Posts Tagged Advamed
With shrinking pool of serious early stage life science investors and stringent capital requirements, the path for medtech companies has become greatly challenging. As is the case every year, Wilson Sonsini Goodrich & Rosati 2017 Medical Device Conference provided a forum for addressing challenges faced by new medtech companies as well as opportunities presented by current trends.
Various speakers and panels addressed these issues from diverse angles and perspectives. Following a welcome address by Casey McGlynn, an early morning panel moderated by Donna Petkanics addressed new models for medtech investing. Panelists Andrew ElBardissi (Deerfield Capital), Eric Milledge (Endeavor Vision SA), Leighton Read (Brandon Capital Partners), and Valeska Schroeder (KCK Group) discussed how the investors are adapting their financing strategies and business models in response to the newer challenges that medical device companies face. Milledge opined that it is now crucial for medtech companies to get some regulatory approval before seeking to raise money. Even CE mark could help, said Milledge. ElBardissi offered that if the company is US based and focused on US commercialization strategy then EU approval does not help. He advised that medtech companies “keep the head down and focus on US approval UNLESS there is capital efficient advantage of focusing on EU”. Schroeder said their fund was “geographically agnostic” but they believed that for an early stage medtech company it is important that they not “simply throw capital without a plan”. but there are values you can get out which may not be revenue based but you can get close to your customer base etc… not go in every country but choosing a small no. of country to go through. Read observed that a company seeking to create larger returns must go after larger markets.
With the current challenges medtech world has become more global as companies and investors are finding win-win solutions through newer models of partnering by going across continents and countries. Geographically, Pacific Rim has emerged as hot collaboration frontier. A panel moderated by Elton Satusky with CEOs Yue-Teh Jang (Medeon Biodesign), Kewen Jin (Serica Partners, Trevor Moody (M. H. Carnegie & Company), and Norman Weldon (Partisan Management Group), who completed such collaborations, financings and mergers with companies and investors in Asia discussed how these transactions may be structured. Another panel moderated by Jack Moorman (US-Japan MedTech Frontiers – USJMF), with panelists Kenichi Hata (Terumo Corporation), Masazumi Ishii (AZCA Inc.), Yuichiro Morimoto (Enplas Corporation), and Richard Packer (Asahi Kasei Corporation) discussed collaborations between Japan and Silicon Valley. Japan has emerged as a major partner in medtech OUS financing and growth strategy.
Increasingly there is a pressure on medtech industry that is unlike most other industries, to show value. Many organizations have now come up with ways to define and measure value creation. Among them, AdvaMed has developed a new framework to assess the value of medical technologies and diagnostics in a broad, patient-centric approach. A panel moderated by Donald May (AdvaMed) with panelists Maneesh Arora (Exact Sciences Corp), Jeff Farkas (Medtronic), and Jo Carol Hiatt (Kaiser Permanente) addressed how companies may leverage value creation to make internal business decisions to allow for more efficient use of capital and to drive discussions with potential investors as well as to keep track of milestones during the commercialization process.
AdvaMed model focuses on following drivers of value creation, 1) clinical outcomes, effectiveness and utility measures 2) non clinical patient impact including impact on caregivers, families, ease of product use, ease of care, financial impact etc. 3) new drivers around value based purchasing, care delivery costs, reduction in readmissions etc. from provider perspectives, and 4) broader public impact on population and communities in terms of whether or not the technology reduces overall cost to the system, helps identify diseases, helps employers reduce absenteeism and so on. May said the model begins with the patient and goes on to incorporate multiple stakeholders and values for all may not always be aligned or the time frames may differ. As an industry, “we need to think of appropriate levels and types of evidence as we think of new value based models of integrated care”, said May. Speakers discussed the need to move away from one number and focus on broad picture with many factors that include clinical as well as economic value, in order to get better outcomes while reducing costs.
As is the case, WSGR medtech conference provides an excellent forum for investors, startups, and professionals in the industry to come together in a spirit of learning and collaboration. And compared to previous years, it seemed to be even more well attended with hallways abuzz with discussions on partnering. As always, the conference ended with short presentations from select few startups and the announcement of the $25,000 grand prize and Medtech Innovator Award. But the best was reserved for the last. More networking happened and deals were done as attendees mingled with good food at the reception and as the best wines were uncorked and venture capitalists served as sommeliers and poured wine for the attendees.
Posted by Darshana V. Nadkarni, Ph.D. in Biotech - Medical Device - Life Science - Healthcare on January 15, 2013
The 6th Annual OneMedForum http://www.onemedplace.com/forum/ conference featured a theme “Profiting from Distuptive Changes in Healthcare and Finance” and ran concurrently with the JP Morgan Healthcare conference, in San Francisco, CA. It was a gathering of some leading investors and the rest management of promising emerging life science companies in Asia and North America. Through panels, workshops, and up-close programming with top industry leaders, attendees explored strategies for company growth.
Overall, there was a palpable focus at this conference on how best to navigate the turbulent market changes and challenges. During individual company presentations, I saw and heard some cool technologies. But during almost all the panels, one cannot avoid noticing that these are challenging times for medical device industry. Panels explored bootstrapping and non-traditional approaches to navigate the companies in the environment of limited resources, little VC funding, uncertain regulatory and reimbursement climate, and looming tax changes. The attendees walked away from the panels with excellent advice, resources, and tools that could help them better steer their companies during this time. See highlights below from some of the panels.
The conference began with China Forum on January, 7. The objective in first two panels was to educate attendees on challenges and opportunities for emerging healthcare companies for doing business in China, while panel 3 aimed at providing tactical approach to innovate joint venture structures.
In his opening remarks, Bin Li, Managing Director & Senior Research Analyst for China Healthcare, Morgan Stanley Research, gave an overview of China’s healthcare landscape. China market is primarily pharma market and not a device market and is the 3rd largest market, right after US and Japan. China’s pharma / biotech market cap is at $200B, with chem/drugs being the biggest sub-sactor. Medical device industry is relatively small in China and hospital and services is an even smaller industry but is the most exciting sector to watch, in the next ten years, said Li. Hong Kong market is a big piece of the pie. China market is heavily regulated and is expected to grow 15-20% for the next 5 years. There are 3 major insurance programs and are sponsored by the Government. Almost entire population (97%) has some kind of coverage and it ensures that everyone in the value chain receives some benefits. Hospital patient traffic volume has now reached historical highs. Some of the challenges of the China pharma industry are; it is a highly fragmented market, it is too tightly controlled, there are price control issues, and there is fierce competition in the low end generic market. Some of the challenges of China medical device industry are; while it is the fastest growing sector, it is not well regulated yet, and there are price control issues.
China Case Study Panels
Several important points were made, during the first panel session, focused on entering the China market, moderated by David Chen, Managing Director with BFC Group. The panelists included, Alan Paau, VP & ED at Cornell Center for Technology Enterprise & Commercialization, Jay Dong, GM with Asia Pacific Region, Cell Signaling Technology & Vice Chairman of BayHelix, Mark Xu, GM at Trout Group, Shanghi and Peter Luo, Founder & CEO of Adagene. China has had success in innovative products and while it continues to grow and there are some first in class drugs, most drugs are “me too-s”. China had 7 NDAs approved in 2011, in comparison to 30 in US. Approval times have greatly shortened in China. In China, similar to US, the primary focus is in oncology, followed by CNS. Many panelists talked about the importance of building trust, in order to do business in China, but cautioned against blind trust and instead advised “trust but verify”.
The next panel focused on operational issues, once a company is on ground, in China. Panelists in the next panel included, Landon Lack, CEO of China MedConnect, Tony Zhang, Chair of BayHelix & Sr. Research Fello, Eli Lilly, Jimmy Zhang, Managing Director, MSD Early Investment, Greater China at Merck, and Jie Liu, Corporate VP of BD & Corp Communications and President of Simcere of America. One issue debated extensively was whether a company should find one credible, trustworthy distributor and hand over issues to them or find several regional distributors. The panelists suggested various other options that are in between the two extremes. Other options that were suggested include, setting up a small commercial team that does not take up a lot of capital; instead of a distributor, find a local company in the similar area and partner with them; and explore how a medical device US company can grow with pharma distributors in China. The panelists suggested frequent travel with extended stays, cautioning that flying visits were not enough. It was also strongly advised that a company entering China market get IP protection, both in US and in China, else few Chinese potential partners would be interested. It was also advised to prescreen potential partners, establish a firm control over the brand and market, go through regulatory process upfront and have a clear understanding of how the deal is structured and its tax implications.
“Connected Health” Panel
Connected Health panel discussed recent trends, implications, challenges and opportunities in technologies that provide patients with ways to monitor their own health. Whether through iPhone apps or through chips implanted in a patient’s body, these technologies are aimed at improving the quality of life. But are they making a big enough difference that payors will pay and investors will invest? These and other issues were discussed in this panel, moderated by Andrew Colbert, Senior VP at Ziegler. The panelists included, Jack Young, Director of Qualcomm Life Fund, Qualcomm Ventures; Peter Neupert, Operating Partner at Growth Buyout Fund, Health Evolution Partners; and Dirk Lammerts, Managing Director at Digital Health, Burrill & Company.
According to Neupert, the whole area of connected Health is growing mature from delivery standpoint, with efficient and accessible technologies. However, the challenge is about inducing change. Additionally, lots of capabilities can generate a great deal of data but the industry has not matured enough to put this data to good use. They are weary of investing in this field. According to Young, however, this is the time to stay ahead of the curve and their fund has invested 50% or $1.4B of capital into digital health. This is invested into six sub segments; wellness & fitness, change driven management, transition care, aging in place, clinical trials, and primary care. There is a need for better data aggregation, said Young. According to Lammerts, the important question is; “what problem is a specific technology solving”? Its is not about cool engineering, but about identifying specific problem that is addressed.
In response to the question, if the area will develop as a payor provided or consumer engaged area, Lammerts said, it has to be consumer engaged, where the consumer is empowered with tools to better manage their health. According to Neupert, it is not about who pays but who has the skin in the game and if there is alignment of interest between physician, patients and provider. According to Neupert, budle payment model with pull adoptions may be the key to induce behavior change. In the end, the usefulness of growing wave of digital health technologies will materialize only through large scale adoption by consumers, and it seems, no one has yet unraveled the key to lasting behavior change.
“CEOs Unplugged” Panel
In a panel session moderated by Stephen Ubi, President & CEO of Advamed, the panelists, David Dvorak, President & CEO at Zimmer, Virginia Rybski, President, CEO, and Director at Regenesis, and Peer Schatz, Managing Director & CEO at QIAGEN, discussed some of the medical technology sector’s most critical issues with a great deal of initial focus on alternative sources of funding and cost containment in development, given the current paucity of VC funding.
Rybski shared that their company was cash positive but it required a lot of focus and instead of the VCs, they raised $15M over 10 years, from Angels. They are now looking into crowd funding opportunities. Also, if the product is for export then a company can get money from the Government to develop, said Rybski. According to Schatz, on the diagnostic side, even if there is clear value proposition, if the mechanism of reimbursement is not clear then it would be hard to get funding from any source. Dvorak shared that they contained costs through improving outcomes, helping hospitals better manage the inventory, and through better communication between the company, hospitals, and customers. “We have been more proactive at increasing operational efficiencies in all areas of our business”, said Dvorak. Rybski also shared that given the intense focus on cost containment, while they were not laying people off, they were also not hiring and not focusing on innovation but solely on sales.
The panelists discussed the importance of key partnerships as key source of information and sharing resources, to help navigate through the current challenges.
Bootstrapping: Bringing Medical Devices to Market with Limited Resources
Christian Haller, VP of Product Development at MPR Associates, moderated this panel and panelists included, Thom Rasche, Partner in Earlybird Ventures, Vicki Anastasi, Senior VP, Medical Devices at Aptiv Solutions and Ashley Wallin, VP of the Emerging Growth Company Council at AdvaMed.
FDA continues to be at the top of the challenge list for small companies. However, according to Wallin, FDA wants to support more innovation through various initiatives such as the Entrepreneurs in Residence program. Sequestration remains a threat, however, which has the potential to result in understaffing at FDA. Additionally, companies struggle with obtaining coverage and payment, and are even losing coverage they once had. Wallin suggested that companies look into reimbursement strategies, early on. Also companies need to keep track of what’s changing in terms of the Physician Payment Sunshine Act, OUS regulations and so on. One example of a strategy companies use to bootstrap is to first commercialize lower class and consumer devices to get to revenue more quickly, which in turn supports commercialization of more complex devices downstream, said Wallin. Also, there are a number of free resources to be leveraged; in addition, a tax break for exported products can be leveraged.
“Don’t worry about reimbursement”, said Rasche. If a company has technology that would improve patients’ lives, then it will get reimbursed, he assured. The goal should not be to get in the US first, but eventually. And it would be hard to tell what reimbursement scenario would look like in next 5 years. Digital health technologies may have an easier regulatory path but would not be easy to get reimbursement. A company can get CE mark easily and get to proof of concept. However, funding situation in Europe is as challenging, as in the US, he cautioned. He noted that private pay models,would have looming challenges of commercialization and test marketing and even bigger challenge would be clinical adoption. However, if the technology offers the opportunity to find a private pay model in which patients and physicians are aligned then the company should pursue this strongly, said Rasche.
He suggested, companies try to outsource what they can and if they find a vendor willing to share the risk then it also looks good to the VCs. The path he suggested was, get regulatory approval in Europe, then tap into Asia market, and then come to US.
According to Anastasi, commercialization path would depend on the technology. For a technology to have faster approval process, it has to have fewer safety issues, preferably a single use with valid predicate. While entry into Europe can be easier, each market in Europe is different and one needs to be knowledgeable about the markets. And the same holds true of Asia, advised Anastasi.