Coatings odds and ends - From pinch tests to trade shows

Posted by Josh Simon on Thu, Feb 23, 2012 @ 01:46

There has been a flurry of activity this year that I am working to keep up with. 

Quite soon, I will be releasing an entire white paper based on my earlier blog article here, 5 Critical Questions to Ask About Pinch Testing. Do not worry about missing the release because you will see an announcement here, plus a press release, most likely.  From either of those sources you will be able to download the article.

We also just got back this week from the MDM West show in Anaheim, CA. With regard to hydrophilic coatings and related subjects, there was a lot of activity there.  Although I must note that Bayer's hydrophilic coating was conspicuously absent from their booth.  Maybe they finally read my blog articles on Hydrophilic Coating Market Size? There were also a few nice talks on plasma treatment of surfaces before coating, and another talk on cardiovascular-based applications by Dr. Ron Sahatjian of Medi-Solve.  To be honest, I could not attend either talk due to the traffic at my booth, and the schedule of meetings I kept that week.  If anyone wants to remark on them, feel free.

This is a little shot of the "Biocoat crew" from the show.

Biocoat Hydrophilic Coatings

Left to Right:  Dhruv Patel, Peg Beavers, Keith Edwards, Josh Simon

Tags: pinch tester, medical device development, hydrophilic coatings, MDM West, hydrophilic coating market, hydrophilic coatings blog, pinch testing, plasma treatment

Hydrophilic Coatings Market Misinformation - Part 2

Posted by Josh Simon on Wed, Jan 11, 2012 @ 10:06

Last week I discussed why some of the estimates that the professional market research organizations make on the size of the medical device coatings market are a bit off.  I did not want to throw everything at you at once, so this week I will continue with the topic.

There is one other area where errors are made in estimating market size.  Let us take the example of a company that has developed its own antimicrobial coating for its own use.  In fact, currently there are several such examples of companies that do this:  Edwards Lifesciences, Cook Medical, B. Braun, and Medtronic. 

These companies employ their antimicrobial coatings on their own devices and gain revenue from sales.  For any one of the examples above, the sales on a given antimicrobial device are in the millions.  The mistake made by the market researchers is adding the revenue of these devices into their market size calculation.  If Cook Medical's minocycline/rifampin line of catheters sells $100 million per year (a number which I just made up off the top of my head), the market reports will add that $100 million to the market size.

This is incorrect.  When a company produces its own antimicrobial coating only for its own devices, it is not licensing out that coating or supplying it to others in any way.  However, what if they were?  Or, what if instead of using their own coating, they licensed an antimicrobial coating from a coating vendor and paid a royalty on it?  The revenue from the licensing and royalties to the coating vendor would be the number added into Market Size for medical device coatings. 

So, my proposal is that instead of simply adding the $100 million to the market size, what the researchers should do is pretend that those coatings were licensed from a coating company and then calculate the revenue gained by the theoretical coating vendor for those coatings.  This isolates the coatings revenue from the device revenue.

Afterall, we are looking at a coatings market, not a device market, so the revenues should be separated out.  Reports that talk about coated device markets might help coated device vendors, but they require all sorts of mental rejiggering to become useful for coating companies.

When you sell house paint, do you look at the selling price of all the houses you are going to paint, or do you look at how many gallons of house paint you are going to use to paint them?

 

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Tags: medical device, medical device coating, Hydrophilic Coating, medical device coatings, hydrophilic coatings, antimicrobial coating, hydrophilic coating market

Hydrophilic Coatings Market Misinformation

Posted by Josh Simon on Wed, Jan 04, 2012 @ 01:46

Happy New Year!  As we start another year at the Hydrophilic Coatings Blog, I want to wish everyone a prosperous and successful year.

Lately I have noticed several firms trying to estimate the size of the hydrophilic coatings market, which is a subset of the medical coatings market.  Previous articles as well as ongoing updates to the data exist on the subject by big names like JP Morgan, Frost & Sullivan, the BBC, and others.  Most of these reports agree with BCC Research (HLC049B) which puts the market for medical coatings at US$5.3 billion in 2010, growing at 10% annually.

I am here to tell you that number is probably wrong, and off by perhaps an order of magnitude or more.

First let's break the medical coatings market down into segments.  Here's how I would do it:

Lubricious Hydrophilic Coatings

Drug Delivery Coatings 

Antimicrobial Coatings

Hydrophobic and other barrier coatings

Of course this is simplified because there is some overlap between these areas.  For example, you can have a lubricious drug releasting hydrophobic coating too.  Nevertheless, follow my logic here.

 

Let's take a look at publically available information on Surmodics and its deal with Cordis to provide a drug delivery coating for the now-defunct Cypher stent.  The quarterly minimum royalty paid by Cordis to Surmodics is $1,000,000.  (This is from Surmodics' latest 10-K form.)  In its heyday, Surmodic's received roughly 30% of its roughly $70 Million/year revenue from Cordis, which means about $21 Million.  So, I will stress again, the revenue to Surmodics on that was $21 Million/year, while Cordis' revenue for Cypher at its peak was way more than that.  For argument's sake, let's say it was $1 Billion.

Researchers that write these marketing reports do not seem to understand that there is a difference between $21 Million and $1 Billion.  The stent market contribution from Cordis at that time was perhaps $1 Billion, but that $1 Billion does not count towards the drug delivery coating market.  Instead, you should use the $21 Million, which is the revenue to Surmodics.

Now think about this.  If every single stent company licensed a swanky new drug delivery coating from a coating company like Surmodics, what would the total revenue be for that?  If there were 10 such stent companies, and they were twice as successful as Cordis ever was, you would have a $420 Million market for drug delivery coatings.  That's probably a generous estimation.

Now add in all the other coating types to that.  Hydrophilic coatings are not drug delivery coatings.  They do not bring in as much revenue.  Trust me if I say that a "really decent" customer can potentially bring in $1 Million/year in hydrophilic coating revenue at an industry standard 2% royalty rate.  Granted, few customers are that decent, but let's pretend they are.  Surmodics claims to have 100+ licensees, so let's pretend that all of them are hydrophilic customers that are "decent", and now let's pretend that there's 5 major players in that market:  Surmodics, Biocoat, DSM, AST, and Harland.  If each one of those companies is bringing in $100 million per year, that's another $500 million for the hydrophilic coatings market.  Since we all know what Surmodics' revenue is, and it's not $100 Million (and it's not all from hydrophilic coating sales), you know that this is wishful thinking.  From the math, you can also see that we haven't even reached $1 Billion yet for market size ($420 Million + $500 Million = $920 Million).

Suffice to say, if you calculate out hydrophobic and antimicrobial coating markets, you will not come up with the other $4.3 Billion put forth by BBC, and again I think this is because they do not differentiate between revenue to the coating company versus revenue that a completed device on the market fetches an OEM.

 

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Tags: hydrophilic coating market

Bayer Boosts Coatings Presence in China

Posted by Josh Simon on Wed, Nov 23, 2011 @ 10:38

I found an interesting article talking about Bayer's coating business and its increased focus on the Chinese market.  Let me point out that the business of "coatings" is gigantic and comprises everything from paint, to industrial coatings, aerospace surfaces, and yes, even medical device coatings.  In this article, Bayer is talking about moving a multiple hundreds of million (perhaps over a billion?) dollar operation in a market just as large.

By contrast, hydrophilic coatings are an almost infintesimally small part of the overall business of "coatings".  Bayer does indeed have a hydrophilic coating it obtained when it bought the business from Lombard Medical. However, I am not sure that Bayer yet realizes that this market is infintesimally small compared to its other businesses. 

In my guestimation, the entire market for hydrophilic coatings, in the world, is not over $120 million.  (Although it is definitely growing fast.)  You have to remember, this is not medical device revenue.  This is revenue for hydrophilic coatings sold to the medical device companies that eventually put them on products.  Effectively, what a hydrophilic coating company sells is a "bottle of stuff", or a "bottle of goo", as Peg Palmer is often fond of saying.  How much money you can get for goo is limited to whatever license fees, royalties, or direct revenue you can get for it.  Unless you capture the entire market, your realistic expectations are likely to be smaller than the rounding error of one of Bayer's typical products.

 

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Tags: Hydrophilic Coating, coatings companies, coatings vendor, coating company, coating manufacturer, industrial coating, Coatings2Go, hydrophilic coating market, coatings manufacturer, coatings supplier, non-medical coating, industrial coatings, Bayer