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Variation in Medicine: What Would Darwin Say?

Variation in Medicine: What Would Darwin Say?

Some of S2N’s recent work has gotten me thinking about variation, sometimes extreme, in the practice of seemingly routine medical care. Take the interventional treatment of peripheral arterial disease, for example. We recently spoke to physicians about their approaches to stenting; some stent about 10% of lesions, some stent everything, and about 1 in 10 had practices that were really out of the norm, such as using TPA or inordinate numbers of covered stents. Peripheral interventions being somewhat new on the scene, one could expect, and accept, a certain amount of variation. Not long after, though, we were speaking to neurointensivists about the management of neurogenic fever in the ICU and came across wildly different beliefs about the efficacy of acetaminophen (a.k.a. Tylenol), definitely not a new therapy, in reducing fevers (somewhere between 0% and 100% apparently). What are we to make of this vast variation in medicine?  What would Darwin say?

Natural selection, the greatest algorithm of all time, addresses variation by filtering variants based on strength vs. weakness; the strong variants survive while the weak die off.  The application of selection methods to medical practice has had some successes over the years (e.g. the sterile field in surgery, lobotomies not a thing), and there is a substantial industry around scientific study and evidenced-based medicine.  Despite all this science, however, medicine remains more of an art. Shifting the balance toward replication of optimal care and reduction in counterproductive variability will require streamlining of both the selection and dissemination of best practices (unless we want to off the weak practitioners, which no one here is recommending). 

Selection: Simply put, medicine needs a good way to pick winning practices.  Maybe you are thinking, silly, we can do that now with randomized controlled trials (RCTs), the pinnacle of rigor in determining the superiority of approach A vs. approach B. Even with medical devices, we’ve figured out a way to conduct sham-controlled studies using fake surgical sounds and video reels. A key limitation of the RCT, however, is the huge investment in time and money required for just one such selection process; data quality is prioritized over cost-efficiency and speed. Perhaps medicine could learn something from the tech industry, where web-based companies are constantly running real time experiments to evaluate page performance and optimize particular metrics in the form of A/B testing. In comparing medical practices that are thought to be similarly safe against near-term endpoints such as length of stay, patient tolerability, or acute complications, this type of rapid, scaled testing might be feasible.  In any event, there needs to be some innovation in picking winners in medicine outside the traditional RCT paradigm if we are going to keep pace with patients’ needs and really impact the variation problem.

Dissemination: According to Darwin’s theory, it is crucial not only that traits best suited for their environment confer survival, but also that they be heritable - reproduced through the passing down from generation to generation. As Atul Gawande explains, the problem in medicine is “...good ideas still take an appallingly long time to trickle down.” “Scaling good ideas has been one of our deepest problems in medicine,” laments Gawande. Currently, good ideas in medicine are circulated primarily through a complex web of hundreds of peer-reviewed journals and scientific conferences.  The timeline from completion of science to publication or presentation is a year at lightening speed, and it can take 10 or 15 years for a truly good idea to be incorporated into standard of care and benefit the majority of patients. While I don’t think dissemination in medicine will ever be as fast as pushing new code out to an autonomous surgical robot (the FDA being one major hurdle to this vision), health IT solutions leveraging the ever increasing capture of real-world healthcare data could greatly facilitate the identification and dissemination of incremental advances in care.

There is no doubt that variation will be an enduring, and essential, aspect of medical practice. While our current system may be burdened with too much needless variation that detracts from quality, some level of experimentation is necessary to prevent stagnation at a “local optimum” (like reaching the top of a hill when there is a mountain beside it). Along with natural selection, variation is what drives evolution. We will always need fresh, new experimental ideas / techniques / care pathways to run against current best practices and challenge ourselves to find even better solutions. Given human nature, and physician nature in particular, I am confident there will always be a wealth of new ideas. We just need a better way to know if they are good ones, and if so how to put them to work asap.

S2N Analyst Rebecca Noble contributed to this blog.  Thanks, Rebecca!

So You Want to Lead an Emerging Med Tech Company? Seventeen CEOs Have Some Advice for You.

So You Want to Lead an Emerging Med Tech Company? Seventeen CEOs Have Some Advice for You.

The CEOs of emerging med tech companies are among the hardest working people I know.  There are a multitude of things to worry about, with several on the edge of cataclysm at any given point – keeping money in the bank, getting the damn technology to work, the FDA, building out the human and capital infrastructure, managing the burn rate, filing IP, gearing up clinical trials, manufacturing, commercialization, engaging KOLs, generating “buzz”, meeting with strategic partners, managing the BOD, and so on.  Just writing that sentence exhausted me.  For a new CEO of a small med tech company, all this can be quite overwhelming, so I turned to my road-tested CEO clients and friends and asked them a simple question:

What's the single most important piece of advice you would give to someone about to start their first emerging med tech CEO job? 

At press time I had 17 responses from current or very recent CEOs of small med tech companies, ranging from development stage (6) to early commercial (11) and publicly traded (2). All but one of their companies are in the greater Boston area, not that I would expect much geographic bias – the wisdom they shared seems quite universal. The vast majority of respondents were not the founding CEO, so they inherited existing teams and operations (and problems). Most have had only one CEO role, so are close to the experience of being a first-time CEO.  I was happy to get replies from so many of these busy people, who seemed eager to share insights from their hard-won experiences that might benefit others on the same path.

In rough order of number of mentions, here is what the CEOs had to say:

1.     Get the right team in place, and fast

While it seems obvious that a good team is crucial to success – a platitude, really - the “need for speed” in building a solid senior team came through loud and clear.

  • The sum total of one CEO’s advice was, “Make your people decisions quickly,” echoed by “make sure you have a solid management team in place, and if not act quickly in creating one.”

  • Rapid action needs to follow rapid intel, but not judgment; “Gather as much information as you can in a short period of time – don’t assign blame to the people there who are there and have been working hard, but make sure they are capable and you can trust them.”

  • Great people aren’t enough, though - you also need everyone on the same page in terms of objectives and roles. “If you have great people, all aligned behind the goals and how to operate together, you can accomplish anything,” offered the most upbeat CEO of the bunch.

  • Another CEO emphasized this point; “Pay attention to how the team works together - individual genius can save a company but dysfunctional teams can disable progress.”

  • If key people aren’t working out, “don’t delay addressing personnel issues” and “be willing and prepared to make changes to the team as the business develops.”

  • The CEO’s role is captain of company culture, and according to one CEO a good culture “…allows people to give their best, removes obstacles, and facilitates the great results the team can achieve.”

  • Singing Kumbaya with your team isn’t the only means to success, though, as one CEO observed. “You cannot gauge progress by measuring satisfaction. Teams are often closest to a breakthrough at the height of their frustration. Revolutionary change is inertial and nearly everyone who is threatened will resist until the facts are undeniable or they have incentive to change.”

2.     Investors / Board of Directors (BOD) – pick and manage carefully

One CEO described his relationship with the Board in marital terms, which pretty much says it all. “The board determines the fate of your company and the CEO, and they will require you to alter your vision and compromise, as in any good marriage.“

  • Boards, like spouses, just want to be heard. “Listen to what’s important to your board members. Understand what the Board considers to be the most important things for the CEO to get done,” offered one CEO.

  • Consider carefully with whom you climb into that figurative marital bed, assuming that decision is in your control. “Find a team of financiers who believe in your vision and especially in you.”

  • Another CEO described what they look for in their funders; “The best investors want us to create value, and want to be there to back us, and grow their investment with the firm as long as their capacity to do so permits.”

  • The right investors for an early stage company might not be the best fit as commercialization nears, and managing that transition thoughtfully is important. “It is natural that the appropriate mix of investors change as a firm grows and matures, and it is important to help facilitate fair rewards to your early backers.”

  • Misalignment between management and the BOD is a big concern - “If the Board members don’t share your values or don’t have the resources to continue investing until you reach an exit favorable to them, your interests will diverge.”

  • Managing investors’ (and others’) expectations of the team and company progress is clearly challenging, especially when a new CEO is brought in to “fix” things; “Typically people’s expectations are out whack, especially when it involves turnarounds.”

  • Several CEOs advised a strong, proactive approach to managing these expectations. “Be firm with your Board as to what their expectations should be, and then communicate like crazy to keep them aligned with you,” advised one CEO.

  • Getting on top of expectations quickly and for all stakeholders is key; "Set and communicate the correct expectations early to the investors, the company, and customers.”

  • How you communicate with the BOD is critical – honesty is important, within limits that is. “Be as transparent as practical with your board - lead when possible by offering solutions but don’t hide problems,” suggested one CEO.

  • Fundamental to a good BOD-CEO relationship is gaining a clear picture of investors’ assumptions and motivations. One CEO with a big company background shared his surprise at learning “…the different meanings of value creation to different investors in a startup” and advised new CEOs to “...know your investors and Board - understand what matters to them, what a good return looks like to them, what their timing expectations are, and try to be sure that they know you have their interests in mind in all you do.”

3.     You don’t know everything – have strong outside advisors

Perhaps because many of the responding CEOs are fairly new to CEO-hood, several mentioned the need for experienced external business advisors, specifically who are not members of the Board of Directors.

  • “Find someone, a mentor or trusted former colleague, who you can level with – you can’t always be completely frank with your BOD. It is crucial to have independent perspective and find someone who can challenge you.”

  • Another CEO was even more to the point. “As a first time CEO you don't know what you are doing. You can’t admit to your team how much you don’t know, but if you pretend you know everything you will be ‘royally buggered’. Surround yourself with people who have done it before and listen to them. Don't put them on your Board.”

  • Commiseration with other CEOs in a similar boat seems to be helpful, too (and was the inspiration for this blog, by the way). “Seek out advisors who have experience as a first-time CEOs and know what you are about to go through, and learn from them,” suggested one CEO.

  • Another offered, “Stay humble, don’t think you know it all, surround yourself with advisors/mentors who were in your shoes before and who know the land mines.”

4.     Market - pursue good opportunities, and get out there

I was a little disappointed but not shocked that only 3 of the 17 CEOs mentioned anything about their market opportunities (a.k.a. their reason for existing) in their top-of-mind advice to new CEOs. Not complaining, though – their preoccupation with so many other priorities, like staying solvent, keeps S2N busy!

  • One CEO emphasized the need to personally immerse yourself in the market; “Listen to your customers - get out into the trenches, early and often, and hear what patients are saying about the technology if it is already commercialized, or what the customers need for technology in development.”

  • The other market-related advice centered on pursuing the right market opportunities. “Be as certain as possible the problem is really worth solving: that there is a real need that someone will pay to address,” offered one CEO.

  • Another CEO suggested, “Ensure you have picked a relatively large market with a very real unmet need to give yourself the best chance that what you build will be embraced by the market.”

5.     Stay funded

Two of the CEOs felt it most important to remind new CEOs that their primary responsibility is to keep the money tap flowing. My guess is that all of the CEOs would agree with this point, and maybe thought it too obvious to mention – no funds, no company, no CEO job.

  • “Remember your #1 reason for existence is to ensure the company has the money it needs to execute its strategy,” advised one CEO.

  • Another CEO made his point in all caps, for emphasis; “KEEP THE COMPANY FUNDED. That is the single most important role of a CEO. You need to look at all funding options. When you have few options, you lose your negotiating leverage.”

Many thanks to these CEOs for contributing their time and insights to this blog:

Manny Avila, Bill Floyd, Chris Hutchinson, Edward Kerslake, Doug Lawrence, John McDonough, Jon McGrath, Maria Palasis, Amar Sawhney, Martha Shadan, Ellen Sheets, Jan Skvarka, Samuel Straface, Howard Weisman, Amy Winslow, Chris von Jako, and Marc Zemel

Top 5 Reasons Why Med Tech is Still Cool

Top 5 Reasons Why Med Tech is Still Cool

In S2N’s very first blog, back when we founded our company in 2011, we shared our top 5 reasons why we like the med tech industry. Times have been challenging for emerging med tech companies, though, and the bad days can make you start to doubt your career choices. Maybe it’s time to do something sexier, like develop an app for $0.99 that 100 million people want, or a biotech drug for a really bad disease that 12 people have.

Yet we continue to soldier on, humbly confident that medical devices are still important, and in fact things are looking up for med tech in 2014. It’s been a good year for S2N as well, so we got bold and added some youthful talent to our team. When we offered Andy the job, we weren’t sure we could compete with the glitz and glamour of biotech. Why would anyone with a million possibilities want to get into med tech now, much less work with us?

To lay our bewilderment to rest, and shamelessly fish for compliments from our vulnerable new hire, we asked Andy to refresh our top 5 List with his reasons for entering the med tech field. What attracts a young buck like Andy to join us rapidly aging folk in the pursuit of med tech nirvana?

Here’s what Andy had to say:

  1. Have you ever heard of Facebook? Yeah, me too. Like most of my generation, I was raised by the Internet. We worshipped Mark Cuban and Mark Zuckerberg, now household names; Silicon Valley is the new Hollywood. What I see in med tech is a potential to rekindle a forgotten industry. While many of my peers flew out West like moths to a bright light, I trekked up to the land of miserable winters and unhealthy Red Sox obsessions (also known as Boston). I knew I wanted to work in an industry that was a little less glitz and a little more grit. Call me naïve, but I see med tech taking front stage in the next tech boom. I’m just getting in while it’s still under everyone else’s radar.

  2. From day one of college I knew I wanted to get into biomedical engineering. In my years of lab research I grew to love the concept of manipulating the mechanics of biological systems to create whole new technologies. But sometimes it felt like my scientific papers were just landing in the great academic abyss. Blame it on me, or blame it on the short attention span of my entire generation, but I knew I needed a little more instant gratification. Wait, what was my point again? Oh right: I wanted to work in an industry that lets you see the hard work of lab research put to use in the real world, and in real people.

  3. Biology is all about revealing the fundamental mechanism behind a process. As a biologist (-ish), I wanted to understand the process of taking knowledge learned at the lab bench and spinning it into a company. After so many years focusing on the science behind medical devices, I became increasingly curious about the businesses behind them, too. Based on my experience, the majority of scientists have only a hazy concept of everything that must happen to translate a science project into a revenue-generating product. The way I see it, this is my new mission: to reveal the mechanisms of turning science into business.

  4. I really should have put this at #1, but here it is: the problems that medical devices take on are the problems worth solving. As much as I love sharing pictures of what I had for dinner with all my Internet friends, the gains for humanity made by these trendy apps are lost on me. With med tech though, every new product launch has the potential to improve or extend a patient’s life. This business might not be the most glamorous, or the best for hitting a jackpot product, but at least the medical device industry strives to tackle real problems. And that makes going to work every day worthwhile.

  5. Deep down, everyone is a salesman, whether you are trying to sell a device, some old speakers on Craigslist, or even just sell yourself as a talented, competent professional. Growing up, I always seemed to be meddling in some “make a quick buck” scheme. Maybe it was this unquenched entrepreneurial spirit that finally drove me to the scrappy space of med tech startups. I wouldn’t be surprised if the thrill of teetering between boom and bust brought you all to this space as well. Whatever the outcome, you know that you are taking action, trying to do something that matters.

There you have it – why I chose to go into the med tech industry in 700 words or less. Now I get to peer into the black boxes of a dozen different med tech companies, all of which are at the forefront of their space. Who knows which one is going to be the next household name?

New Year’s Resolutions for Medtech Companies

New Year’s Resolutions for Medtech Companies

As I sit here reaching for one more stale holiday cookie, mulling the merits of spiked eggnog vs. spiked hot cider, I realize it’s time to make some New Year’s resolutions. Ugh. I much prefer hiding under the covers in blissful denial, but activation is required before the situation turns dire. Similarly, the medical device industry, still a bit complacent and bloated from the good old days, needs to confront the new reality of the lean, mean healthcare marketplace and take action.

So here are my New Year’s Resolutions for medtech companies, big and small; a little menu of aspirations for the 2014 company plan (if you don’t have a 2014 company plan, getting one should be resolution 1a):

1. Stop whining

Last I checked, the U.S. spends over $7 trillion on healthcare every year, and this vast sum is only going up, albeit at a slower but still unsustainable rate of growth. The global regulatory environment, while tightening up, is also becoming more transparent and predictable. Investors that never had the stomach or appropriate time horizons for healthcare are getting out, but others are stepping into the breach and M&A deals are still happening. Things could be a lot worse – remember 2008?

2. Truly disrupt, even yourself

Leaps in processing power, unprecedented data capture, and globalization of R&D should all be catalyzing the innovation revolution required to truly bend the cost curve of health care. The device industry should be leading the charge for technology- and information-based solutions to address the biggest cost juggernauts in healthcare – labor and infrastructure. Incremental improvements and defense of the status quo are ultimately failing strategies.

3. Invest in the data

Increasingly, there are no shortcuts to market adoption for new technologies, and existing devices are far from secure if they don’t demonstrate a clear benefit in terms of outcomes and/or economic savings. Unfortunately not much has come along to disrupt the cost of clinical trials (and we’ve been looking), but no amount of modeling and hypothesizing can replace rigorous human data when making the case to health systems, payers and clinicians who are increasingly employees of health systems. Patients, who are bearing more and more of the cost of healthcare, are “Googling” for evidence, too.

4. Know your customer better

Medtech companies traditionally excel in engineering, and also in roll-up-sleeves sales. Between invention and commercialization, though, there is often too little customer input into product and clinical development; a surefire recipe for an anemic market launch. As difficult as it may be to raise that extra money and/or spend that extra time to get solid feedback from the real world during development, it is even harder to do once a product is commercial and not hitting the mark.

5. Inspire and train the next generation

Anyone who has lingered in the medtech industry as long as I have will agree that it’s a small, almost incestuous little community, and (let’s admit it) an aging one as well. In many skill areas much needed by medtech, such as manufacturing, quality systems, regulatory affairs, clinical development, and yes even marketing, the pool of experienced professionals is often insufficient to fill our org charts. Medtech companies need to take an active role in enticing smart people to enter our industry, which has all the makings of a rewarding career (challenging, multifaceted, global, opportunity to impact on many lives). We also should commit resources to training promising talent in the specialized skills necessary for our long-term success.

Dismounting from my high horse now, a hearty pat on the back to all of the medtech companies out there confidently riding the waves of change and gearing up for a spectacular 2014!

Should I Fund My Medical Device Company on Kickstarter?

Should I Fund My Medical Device Company on Kickstarter?

If you don’t prowl the crowdfunding site Kickstarter as often as I do (I admit I’ve funded ten projects to date), you might not know that a medical device company recently reached its stretch goal of raising more than one million dollars. The Kickstarter donors to Scanadu, a Star Trek inspired “medical tricorder”, essentially bought their own participation in a quasi clinical trial, sweetening their cash with a little crowd-sourced data. Kickstarter and similar sites provide a platform for startups to raise money in exchange for early-bird perks such as first access to products, dinner with the founders, or even a bit part in a movie (a speaking role in the Veronica Mars movie went for $10,000). The relevance of Kickstarter-type crowdfunding for medical devices has yet to shake out, and a hot debate on the topic is emerging.

Some skeptics of Kickstarter for medtech believe that this pre-selling / fundraising route is only for “toy” medical projects, not for serious FDA-regulated devices. A review of the numbers, though, may cause these naysayers to take a second look. Projects on Kickstarter have raised $670M over the last three years; according to PWC MoneyTree, start-up and seed investment in medical devices totaled $492M during that same period. Kickstarter will never replace the role for traditional angel, venture and strategic investors, especially for medical technologies requiring tens of millions of dollars in investment (a.k.a. most of them), but it could provide yet another hopeful bridge over the valley of death for earlier stage medical technology companies. And Scanadu is proving it can work for some devices.

To help emerging medtech companies decide whether to defy the skeptics and launch a Kickstarter campaign, I have created a simple three-point checklist. Answer yes to all three of the below questions and crowdfunding might be just the thing to get your gizmo out of the garage.

1. Will people care about my device?

The typical Kickstarter “donation” is in the $100-$200 range, so you will need a lot of crowdfunders to achieve a meaningful sum of money. For people to engage and open their wallets, they must:

  • a) Think your product is super cool; and/or,

  • b) Want to help you solve a problem (a plus b is best)

Scanadu, with its relatable value proposition and Trekkie cache, attracted more than 5,000 donors averaging ~$195 per donation. I can’t imagine that a hemorrhoid therapy would have the same broad appeal, but then again typical Kickstarter trollers may spend a disproportionate amount of time sitting in front of their computers.

2. Can I offer appropriate perks?

This is where many medical device companies will struggle. Early access to a life-saving medical technology is not exactly something a company can offer for unapproved technologies, and a company can’t guarantee participation in a clinical trial given the normal litany of inclusion criteria (not to mention you may end up in the control arm). Being an OTC device certainly made Scanadu’s life easier, but even so, Kickstarter donors will get a research version of the device to help develop algorithms for later testing in clinical trials. In general, the more consumer-oriented the medical device, the more likely it will be appropriate for Kickstarter-type crowdfunding, but creative entrepreneurs may be able to come up with some compelling perk (product naming rights?). Definitely have legal counsel review any offer before you put it out there.

3. Can I get enough to make it strategically worthwhile?

Most medical device companies need double digit millions to reach cash flow positive. $5.5 million is the largest raise on Kickstarter to date (though Ubuntu Edge is looking to smash that record and raise $32M), so Kickstarter alone won’t get you there. If $1 million or less can propel you to an important milestone, such as functional prototype or proof of concept, and if the Kickstarter platform gives you something else of value in addition to cash, such as user feedback and consumer awareness, then Kickstarter could be a good move.

Currently, only a small subset of medical technologies might make worthy Kickstarter projects, but crowdfunding for medtech is here to stay. Equity-based healthcare crowdfunding is next to emerge, though the rules are just starting to take shape and currently only accredited investors are able to invest through these platforms (see HealthFundrReturn on Change, and VentureHealth). For those of us in the emerging medtech space (and every other space for that matter), a little revolution on the funding side seems in order.

The Luck Factor for New Medical Devices

The Luck Factor for New Medical Devices

If all a startup medtech company needed to succeed were a clever invention, a smart plan and competent execution, the odds of a big payday would be far better than they are today. But life is a non-linear, unpredictable adventure, and so is the development of new medical technologies. Whether we humans want to admit it or not, luck is an omnipresent factor in determining winners and losers in med tech innovation.

Luck (at least the good kind) is defined as “success apparently brought by chance rather than through one’s own actions.” Our personal stories are filled with chance events that helped us land a job, meet a mate, or get out of a self-inflicted jam. In the emerging medtech world, luck often takes one of three forms, as illustrated by stories from some of our veteran medtech compatriots:

Chance Meeting
A start-up company executive we’ve been working with met his future angel investor on a plane; it turns out that said investor has a deep connection to the disease area relevant to the company’s technology. I’m willing to bet that every successful medtech start-up has at least one fortune-changing tale of a chance meeting. This fairy godperson type of luck can also take the form of a reasonable, experienced FDA reviewer, but the odds of the in-flight scenario may be better.

Fortunate Timing
You wouldn’t think a fortunate timing story would start with the big tsunami of 2011 in Japan. For 3-D Matrix, an MIT-founded drug delivery and regenerative medicine company in the final stages of an IPO in Japan right in the thick of it, the economic fallout seemed like bad luck at the time. But the natural disaster delayed the IPO to the following fall, when the Tsunami bolstered the economy and currency to decade highs. 3-D Matrix’s shares are now valued at over 10X the IPO price and have been the best performing in the biotech/medtech sector since then. More commonly in medtech, companies benefit from catastrophes such as influenza outbreaks, or famous people famously struck by a health problem addressed by a new device.

Competitor Missteps 
Boston Scientific’s Taxus drug-eluting stent, one of the most successful medical devices in history, was launched at a time when its arch-rival’s product, the J&J Cypher stent, was suffering supply problems. As a superior product with strong data entering an undersupplied marketplace, Taxus quickly capture significant share from J&J. Sometimes bungling competitors can sour an entire market (that would be bad luck), but in this case demand was strong and going unsatisfied – a perfect situation for a new entrant.

But luck is never really all luck, is it?

Case #1 – chance plane meeting. This particular entrepreneur is not only passionate about his product, but has his medical technology’s story down and ready for airing at a moment’s notice in a compelling and concise manner. And he clearly forgoes heavy drinking on planes, always keeping an eye out for networking opportunities.

Case #2 – tsunami-delayed IPO. According to 3-D Matrix co-founder Zen Chu the company was able to hang on for a better-timed IPO with smart rainy day planning and quick reflexes. “We had enough capital to weather the storm and 18 month aftermath, and we were able to throttle down when we needed to,” reminisced Zen. Thoughtful planning with strategic partners and capital sources allowed the company to survive unforeseen events and capitalize on better market timing.

Case #3 – competitor supply problem. 
Boston Scientific’s then CEO, Jim Tobin, is adamant that BSC’s success was no lucky break.  BSC became aware of J&J’s supply chain problems and customer frustrations, and aggressively invested in manufacturing capacity and a top-notch sales force. “We put our company in the perfect position to exploit J&J’s weaknesses,” said Tobin.

In the end, good luck happens to those who are seeking it, can recognize it when it happens, and know how to make the most of it. Or as med tech start-up veteran Amar Sawhney said when I posed this philosophical topic to him, “Life presents you with situations. Some may seem lucky on the surface, while others seem tough. The tenacity to turn a tough situation in their favor is what distinguishes successful entrepreneurs.”

The Three Greatest Pivots in Medtech

The Three Greatest Pivots in Medtech

For medtech-ers taking cues from the internet startup world, a noteworthy new philosophy has crept into the lexicon of new web ventures: The Lean Start-Up. The basic tenant of this methodology, coined by Eric Ries, is that a startup is just a conglomeration of hypotheses,and job one of any startup is verifying these hypotheses as quickly as possible yet with a disciplined approach. For web products, this entails rapidly building a “minimum viable product” and testing it with real customers. Based on the results of these mini market experiments, the company can tweak the product or pivot, a.k.a. change course altogether.

While this works in the fast-paced web world, it is much more challenging to build a “minimum viable” medical device and test it on actual customers (we use animals or employees for that). Despite this reality, medical device startups should be constantly and rigorously testing their assumptions as early as possible, and not only the product-related ones, but also the business model, competitive positioning, and the like. In fact, the backstories of some quite admirable med-tech start-ups reveal surprisingly bold “pivots” that, while presumably painful at the time, ultimately led to success.

3. Conceptus

Probably my favorite pivot of all time. Conceptus was originally founded on (and named after) the idea of enabling conception by opening blocked fallopian tubes with a novel catheter technology. What they found during early testing was that their catheters easily accessed the fallopian tubes, but alas… the technology was much better at blocking the fallopian tubes than propping them open. Problem. Instead of going back to the drawing board on fertility treatment, though, they pivoted 180 degrees to focus instead on minimally invasive sterilization. Fast forward to the present (admittedly 15+ years post-pivot), and the company is pulling in $100M in annual revenue on their Essure female sterilization product with a healthy $600M market capitalization.

2. Ardian

In 2011, Medtronic paid a whopping $800M for the venture-backed, pre-revenue medical device company Ardian, the ink barely dry on the CE mark for Ardian’s minimally invasive renal denervation technology. While this novel treatment for severe hypertension fetched big bucks on the promise of a whole new lucrative vertical for Medtronic, it’s worth nothing that hypertension was not the problem that the company initially set out to solve. Originally, the clinical target was fluid overload resulting from heart failure, and the technology platform was neuromodulation vs. the current RF approach. A big pivot occurred somewhere around Series B, reportedly as a result of both technical and market challenges with the initial vision.

Wisdom from Ardian co-founder Howard Levin: One of the hardest things is knowing when to switch or modify an approach. You want to stay in there long enough to know if it’s right or wrong, but you also want to be flexible enough to change when change is warranted.

1. Intuitive Surgical

Now probably the hottest medical device company on the planet, back in 2000 Intuitive Surgical launched its da Vinci robot with 3-D sites set on an application that even today does not on appear on the robotic menu – cardiac procedures.

From Intuitive Surgical’s 2001 10-K: “We will place significant emphasis on marketing the da Vinci Surgical System to leading surgeons who are considered to be the “thought leaders” in their institutions and fields. These surgeons typically perform complex surgical procedures that are currently not adaptable to MIStechniques. For example, cardiac procedures, of which over one million are currently performed annually worldwide, are among the most difficult to perform using MIS techniques.”

Intuitive did not find the expected market traction in cardiac procedures, nor in general surgery where it went next, but finally found a home below the belt with prostatectomies and hysterectomies. (Side note: a lot of key regulatory and clinical decision-makers happen to be in the prostate-concerned demographic, a potential plus for technologies in this field.)

In the real world, successful start-ups rarely achieve success along a linear path. They pursue their vision aggressively, struggle, learn from early failures and mistakes, pivot, and ultimately get somewhere good. This makes me understand why investors are so focused on the start-up teams, not just the great technology and market story.

The Affordable Care Act - Implications for Emerging Med Tech Companies

The Affordable Care Act - Implications for Emerging Med Tech Companies

Most Americans, even the smart ones, are still scratching their heads about what the Affordable Care Act (full name ’Patient Protection and Affordable Care Act’, acronym ACA) means for them. As a healthcare consumer, I have the year 2014 in my head as the deadline for when I need to figure it out, as it seems like all the main provisions don’t hit until then. As someone who develops 5-year plans for emerging med tech companies standing to win or lose as healthcare reform rolls out, I sort of need my head around it now. So I hunkered down, ingested several caffeine products, and dug into the details of the notorious ACA.

Expanded Health Insurance Coverage

A cornerstone of the ACA is the ‘individual mandate’ to procure health insurance, which will add an estimated 30 million people to the insured pool. Keep in mind that these newly insured folks are not in the Medicare eligible group, so by definition they are younger and in less need of many of the aging-related devices such as orthopedic implants, pacemakers and the like.  An earlier S2N blog predicted that home care and wellness would win in the new healthcare economy, and in fact the ACA quite specifically enumerates several wellness and prevention programs that will be supported under reform, including weight management, heart disease prevention, diabetes prevention and stress management (couldn’t we all use a bit of that!). There are also increases in reimbursement and several demonstration projects for community- and home-based care for the toughest patients, e.g. dual eligible Medicare / Medicaid patients.

Primary care services are slated for increased reimbursement and bonuses under the ACA, not that a lot of expensive devices are used in this setting. Wouldn’t be a stretch to imagine an increase in routine point of care testing with the encouragement of primary care and preventative services. There are also surgical categories such as women’s health and ENT that tend to hit the sub-Medicare demographic; these could get a boost from expanded coverage. I must not be the only one with this view, since stocks of hospital companies shot up with the recent Supreme Court decision to uphold the act.

The Medical Device Tax

The provision of the ACA that attracts the most ire from the med tech community is, unsurprisingly, the medical device tax set to go into effect in 2013. To paraphrase, the justification for the tax is, ’Hey, we are spending big buckage to insure a lot more Americans who will need a lot more of your fancy devices, so pony up!’ Despite aggressive lobbying by the behemoths of the device industry, and a House vote in June to repeal the medical device tax , Senate politics are such that this tax is likely here to stay.

To tease apart the impact of this tax on emerging med tech company, I turned to the tax experts: the IRS. Because this tax is an excise tax, incurred upon the sale of the device to the customer and the responsibility of the manufacturer, there is nothing that exempts small med tech companies earning little revenue and generally no profit from paying the tax. And no, moving operations to Tijuana will not exempt you unless your customers are also there; the tax applies to the US sale regardless of where the company is located. However, the time-tested med tech strategy of first gaining approval and selling in Europe will soon have the added benefit of avoiding the US medical device tax, since ex-US sales are not subject to the tax (makes sense, since Uncle Sam is not paying for that hip implant in Paris).

Not all medical devices are subject to the tax, though. Exempt from the tax are medical devices of a type generally purchased by the general public at retail for individual use, with the examples of hearing aids, contact lenses and eyeglasses, as well as durable medical equipment. We may see more activity in the consumer health sector as a result. The definition of medical device for purposes of the tax also excludes anything for which metabolization by the body is the chief mechanism of action; apparently someone forgot to tell the drafters of the legislation about combination products, so these details are still to be worked out. One good bit of news for emerging technology companies is that “Research Use Only” devices and those used under an Investigational Device Exemption (IDE) are not subject to the tax on the basis that these products are not yet registered with the FDA – a litmus tests for “taxable devices”.

In general, though, avoidance of a 2.3% tax will not be sufficient to overcome a weak market opportunity or value proposition. So my advice to emerging medical technology companies: you have enough to worry about trying to get your great products to work and not kill anyone, so ignore the tax for now and keep developing products that make a difference. The big device companies representing your potential exit will feel poorer because of the tax (depending on how much of their revenue is impacted), but will still need acquisitions to fuel growth. The question is whether they will shift to a focus on deals accretive to earnings, a la Covidien, which may be happening anyway.

Comparative Effectiveness Research

My read of the comparative effectiveness provisions of the ACA is that the end result is a fairly benign, motherhood and apple pie sort of approach. The Patient-Centered Outcomes Research Institute, or PCORI, the 2010 founding of which was one of the earliest tangible manifestations of the ACA, is far more constrained than its powerful UK cousin, the National Institute for Health and Clinical Excellence (misleadingly called NICE), which can make or break the prospects for new devices trying to enter the UK market and beyond. Unlike NICE, for example, reimbursement coverage decisions by CMS cannot be based on POCRI decisions, although they can factor into decisions along with other data and public commentary. PCORI is also going to be focused on the most costly treatments affecting the most Americans, which means that a lot of novel niche products being developed may never hit the PCORI radar.

Clinical effectiveness studies can cut both ways for emerging medical device companies. This type of research is most often associated with marketed products where utilization and related outcomes can be measured on a large scale. It is nearly possible to establish the kind of evidence to support clinical effectiveness in the size of studies normally conducted under an IDE before a product is commercial. Comparative effectiveness research on an existing market competitor could create an opportunity for an emerging company, for example if the company can demonstrate reduced costs (e.g. fewer complications) or improved outcomes with their device compared to the one just trashed by PCORI.

With or without PCORI, the bar has been raised on clinical evidence required for regulatory approval, reimbursement and adoption of new medical devices. If you need payors to cough up more money for your fancy new gizmo, they will find any lack-of-evidence stick to beat you with, PCORI or no PCORI.

Bottom Line

If you are an emerging med tech company executive who thinks he/she should be on top of healthcare reform, but between fundraising and hitting those milestones you just can’t get your head around it, don’t sweat it too much. If your technology makes sense today in the care of patients, it will probably make sense in the brave new healthcare world.

We’d love to hear your thoughts about how you believe the ACA will impact small med tech companies. As for the large companies, we’d like to know how this will affect your deal flow and targets (no whining about how much the tax will cost you, that’s what Advamed is for!).

When Medical Devices go Quiet - Managing End of Life

When Medical Devices go Quiet - Managing End of Life

Amy wrote this in honor of her dad, Dr. Howard Siegel, who passed away on June 18, 2012.

The past few weeks have culminated in a sorrowful irony for me, as my father advanced to the final, terminal stages of heart failure. Professionally I am immersed in a universe of promising new medical devices, while personally I witnessed the one-by-one elimination of technological solutions for my father’s grave condition. Percutaneous valve: not an option, he’s too far gone, too weak. Left ventricular assist device: contractility not his problem, it’s his valve. Implantable defibrillator: already in place and vigilantly awaiting the call to duty, time to turn it off lest it torture him in his final days. No more need for sophisticated tests or monitoring; nothing really to do with all that data. The declaration of surrender was strangely relieving to all, especially to my dad. Put down the arms, the battle is over, the retreat begun.

Replacing the beeps and whirrs of sophisticated technology were the hushed voices of nurses administering medication to lessen his discomfort, most of them cheap and old as dirt. Hydromorphone, methadone,lorazepam – have we really not invented anything better in all these decades? Hospice caregivers are a personality archetype I’ve rarely encountered in my work context of medical technology. Unmoved by gadgetry, a world away from cath labs and endoscopy suites, they trade in compassion, patience and treatment minimalism.

As a society, we place a high value on aggressive, invasive therapies that save, extend and improve life, and my father, with his bad heart genetics and love of ice cream, certainly benefitted for many years from the best our industry has to offer – bypass, angioplasty, stents, a pacemaker, the works. As an ophthalmologist, Dad himself employed medical technology in the care of hundreds of patients, practicing medicine for over 52 years until his legs literally gave out from under him.

Once he shifted to hospice mode, my father required only simple technology to ease his last mile; an adjustable hospital bed, some oxygen, suction. Even if someone were to invent an effective mechanical solution for improving end of life management, I wonder if such devices would ever gain acceptance. Perhaps the ancient palliative approaches we use today are as much ritual as rational. The obtrusive sights and sounds of medical technology do not seem to befit this part of life’s journey.

Top 5 Anxiety-Provoking Med-Tech Acronyms

Top 5 Anxiety-Provoking Med-Tech Acronyms

Every industry has its three-letter acronyms (TLAs), and certainly med tech is no exception. If you work for a big device company, you practically qualify as bilingual with the extent and array of acronyms forced into your personal lexicon. At one point I may have actually said a sentence like, “The CMO called the PI about the IRB process to estimate dates for FPI and CE mark in the PDP.”

Acronyms are popular because they serve the useful purpose of expediting communication, creating a tribal sense of community for those in the know, and conveying the (sometimes false) perception of vast expertise to the uninitiated. There are certain acronyms, however, that strike fear into the heart of the med-tech entrepreneur. Upon mention of these TLAs, the tension in the room is palpable as brains silently begin to revise development timelines, budgets and cash out dates.

Our nominations for the Top 5 Anxiety Provoking Med-Tech Acronyms (APMAs):

FDA
The only US executive branch agency more groan-worthy than the IRS is the Food & Drug Administration, particularly among med-tech entrepreneurs. At least taxation (like death) is predictable; not so with device regulation under the FDA. The length and tortuosity of an emerging med-tech company’s journey through CDRH can vary greatly by branch, division and reviewer (many of whose badges are still warm from the laminator). The US regulatory process is macabre enough for run-of-the-mill devices, let alone 21st century technologies like medical smart phone apps. Sorry, Shuren, your Innovation Pathway program just sounds vague and scary.

PMA
Back in the good old days of plentiful big-market medical devices with capital-efficient 510(k) regulatory paths, med-tech investing was a pretty good bet. But some companies pushed the boundaries of this regulatory shortcut and a few high-profile safety issues emerged (this New England Journal editorial from last fall singles out metal-on-metal hip implants). Whatever the ultimate fate of the 510(k) program, more companies will be forced down the Pre-Market Approval path, with its higher approval hurdles (safety and efficacy vs. substantial equivalence), longer timeframes, and therefore greater costs. Silver lining: more frequent flier miles from all the international travel! C’est la vie.

SAE
News of a clinical trial patient suffering a Serious Adverse Event is upsetting for emerging med tech companies, whether or not the SAE is attributable to the company’s device (and proving it’s not can be complicated). Of course, the first concern is for the patient with the SAE and their families. Shortly thereafter, though, thoughts go to the just-barely-enough money that was raised for the trial, the timeline-busting impact of halting recruitment, possibly needing to redesign the product or retest in animals, and even scarier corporate doomsday scenarios. As a clinical consulting friend once said, “If you are going to have any adverse events, get it out of the way early.”

V&V
When I first heard this shorthand for Verification and Validation, I thought it sounded kind of mysterious and even remotely sexy, even if usually uttered by a nerdy engineering type (a.k.a. our favorite clients). It wasn’t long before I realized V&V is actually a Yiddish term: “Vait! Vait!” Explaining to your investors the time and dollars required for V&V so that your QMS is ISO-compliant is just no fun. If they look puzzled, just refer them to IEC 60601-1, 3rd edition and it should all become clear.

CPT
You may have heard of a CPT code, but here’s a pop quiz for you – do you know what CPT stands for (without Googling it)? Answer: Common Procedural Terminology. Second question: what organization issues CPT codes, the all-important keys to the physician reimbursement castle? If you said CMS, you are wrong. Why, it’s the American Medical Association! And while you’d think that the premier US physician lobbying organization might be loose and generous with the codes, this is definitely not the case. If you are unlucky enough to have a technology requiring a brand new CPT, get ready for a long, arduous and likely doomed process, and start counting your RVUs.

As fear-inspiring as these and many other acronyms can be, let us not forget that med-tech entrepreneurs are a hardy bunch and not easily intimidated. Otherwise they’d be developing frivolous, benign things like Instagram. Rats.

Now for our call to action!  Add your (least) favorite med-tech acronyms to the APMA Hall of Shame – Click Here to Add Your Favorites