Posts Tagged Wilson Sonsini Goodrich & Rosati

WSGR 2014 Medical Device Conference – Funding Strategies for Early Entrepreneurs


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.  image003

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.

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Life Science Startups: Challenges & Opportunities – Panel and EPPIC event Preview


EPPIC Global (www.eppicglobal.org) is celebrating its 15 year journey in the Life Science arena.  EPPIC is a volunteer driven organization that was found by a group of Silicon Valley Life Science professionals to provide networking, mentoring, and learning opportunities to life science professionals.  During EPPIC Global’s 15th Annual Celebration, on October 26, 11am to 4:30pm, one of the panels moderated by Mahendra Shah, Partner, Vivo Ventures and Shalabh Gupta, Founder & CEO, BioCycive, will discuss “The intricacies of starting a life science company”.”

Starting a life science company has become more complex and more challenging.  There are different funding approaches that may be appropriate for different business models and core technologies, different regulations are in place that must be followed.  The illustrious panelists will discuss all issues pertinent to starting life science companies and navigating through the challenges.

One of the panelists, Daria Mochly-Rosen, is Senior Associate Dean & George D. Smith Professor of Translational Medicine, and SPARK Director at StanfordUniversity, School of Medicine.  Concurrently, she is also Professor at Department of Chemical and Systems Biology.  At her multi-disciplinary research lab, some of the research focus included, understanding how protein-protein interactions govern cell signaling.  Kai Pharmaceuticals found by Dr. Leon Chen and Dr. Mochly-Rosen was acquired by Amgen.  The lab’s current research efforts focus on identifying small molecules that correct genetic defects in other critical enzymes, through the use of high throughput screening, in silicon design and synthetic organic chemistry.

Panelist Kenneth A. Clark, is Partner at Wilson Sonsini Goodrich & Rosati.  He was recognized by Chambers and Partners in its 2005-2013 editions of Chambers USA: America’s Leading Lawyers for Business as one of the country’s top biotechnology lawyers.  He currently serves as a director of Pharmacyclics Inc.

Panelist Farah Champsi is Managing Director at Alta.  Farah led Alta’s investments in various young pharmaceutical companies.  She also serves on the board of directors of Allakos, Chimerix, Kite Pharma, Portola Pharmaceuticals and Trevena. Prior to Alta, Farah was an investment banker at Robertson Stephens & Company and helped build one of the most successful life sciences investment banking franchises on Wall Street.

Syed Askari, Co-founder and CTO of Medicus Biosciences, is a serial entrepreneur of 3 different startups that focused on key polymer technologies for FDA approved biomaterials.  One of the startups was acquired for about $1 billion and another startup has acquired a major market share.

Other panels and keynotes are just as interesting and include a panel on intra and entrepreneurship in the life sciences, a panel on women entrepreneurs and much awaited keynote address by Nagesh Mhatre, EPPIC Founding Member and Partner at The Angels’ Forum, Halo Fund.  Mhatre’s 35 year long illustrious career includes tremendous achievements, in addition to his major contributions as a mentor for several of Silicon Valley life science startups.   Registration is only $10 and $20 for students and non-members respectively.  Register for the event before it is sold out at http://www.eppicglobal.org.

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Marketing Insights for Commercial Success in Medical Device Market


Wilson, Sonsini, Goodrich, and Rosati 2013 Medical Device Conference (www.wsgr/news/medicaldevice.com) focuses on understanding the opportunities and challenges in medical device sector.  A panel of experienced CEOs discussed the challenges of getting a new medical technology to market, in the current environment, and shared insights to help overcome early challenges and obtain commercial success.

David Bruce, President and CEO of Arstasis www.arstasis.com  shared about how they implemented strategies to accelerate the commercial growth phase of the company.   Companies need to define their market and pick the customers, and then figure out how to get through to them, said Bruce.  Arstasis was clear that they needed to succeed in the US market and reach the customers with direct sales force.  Arstasis offers self-sealing access for femoral catheterizations, securely, without leaks, and with drastically reduced complications.  Bruce said that innovative product requires education and going after early innovative types, the risk takers, and sales reps trained to walk away from targets that are not good.

English: Balloon catheter for anorectal manome...

English: Balloon catheter for anorectal manometry Русский: Балонный катетер для аноректальной манометрии (Photo credit: Wikipedia)

Waiting for tubal ligation, Guatemala

Waiting for tubal ligation, Guatemala (Photo credit: NewsHour)

Keith Grossman, President and Director at Conceptus www.conceptus.com , discussed the challenges that come with lack of clear focus.  Conceptus, a medical device provider of women’s health market, has a non invasive tubal ligation device that can be placed non-surgically and is more effective than having the tubes tied.  It is also allows the doctor to make more money, while being less expensive for the payer.  Yet it hit a wall.  The company had a lot of people on the ground and was putting a lot of money into sales and marketing efforts.  However, there was little clarity on how the customers were segmented and while a lot of customers were being trained and lot of new customers were generated, the company was not doing enough work with existing customers.  The sales people were selling more and more products with single digit margins.  After clarifying the focus, dramatic changes were made and within 6 quarters it led to double digit growth.  Learning from the mistakes, Grossman said, they started too broad and were not penetrating the market deep enough because sales team lacked a guiding strategy.  There was misalignment between the marketing message and the sales strategy and there was confusion regarding whether they were looking for penetration or profitability.

B0007766 Popliteal aneurysm: reconstructed CT scan

B0007766 Popliteal aneurysm: reconstructed CT scan (Photo credit: wellcome images)

Christopher G. Chavez, Chairman, President, and CEO of TriVascular www.trivascular.com , discussed the technology that focuses on serving patients with aortic disease.  Traditionally abdominal aortic aneurysm required high invasive open surgical procedure with high risk of mortality and other complications.  EVAR or endovascular aortic repair procedures dramatically reduced complications. Trivascular’s initial product offerings are novel endovascular grafts focused on significantly advancing EVAR and addressing this $1B+ market.  This is a hugely compelling, underserved, unmet need, said Chavez.  They are seeing excellent outcomes in trials and are going into first in man, later this year.  To address the marketing challenge, the company plans to focus on creating service excellence, in addition to strong field rep training program and building direct sales force in US and Germany.

Tom Prescott, Director, President, and CEO of Align Technology http://www.align.com shared that the company vision is to help people get beautiful smiles.  Align Technology pioneered the invisible orthodontics market, with the introduction of the Invisalign system, in 1999.  “Be patient for success, be impatient for patient success”, said Prescott.  Marketing is about behavior change and it happens with energy, effort, and commitment.

English: Invisaling aligner

English: Invisaling aligner (Photo credit: Wikipedia)

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Promise & Challenges of Digital Health


Digital Health has been an emerging sector in medical device arena.  A panel at Wilson Sonsini Medical Device Conference (www.wsgr/news/medicaldevice.com) discussed the challenges and opportunities in this area.  Moderator Milena Adamian is founder and executive director of the Life Sciences Angel Network, which is focused on early-stage investing and entrepreneurial activities in medical devices and healthcare information technology arena.   Having spent 20 years in medical device development, she brings the perspective of a clinician and academic researcher and opened the panel with historical background and broad overview.  Panelists included Chilukuri Sastry, Associated Principal at McKinsey & Co., Jonathan Javitt, CEO & Vice Chairman at Telcare, Jay Silverstein, Co-founder of Oxford Health Plans, and Lisa Suennen, Co-founder and managing member of Psiolos Group.

Silverstein raised a key question, right upfront.  “Show me it works”, he said.  While there are some neat ideas and lot of hope, it is not yet backed up by reality, he said.  Sastry said, there is an evolution under way, with a focus on data interpretation from earlier focus on data accumulation.  According to Javitt, it is a matter of making a business case and applying technology, to increasing efficiency.  Suennen pointed out the shift that is happening broadly in the industry, with the entrepreneurs focusing on enabling consumers to engage in matters of their health, more cheaply.  Currently, 7 out of 10 dollars in healthcare are spent on management of chronic diseases and about 5 thousand kids with asthma, die on the way to the hospital, where there is an opportunity to make an impact, pointed out Javitt.  The challenge is to make healthcare sensing as ubiquitous as auto sensing.  Disconnected medical devices will not help transform healthcare, he said.

Silverstein pointed to the gorilla in the room, the challenge of patient engagement.  The panelists had several perspectives on dealing with this challenge.  Silverstein stressed the need to incentivize health, Javitt suggested combining healthcare with gaming.  Suennen pointed out that gaming might attract short term focus that may not have a lasting impact, as people get bored of games.  Silverstein emphasized the need for segmentation so that there can be constant communication, marketing, and efforts to engage patients with specific needs, on a continuing basis.  Sastry said, while behavior modification is challenging, the new and emerging technology will allow for better patient engagement.

Sharing advice for entrepreneurs in this sector, Silverstein suggested that they carefully pick customers and value proposition.  They should not claim to be good for payer, investor, physician, but instead find a niche.  Suennen said, right now it is too easy to start a company in this area; all they need is an iPhone and a starbucks card; but failure is also fast.  A big lesson, observed Javitt, is that a lot of great ideas are poorly marketed and poorly packaged and do not take into account that an average consumer needs 3+ touches, to be noticed.  Sastry stressed the need to become a data scientist.

Adamian concluded the panel saying that as an investor, she would consider the team, look at the market, sustainability, analytics and suggested that entrepreneurs be mindful of regulations and also focus on how to engage patients.  The area of preventative medicine is a whole other area that will be of a lot of interest, said Adamian.

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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...

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Challenges and Opportunities in the US Spine Market


A panel moderated by Justin Klein, Partner with NEA, addressed issues and challenges in the spine market, at WSGR Annual Medical Device Conference.   Just a few years ago, the spine represented the fastest growing segment of the orthopedic industry, and venture capital funded dozens of new companies each year in this space. The US spine market was growing rapidly and was estimated to exceed $8 billion by 2016. Today the U.S. spine market is flat or declining, despite the unmet needs of patients with spine conditions and related pain issues. New percutaneous and MIS technologies—accessible to both interventional pain specialists as well as spine surgeons—are gathering increasing evidence in the clinic and are emerging on the radar of strategics.

Panelists at WSGR annual medical conference on spine, Matt Alves, VP of Strategic Development with Stryker, Alex DiNello, President & CEO with Relievant Medsystems, and Earl Fender, President & CEO, Vertiflex, discussed the challenges and opportunities in this rapidly evolving spine market. Overall view from the panel was that payers are increasingly looking at clinical outcome data and there is’nt much data on appropriate clinical outcomes, particularly in chronic back pain treatment studies. Studies need to be put together that look at the effectiveness and also do cost effectiveness comparison, said DiNello. There continues to be growing scrutiny in the US on the justification for and prevalence of spinal fusion procedures. Though insurance companies are pushing back on fusions, these patients are not going anywhere and are not getting better and are finding their way back into other pain management avenues. So clearly the need exists.

According to Alves, data is pointing towards the benefits of early intervention in terms of requirement of a less invasive treatment and saving cost. Fender said that Vertiflex device is showing many advantages in terms of cost saving, less blood loss, less trauma, and no infections. It seems clear that although demand for spinal implant procedures is there and is growing, the cost-constrained environment will continue to affect the market over the forecast period. Minimally invasive approaches to spinal fusion continue to gain in popularity due to less blood loss, decreased patient trauma, and faster recovery times and all this in turn resulting in cost savings.

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