Posts Tagged Casey McGlynn
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.
Medical Device industry has been facing enormous and unprecedented challenges during the last several years. Only now it is emerging from the dark tunnel of funding dryout, layoffs, and lackluster job scenario. The 2014 Wilson Sonsini Medical Device Conference reflected some cautious optimism based on recent uptik in the industry. The challenges are not gone but companies have learned to work with the complexities. The conference this year focused on understanding the challenges still facing the Medtech startups and the new strategies that are emerging as response to these challenges. The conference was a sold out event with 600+ attendees that included CEOs, venture capitalists, investment bankers, market analysts, and industry strategists. Below are the highlights from one of the panels.
Funding Strategies for Entrepreneurs
Dried up funding continues to be a challenges for medtech start-ups. This panel was moderated by Casey McGlynn, Partner, Wilson Sonsini Goodrich & Rosati. McGlynn said he is increasingly seeing companies getting funded, even PMA projects are getting funding. One of the strategies for PMA is to have a believable path to an existing market in Europe that will adopt the product. Building product is not the challenge, but for these, the regulatory approval process in the US, becomes a big hurdle. For bite size consumer facing, wearable type, or health IT projects, crowdsourcing could be a good strategy, said McGlynn.
The panelists included CEOs who shared their experiences in search for capital. The panelists also discussed how interests of the investors are changing.
Laura Dietch, President and CEO, BioTrace Medical, shared about the technology that emerged from the Stanford BioDesign program. BioTrace is developing a temporary cardiac pacing device to treat reversible symptomatic bradycardia, during general surgery for percutaneous valve procedures. This is a 510K device. BioTrace raised $3.5M from 5 investors. Dietch’s advice to the entrepreneurs? “You have to be tenacious, have good target partners, be willing to take a lot of rejections, be organized, and be creative. She also advised entrepreneurs to stay lean, whenever possible, have a physician on the team, and be clear from the beginning regarding the exit strategy.
Qool Therapeutics offers patented cooling technology to induce therapeutic hypothermia. This minimally invasive technology has applications in stroke, cardiac arrest, traumatic brain injury, sports injuries and so on. President and CEO, Beverly Huss shared how the company raised $1.5M from small investors that included COO at American Airlines, General Counsel at EBay, an executive at Dish Network and so on. She said these relationships were developed over the years. “Early stage investing is a labor of love and can come from people who believe in your ability to deliver on a technology they like”, said Huss. She also advised that entrepreneurs be relentless and follow every path and see where it takes them, and be open to learning the lessons from each path they pursue. What has changed is how we are bringing therapeutics devices to a consumer market, said Huss.
Dr. Daniel Burnett, President and CEO at TheraNova also talked about how the climate has changed. With his first company, they raised funding without any animal or human data; next company required huge clinical data and since then most companies need some human data, before money can be raised. TheraNova turned to corporations and also had 4 SBIR grants. Since 2006, Burnett raised or helped raise, over $95M for six venture-backed TheraNova spinouts, BAROnova, Novashunt, Velomedix, EMKinetics, Channel Medsystems, and Potrero Medical. For Channel MedSystems, he partnered with Mir Imran’s Venture Health Crowdsourcing platform. His advice to entrepreneurs was to be lean and mean and to focus on both cost saving and improved outcome. Burnett said he avoids PMAs. Angel investors have been beaten up badly and still recovering but he advised that entrepreneurs can go to crowdsourcing platforms like Venture Health or DealLabs.
Doug Wall, Managing Director, Volcano Capital talked about some of their portfolio companies. All in all, market for early stage investors is pretty lonely, said Wall. There was virtually no competition from 2009 to 2011 but that is now changing. There are some VC funds now taking an interest in early stage deals. Most successful companies are the ones that think outside the box. Answering the question regarding what would be more important market or people, Wall said, “we are flexible on market size, but most important thing to us is the management team, and then we look to see if the milestones are thoughtful, and if the team shares the strategy to be capital efficient”. He said, they avoid PMS entirely to mitigate the regulatory risk factors.