San Clemente startup gives Medtronic a heart attack

The medical device market can be pretty stable. But as the pace of change accelerates, that stability can be threatened at a stroke.

Here's an example. A San Clemente, Calif. start-up called Cameron Health has gotten a hugely-popular study into the New England Journal of Medicine praising its new subcutaneous Implantable Cardiac Defibrillator (ICD) (right, from the NEJM.)

Not only is the new device placed just inside-the-skin, rather than inside the chest, but the new device works without requiring the use of electrical leads close to the heart, or the control of imaging for placement. Leads can short out, leading to death (and at least one Law & Order episode).

This is not good news for Medtronic, the current industry leader. It comes less than three years after the company had to recall leads on some of its devices. It comes just weeks after rival Boston Scientific suspended sales of its devices over manufacturing issues. (Sales resumed in April.)

The U.S. market for such devices is estimated to be worth $4.3 billion. Growth is steady but the competitive environment was also steady, with Medtronic holding just under half the market, Boston Scientific (which bought Guidant's business in 2006) having just under a quarter, and others as niche players.

This could change quickly, depending on how fast Cameron can win FDA approval and how fast it can ramp-up manufacturing. A safer, more reliable defibrillator is a very good thing indeed.

But this is also a case study at how rapidly an industry can change in the face of innovation. As the pace of innovation increases, the likelihood of this sort of upset hitting any device maker grows, meaning their financial risk grows, and their attractiveness as an investment falls.

Good news for patients is often bad news for the industry.