Posts Tagged Crowdfunding

OneMedForum – San Francisco, 2014


The OneMed forum conference was launched in January of 2008, when economy was showing all signs of progressing to new heights, with an objective to showcase innovation in medtech.  The conference aimed to bring together the companies and investors, during the large influx of healthcare investors and executives, during the JP Morgan Healthcare Conference, in San Franciso.  Fast forward to 2014 and we are perhaps just emerging from one of the worst recessions; a downturn that hit the medtech sector more than any other industry segment.

This year, the location of OneMed Forum was changed and the venue was moved further away from the JP Morgan Conference.  Since the weather in SF was gorgeous, it was not a problem; but if the venue continues to be further away in future, and in the event of cold and rainy weather, it can have an impact and lower the attendance at future OneMed events.  This year also OneMed event seemed to be sparsely attended, although that appearance might also be enhanced because the meeting rooms were spread out on two different floors and there wasn’t a single spill out location for the participants to meet and network – another problem with the venue.

There was also a palpable difference between the JP Morgan conference and the OneMed Forum, this year, in terms of optimism.  While biotech and pharma sector is returning to pre-recession levels with a large number of IPOs and higher numbers of dollars raised, medical technology companies have yet to see significant investment dollars.  On talking with the participants, I heard a note of disappointment regarding low attendance from VCs and other investors, just like in the last few years.

However, despite slow pickup and staggering growth in the medtech sector, it is transforming and the companies are learning to operate more efficiently.  It is also recognized that healthcare is at a critical point and medical innovation will have to address some key challenges.  Various panels and speakers at the OneMed Forum, addressed the changing healthcare landscape and how the future of health and medicine will need to be shaped, in the coming years to address the key issues. 

Major Highlights

Personalized Medicine Panel discussed the promise offered by customized diagnosis and treatments, in lowering the cost and increasing effectiveness.  Panel sessions addressing the JOBS Act and the Affordable Care Act, explored the impact of the legislation on cost of care and access to care.  Companies and solutions that may be poised to offer effective healthcare solutions and may also present interesting investment opportunities were highlighted.  In somewhat grim medtech landscape, digital health is emerging as the hottest new trend, with much potential.  The Digital Health panel discussed the impact of Affordable Care Act in increasing information transparency and empowered consumers taking greater control of their health information.  The changing role of the patients/ consumers will require change in the healthcare delivery and transformation in the business model.

A panel addressing “reimbursement strategy after the affordable care act”, discussed impact of medicare payment rules on medtech and hospital markets.  The panel also discussed trends in coverage and payment for newly emerging molecular diagnostic tests.  One key advice from the panel was that thinking upfront about the reimbursement strategy will be increasingly more important for companies with new, innovative products.  A panelist also suggested that during clinical trials, companies can also think about reimbursement and instead of doing only what may be required by the FDA, if they can also collect reimbursement data then they would come out ahead.  During innovation, the companies should relentlessly focus on disease management, and that would lead to them to appropriate and effective reimbursement strategy, advised the panel.

Financing and IPO issues were addressed in various panels.  One interesting panel on Crowdfunding discussed a handful of portals that are beginning to raise some capital for emerging growth companies.  One investor who was attending the panel, later told me, that it is too early to give an opinion on what kind of success this strategy would yield, but he had some grave concerns.    AdvaMed CEO’s Unplugged Panel featured some of top leaders of the MedTech industry, who shared their insights on key challenges facing the industry.  Stuart Randle, CEO of GI Dynamics advised startups to focus on crucial healthcare issues including obesity.  He also advise companies to pursue capital intensive strategy, and at least initially sell products outside the US.  Scott Brooks, CEO of Regenesis Biomedical, advised startups to get good legal and regulatory counsel early on.  Patrick Daly, CEO of Cohera Medical was optimistic about the future of MedTech.  “IPOs are coming back, M&A is picking up, and dollars are rolling in, big companies have record levels of cash, and I feel positive”, he said.

One of the most prolific financiers, Bill Hambrecht gave a keynote address.  Hambrecht has over 500 IPO’s to his credit that include seed level funding in nascent industries.  Although I did not attend the keynote, I heard some highly positive comments from an attendee.  Steven Burrill, who has been at the helm of innovation in healthcare and shares and who regularly shares his insights through his annual reports, gave a second keynote.  Again, I missed the address but both keynotes were major highlights of the event.  Throughout the conference, over 800 emerging companies gave presentations.  Following the presentations, partnering and breakout sessions gave the opportunity for conference delegates to meet the CEO’s of these companies.

Although it may seem hard to believe, it appears that now the MedTech sector has nowhere to go but up.  The industry has learned some hard lessons, the companies are lean, operating with greater efficiency, spending cash wisely, and instead of hawking next new technology, they are focused on key problems facing the healthcare industry, and on providing effective solutions.  If the healthcare providers are not eager to incorporate some of the solutions, then it will happen out of necessity.  It will become incumbent upon the healthcare industry to implement solutions offering greater ROI in terms of improved health and lower cost.  Healthcare providers will be looking for solutions that provide digital and point of care diagnosis and health monitoring and treatment options and solutions from personalized medicine and genomic health.  Let us stay tuned for some cool innovations from the MedTech sector in 2014.  Senior Analyst at Wells Fargo, Larry Biegelsen has also observed that not only acceleration in healthcare spending is expected in 2014 but there are number of other tailwinds including, “emerging technologies and emerging markets contributing more to growth and a more industry-friendly FDA, which should lead to faster approval times for medical devices”.   

 

, , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Leave a comment

Crowdfunding – New Source of Capital for Medical Industry


Wilson, Sonsini, Goodrich, and Rosati 2013 Medical Device Conference (www.wsgr/news/medicaldevice.com) focused on understanding the challenges that Medtech startups encounter in the current environment, and the emerging strategies to respond to these challenges.  It was heavily attended by industry CEOs, venture capitalists, industry strategists, investment bankers, market analysts, and life science industry professionals.

Wilson Sonsini Goodrich & Rosati

Wilson Sonsini Goodrich & Rosati (Photo credit: Wikipedia)

Below are some highlights from panel on crowdfunding.  Crowdfunindg is emerging as a source of potential new source of capital for early stage and emerging growth companies.  The panel was moderated by Phil Oettinger, partner at WSGR and the panelists included Andrew Farquharson, Managing Director at InCube Ventures, Scott Jordan, Partner at S. Jordan Associates, Greg Shearer, Managing Director at Healthios, and Ben Lee, Director of Business Development at CircleUp.

Oettinger gave a background on Crowdfunding.  He also discussed impact of JOBS act that is expected to enable advertising for private investment offerings and allow unaccredited investors to participate in online equity crowdfunding.  Thus far, crowdfunding has not lived up to the hype of being a startup panacea.  It caps an amount an issuer can raise to $1M, in any 12-month period and caps the amount a person can invest in all crowdfundings over a one year period at 10% of annual income or net worth of the investor.  Shares issued in crowdfunding transactions are subject to a one-year restriction, and there are other restrictions that render non-US companies ineligible to participating in crowdfunding.  Crowdfunding also must be done through a registered broker-dealer or registered “funding portal”, who cannot solicit investments and law requires extensive due diligence, including background checks on management and large stockholders.  None of the challenges however, have dampened the enthusiasm.  SEC has already stated that equity crowdfunding portals are exempt from certain restrictions and more changes are on the way.

Scott Jordan is an accomplished life sciences business development and investment banking professional with over 20 years of corporate experience in negotiating strategic corporate alliances, securing international licensing agreements, building national sales teams, and contributing to successful product development, approval, and launch.  In partnership with Greg Shearer, Managing Director at Healthios Capital Markets, and CrowdConnect, Jordan and Associates, launched Healthios Xchange fund, with an aim to assist emerging growth healthcare companies raise capital from accredited investors, and non-dilutive financing from foundations.  It offers three large value propositions, said Shearer.  Open access eliminates selection bias and does not curate the deals going on the site.  “Crowd” anchors the continuum.  H/X scoring based on sophisticated algorithms, makes it heavily data centric, similar to LinkedIn.  Healthios charges fees to companies that raise money on its portal, except in certain cases where it offers carry-free, fee-free feature allowing investors an opportunity to directly invest in companies, eliminating transaction expenses.  The fees will likely fall in the 5-10% range.  The fee structure will be different for non-profits.  Each company gets a company pitch page.  Several features including e platform button, e signature of docs, e regulatory assessment etc., enhance ease of use.

Ben Lee, a developer of innovative teeth whitening products at GoSmile, and founder of TaskRabbit, an online services marketplace, joined CircleUp, which offers consumer companies an access to funding through passionate, sector focused investors.  “Very simply, crowdfunding is a numbers game and it offers an opportunity to reach out to large number of people, who are looking to invest”, said Lee.  CircleUp has launched a highly active, fast growing portal and has gained considerable credibility.  Lee said, “We are 100% focused on branded consumer products” where there is little institutional investment.

Prior to his current role at Incube Ventures, Andrew Farqharson, a serial entrepreneur had co-founded Operon with no venture capital and sold it for $150M.  He also had launched a company in microfludics, Innovadyne, and had held several roles in research operations at Genentech.  At InCube, with Mir Imran and Talat Imran, Farqharson co-founded VentureHealth, a crowdfunding portal, to enable physicians and other accredited investors to invest in “compelling biomedical inventions”.  Farqharson said, this emergence of crowdfunding is very exciting and enables entrepreneurs to be less dependent on VCs, while it unlocks a lot of latent capital, and also gives investors more degrees of freedom.  Unlike other equity crowdfunding portals on the panel, VentureHealth has adopted a carried-interest business model.  They do not charge fees to the companies that raise capital but charge the investors; just like a venture fund.  In this model being driven by carried interest, they make money only if their investors do.  Clearly, they have an incentive to only support the most promising companies, unlike many broker/dealer sites that may have lesser interest in screening for quality, as their primary incentive may be to raise capital for as many companies as they can.  It will be interesting to see which approach holds more long-term promise.  My initial thoughts are, if I, as a rather naive investor, were to risk my money, specifically in the complex class 2 and class 3 devices, with many regulatory, reimbursement, and marketing challenges, I would prefer to risk it where some prior due diligence is done by seasoned and serial entrepreneurs like Imrans and Farqharson.  Explaining the success of InCube Ventures, Farqharson said, despite the challenging environment, they have had 3 exits this year.  BodyMedia was acquired by Jawbone, NFocus Neuromedical was acquired by Covidien and most recently Spinal Modulation was acquired by St. Jude.  Exists led to $700M+ in 2013, said Farqharson. They are actively screening investors.

Image representing Spinal Modulation as depict...

Image via CrunchBase

 

 

Enhanced by Zemanta

, , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Leave a comment

%d bloggers like this: