Originally Published MX July/August 2003
EDITOR'S PAGE
The Risks of Management
In the current economic environment, investors have grown increasingly cautious about putting their money into medical technology companies. That's especially true among those who have no specialized understanding of the industry, and are therefore uncomfortable with the perceived risks inherent in the field.
Unquestionably, the often-enumerated list of such off-putting risks includes some areas that can be of significant concern to medtech companies and their investors. The difficulties of operating in a regulated environment, for instance, can bring about uncertainties that are the natural enemies of the investment community. Over the years, the inability to predict whether or when FDA will approve a particular premarket submission has become a well-recognized obstacle to investment and company growth.
Similar uncertainties pertain to Medicare coverage determinations, government and other third-party pricing decisions, hospital purchasing policies, and clinical practice guidelines—all of which are outside the direct control of medtech manufacturers. And this list doesn't even begin to account for competitive risks or for the challenges involved in growing a new market.
With so much risk in play, it's no wonder that investors scrutinize every aspect of a company before opening their purse strings. But in the eyes of many investors, one factor outweighs all the rest: management. A company with a good management team has the potential to overcome all the objections that potential investors might raise. Good management trumps risk every time.
Unfortunately, the opposite is also true—as has been made all too apparent in the recent examples of Jomed and Guidant (see Business News, page 16). Bad management decisions can cost companies and their investors dearly. They can destroy companies. And by making investors nervous, they can also have a devastating impact on the entire industry.
By investigating their own teams and practices—before others do—medtech companies can prevent management from becoming another investment-killing risk.
Copyright ©2003 MX
