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Get In Or Get Left Behind

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Womack agrees: “A lot of biotech is done virtually until the human clinical testing stage.” He confirms that NanoVec spent about 50%of its cash flow in outsourcing its lab work and about 40%in legal fees to protect intellectual property. And a summer 2008 study by biotechnology analysts with the investment firm Turner Investment Partners in Berwyn, Pennsylvania, revealed that contract and clinical research outsourcing is projected to reach $29.4 billion by 2011, up from $16.3 billion in 2006.

Medical devices in demand

Further advances in surgical apparatuses and the discovery of safer and more flexible synthetic materials for implanted equipment are among the factors driving the growth in medical devices, according to Matthew Gardner, president and CEO of BayBio, a life science advocacy group in San Francisco.

“A lot of investment is going into high-reliability devices such as circuit boards and mainframes for medical devices that are not likely to be outsourced,” says Julian Harris, a research analyst with the consulting firm Frost & Sullivan in San Antonio. “These devices are found in minimally invasive surgery equipment and cardiovascular regulatory devices and have stricter quality standards.”

Gardner says that even in a bad economy, the development of new equipment remains resilient because product development takes a great deal longer than an economic cycle. And research funding from government agencies, such as the National Institutes of Health, that sustain medical research allows such development to continue on a positive growth curve. However, he adds that regulatory processes significantly prolong the time-to-market.

“Diagnostic devices often enjoy faster returns on investment and less regulatory restrictions than devices for surgery or treatment,” Gardner says.