ten lies never to tell investors - a great article from Inc magazine which continues to reinforce why remaining market orientated is so important in all businesses, not just start ups!

Australia has tragically lost one of its leading  Biotech pioneers and entrepreneurs to cancer this morning. It has also lost one of its favourite sons.

Mike Hirshorn was a co-founder of iconic Australian biotech Cochlear and a director of Resmed in its early days. He played an instrumental role in driving the sector to a level of maturity and sophistication where it could compete and succeed globally. As both a Director, investor and thought leader in this sector, Mike made an indelible impression on all those he came into contact with.

In addition, to all of his many commercial successes, Mike was a truly wonderful man who gladly gave his time to many within the industry and more broadly within the community. His wonderful and wicked sense of humour, insight and extraordinary wisdom will leave a gaping hole in the Australian life sciences sector and more broadly within the Australian business sector.

Our most sincere heartfelt condolences to his family and colleagues.

Mike, we will miss you greatly. Thank you so much for your friendship and for so generously sharing your knowledge and wisdom with the Cogentum team. There was so much more we wanted to ask you, so much more we wanted to learn from you. You are and will always remain an inspiration. RIP.

Looking back this now seems antiquated. The novelty of the iphone replacing an expensive medical device. Who would have thought! In this case it was the humble stethoscope - a device normnally costing $100+ being disrupted by a $1.19 app. And no distribution costs or stock and warehousing to worry about.

The sheer number of apps appearing is quite extraordinary. The impact of this on well established value chains is frightening

W

I have a confession to make. I have conversations with a friend who is an analyst in the biotech sector and, well, these conversations tend to drag on a bit. We both like a bit of a chat and let’s face it; in the biotech industry there is an awful lot to chat about.

Mind you, quite often the conversation quickly veers off onto subjects that may seem unrelated to Biotech, which our patient and bemused business partners will attest to. But, trust me, they somehow always are!

Usually our conversations are conducted over the phone. And to be perfectly honest they go for a long time - sometimes over an hour! However, no matter how long they go for, they always, and I mean always, end a bit like this.

One of us seems to start to lose concentration and then after a couple more minutes and usually half way through a particular train of thought, an announcement is made, “Look I have to go… but I will call you back later.” End.

I have always assumed that we both move on to our next meeting, the next urgent issue we need to contend with. Or do we? One also might be mistaken for possibly thinking that the listener has suddenly gotten bored by the conversation and simply decided to cut it short. But I promise you David, this has never been the case on my part at least. And now I have scientific proof!

“Prof Paul Maruff, Chief Science Officer at CogState Ltd (ASX:CGS) and Professor at the Mental Health Research Institute of Victoria, Australia received one of 10 Ig Nobel Prize awards during the annual ceremony last week at Harvard University. He and his co-authors and colleagues from the Lifespan Hospital System in Providence, Rhode Island and Yale Medical School, New Haven, Connecticut were recognized for their work which found that an acute urge to void the bladder can result in impairment in cognitive function the magnitude of which was greater than that found for 0.05% blood alcohol concentration or with 24 hours sleep deprivation.”

Having two sons, aged five and three, I have often noted this relationship. It is usually accompanied by the hoping from one foot to another. However, when it comes to my own behaviour I must confess I have often struggled with ending a conversation with the truth. “Sorry I haven’t heard a word you’ve just said as I am busting for a pee, I’ll call you back”. Instead I have always gone with the ending described above, the abrupt,” Look, I have to go”.

So just to avoid any confusion in the future, if the conversation suddenly ends, put it down to a touch of cognitive impairment!

We have commented previously that the impact of technology and innovation often has unintended consequences. Often these consequences can result in entire paradigm shifts. Shifts that can disrupt and potentially wreck well etsablished exiting business models. Indeed histroy is littered with companies that simply “didn’t see it coming”.

The iphone is having such an impact. Not just in the consumer area, but especially so in the medical field where medical device development and manufacture is characterised by massive investment in bespoke, highly sophisticated technology.

Increasingly, developers and researchers are building apps and accessories that ‘do the job’ of what was previously highly expensive and highly complex technologies. One such recent example is in the space of medical imaging. Some researchers out of UCLA Davis have managed to cobble together with $40 of lenses and an app a medical imaging device capable of identifying individual blood cells. Not bad, hey!

The ability of developers with both medical device experience and those within the general web/IT industry to build specific apps and then additional accessories that harness the iphone’s base technology provides a very real and credible threat to the medical device industry.

Much of the research on innovation and disruption, especially that by Harvard’s Prof Clayton Christensen, often points to fact that industries and businesses are disrupted by those from outside the industry.  With society (the payer) placing an increasing emphasis on the cost of healthcare and the existing industry trying desperately to keep a lid and/or cut R&D costs, it strikes us that the medical device industry is ripe for significant disruption. The iphone/ipad is increasingly looking like the catalyst for this change.

You are entitled to your opinion but you are not entitled to your facts.

A great statement!

We believe anecdotes and what makes us feel real, but we rarely believe the proof.

An absolutely fascinating TED presentation by Michael Specter that raises the issue of how and why we can deny unpallatable truths.

Well worth the read. Our particular interest is in the context of when does an organisation make the decision to kill a project which it has invested heavily in - both financially and emotionally. Its a tough call, and who makes it?

We have argued for some time that the social media business model is in fact the nightclub business model dressed to impress. And that just like nighclubs, the inherent fad nature will ultimately kill each individual player. Hence, we blogged previously that Mark Zuckerberg should sell out now and run away to fight another day.

This week we saw another interesting move in the social media  ’nightclub wars’. This week Google opened up  the Google+ ‘nightclub’, which was opened to the broader public this week. It will be interesting to see how this progresses.

Google are in essence appealing to everyone. I am not sure how attractive a nightclub that will let absolutely everyone in is - so it will be interesting to see whether Google+ will attract the numbers.

Increasingly social media is coming up short  - especially as a marketing tool.

Brands and marketers are increasingly questioning whether social media is actually delivering the intimacy with consumers that was promised in the initial hype. While those promoting social media talk of consumers ‘friending’ a brand and becoming a ‘fan’ of a company, our observations are that this is actually far from the truth and that the commandeering of these terms by Social Media promotors is verging on deceit.

More and more research is pointing to ‘net’ based relationships being about specific transactions. That consumers ‘join’ a group relating to a brand to benefit from a discount or some other offer. Our conclusion is that rather than building brand loyalty there is a chance that social media relationships actually push brands more rapidly to commoditisation and an increasing spiral of price discounting and special offers and sales. In essence, social media is teaching consumers to only buy when something is on sale and only when combined with other beneficial offers. A margin destroying strategy that will result in wholesale value destruction.

To return to the original analogy, nightclubs offer happy hours, two for one drink deals, free entry, etc in an effort to entice members to enter and spend time there. Ultimately though, the more desperate the offer the more clubbers begin to suspect that the ‘in-crowd’ has moved on and that they should be finding out where they need to be next.

The challenge facing marketers in this new ’social media’ world is how best to manage their brand in a world of ruthless trending. What no brand can afford to be is the geek stuck at the bar in an empty nightclub. That’s the sort of outcome that would ruin anyones reputation.

They signed!!!!!!!!!!!

It’s licensed!

There’s the sound of popping corks, a surging share price and the slapping of backs, followed shortly after by the sound of a large check slapping onto a desk. That glorious up front payment. Ahhh - that golden moment every tech firm dreams of!

In Biotech, where preclinical and clinical programs take years, this is the Holy grail moment!

And for some this as good as it gets.

According to a recent article in Fierce biotech, this really is as good as it gets as big pharma increasingly backs out of deals as ‘pipeline re-prioritisation’ fever takes hold.

According to BioWorld deals have been terminated so far this year, compared to eight at the same point last year. Deloitte Recap’s Chris Dokomajilar told BioWorld that  Big Pharma’s concentration on cutting costs is resulting in many deals being terminated well before market entry.  ”We’re going to see more terminations and at earlier stages,” he said. ”It costs a lot of money to keep programs going, and there might be more value in terminating.”

Tyrian Diagnostics (ASX:TDX) certainly reinforced this recently. Investors need to look carefully to assess whether a company has fully mitigated the risk of hand back, otherwise, that initial champagne  well turn to sour grapes fairly quickly.

As we pointed out in the recent Bioshares article, Market risk can be mitigated. Best practice clearly calls for managers of new technology and innovation to clearly understand issues surrounding acceptance and adoption and better manage the strategies surrounding the new product development process. Investors clearly need to hold management to account to ensure that they are not only investing in the development of a new technology/product, but also the successful commercialisation and management of return on funds invested.

“A Dutch research centre has developed a wireless monitor that allows your organs to send alerts to your mobile phone.”

Good lord. Somewhere a medical device company who is in the process or who have already raised a fortune to pay for their proprietary diagnostic technology and device, have just has conniptions!

The ehealth revolution is here.

And if you are a device company you should probably be a little concerned!

If you are committed to long clinical trials, well credentialed key opinion leaders, multiple fund raising rounds, clinical papers and years of technology development then I’ve got some news for you. The 20^th century finished a decade ago!

The model changed.

Did you pick it?

Here are some pointers on the new landscape.

The ehealth revolution is not about big technology. The ehealth revolution does not feature large licensing deals.

The ehealth revolution does not require a big pharma to provide distribution to the myriad of doctors who will use your device.

Nor does it need a company with a big board, experienced chairman and the requirements to fund Phase III trials.

In fact if this is your model, then, hold your breath!

You see in the ehealth revolution there is a new paradigm.

Pharma isn’t the only distributor with unique access to the medico’s who will use your product. Oh no, in fact, here’s some interesting research results. The vast majority of Doctors dislike, do not trust and do not want to see Pharma reps. At all.

How about that? Big pharma’s greatest asset –its distribution channel -  is under threat and is, in fact, eroding. They are struggling to maintain the value of their one true asset - their relationships with their customers!

You see in the ehealth revolution, Pharma is just one player in the picture. After all, why would you want to deal with some massive faceless distrusted organisation when you’ve got the Apps store? Cool, sleek, modern and whoa –   international distribution at the click of a button!

But what about the licensing deal? In the traditional model we could get a 7-15% royalty cheque!

The Apps store cuts it 70:30.

70% you, 30% Apple.

But our technology costs hundreds of dollars a test, you scream. How can we sell that on the Apps store?

It costs that much? Really? How’s that work out? What are your Cost of Goods anyway?

Cost of Goods in the 20^th century model, well we all know what that includes, years of R&D,  the medico CEO, the Business Development Director, the founder, the large board and the big lab.

Sorry to disappoint you, but in the ehealth revolution it’s a little different. There’s you, the one with the idea and the knowledge and then there’s that guy in the lab who also knows how to work the computer – and some mates of his who know how to code. You’re the med device company!

Key Opinion Leaders? Do they have an iphone or an Android phone? Yes, ok, then they’re KOL’s. Did they down load the app, ok, then they count.

Regulatory pathway? What for?

And this is the sharp end of the stick!

This is the kicker!

Regulatory pathway’s are all about one thing. They focus on one thing. Disease. Treatment of disease. Improvement on a diseased state.

The ehealth revolution is not about disease. It’s about wellness.

The successful ehealth device seeks to provide existing normative data.ie. data that tells you where you sit against the norm. In other words, how ‘well’ you are. And only then, after establishing this does it show divergence from the norm. That’s all.

And if you do diverge from the norm, well hell, you better download another App. And maybe also go see a doctor and show them the data . Because you are not well.

And guess what? Those folks leading the revolution? They worked out that no one wants to pay for a test to say you’re sick anyway! People want to pay for a test that tells you that you are well. Just as they happily pay for horoscopes and fitness memberships.

As for clinical trials? What for? Wellness? Ha! All that data already exists!

You see the ehealth revolution has changed the paradigm.

Diagnosis starts before the Doctor’s diagnosis.

In the ehealth revolution, the doctor is used by the patient. Did you like that? Let me repeat it, the doctor is used by the patient - to confirm a diagnosis.

All those tests that Doctor’s used to order? They’re already done. We did them. You, me, everyone. Without setting a foot inside a surgery, a hospital or even a pharmacy.

We downloaded the App and worked out exactly why we needed to see a Doctor. We then read up on the available solutions.

All we’re doing is coming in to see the Doctor and actually get the benefit of their wisdom. Does the data say what we think it says? Can we order the solution? Great, thanks.

All those expensive procedures that a Doctor had to order before a diagnosis was reached?

All gone. Well, not gone. Just sitting on the app store waiting to be downloaded.

The ehealth revolution is here. It’s about wellness, it’s small, it’s low cost and its everywhere.

Viva la revolution!