I have not mused about the business in several posts, so let me get back to that for a bit.
When it comes to coatings for customers, the focus is on the customer, and rightly so. Naturally, for such a deal to occur the customer must be interested in the hydrophilic coating (or other coating) company, but what is on the other side of the coin?
This is: the coating company must be interested in you too.
We do not talk about this enough, and openly, but doing so will save a lot of people a lot of wasted time on both sides of the relationship. Every slippery coating company wants to land the gigantic medical device suppliers of the world, and they also want to land a good many of the smaller players too! When speaking of catheters, guidewires, introducers and other "conventional" devices, those people have nothing to worry about. A coating company will nearly always welcome you with open arms.
What about the less obvious devices that may or may not benefit from a coating? I generally go by these criteria when thinking about taking on a customer:
1) Application of the coating onto the device should be achievable, and with minimal manufacturing nightmares.
2) The volume produced should be significant, on a yearly basis.
3) The customer should be an established, if not reputable, business, not a university, not a lone physian, not a retired consultant with no resources, not a grad student, etc..
4) The application should be in the medical or diagnostic field, or at least if not in the medical field, the forces and environmental conditions where the coating is used should be along the same lines as medical forces/conditions.
5) The customer must undestand that coatings are not free. (Don't laugh! I have been asked to give our services gratis!)
Much of this is talked about in this paper on hydrophilic coatings. If you have a medical device with an odd shape, the best thing to do is ask someone like me or another person working at a hydrophilic coating company. Anyone with some coating experience will do. I have seen great ideas and great devices foiled by the simple fact that getting the coating onto the darned thing is nigh impossible.
I have a large family. One day I will probably go broke from the number of college educations I need to pay for. In order to have any hope of staving off bankruptcy, I need to keep the high-value customers rolling in. A high-value customer is quite simply a customer that brings in much more money than we spend on maintaining them.
If your company is in India (or another faraway land), and you want to buy $10,000 worth of material every year, and my company needs to spend $12,000 to visit you and provide customer service to you every year, guess what? We are not interested. That is not high-value.
If you are a lone-actor that wants to coat 5 pieces of stainless steel, once, ever, that prospect really holds no hope for a coating company. It is wonderful that a century from now your device will be the greatest thing since sliced bread with a volume of millions per year, but our outlook is more toward the 2 to 8-year time scale. Unless your device is already in a company an under initial stages of Design Control, it is probably not less than 8 years out.
Honestly, this is more related to the previous two points than anything else. It takes a serious company to A) know how to develop a medical device in today's world and B) be capable of producing the volumes necessary to make us both successful.
Physicians (and occasionally Professors) do provide great design ideas for medical devices, but they themselves have often dedicated little time to understanding how a device is designed and commercialized. Going it alone is not an option. If you come to me as a lone physician unattached to a company, I will thank you for your time and point you to Coatings2Go.
I will also say the same to graduate students, and consultants that just want to try something out, and for the same reasons.
Simply having a company to work from is not always a guarantee either. It is necessary to demonstrate a knowledge of product development in the medical field, if this is a medical device.
Medical Devices and Non-Medical Uses
I do not want to make it seem like trying to coat non-medical devices with hydrophilic coatings is pointless. It is not, IF you know what the characteristics of the coating are. Nevertheless, I still get calls from people that want to coat valves for the crude oil industry and truck parts, etc. They usually do not bother to read (and admittedly it may not be that easy to find) the material that talks about the impermanent nature of hydrophilic coatings, especially under high abrasion and repeated use. High abrasion and repeated use are two phrases that sum up the vast majority of non-medical uses, and thereby eliminate most of those uses with medical grade hydrophilics.
If you are from a non-medical company, think long and hard before calling up a supplier of something that is impermanent and mostly geared for disposable single-use devices.
Coatings Cost $$
See the first paragraph under Production Volume. The good news about this is that although coatings cost money, the goal here is to make the customer money as well. Both parties must benefit.
This rules out charities that produce medical devices, unless of course they find a vendor willing to donate. It is not so prevalent for people to ask for lifetime free coating supplies, but often they can be taken aback by the costs associated with coatings. Often, hydrophilic coatings, drug delivery coatings, and antimicrobial coatings are more epxensive than non-stick PTFE coatings, and other sorts of barrier coatings.
The folks at MDDI have posted an article contributed by me on the Regulatory and Economic Landscape for Hydrophilic Coatings, in my opinion. Normally I post these musings here, but MDDI wanted to pick up the article from me, so enjoy!
If you are looking for coatings, and want to talk personally with the big players in that arena, do not hesitate to attend the MDM Minneapolis trade show coming up.
An archive of the webinar we recently announced on hydrophilic and hydrophobic coatings is now available to everyone for download. Please stop by and grab the file and listen to it.
Click here to download the hydrophilic coatings webinar.
The webinar was sponsored by Biocoat and Specialty Coating Systems. Half of the presentation by Josh Simon is actually about hydrophilic coatings and the second half by Lonny Wolgemuth talks about hydrophobic coatings. Remember, hydrophilic means "water loving". Hydrophobic means "water fearing". The webinar sets the record straight on which is which and why you would want to use some in specific applications.
For both coatings, lubricity is discussed, i.e. how slippery they are respectively, as well as some basic mechanical properties and medical device applications.
All in all, I am told this is a pretty good overview of coatings, and it is a nice place to start if you are just beginning your research on this area for possible future products or medical devices.
Surmodics' latest news release tells of a realignment, which by my count is the second such one in the last couple of years. I could be off. Read the release here.
My humble opinion is that they tried to spread themselves a little too thin by getting into the pharma business, and now they want out. Maybe now they will focus on their hydrophilic coatings, drug releasing materials, and perhaps their in vitro business.
A kid once asked me, "if you are so smart, how come you aren't rich?" He had a point. My own personal wisdom and business sense have not made me rich yet, so take the following for what it is.
I think that the idea of creating a business out of making various drug delivery coatings for medical devices is not sustainable, on a contract basis, licensing basis, or otherwise. Here's why: in order to get ONE good drug releasing coating verified and onto the market on a product, you need a whole company. Even then, your chances of failing are huge.
If you spread yourself out thinly and try to make numerous drug delivery coatings, you increase your chances of failure for each coating. Surmodics got lucky by creating the coating for the Cypher stent (with Cordis' help), and Cordis represented over 30% of their revenue until just a few years ago. Once they started to branch out and offer this for everyone, I think they got ahead of themselves.
In a previous article on poorly made hydrophilic coatings, I barely scratched the surface of what sort of development time and effort it takes to make a good hydrophilic coating. If you want that coating to release a drug, multiply that by 10. Then if you want to switch from drug A to drug B, throw away everything you know about releasing drug A from the coating, and do it all over again. Each drug or agent in a coating will act differently as far as kinetics of release and chemical interaction with the matrix are concerned. It takes a lot of work and people (scientists) who know what they are doing. This is why the Medtronics, Boston Scientifics, and J&J's of the world spend millions per year to do this: an amount probably equal to most of Surmodics market capitalization.
A version of Hydrophilic Coatings: Considerations for Product Development
that was published by MDDI is now available for download as a PDF.
To get this article head over to Biocoat's hydrophilic coating article page, and request a copy. This is a must read for those seeking to a develop medical device with a lubricious coating.
This is an article I wrote for MDDI that will also be published in their May issue this year. It is a compilation, summary, and expansion of many of the things I have talked about on this blog over the last two years dealing with selection of lubricious coatings
and product development. If you read this article, you will have a good idea of what most of the previous ones of this blog have covered!
Hydrophilic Coatings: Considerations for Product Development
First off, happy new year! I'm looking forward to a third year of adding material to this blog for the benefit of people in the hydrophilic coatings industry.
Today I want to point out two possible roads you can take when manufacturing medical devices with hydrophilic coatings. Both have their own advantages and disadvantages. On one hand, you can do the less automated approach. This involves having one or more dipping/spraying/other coating machines in a clean room, operated by a tech at each machine. The operator(s) load(s) each device into the machine manually and, if necessary, unmounts the devices and moves them on a cart to the next machine/oven/etc. Alternatively, you can have a more automated process, whereby an operator puts the devices in at one end, and takes out fully-coated devices on the other end, ready for packaging. Everything in the middle is in a big black box.... maybe not literally, unless you paint the coating apparatus black.
Manual Processes - Advantages
Cheaper to create - designing and implementing a dip coating process in this fashion, complete with an oven, can be done for less than $100,000.
Good for low volumes - if you are only making 10,000 or so devices per year, why spend money on something big? A system that can crank out 100 devices per day will work fine.
Expandable - got more devices to coat in Year 2? Add a second dipper and oven set. Done. No redesign necessary, unless you count fiddling with your floor layout.
Cheap labor - in places (countries) with cheap labor, you may actually save money by filling a room with workers rather than paying a high prices for a fully-automated rig.
Automated Processes - Advantages
It's automated - no brainer. More automation means less personal interaction with the product, which means less errors caused by human factors.
Good for high volume - if the 100/day rate doesn't cut it for you, because you are making 100,000 devices per year or more, this is the way to go.
Design - if you are using a hi-tech piece of equipment, chances are it has a lot more thought put into its design in terms of safety and material handling, not to mention ease of use
Labor costs - In places with high labor costs, it may not pay to have many manual workers. A setup like this could be run by a couple of people per machine.
Manual Processes - Disdvantages
Design - the cheaper price tag on designing this kind of system may mean you get what you pay for: less attention to safety and usability
Bad for high volumes - at some point, this process is not expandable because of the size of your clean room and the number of workers you must hire. Granted, that limit can go fairly high, but you will hit it eventually if you are successful, and have to change your process.
Human Interaction - the more human interaction you have with a product, the more chance there is for something to go wrong related to that.
Expensive Labor - in countries where the labor costs are high, it may not be smart to have many people working at stations doing coatings if you have to pay them benefits, 401K, pensions, etc.
Automated Processes - Disadvantages
It's automated - when something breaks, you have to fix it. In the meantime, your coating line is down. If you have to wait days for a replacement part, guess what?
Bad for low volume - if you have read this far, you understand this now. There's no reason to pay $400,000 for a grand automated coating system if you are making 1,000 devices per year and selling them for $50/piece.
Design - you will constantly be working against design flaws in the coating product, especially in the beginning. This could affect production.
Expensive - this is related to the volume disadvantage. A startup company is not able to partake of this option. Machines like this can cost as much as half a million dollars.
As a guest blogger at Medical Design & Diagnostic Industry's blog, I have posted an article on the challenges of hydrophilic coatings for drug delivery.
Go over there and read the latest blog post on hydrophilic coatings for drug delivery.
First of all, I want to wish everyone well after this US Thanksgiving weekend. Now off to business!
When I was in college, there were two kinds of science and math courses. There was science and math "For scientists", and there was science and math "For Engineers". Generally, the "For Engineers" suffix meant the course was more Calculus-based, which everyone took to mean "harder". However, when it comes to business, as an engineer myself (who also happens to have an MBA), I like to make things easier for engineers who are usually the first people to call me up. So here is how the hydrophilic coatings business works.
In most businesses, when you want to buy something, you call them up and ask for a price. Then you make some decision to buy or not. If you decide to buy, you hand them your money and they ship you the product. Done.
The first mistake most people who call me make is thinking that getting a hydrophilic coating is exactly like that. It's not. It's nothing like that for most vendors.
Since (as I have said probably a million times before on this blog) hydrophilic coatings are non-trivial components that require a lot of fine tuning and process work, they cannot be sold in this fashion. If you were to call me up and ask for some coating solution and I were to take your money and send you a bottle of it, you would have no idea what to do with it. You might think you do, and you might try to do something, and you might even get a decent coating on a lab-bench scale, but even if you got that far, you would run into some significant delays when you tried to develop and validate a process you have no idea about. Eventually, you MIGHT get a process you can use, but without any help from one of us, you would be re-inventing the wheel and it might take you a couple of years or more. There are so many idiosyncracies with each hydrophilic coating out there, that it will take you a while to figure it out, even if you are already a coatings expert. Then, on top of all that, the hydrophilic coatings company would not make any money at all and would go out of business, and you would be left with nothing. (Selling bottles of coating solution at near cost is a bit of a dud as far as business models go.)
So, this is why we do not do it that way. There is a body of know-how surrounding hydrophilic coatings that you, as the client, will require to get up and running, and only a few companies are willing to share that know-how, for a price. Enter the "License Fee" and the "Royalty".
Some hydrophilic coatings are patented and some have had their patents run out a long time ago. Either way, what you will often be asked to do is pay a license fee for using a hydrophilic coating. The license fee will cover the patented material and/or the know-how. For this license fee, you should get a lot of tech support, technology transfer, and a can-do customer service attitude. If you do not, then you might have picked the wrong hydrophilic coatings vendor.
However, even before the license fee is paid, you will need to do some development. Each device is unique and requires its own tweaks when coating it. To do this, you will need to work with the hydrophilic coatings company before you license. That means, you will need to send them samples of your device and have them coated by the vendor as a test. When you get the devices back, you can see if the coating is appropriate, and it may take several rounds of testing back and forth to see if you can make the coating work. Not everything works on the first try.
Some differences between vendors occur at this point. Some vendors will charge you an arm and a leg for "Development". They will make you sign a big contract, and they will make you pay a lot of money for it. Other vendors won't, unless your project is so far out that it will require significant time and resources from the coatings vendor to figure out how to coat your product. If all you have is a simple catheter, and a coatings vendor wants to charge you major dollars to sign a development agreement, go somewhere else. You should be able to get the first few samples coated for free, and then after that each sample for a nominal fee.
Another difference will occur at the royalty end. The actual royalty rate that each company charges is secret, but we all know approximately what our competitors charge. The big difference here is whether the coatings vendor charges minimum royalties or not. If the coating vendor charges you $100,000 minimum royalties per quarter just to maintain your license agreement, steer clear. The point of a minimum royalty is to make you worthwhile to the coatings company. If you are a small operation, it is not lucrative for us to coat for you. The way some coatings companies get around that is by charging you a minimum royalty to make sure you are serious and to make you worthwhile for them business-wise. However, if you are coating anything upwards of 10,000 items per year, there are plenty of hydrophilic coating companies that will take you without a minimum royalty. If you are coating only 500 units per year that sell for $50 each, then not so much. Again, this is a business, and we cannot coat things that do not make us profit, else we will no longer be in business and everyone will suffer.
So, to sum up, this is not a normal buying cycle. The steps for buying a hydrophilic coating break down thusly:
1) Call up vendor and ask for basic coating properties
2) Send sample of your device for vendor to coat
3) Receive your coated sample and test it.
4) Repeat Steps 2 and 3 as often as needed until you are satisfied with the coating on your product
5) Sign a license agreement with the hydrophilic coating company
6) Begin transfering the coating process to your facility or a designated third party's facility
7) Start bringing up the process and testing its parameters, i.e. limit testing, etc.
8) In parallel, start coating your own samples for Design Verification and Design Validation of the device
9) Nail down the manufacturing process and Validate it
10) Start producing your coated devices.
What came first? The chicken or the egg? In the scenario for medical devices, this question is equally tough. Do you make a device to suit the market need, or do you invent and then find a need for your invention? Coming from both a research and business background, I fall squarely into the former camp. People will not buy what they do not need (or think they need.) Just look at American car companies. However, on the other hand, there is something to be said for innovation and the spirit of research, even in Industry, where costs are King. The solution, in my mind, is to keep the business and research folks talking to one another.
How does this apply to hydrophilic coatings?
Almost exclusively, my first contact with coating seekers is with Engineers or Research Scientists in Industry. Occasionally, it's a Purchasing Manager or other type. Ultimately, that's a good thing, because I can talk technical with them and really find out if our products are suitable. However, then it becomes more difficult when the conversation turns to Production and Costs. Namely, these people almost never know what their product will cost, what its ASP will be, or how many of them will be made yearly.
Put yourself in the shoes of a medical device coating company. In our world, we make money through license fees, royalties, and development consulting fees. That means we want to maximize two things for your device: A) The yearly production volume B) The amount of royalty per piece (or the amount that we produce under contract) Therefore, if a customer comes to us saying he or she wishes to make a device that sells for $2 with a yearly production volume of 5,000 per year, what we are hearing is that in this deal we will make virtually nothing.... in fact, a deal like that would cost US money. Ultimately, a customer like that would be politely turned down, or worse, blown off, depending on the company.
When I get calls from prospective customers, and they do not know anything at all about the numbers, it tells me that the company may not be doing proper market research. Hopefully, it just signifies that Marketing is not talking to Engineering, which can be fixed. At worst, it means that Research is running the company, and simply cooks things up without worrying about who may be there to buy them. (No, please no.)
So, if you are looking for a hydrophilic coating on a medical device, take the time to find out some basic numbers. How much do the parts cost? What is the ASP? How many would you make in Year 1, Year 2, Year 3? It may be as simple as walking down the hall and asking Marketing or Market Research, or you may need to sniff around a bit. Satisfying the itch to know revenues is not actually the only reason for this. Your production volumes will directly affect your costs! If you make 10,000 per year, and the device costs $10 to coat, you might get away with $5 per device at volumes of 50,000 per year. It is hard to tell how the scale-up will work, but it will almost definitely go down with volume.