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Mitraclip – an Overnight Success 20 Years in the Making

This morning’s New York Times article on the astonishingly successful MitraClip trial results, read at 4:30am before my flight to The MedTech Conference, sent me digging for some history. Hadn’t we been talking to cardiologists about MitraClip for years? I recalled clinicians telling us how challenging it is to place correctly. Why the news now? Wait, didn’t Abbott acquire that technology ages ago?

To save you some work, here’s the whole timeline (VC-backed friends, you may want to stop reading at this point):

  • 1999: Evalve (inventor of MitraClip) founded

  • 2008: MitraClip receives CE Mark  - “first commercially available device which enables a non-surgical option for patients suffering from the effects of mitral regurgitation (MR).” Also in 2008 – MitraClip receives priority FDA review because there are few options for patients with degenerative mitral regurgitation (MR) who can’t withstand surgery.

  • 2009: Evalve acquired by Abbott for $410 million – this deal was one of four in 2009/10 of pre-IDE structural heart companies, two purchased by Medtronic (CoreValve for $825M, Ventor for $325M), and one by Boston (Sadra for $386M). It was a heady time for structural heart deals.

  • 2012: COAPT trial initiated - randomized, open label, 610 patient efficacy trial in symptomatic heart failure patients to measure 2 year impact on mortality, hospitalizations and quality of life in patients with moderate-severe functional MR (60-80% of MR patients).

  • 2013: First FDA PMA approval for MitraClip with a limited indication to the non-surgical candidates, based on a mixed bag of trials and results.

  • July 2018 – FDA approval of next gen MitraClip device that makes it easier to precisely place and use in difficult anatomies; other issues are also addressed

  • August 2018 – French trial MITRA-FR failed to show efficacy in severe functional MR patients. Not great for Abbott (this was supposed to be for reimbursement in France).

  • September 2018: Surprise! COAPT’s fabulous results presented at TCT. Trial was larger than MITRA-FR, patients were less sick, and endpoints were different. In COAPT, clinicians had to actually demonstrate their skill in inserting MitraClip (for MITRA-FR they had to have performed 5 prior procedures).

S2N’s take – what we can learn from the MitraClip journey is that can take a long time from invention to broad commercial adoption, especially for novel therapeutic devices. Factors that contribute to the 20-year, overnight success scenario:

  • The first generation of any complex product is likely to be kludgy; in med tech there is often a push to get “something” on market asap, mainly because we can (e.g. in Europe). While this is a great opportunity to learn with real-world use, be prepared to iterate the technology based on this critical feedback

  • Early users of a new device often “niche” it because they want to minimize safety risk and get comfortable with how and where to deploy it, especially when there are alternative clinical approaches. As in the MitraClip case, the FDA may also restrict labeling based on the population studied and trial results.

  • These new devices are expensive (MitraClip is ~$30K), and usually require new reimbursement codes. Payers can more or less demand as much data as they want before agreeing to cover a new technology.

  • Trials don’t always work out the way we planned, and many factors can contribute to the failure of a trial. Abbott learned along the way and adapted patient selection, endpoints and operator training. With more upfront work and modeling, some of these risks might be mitigated sooner.

On a positive note, analysts are now super bullish about MitraClip taking off based on the COAPT data, and the market opportunity with expanded labeling and use in heart failure will be well into the US$ billions. If the technology helps keep heart failure patients out of the hospital, the one-time $30K price tag could seem like a bargain, especially when compared to any number of drug therapies.

A 2016 Proposal for Med Tech: Build the Brand

A 2016 Proposal for Med Tech: Build the Brand

For the past few years, med tech entrepreneurs have seemed practically apologetic for being in med tech. True, there are many reasons, or maybe excuses, to have had ears down and tail between legs.  Venture capital has generally favored biotech and health IT over med tech.  The large medical device companies have been more focused on merging, cutting costs and doing accretive deals than growing their pipelines, although in certain hot areas (e.g. mitral valves) some earlier stage deals are happening. Payers and health systems remained stunned by all the changes to their ecosystem and are categorically wary of anything that might cost more. Oh, and the attractive regulatory shortcuts for med tech are either gone or irrelevant as market risk has become what everyone really fears.

But that was so 2015, or more like 2008-2015, which is how med tech has ended up with a “meh” brand in the financial and health care markets.  My proposal for 2016 is simple: stop whining, stop attaching biotech to your company names or disguising yourselves as a tech company (how’s that working for you now, Theranos?), and own the med tech title like a badge of honor.  Here are some suggestions for infusing a little “sizzle” in the med tech brand:

  1. Med tech solutions are simple, elegant and effective.  Med tech innovators are, by and large, very practical problem solvers.  Our technologies don’t always involve high science (sometimes they do), but they are usually clever and everyone can get their heads around them. There may be very few true med-tech platforms with $10 billion revenue potential, but there are a lot of great singles and doubles out there to be found. CRISPR sounds great, I think, but will knocking out and replacing genes really work and not kill people or turn them into flesh-eating zombies? Not sure I’m signing up for that clinical trial (I’ve clearly watched too much Walking Dead).  With patients and administrators ever more involved in health care purchase decisions, this simplicity can work to our advantage once a product enters the market.

  2. Health care providers need med tech innovation.  Yes, the bar is much higher for adoption of new medical technologies, especially if they are associated with a higher direct cost, and the burden of proof on small med tech companies can seem prohibitively costly and long.  If you step back, though, you’ll see that the dynamics in the provider market create exciting opportunities for truly innovative and valuable technologies. Silos between inpatient and outpatient costs are breaking down and many hospitals are in effect insuring large populations, opening the door to longer-term cost savings arguments. The increasing availability data is enabling hospitals to be measured on quality of care and patient satisfaction, which can in turn impact their reimbursement and market share. There is an emerging bottom-line argument for new devices that can improve care on these dimensions.

  3. Big med tech needs innovation, too. The large medical device companies are running out of late stage and non-dilutive stuff to buy, need to innovate, and generally can’t get out of their own way to do it efficiently in-house.  Behind the scenes, we see a lot of early stage and technology deals happening that don't get announced because they aren’t "material".  We also have noted the trend toward deals involving more back-ended pay-outs, co-development, and other ways of de-risking before owning. These types of partnerships aren’t the favorite of traditional venture capital, but are keeping many innovative med tech companies afloat and attracting alternative sources of capital.

  4. The FDA climate for devices is improving.  While certain medical devices are getting more regulatory scrutiny now, for example vaginal mesh just got PMA’ed, overall FDA approval times for both 510(k) and PMA devices have been quietly coming down. It also seems that the FDA has finally figured out their own de Novo 510(k) process, designed with the good intent of providing a streamlined pathway for relatively safe devices without clear predicates. The use of the de Novo pathway has been increasing across a range of device categories; while still far from perfect and potentially requiring extensive clinical data, a functional de Novo option can be very helpful to innovators, saving money and time especially if design iterations are necessary (as they often are!).

  5. Med tech is a port in the biotech storm. While the biotech industry has made a big gamble on being able to astronomically price drugs for niche, or even micro-niche, diseases, med tech hasn’t lost its focus on addressing common and chronic conditions.  The market may shift between surgical and interventional, inpatient and outpatient, fixed site and wearable, but the demand for our knees, pacemakers, IV pumps and diagnostic tests is not going away, and if anything will grow with the aging of the population. While there is price pressure on devices, these forces aren’t catastrophic and underscore big med tech’s need for continued innovation (see #3).

Making the most of these favorable trends requires med tech innovators to think creatively about how to develop technologies, fund companies, approach and define strategic partners, staff teams, and commercialize new products. We also need our industry organizations to stop fighting last year’s war and start selling some med tech futures.  Med tech is the new black!  Clearly need to work on the tagline...


Commercializing Med Tech Innovations: When Scaling Sales Makes Sense

Commercializing Med Tech Innovations: When Scaling Sales Makes Sense

Mark Andreessen, the founder of Netscape and regarded investor/entrepreneur, coined the term “Product/Market (P/M) Fit”, which simply means “…being in a good market with a product that can satisfy that market."  According to Andreessen, this state of commercial Nirvana is achieved by iterating on your product, messaging, and targeting until something really clicks.  Then, and only then, do you flip the switch to “Scale”.  In med tech (vs. tech), there are usually two or more markets to satisfy, namely users of the technology (e.g. doctors, nurses, patients) and those paying for it (e.g. hospitals, health insurers, maybe patients again).  There are often two products, too – the gizmo, app or service being sold, and the evidence demonstrating that the product is worth the payers' money or the users' effort. You could say that in med tech a “Product/Evidence/Markets (P/E/M) fit is the gateway to scalable commerce.  

In our industry, we have become very creative in hitting that all-important “on market” milestone as quickly as possible, making good on long-standing promises to investors (often longer than planned) and sparking celebration among long-suffering employees. For PMA devices we go to Europe, we pursue humanitarian device exemptions, and find first applications with the fastest clinical pathway no matter how small the opportunity or insignificant the benefit.  For 510(k) devices, the possibilities for fast-tracking to launch are even more plentiful. But this cleverness and scrambling increases the likelihood P/E/M fit has been bypassed, delayed, or just ignored.  This can lead to the Commercialization Doom Loop:

Here are four steps emerging med tech companies can take to find their P/E/M and avoid market purgatory:

1.     Gain P/E/M insight as early as possible - learn what you can about product performance and evidence requirements for both user and payer market majorities well before submitting that FDA or CE filing. This early feedback could affect everything if you listen carefully: clinical study plans, product designs, regulatory pathways, financing requirements, even what talent you need.  While engaging S2N to help gather all this data is great (shameless plug), most critical is sending all the company leaders into the field to interact with target customers and opinion leaders. This gets everyone on the same page, and helps the company build loyal future customers who will bear with you through early mistakes.  In our experience these first accounts are often your best ones for many years to come.

2.     Clearly set investor expectations that regulatory approvals and clearances don’t translate into immediate hockey stick sales growth.  Initial launch is not the time to hire the seasoned commercial CEO and replace all of your engineers with glossy reps. Use different language to describe your first 6-18 months post approval – deploy terms like “limited launch” and make an overt distinction between that and “full launch”.  While not the ticket to instant riches, the first regulatory approvals do drive value in that they reduce the cost of evidence development and provide irreplaceable real-world use experience. Product and study iterations are challenging in our regulated industry, but a window of relative efficiency can open after regulatory approval and before locking down scaled manufacturing.

3.     Once “on market”, start small. Limit the size of your initial sales and marketing organization so that you can iterate on messaging and targeting, and ultimately find that repeatable, scalable sales process (assuming you have P/E/M fit). Starting small has a number of benefits – you learn from the market while managing not just your commercial spend, but also containing the costs for your clunky, sub-scale first-gen devices, and minimizing the likelihood and scope of any initial safety or performance issues.  If you make the most of the limited launch period, and don't exit it prematurely, you will be much better positioned for success at commercial scale up (look for our next blog on sales metrics and knowing when to hit the gas).

4.     Consider a longer, more meaningful regulatory path. Heresy, right?  Regulatory approvals are so seductive and satisfying, but no matter how much you try to contain investor expectations, or how ready your team may feel to progress to the next chapter, the shortest path to market may not be the wisest.  Consider alternative regulatory strategies that may take longer initially but provide you with more claims or “E” at launch, such as a de Novo 510(k) vs. a traditional 510(k).  The timeframe to meaningful sales could end up being no longer, and even shorter, than Plan A, and the additional market risk reduction could be attractive to commercial stage investors or acquirers.

The road to P/E/M fit is never clear, easy or short in med tech, but the destination can be well worth the trip.

Realizing the Value of Med Tech Innovations

Realizing the Value of Med Tech Innovations

I recently attended a workshop hosted by the National Institute for Health and Care Excellence (NICE), the UK agency that reigns over new technology assessment and drives reimbursement decisions within and sometimes beyond its jurisdictional borders.  Having girded myself for a sermon on British-style healthcare frugality, I was surprised to learn that Solvadi, Gilead’s $94,500 per course Hepatitis C drug, has been recommended by NICE for use in the UK. While Solvadi’s high price tag is controversial to say the least, NICE’s thumbs up got me thinking that medical technology companies are probably too timid when it comes to pricing breakthrough innovations. By leaving too much money on the table, are we crippling the whole med tech innovation ecosystem and dooming ourselves to commoditization and mega-mergers?

There are many examples of medical devices that arguably are priced well below their value.  One of my favorites is Mirena, the levonorgestrel-releasing intra-uterine device from Bayer. Mirena provides 5 years of reversible birth control without many of the risks of dual-hormone oral contraceptives, including the risk of not remembering to take them. So why was it priced lower than the 5-year cost of market-leading birth control pills? The humble pacemaker is another good example; pacemakers can vastly increase the length and quality of life, sometimes for decades, yet they cost less than $5,000.  The list goes on of truly game-changing technologies whose sticker price — even factoring in procedures, tests and device-related complications — doesn’t come close to accounting for the quantifiable direct savings much less the gain in Quality-Adjusted Life years (QALYs) that the health economist wonks at NICE used to justify Solvadi.

Why have med tech innovators been hesitant to bust through conventional device price ceilings and really go after the money they are worth? And more importantly, what can be done to change the paradigm?

Overcoming incrementalism

Most med tech innovations represent incremental advances, building off of existing technology that was revolutionary in its day.  The first coronary stents were unequivocally a breakthrough because they offered a therapy for coronary artery disease without requiring hugely invasive and dangerous open-heart surgery. Drug-eluting stents came along and finished the job, achieving sufficient efficacy to convert a large share of the surgery market (with the help of aggressive interventional cardiologists), and became a rare $4B+ device category. Since then, new stent iterations have made unexciting gains, and both stent prices and reimbursement have come down.  Many other device categories, from orthopedics to vascular to ophthalmics, have also seen a parade of line extensions focused on defending shares and justifying modest price increases to health system purchasers. Incremental medical device advances are crucial to the engineered solutions we develop, and appropriately supported by the FDA 510(k) regulatory pathway, but they rarely change the conversation from the purchaser or payer perspective.

Generating the evidence

Even when a medical technology represents a revolutionary step forward in treatment, device companies often don’t spend the money and time that biopharma does to demonstrate the efficacy and cost-effectiveness of their solutions. Asthmatx received US regulatory approval for their severe asthma treatment Alair with a 300 patient study, and many payors still consider it investigational over four years later.  By contrast, when NICE reviewed Xolair, a leading drug for severe asthma, the agency could draw from 11 randomized trials with data from more than 2,300 patients. Ultimately NICE gave its blessing to Xolair, which can cost up to $40,000 per year and generates $1.3B in revenue for Roche and Novartis. Granted, it can be tough to conduct randomized controlled trials with many devices (creating sham controls for devices is truly an art form), but payers don’t really make that distinction. The clinical development necessary to achieve clinical acceptance and additional reimbursement can be too much for traditional med tech companies and their VCs to stomach, but it’s precisely this evidence that enables pricing to value vs. pricing to existing competition.

Fighting the good fight

Even if we had the evidence we need to justify new reimbursement and get fair value for our innovations, it is just way easier to find a way to fit into current reimbursement than confront the hellish slog to new code. Short-term focused investors even insist on it, having grown allergic to both regulatory and reimbursement risk.  To put medical devices on par with drugs in monetizing demonstrated value, some companies will have to step up and get into the ring with CMS. The manufacturers of transcutaneous aortic valves are going for it, having developed a technology that can avoid major open-heart surgery as stents once succeeded in doing.  Edwards et al are charging more than $30,000 per device, and are building the evidence to demonstrate not just efficacy but also cost effectiveness and yes, QALY gains.  CMS is slowly coming along with a National Coverage Determination that has more conditions than a Hollywood pre-nup, but it’s a start.

Clearly not all new medical devices will, or should be, disruptive innovations that warrant significant allocation of scarce healthcare dollars, and plenty of new drugs are incremental, too (how many erectile dysfunction drugs do we really need?).  However, we med tech people have to resist our inherent urge to endlessly tinker and make some big bets.  We, too, know how to modify disease, though we may not call it that enough, or aim that high often enough. 

Note: Amy Siegel from S2N will be hosting a panel on these topics this Friday, November 7th at the MassMedic MedTech Showcase, featuring Medtech-Biotech crossover executives and investors.

Marketing Steps Up in Med Tech

Marketing Steps Up in Med Tech

Historically, marketing has been the Rodney Dangerfield of med tech. We marketing people don’t get much respect. Sure we wear dark suits at the booth and talk to customers, but the med tech Sales & Marketing equation has generally been big “S” plus little “m” (or as one sales executive we know put it, marketing is just sales overhead). Enter the last decade and the virtual collapse of the traditional med tech sales model; gone are the days when reps can leverage chummy relationships with physicians to brute-force expensive new medical devices into the hospital. An autopsy would reveal many causes of death, but to name a few:

  • Hospitals have given financial decision makers more muscle in purchasing decisions, e.g. value-analysis committees are actually doing value analysis

  • Doctors are increasingly employed by hospitals (though surgical subspecialties are bucking this trend) and more beholden to hospital priorities

  • Increased regulation of sales interactions and hospital control on rep access have made direct selling to physicians much more difficult

This is where marketing enters the scene. Success, or even survival, in the face of all these challenges requires clever, proactive and well-executed marketing efforts, with sales as the icing on top. Big “M”, littler “s”. Highest on marketing’s current agenda are:

1. Launching the right product with the right data. The marketing imperative starts during product development, making sure that the R&D folks are creating stuff that future customers actually want / need, and doing so at COGS that leave room for some profit at market-driven ASPs. With the bar on clinical evidence continuously being raised by penny-conscious customers, the marketing voice is also critical to align study designs and endpoints with purchaser and payer requirements. Unfortunately many R&D and clinical teams take a similar view of marketing as their compatriots of sales, but this is slowly changing.

2. Offering a solution, not just a product. A great technology developed with lots of customer input is a necessary but insufficient condition for driving adoption in the current constrained healthcare environment. Device companies have to solve real problems for their customers, who are generally happy to maintain the status quo that existed before the appearance of your new gizmo. One way to become a total solution provider, and capture more value, is to combine device offerings with related services. Medtronic’s acquisition of Cardiocom for $200M is a notable move in this direction (a trend S2N predicted last year). No doubt marketing will play a vital role in coupling Cardiocom’s telehealth and chronic disease management offerings with Medtronics’ vast portfolio of devices to defend and grow share, maintain premium pricing, and create competitive barriers to entry.

3. Redefining the customer. Med tech companies need to take a more expansive view of the sales targets to include new purchase decision influencers, for example the consumers of healthcare. Americans now pick up the tab for about 13% of the US healthcare tab, spending >$400B per year out of pocket. This is a customer group that med tech sales forces rarely if ever touch, and therefore lands squarely in the domain of marketing. How patients feel about their healthcare experience is also mattering more to hospitals. The CMS Value-Based Purchasing Program is tying incentive payments to hospitals performance on the dimension of patient experience, and medical device companies are well positioned to help hospitals measure up against these metrics by engaging and “delighting” patients with their device-based care.

Consumers are also starting to take a bigger role in their own health, shelling out significant cash for health trackers like Fitbit, Nike+, Withings and other wearable technologies. These “toys” are migrating to more serious medical applications, creating a gray area that offers growth opportunities for device companies. The marketeers at Alivecor, for example, are putting home EKGmonitoring in the hands of patients; we recently heard of one doctor recommending the self-pay device to patients because it’s cheaper than copays and deductibles on traditional heart monitoring. Hopefully orthopedics companies are putting their marketing teams to work on exploiting the synergies between activity trackers and new hip implants to improve or demonstrate better outcomes.

In the old med tech model, Marketing got pulled in when Sales ran into trouble (usually when it was too late to do anything productive). One could say that Sales is now in a permanent bind, and Marketing needs to take the helm for a while. Just someone please tell me where I can find some good med tech marketing people…

Making the Most of Scientific Meetings - 5 Tips for Emerging Medtech Companies

Making the Most of Scientific Meetings - 5 Tips for Emerging Medtech Companies

I’ve attended at least three lifetime’s worth of trade shows and scientific meetings, both as an exhibitor and a hanger-on, and I still find myself wondering before each one whether it’s worth the time and money to go. What do you really get for wearing your shoes down at RSNAAAOSTCTDDWACC, and the like? For big device companies paying major bucks for a top-notch “footprint” in the exhibit hall, it’s about supporting the professional societies, brand-building, and rubbing shoulders with thoughtleaders (a diminished presence could ignite all sorts of rumors and ill will). For emerging medtech companies, though, whose product may be years away from market, the idea of increasing the burn rate to buy booth space seems kind of crazy. But these meetings uniquely and valuably assemble everyday clinicians, scientific glitterati, competitors, potential strategic partners, and even some investors together in captivity under one great big convention center roof.

So the question remains, if you are lacking excess cash or even so much as a working prototype of your gizmo, is it worth even attending scientific meetings, much less exhibiting? For most early stage companies, really until full commercial launch, an official presence in the exhibit hall is generally not a wise investment. While a booth provides a certain legitimacy and anchor point for meeting up with people, it quickly becomes a ball and chain, not to mention that any booth affordable to a start-up is not in a prime location (I have been positioned next to Alcoholics Anonymous more than once, whose services I required by the end of the show).

Best to attend scientific meetings as a free agent, but even then you can waste your time and money, that is unless you follow these five tips to make your trade show investment count:

  • 1. Have clear goals – It is easy to wander around aimlessly at these enormous meetings, hoping to learn something inspiring at a session (you won’t) or run into the “right” people at the networking events (you won’t). Some more realistic objectives might include understanding current practices and trends, investigating your competitors, establishing early relationships with thoughtleaders, conveniently gathering your scientific advisors or investigators, or meeting with potential strategic partners. Before you drop one dollar on registration, make sure you know what you want to accomplish.

  • 2. Pick the right meetings – Not every scientific meeting will be well suited to your goals, and frankly some are just better than others at attracting the right attendees, exhibitors and content. The big meetings are best for connecting with strategics, since the business leadership is more likely to attend, and also good for competitive snooping in the exhibit hall since you can get lost in the crowd. If your goal is to meet with target clinician customers, check with a few to make sure they are attending. Smaller, more focused meetings are usually better for connecting with potential advisors who specialize in that area; there may be less competition for their time at these smaller meetings as well.

  • 3. Start planning early – Review the conference program at least 4-6 weeks in advance of the meeting; the program is a great way to identify clinician thoughtleaders with knowledge relevant to your technology. Reach out to these folks at least 3-4 weeks before the meeting; dance cards tend to fill up very quickly at these events. If you have a truly novel technology, they will probably give you 20 minutes over coffee. Also study the exhibitor list in advance to know which companies have a presence if you want to set up partnering meetings or gather competitive intel (note that the exhibition is generally shorter than the conference when you book your travel). Inside tip – the reps in dark suits manning the booths get quite bored and would talk an inanimate object by the last day of the show.

  • 4. Come prepared – So now you’ve set up your meetings, noted the few must-attend sessions, and planned your exhibit hall time. The next step is to have the right props and materials with you to impress the important people you encounter. Create a short company presentation on your iPad, 4-5 slides maximum, that clearly describes your technology and the problem you are solving. A few select slides from your investor pitch deck should do the trick. Animations or images of your medical technology are also a great way to quickly ground your discussions with clinicians or business people. If your device is small enough and not likely to get you into trouble with TSA, stick some in your bag. Nothing says “we are real” like some devices strewn across the table at Starbucks.

  • 5. Don’t forget to follow up – Take a cue from the reps at the big device companies and follow up diligently on every lead and contact you generate at the meeting. Let them know you are professional and organized; invite them to come by your global headquarters (a.k.a. the sub-sub leased space off the freeway) if they find themselves nearby. Most importantly, articulate a tangible “call to action” and some clear next steps. Do you want them to become advisors to the company? Agree to evaluate your device in a pilot launch? Collaborate on a feasibility study? Keep the drumbeat of communication going so by the next scientific meetings these are old friends who are happy to see you.

With good planning, execution, follow-up, and comfortable shoes, scientific meetings can reap rewards for early stage medtech companies.

Five Essentials for Emerging Medtech Pitch Decks

Five Essentials for Emerging Medtech Pitch Decks

Last month I had the sadistic pleasure of serving as a judge for a business plan competition at the 2013 Advamed conference. I have to give credit to the fledgling entrepreneurs who agree to present at such sessions, designed to publicly expose the flaws of their technology, commercial story and personal presentation styles. The only grimmer form of torture is watching a videotape of yourself giving the company pitch.

The presentations by these energetic new CEOs, on top of the many I encounter in my day job, got me thinking about the “must-have” elements of early stage medtech fundraising pitches. So here is my checklist – commit it to memory if you want to avoid public humiliation at my hands during some future business plan competition:

Be clear on what your product is, right up front

It is surprising how often I hear a pitch that leaves me asking, “So what exactly is it that you have / do / make?” A good product description should be understandable by an intelligent layperson, incorporating enough technical elements to sounds like an accomplishment but not rocket science; remember that you know way more about your specific area than your potential investors do. Include images, or animations if your technology is used in a procedure or it is difficult to envision how it works. A concise technology description should be in the first tenth of your pitch deck, not the exciting climax after a big buildup of the company history, IP, market, and so on, or you will lose people quickly.

Articulate the important problem you are solving

Once a potential investor understands your product or service, the next natural question is, “So what?” The simpler your value proposition story, and the more compelling, the better it will be received. I fondly recall a conversation with a founder of Nellcor who simply described the value of pulse oximetry as “preventing death.” A technology doesn’t have to save lives, though, to be meaningful. An example of a clear value proposition, selected randomly from MedGadget, is “Fertility Lab-on-a-Chip: Assess Your Semen Quality at Home.” I get the concept right away, and can see why men might want a home test for this particular purpose.

Define your customers

Closely following the “so what” question are “who cares” and “who pays.” Who are the customers for your technology? In what setting will it primarily be used? Who will champion it? Who will need to be convinced of its value? To paraphrase George W. Bush, who will be The Decider? It is advisable to focus on a clear set of customers and stakeholders who are logically vested in the problem you are solving and are in a position to take action.

Spell out how you will create value with the $$ you are raising

Investors are funny creatures; curiously, they like to know what you plan to do with the money they are being asked to give you.  What near-term milestones will the funds enable your medtech company to achieve, and how will achieving them increase the value (and valuation) of your company? Don’t waste a slide on a bar chart showing a 3-year revenue ramp to $1B in sales (and that’s just the US market), or a plan for a big licensing deal or strategic take-out in two years. No one will believe you and you won’t look credible. Instead, highlight the data you will generate, the functional prototype you will develop, or the regulatory clearance you will obtain, and the activities and expertise that must be funded to get you there.

Instill confidence in you and your team

If you’ve done a good job on “what”, “so what”, and “how much,” its time to tackle “why me.” It may be trite to say that investors invest in teams, not technologies, but it’s true. Company leadership is most important; have you assembled the right skills and experience on your team to get the job done? Do you as a leader exude energy and passion in your presentation? Have you engaged strong advisors and collaborators to support you, connect you and lend credibility to the solution you are peddling? Are they for real or did you just run into them in the men’s room at a scientific meeting? Keep in mind that any serious investor will call them!

I would love to say that the value of technology speaks for itself, and in rare cases a great idea can overcome a discombobulated pitch. But like a depressed real estate market, with all of the forces and odds against medtech entrepreneurs, a little “staging” is a wise investment if you want to make the sale.

Reimbursement Fundamentals for Disruptive Medical Technologies

Reimbursement Fundamentals for Disruptive Medical Technologies

Many new medical technologies, particularly the low- or mid-tech ones, fit more or less neatly into an existing reimbursement code. For the companies developing such devices, de-risking involves demonstrating 1) it works and won’t kill anyone, 2) the path through FDA is efficient, 3) the company can manufacture it at attractive margins, and 4) enough people will want to buy to imagine profitability.

For most “disruptive” medical technologies, however, it is the market adoption risk that often generates the most worry starting around Series B and escalating to a fever pitch in the quarters leading up to launch. Providers generally want to get paid more for using expensive new technology, and additional reimbursement typically lags years behind product approval if it ever happens at all. Compared to the payers of the world, the medical device regulatory bodies are virtual pussycats. You did one study for FDA? We need three. You studied patients out 6 months? We want two years. And we still might not pay extra for your devices, no guarantees.

The high hurdle to new reimbursement will, and is meant to, discourage all but the most confident in the value of their novel therapy or diagnostic. Those brave companies that do forge ahead to slay the reimbursement beast need to be armed appropriately. To learn more about how emerging medtech companies can pave the way toward reimbursement for disruptive new devices, I spoke with Kelly Shriner, Director of Health Economics and Reimbursement for Boston Scientific (by way of Asthmatx). In 2010, BSC acquired Athmatx, with its novel Alair Bronchial Thermoplasty treatment for severe asthma, for $193.5M up front and up to $250M more on the back end. Bronchial Thermoplasty was awarded a rare new Category 1 CPT reimbursement code in 2012, a major milestone long in the making.

For the edification of our emerging medtech clientele, I asked Kelly what she was glad she did early on at Asthmatx to position the technology for reimbursement down the road. “I can’t overemphasize the importance of a strong clinical strategy,” said Kelly. “We followed a scientifically sound path that helped us gain ground along the way, which was crucial for a technology as novel as ours.” What made Asthmatx’s clinical program so rigorous? Three randomized, controlled trials, including a robust sham control arm and tracking of healthcare utilization data in both arms to facilitate economic comparisons. “If we didn’t have that data, we’d be dead in the water with payers,” said Kelly.

Building relationships with the relevant clinical societies, and building them early, is also important groundwork for future reimbursement. “Payers seek the input of these societies on all their decisions,” said Kelly. Asthmatx started reaching out to societies in 2005, a full seven years before receiving their Category 1 code. “The societies are the ones that push for appropriate coding with the American Medical Association (AMA), and as a company you can’t own that process,” said Kelly. “The persistence of the societies helped us go from a temporary Category III code to a Category 1 code in one year.” Trust me, this is lightening speed.

Once on the market with a new CPT code, the reimbursement effort is far from over. Individual payers still have to agree to actually cover the assigned code (a.k.a. send money) when the procedure is performed. Payers can do this on a case-by-case basis, necessitating much paperwork and fortitude on the part of providers, or they can issue a coverage policy so the reimbursement flows with appropriate use. “The Catch 22 is that payers’ coverage policies don’t flip until payers see demand from market, but demand is driven by reimbursement,” says Kelly. In the meantime, companies need to be prepared to offer users “an intense level of support” through the one-off reimbursement appeals.

Companies also need to intensively educate the payers, for example about the rigors of the PMA regulatory process. “I found myself having to explain the difference between a 510(k) and a PMA, and the level of evidence required for a PMA device like Alair,” said Kelly. Feeding into this misperception is the fact that the FDA has access to all of the company’s data, whereas payers tend to only look at published, peer reviewed articles – a naturally self-limited dataset. Given the opportunity to explain how similar a PMA is to an NDA, though, payers got it. “As an industry, we need to do a better job of bringing payers up to speed on the FDAprocess, particularly for PMA-approved medical devices”, suggested Kelly.

Kelly continues to negotiate with payers around the world as part of the BSC team. Reflecting on the acquisition, Kelly proudly recalls, “Our early payer strategy helped BSC get comfortable with Asthmatx; the reimbursement strategy, as well as the strong clinical strategy and compelling data, helped get BSC over the hurdle of taking on an earlier stage technology.”

Medtech heads to Africa and so does S2N

Medtech heads to Africa and so does S2N

The large medtech companies seem to talk endlessly about emerging markets delivering their top-line growth targets, and they are not just talking about BRICcountries anymore. During his recent visit to Africa, President Obama stumped for increased trade with “the world’s youngest continent”, and companies like Covidien are seeing the promise of Africa, too. Selling in Africa seems like a natural step for some of the industry giants, but what about the little guys? Can emerging med tech companies turn the large African populations, improving healthcare infrastructure, and growing middle class into valuable markets?

Not to be outdone by Obama, last month I traveled to sub-Saharan Africa for an S2N client seeking to understand regional customer requirements for a novel medical technology. This medical technology is funded in part by a foundation grant, hence the African twist. While there, I visited several health centers and was able to get a sense of how care is delivered and by whom in this part of the world. These observations, admittedly from one country (Ethiopia), underscore both the potential and challenges of African markets for healthcare technologies.

The key customers are governments.

Government sponsored clinics and hospitals serve the majority of people in Africa, often providing care at no charge or for a nominal fee. However, private health clinics do exist for those who can afford a fairly modest fee for services. While in Africa, I visited a brand new private health center with 40 inpatient beds and 2 ORs. This center was well supplied, exceptionally clean and had its own IT department. This private center was actually funded in part by the local government because the public one was struggling to keep up with patient demand. Indeed, the public clinics were busy and waiting areas were full. In many African countries, the government may be your first call point, and official buy-in will be important when introducing any new technology more broadly. The government not only influences purchasing but also practice, care delivery and technology use.

Unlikely healthcare workers perform procedures.

Because of a shortage of trained MDs, it is healthcare workers, with widely varying skill levels, who are the primary providers of patient care. One of the public clinics I visited had throughput of ~300 patients per day, managed by a staff of 14 healthcare workers; the one MD on staff had been on medical leave for several weeks. In both the public and private clinics I visited, the workers were clinically knowledgeable, keenly interested in learning about new technologies, and articulate in describing their needs and capabilities as care providers. Many healthcare workers with 2 – 4 year degrees could deliver babies and perform small surgical procedures (e.g. wound closure and episiotomies). Most of the healthcare workers I encountered in the urban and peri-urban clinics spoke English, although I was grateful for our counterpart who spoke the local language.

Preventative care is challenging, and cell phones may help.

In Africa, patients often go years without seeing a doctor or other healthcare worker. The concept of a general check-up, especially if you are healthy, is almost non-existent. For patients who do make it to the clinic, healthcare workers commented that follow-up appointment cards may be given for 3-5 years out, but there aren’t really appointments – long lines are the norm. Many patients also travel great distances to the nearest health clinic, so governments and NGOs are focused on ways to bring care closer to the patient. Ethiopia is a pioneer in training health extension workers to provide basic care, for example vaccinations and family planning counseling, in the more rural areas. With mobile phones nearly ubiquitous, even in remote villages, m-health solutions are also receiving attention and funding for preventative care and treatment in Africa.

While a single experience in one African country does not tell the whole story, I hope and expect to be traveling to the emerging markets more frequently for my emerging medtech clients, particularly for those medical device cost-disrupters who can meet the low price points demanded in Africa. Certainly getting into the field to visualize the environment and talk to the people who may someday be using your technology is an invaluable first step in the right direction.

Defining Disruption in Emerging Medtech

Defining Disruption in Emerging Medtech

In our line of work, we come across many innovative medical technologies appended with the adjective “disruptive”. Some uses of the term require more squinting to imagine than others. The disruptive label is enticing because big ideas are associated with big funding and big exits in the emerging medtech landscape. Alas, there is no objective measure of a device’s potential disruptiveness; like pornography, to paraphrase a former Supreme Court justice, “you know it when you see it.”  Renal nerve denervation for refractory hypertension – now that’s disruptive.  Fully implantable artificial heart – disruptive.  Transcranial magnetic stimulation for depression – disruptive.  RF ablation for severe asthma – disruptive. Of course, to really disrupt the market, these technologies need to be widely adopted, and it so happens none of these have quite reached that stage yet, but at least the potential is there to fundamentally change treatment paradigms.

High “disruptivity” is not essential for new medical technologies to attain success. There are perfectly clever, fundable innovations out there that don’t rock the healthcare world or get published in NEJM. What is important, though, is ensuring a proper balance between the two fundamental dimensions of disruption, namely Care Disruption and Cost Disruption.

Care Disruption can be created by:

  • A new device-based treatment where only drugs (or nothing) existed before

  • Enabling a much broader group of patients to be treated

  • A completely new setting of care, e.g. new home treatment or monitoring

Cost Disruption can be created by:

  • Being significantly cheaper than existing solutions (e.g. 5-10X cheaper)

  • Adding significant costs to the healthcare system

  • Massively shifting costs associated with a certain condition from one category or payer to another

To lay this out visually, if your technology is both a Care and a Cost disrupter, then it is in the “Maximally Disruptive” box on the above classic 2×2 chart. For technologies that significantly change care and also increase or shift costs substantially, the key to market creation is the development of compelling clinical data. The reward for successfully demonstrating value may be keen interest by the big medical device companies looking for entirely new verticals (consider the $800M purchase of Ardian by Medtronic).  Medical technologies that are able to disrupt care at a significantly lower cost, for example by leveraging advances in processing power (Moore’s law), are equally exciting but are just starting to emerge.

On the other end of the spectrum is the “Market Share Battle” quadrant, where incrementally better new products with a comparable or slightly lower price tag fight entrenched competitors for a piece of an existing market. The battlefront here is often in purchasing departments of health systems, and the sales channels are likely through distribution. Exits for products in this category tend to be later stage and based on multiples of revenue; prove you can gain share on the market and there will be interest.

If your technology involves a significant change in care but not necessarily in cost, for example a shift in the site of care or a less invasive, easier procedure, then the focus of the company should be on Market Education. Products in this category, even if money-saving, can encounter referral pattern problems where clinicians who “own” the patients may be disincentivized to offer a less expensive solution, especially if it is provided elsewhere. In this case, direct-to-consumer marketing and advocacy may be required to gain traction and prove demand for the new technology. Companies offering endometrial ablation solutions, as an alternative to hysterectomy, could tell you first hand about the referral pattern problem. Proving cost-neutrality or savings with post-market economic studies may also be required to realize a shift in care patterns.

Where you don’t want to land is in the upper left box, unless your technology is on the cheap end of cost disruption. No entrepreneur will admit that the innovation they’ve nurtured is an incremental improvement at a higher cost. Unfortunately, until the clinical benefits and/or economic savings of more expensive innovations are credibly demonstrated in studies or even better with real-life use, skeptical clinicians, payors, hospitals and patients will likely place it in this box. The trick is moving as quickly and efficiently as you can to a better zip code.