“Medical robotics a fascinating play”:Eitan Konstantino, QT Vascular
Started with an idea about overcoming the limitation of stents, SGX-listed medical technology firm QT Vascular Ltd. is exploring new areas of growth. Primarily involved in the development of advanced therapeutic solutions and technologies for the treatment of peripheral artery disease and coronary vascular disease.
The product of a merger between two medical device companies — United States-based TriReme Medical, which designed the bifurcation stents and Singapore-based Quattro Vascular, a local company founded with the help of the Economic Development Board of Singapore — it is credited for developing the Food and Drug Administration (FDA)-approved, interventional medical device balloon catheter, the Chocolate.
Working towards being an innovation supplier for medtech firms globally, QT has two main product lines targeted at coronary artery treatments and peripheral arteries, primarily in the legs. Using its technology, QT Vascular has developed an angioplasty balloon with a drug that treats blocked arteries without leaving anything behind.
In an interview, Eitan Konstantino, CEO of QT Vascular, shares his views on emerging medical technologies, the prospects for Asia and capital market activities centred on the general medtech space and firms such as QT Vascular.
Edited excerpts:
What do you feel is the next area of medtech that holds a lot of promise for QT Vascular because if you look at East Asia and Southeast Asia, you have many ageing societies. What’s the growth opportunity for a Medtech firm like yours, looking at from now to 2030?
If we look at the whole global market, the three most important markets are the U.S., China, and Japan in my opinion. Yes, there are other markets beyond that, there’s Europe, there’s South America, there’s South East Asia, there’s Australia, but by dollar value and growth, the U.S. is the most important. China is a large, fast growing market but harder to penetrate and more fragmented and Japan is still a high value market. So, those three markets are where I think medical device companies should focus.
With Asian emerging markets forecast to dominate economic growth in coming years, how do you see QT Vascular capitalising on this growth narrative?
Asian emerging economies are growing very fast, and I’m particularly impressed by what’s going on in Vietnam, for example, and how fast they are growing in terms of the many hospitals being built and so on. However, by absolute numbers they are still small compared to China and Japan, without the favourable pricing found in more mature economies like Japan, the US and China.
If you’re looking for growth you need to first secure regulatory approvals to commercialise product in the Asian markets. Most Asian markets require their own regulatory approval or registration and there is a lot of leg work required before the launch of the product to and drive its growth. Being located in Singapore gives QT an advantage when it comes to obtaining Asian approvals which in turn will lead to growth.
You’ve touched on China and Japan. Where does Asia’s third largest economy, India, factor into the medical technology space?
With India, the pricing is prohibitive. It’s so low that it’s very difficult to have a return. So, it’s great that India’s economy is growing fast, but medical device pricing is dictated, in the end, by the type of medical insurance that countries provide to the citizens and how much those insurance providers are willing to spend. India insurance providers are not there yet.
We don’t see good government reimbursement in India. One can potentially focus on the private sector in India and get good pricing but this is a relatively small market segment and they pay out of pocket. It is substantially more difficult to sell advanced medical devices for the mass population since the insurance coverage is not sufficient to support reasonable pricing.
A Standard Chartered report published earlier in 2019 predicted that by 2030, the largest economies will be China, followed by India, then the U.S. and then Indonesia. Where would you say Indonesia factors in for the medical technology industry, as a whole?
Indonesia is among the fastest growing economies, but I would say the growth in medical devices will not necessarily be in the device category we are selling, stents and balloons, because of the lack of cardiac hospitals infrastructure. Devices and solutions for diseases that are common in Indonesia will do well. For instance, diabetes is quite common in Indonesia and this is a good market to penetrate with solutions for diabetes.
It’s a good market for new devices and Indonesia is also unique because of a totally different aspect: I would contend that most companies are not filing for patents in Indonesia. This means that you can take technologies from other markets and legitimately make and sell them in Indonesia without worrying about IP. You don’t need to reinvent the wheel.
Any take on the effects of the macroeconomic landscape and the possibility of a larger global recession impacting QT Vascular?
The strength of the healthcare market is that even during recession people get sick and need to be treated. If you’ve got a heart problem you’re not going to wait until the end of the recession to treat it. Recession-wise, when it comes to medical devices and healthcare, it mostly impacts elective surgery, cosmetic, aesthetic, etc.
Basically, everything else, you can postpone.But when it’s life-threatening heart condition, or when it is a case of blocked arteries in the legs or something that impacts the life of a person, you do what you have to do. A recession will not make you sit and wait to solve such problems. So, that’s the strength. I think when the economy goes down, this type of medical devices will still remain stable.
With the 3D printing of drugs, what sort of opportunities does this space offer for entrepreneurs?
It’s a whole new frontier. The synthesis of new drugs is very relevant to modern healthcare. Drugs still require long approval process. The average cost of bringing a new drug to the market is close to US$1 billion. Maybe, with new manufacturing methods and development techniques, it can be cheaper. But it’s still a huge investment so it’s not for most entrepreneurs. There are a number of emerging companies that are doing well but those are significant bets and not all of them are successful at the end.
Let’s look at medical robotics and assistive mobility exoskeletons. How do you see this impacting healthcare?
Robotics companies are doing extremely well. We’ve seen a few multi-billion dollar acquisitions in the past two years, and I think that this will continue. Robotic assistive surgery is really opening up new frontiers, with less injury, faster recovery, and better results. It’s quite fascinating, and it’s going very well for the robotic companies.
I’m personally impressed with exoskeletons. You know, people sitting in a wheelchair can now walk. I think it’s remarkable. It is great that exoskeletons are receiving a new injection of capital for research and development. In the past, it wasn’t a big area in medical devices.
People talked about exoskeletons for military needs, etc. But what we see now is that these technologies are getting used more and more in medical development.
What about other emerging technologies, such as augmented reality (AR) and virtual reality (VR)? What are the opportunities for a company like yours?
When you’re talking about it I’m thinking of gaming. It will be great. There are discussions about providing support to remote places by communicating real time information to experts that are in a different city or even a different country. But that’s not much the case for us. We are focused more on the medical intervention devices themselves. So we are not engaged in this part of the ecosystem.
Any perspective to offer on the current state of bioprinting technology, as well as the prospects for tissue and organ 3d bioprinting? What’s the segment that could spur further development and attract investors and entrepreneurs?
These are custom-built organs, basically. Once the technology is developed and production of an artificial organ becomes standard, it can extend life. It can make organ replacements far simpler.
If you think about taking it to the extreme, maybe you can even replace organs much earlier. You no longer have to wait to the last minute until you need new pair of lungs, or new heart. Rather, you just do it earlier because you can. And for instance, if you’re dealing with back pain, you can replace a disc and just feel a lot better. I think there are endless opportunities when discussing artificial organs, starting from key organs like heart and kidney, and so on. Even going to cosmetics, who knows?
It’s great but it does require a lot of research and development investments. There are investments into this but it’s still insufficient. Maybe we need government grants and more public investment to be involved and just push more research money into this area. This is definitely the future. Imagine if somebody has a tumour in their liver and we can just replace the whole liver? Because it’s so easy, it’ll be remarkable.
When looking at capital markets, what’s your experience with liquidity on the SGX as a foreign issuer? Given that locally a lot of entrepreneurs and industry observers always express concerns about thin liquidity, as well as other matters, do you have some perspective on this?
So, for us, up until recently, liquidity was great. I would even contend that when compared to other companies along the years with similar market caps, we have enjoyed better liquidity. We were fortunate enough to benefit from liquidity, which was very positive. But this has changed recently, though we’re hoping to see this improve again.
In terms of investor communications [i.e. media visibility and coverage by equity analysts], how important is that for a small cap issuers like QT Vascular, especially when you want to build and sustain liquidity from the investment universe?
It’s critical. We don’t have any research coverage. Most equity analysts and brokerages decline to cover small cap companies like us. Subsequently, it becomes a kind of a vicious cycle where if you don’t have the coverage and investors are not well informed about who you are, there’s little you can do. So, I think that if anything can be done to increase the scope of the existing research coverage by equity analysts and other stakeholders, it will help us tremendously.
You’ve discussed the role of product line sales and IP licensing in growing your revenues, yet despite this, there was little effect on your share price. What does this imply about local healthcare investors?
When I look at the composition of our top 50 investors, the vast majority are retail investors. I see little, if any, institutional interest. We were not able to benefit from any positive announcements or attract institutional investors in Singapore.
This is because of the lack of expertise in healthcare and understanding the dynamics of the healthcare market. There aren’t enough fund managers who have this depth of knowledge regarding healthcare and know how to value healthcare assets. So, it’s different from what we expected. We expected to have more institutional investors and less retails but the makeup of our capital now is mainly retail.
What do you make of the partnership between the Tel Aviv Stock Exchange (TASE) and Singapore Exchange (SGX) to boost technology and healthcare listings on both bourses?
The synergies are there between Singapore and Israel and it’s a great partnership between two small countries. We know for a fact that the number of startup companies in Israel is one of the largest in the world. Israel is a significant hub for medical devices with an estimated 1200 medical device and life science companies.
For a population that’s about 8.7 million, it’s quite unusual. I hope that we will see more Israeli companies coming here, with greater interplays in terms of capital and technology flows between these counties.
Any perspectives to offer on the comparisons between Singapore and Hong Kong as listing destinations for entrepreneurs?
Hong Kong is a much larger exchange and even if you just look at the number of finance institutions (FIs) registered in Hong Kong compared to Singapore, I reckon it’s more than 10X. Hong Kong has more opportunities. I don’t know how the Chinese angle will impact the Hong Kong Stock Exchange and where it’s heading in the future. Will it stay as attractive as it is now? Will the volume go to Shanghai, or some other places? I just don’t know.
To be attractive in Hong Kong, you need a China angle, in terms of your marketing and sales, as well as a Chinese footprint. If we were to bring the company to Hong Kong, I would spend time establishing relationships in China, building a distribution centre and perhaps manufacturing facilities as well, to ensure some foothold in the Chinese market.
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