2004 and 2010, more than half of all innovative devices were first approved in Europe. Because more devices now launch in Europe, companies increasingly study the products there. In 2004, 86.9% of all medical-device studies listed in www.clinicaltrials.gov were being carried out in the U.S. By 2009, only 45% of clinical trials were run here.

Manufacturing is also moving overseas as a consequence. Many emerging-market countries including China, India, and Brazil have enacted “country of origin” rules. These laws require a marketed device to be made in the same country where it received regulatory approval. Companies know they’ll get European approval long before they get the FDA’s nod. So if they want to market their devices in these emerging markets, they need to make sure manufacturing facilities are also located in the European Union.

Not surprisingly, U.S. investment in medical devices is falling. According to data from PricewaterhouseCoopers and the National Venture Capital Association, the number of newly started, venture-backed medical-device companies fell to 60 in 2010 from 118 in 2008. The magnitude of these declines dwarfs those seen in other entrepreneurial sectors. It can’t reasonably be ascribed to the struggling economy alone.

Yet the FDA is demanding more drug-like trials for devices, causing many of the delays in getting new products to U.S. consumers. Europeans typically don’t demand these kinds of studies. A 2011 study by the Boston Consulting Group of European device approvals suggests that Europe’s more expedited process is just as rigorous and safe as the FDA’s.

There are good reasons why European regulators handle devices differently than drugs. Among other things, most devices undergo gradual evolution. So a new device is often similar to an existing product. Requiring drug-like outcomes trials for each version discounts the knowledge that already exists about similar, marketed products.

Devices are also tools in the hands of physicians. The benefits of a device are ultimately dependent on how it is used by a physician. A stethoscope, for example, only needs to show that it can enable a doctor to hear heart sounds. A stethoscope should not have to prove that using it can reduce complications from heart failure.

When the U.S. Congress crafted the modern device-review process, it envisioned an approval path structured much differently than drug reviews. The Senate Health, Education, Labor and Pensions Committee and House Energy and Commerce Committee are working on comprehensive legislation that would reinforce the FDA’s mandate to be “least burdensome” when it comes to new devices. The measure would also prevent the FDA from jamming companies with draft “guidance” documents that change the rules on innovators midstream, without advance notice or chance for comment. The bill will tell the FDA, with unusually explicit direction, how to use its existing rules to improve post-market monitoring to ensure patient safety. The FDA was recently upbraided by the Government Accountability Office for not effectively using its current recall tools even while asking for new post-market authority.

These ideas have broad bipartisan support. Congressional Democrats and Republicans have expressed concerns that the FDA’s regulatory slide could be harming innovation, job creation, and patient care. Sen. Michael Bennet (D., Colo.) recently brought FDA Commissioner Margaret Hamburg to Colorado for a public meeting with local entrepreneurs and health leaders to address these concerns. “At a time when our nation’s drug, biotechnology, and medical device startup companies are struggling to access capital,” he said, “We must strive to provide them with regulatory clarity and predictability.”

Congress could go further and borrow from Europe. There are countless examples where devices already marketed in Europe were still required to undergo costly, multiyear animal trials in the U.S. The FDA could allow human data generated in Europe to obviate the need for animal studies in American pigs and sheep. Surely the scientific data generated by following European patients is more informative than what can be learned by placing a new device in an animal.

As for that aortic valve, more than 15,000 patients worldwide will receive the device by the time it’s slated for approval in the U.S. Some Americans healthy enough to fly have sought the procedure in Europe. Tens of thousands of Americans unable to travel, and too sick to undergo open-heart surgery, have died during the intervening four years.

This is no way to run a regulatory process if the FDA is serious about promoting medical innovation and advancing public health.

Dr. Gottlieb, the deputy commissioner of the FDA from 2005-2007, is a practicing physician and a resident fellow at the American Enterprise Institute. He invests in medical device companies.