Innovative Deal Structures in Medtech Financing (2015 WSGR Med Device Conference)

WSGR 2015 Medical Device conference, focused on understanding the challenges facing the medical device industry, and highlighting the emerging strategies to navigate the new and complex world of medtech. Eminent team of panelists discussed “innovative deal structures” at WSGR medtech conference, in San Francisco.  The panel was moderated by Scott Murano, Partner at WSGR and panelists included Justin Klein with New Enterprise Associates, Evan Norton, Divisional VP at Venture Investments, Abbott Ventures and Mir Imran, Chairman and CEO at InCube Labs.  The panel shared insights from their recent experiences with corporate partnering transactions.

Justin Klein at NEA, with $3.1B fund, focuses on medical device, healthcare technology and biopharmaceutical investments.  Recently NEA funded three medical device companies, all of them in Atrial Fibrillation space.  “Scarcity of assets in AFib category positioned AFib as a very attractive category”, said Klein.  NEA was a strategic investor alongside others, including Abbott Ventures, in its more recent financing of Sunnyvale based VytronUS, with a proprietary cardiac imaging and ablation system to treat atrial fibrillation and other arrhythmias.  Although NEA funds companies from early stage, VytronUS is couple of years away from commercialization, said Klein.  NEA looks for interesting opportunities to syndicate with a broader variety of partners.

Evan Norton said his job at Abbott Ventures is to go out and find new business that Abbott can enter into.  Abbott Ventures focuses on emerging medical technology companies that have the potential to provide long term strategic growth options for Abbott.  Mostly AVI looks for early stage opportunities and makes it possible for early stage companies to gain critical access to capital, in return for bigger equity stake.  “Our job is to identify the next Spinal Modulation earlier”, said Norton, referring to Mir Imran’s company that was recently acquired by St. Jude.  AVI does not move to non-buying term sheet phase earlier, in the process.   “About a 4th of the capital in our syndicates, comes from China”, said Norton.

Among corporate venture funds, Abbott Ventures tends to be highly creative in putting together early stage deals.  AVI focuses on medical devices, drug/ device combinations, diagnostics and unique drug delivery technologies.  An absolute key aspect of putting together a deal is flexibility on both sides, said Norton.

Mir Imran, Chairman and CEO at InCube Labs, also runs VC fund at InCube Ventures, along with an online crowd funding platform at Venture Health.  Currently, there are about 9 companies that are incubated at InCube Labs.  The Spinal Modulation deal happened with SJM “because SJM was creative in putting together a deal they could live with and we could live with”, said Imran.  Most recent buzz has been around Imran’s company, Rani Therapeutics, which has developed a technology to convert injectable biologics (such as insulin and Humira) into pills, allowing millions to escape the needle prick.

“Rani has a powerful platform and many large pharma companies are talking with us to convert their injectable drugs into pills”, said Imran.  According to recent announcement, Novartis has joined previous investors Google Ventures, InCube Ventures and Venture Health, in a Series C round of more than $25M and similar deals are in the works with other investors.  The deal will allow Rani to evaluate Novartis molecules on the new platform, with equity investment and all expenses for testing of the molecules to be paid by Novartis, said Imran.  Imran avoided entering into license negotiations, at this stage.   “If the technology delivers expected results with Novartis molecules, then we can sit down and put a licensing deal at a later time”, said Imran.   

How has Imran managed to create mutually beneficial conditions for deal negotiations, with large pharma?  “From small company perspective, I don’t like to give away rights too early”, said Imran.  Most of Imran’s companies come out of R&D at InCube Labs.  “We keep our burn rate low and keep a relentless focus on execution”, said Imran.