US Commercial Strategy: Medical DevicesDebra Chanda

Global Ambassador, Singularity UniversityVP of Marketing, Invest Crowdfund Canada (ICC)

debra.chanda@launch120.com

The Drivers Have Changed

Healthcare Reform

Stringent FDA

The End: Financing the Risk

• 33 percent above Medical Devices/40 % drop since 2007, WSJ• 13 VC-backed IPOs in Q3, investors pulled back from the sector • deal activity and funding declined 27% and 36% from 2nd quarter resulting in

the lowest financing amount in the past five quarters.

• $19.8M: Sapheon, North Carolina, seals varicose veins with glue, Sept 2013

• A new, minimally invasive treatment uses ultrasound and medical glue to seal up potentially problematic varicose veins in the leg

• Series B preferred equity offering from existing and new accredited investors

• CE marking since September 2011 and has treated more than 1,000 patients in Europe and Hong Kong

• Proceeds of Funds PMA, FDA: pivotal studies, 10 sites, 242 patients.

• $300M: Tranche Strategic Deal, June 2013

• Pain in leg, foot, etc.

• Exclusive option to buy Spinal Modulation for a maximum of $300 million, milestone payments

• Rights to distribute the company's device in overseas markets.

• $10.5M: Series A funding, Nov 2013

• Consumer health diagnostics products

• $1.66M Raised by Big Indiegogo Campaign, for Medical “Tricorder.”

Exodus of Venture Capital: So where are co.’s getting $?Wherever they can find it: Angels, Crowdfunding,

Earlier Strategic

TOTAL $109MFUNDING TOTAL $109M

Series A, 1/2006 1

DeNovo VenturesKleiner Perkins Caufield & ByersDraper Fisher Jurvetson (DFJ)

$7M

Series C, 11/2009 2

Johnson & Johnson Development CorporationInCube VenturesRaffle Venture PartnersDeNovo VenturesDFJ ePlanet VenturesKleiner Perkins Caufield & ByersMedVenture Associates

$27.4M

Series D, 6/2011 3

DeNovo VenturesDFJ ePlanet VenturesInCube VenturesJohnson & Johnson Development CorporationKleiner Perkins Caufield & ByersMedVenture AssociatesRaffle Venture PartnersMedtronic

$30M

Series E, 6/2013 4

St. Jude Medical $45M

Sunnybrook & Ryerson University

• Weeks vs. Months in providing accurate responses to chemotherapy in breast cancer tissues using ultrasound as underlying technology.

• $57K

Health care startups

nationwide raised $369 million from corporate

venture arms during the

third quarter. About 8 percent went to Minnesota

companies.

Accountable Care Act: New Hospital Environment: Strong Health Economics Value Propositions =

Understand New Landscape & Insurance

System Drivers Needs

Metrics Forcing

Behavioral Change

Better Outcomes

Comprehensive Care

Cost Effectiveness

Treats Broader Patient Populations

Evidence Based Outcomes

Cost Justification

Capitation

Moving from Fee For Service To Quality Metrics

Commercial Strategy determines

Regulatory Strategy: Regulatory Class determines Clinical/Quality Plan & Reimbursement Pathway

• Medical devices fall within 3 categories

• Class I – No pre-market approval or clearance

• Class II - Pre-Market Notification -510(k) – short process

• Class III – Pre-Market Approval (Long Process)

“Starts with addressing a Clinical Unmet Need in the Market: Invention is not Innovation.”

Get your Proceeds of Funds & Milestones Together Early

Budget and Milestones

2013 2014Total

3Q 4Q 1Q 2Q 3Q 4Q

Prototype Validation Pilot Product Validation Commercial launch

Corporate 25 50 50 75 75 75 $ 350

●Recruit core team, interim CEO, COO●Raise seed round

●Secure additional seed funding●Identify and engage with strategic partners

●Begin series A fundraising●Establish facilities

●Scale organization - CEO, finance, sales and marketing, HR

●Operations ●Operations

Design & Development

75 75 75 75 75 75 $ 450

●Prototype model fabrication and design testing (Finite Element Analysis)

●Bio-engineering and gait analysis

●Pilot model design

●Engineering testing

●Fatigue and long-term stress testing

●Biocompatibility testing

●Design for manufacturability

●Cost optimization

●Ongoing product engineering

Quality Management

20 20 15 15 20 25 $ 115

●Establish document control ●Establish design control, change control, and traceability for design

●Implement initial (minimal) quality management system

●Complete design verification and validation (V&V)

●Complete FDA required production and process control ●Scale customer feedback/service and complaint handling process

●Obtain CA FDB licenseMaintain ongoing documentation and quality management

Clinical Research

20 20 25 30 15 15 $ 125

●Recruit for and initiate 10 participant User Preference Study

●Complete User Preference Study, analyze and document study findings

●Establish pilot model design requirements

●Design, recruit for and initiate 30 participant study

●Complete pilot study and document results

●Establish launch product requirements and development roadmap

●Publish study findings ●Ongoing tracking

IP Filings/Legal20 20 10 10 5 5 $ 70

●Complete Filings of provisional patents

●Complete FTO assessment ●File founding patents ●File supplemental patents ●Ongoing IP/legal support ●Ongoing IP/Legal support

FDA Submission5 25 10 10 10 $ 60

●Develop regulatory submissions strategy

●Prepare FDA submission and file for 510(k) clearance

●FDA follow-up and obtain clearance ●Supplemental filings as needed

Transfer to Manufacturing

15 30 60 60 $ 165

●Establish supply chain strategy and source components

●Compile Device Master Record (DMR) for launch product

●Qualify pilot build

●Scale up production operations

●Operate production run for [NN] units/month

Business Development and Clinical Support

10 15 20 30 30 30 $ 135

●Develop go-to-market plan ●Develop and manage KOLs, clinical partners

●Develop promotional and marketing materials

●Campaign for branding and PR●Establish pilot site(s) with clinical partner(s)

●Develop and implement educational and ongoing clinical plan

●Ongoing promotion and clinical support

TOTAL 375 510 585 $ 1,470,000

EPS

CARDIAC

SURGEONS HOSPITAL CSUITE CARDIOLOGISTS

NURSE PRACTITIONER

/SCREENING PATIENTS

HOSPITAL ADMIN

INC. MARKETING AND

CONTRACTS FAMILY CARE GIVERS SOCIETIES/KOLS

ROLE Procedure Champion

Opens new treatment markets for persistent AF population

Support EP and help champion the procedure/educate patient

Direct visibility for safety and efficacy

Approval Authority

Prioritize

Refer persistent AF patients for convergent procedure

Managing & Treating persistent AF Patients Effectively post procedure long term to prevent re hospitalizations

Managing & Assisting in therapy selection for AF

Follows Patient

Patient Advocate

To be treated Contracts with Payers:

dossier third party

Marketing: generate awareness around Center of Excellence for Arrhythmia Management direct to patient

Support Patient Influence Peers

NEEDS - Address broader AF patient population

- Better Ablation Tools

- Safe Way to Isolate the Posterior Wall

- Training and Clinical Support

- Protocols

- Efficiency Models

- EP feedback

- Need to participate in Clinics

- Have a good working partnership with EP

- Better Outcomes: Literature/Local Experience

- Comprehensive Care/Long Term Disease State Management

- Treatment of Broader AF Patient Populations

- Cost Effectiveness to justify reimbursement

- Differentiator/Center of Excellence

- Treatment Education on therapy outcomes, technique, products & cost effectiveness

- -Knowledge of some local procedure experience EP advocacy

- Referral development to increase patient flow through education materials

- Nurse Education procedure education, and data and patient selection criterion; therapy products

- Tools to educate patient the therapy

- Innovative Effective AF Treatments

- Education and Awareness of new therapies

- Dossier outlining procedure benefits

- Template for -Marketing Messaging to Program

- Proper Education about the success and limits of the therapy

- Knowledge of how to care for patients

- Share experience with other patients

- Data

- Proper Education about the success and limits of the therapy

TREND -Explore better ways to treat AF

-Continually Less Invasive Approaches

-Reimbursement pressure by payers on re-hospitalizations

-Consolidation of private cardiology practices into hospital systems

-Hospital EP Programs marginally profitable

-Metrics demanding better efficacy and broader treatment alternatives

-Increase importance in effective long term patient care management to prevent re hospitalizations

-utilizing social media

-Revenue/Profit Programs

-More proactive in exploring solutions

-Less influence

IMPACT ON

THERAPY

ADOPTION

Current: HIGH

Future (5y+): High

Current: MEDIUM

Future (5y+): High

Current: HIGH

Future (5y+): High

Current: LOW

Future (5y+): High

Current: LOW

Future (5y+): High

Current: LOW

Future (5y+): Medium

Current: LOW

Future (5y+): Medium

Current: LOW

Future (5y+): Medium

Current: LOW

Future (5y+): Medium

CO. ABILITY TO

INFLUENCE

HIGH HIGH HIGH

-selling program $ and metrics

MEDIUM LOW LOW HIGH

-marketing and dossier templates

MEDIUM

-key is adoption

MEDIUM

It’s all about the Adoption: Know the Stakeholder Wants

Don’t Be Another Tree Falling in the Forest (a patent isn’t a business): Retain Operational Management Expertise Early

(skills, abilities, operational leadership experience)

Financing will find opportunity, but only funds management

• The key to the success of these new ventures is always the management team (20% is the valuation of the technology). It is all about execution of the business plan.

• Investors fund companies, not narrow niche technologies (licensing opportunity/lifestyle business).

• **** they invest in the multiplier of the upstream potential of new therapeutic claims

• Most private sector investors (angels/VCs) ignore public sector technology.

• It is estimated that angels provide first-time, seed/startup funding to 20,000 companies per year in the US.

• US VCs invest in about 1000 new companies per year. • Angels and VCs invest in management teams (already in place)

to fund implementation with customers and growth.

Different Skills/Resources Required:

Academia/TTOs• Concept Development

• Assessment and Evaluation of Discoveries

• Obtaining Seed Research Funds

• Obtaining Substantial Research Funds

• Recruiting Research Personnel

• Managing Research Focus

• Orienting Research To Market Need

• Disclosure Process Management

• Working With the Technology Transfer Office

• Managing Conflict of Interest

• Intellectual property protection

• Managing Corporate Partner Expectations

• Securing funding for proof of concept

• Development (bridging the “Gap”)

• Commercialization plan (licensing or start-up)

• Identifying and marketing to potential partners

• Negotiating technology transfer agreements

• Following up to ensure that contractual obligations are met and payments are made

Development Stage Companies

• Product Development (Physical Form)

• Scaling up Manufacturing

• Maintaining Sufficient Funding

• Generating Initial Revenues

• Securing Intellectual Property

• Managing Intellectual Property

• Retaining Experienced Management

• Recruiting and Retaining Experienced Non-Management Personnel

• Obtaining Enlarged Space for Operations

• Optimizing Strategy

• Managing Development Focus

• Understanding the Evolving Market

• Understanding the Competition

• Working With Technology Transfer Offices

• Working With the FDA/CE/Health Canada (regulatory bodies)

• Working With Vendors

• Working With Salespersons/Distributors

• Securing Credit

• Managing Board Interactions

• Managing Inter-Corporate Interactions

• Developing Follow-On Product Prototypes

Scientific and Commercialization hurdles need to be considered in parallel.

Problematic as each group perceives its own difficulties to be the greatest.

Remember Businesses aren’t always the solution. If you make small improvements, think about licensing the technology versus starting a company.

Better Benchmarking, Collaboration & Commercial Leadership with Operational Expertise in Global Markets

• Founded in 2000

• filed for over 2,200 patents

• more than 500 active licenses

• 66 spin-off companies that have received $750 million in private equity investment

• Nearly 1,100 jobs have been generated as a result of Cleveland Clinic Innovations and its spin-offs, having a significant impact on economic growth in Northeast Ohio.

• formed 19 companies since the early 80s and holds over 140 patents.

• Spinal Modulation/St. Jude's $300M Strategic Deal, June 2013

• Implantable cardioverter-defibrillator with Intec Systems, which was acquired by Eli Lilly, spun out to form Guidant, and acquired by Boston Scientific in 2006 for $27.5B

• low-pressure balloon and aspirator system for use in catheter based interventions. Primary innovation for Percusurge, which was acquired by Medtronic in December 2000.

• multiple funds including its first fund, DFJ InCube Ventures, managed with Draper Fisher Jurveston

WHY?: Innovative new products are essential to the progress of any society & essential to human well being

• Aging population, rising incidence and prevalence of chronic disease –need to care for

• Economic & Community Empowerment – Job growth comes from SMEs, not multinational branch plants

• Next Generation to Lead “Together, we all have a fiduciary responsibility to our society as a whole to build great companies in the medical technologies space. We have world class institutions, research, education and manufacturing capacity.”

Thank you

If Interested in The Technology Frontiers Collaborative (not-4-profit), Best Practice Whitepaper focused on spin outs and licensing opportunities; and how both

technology transfer offices and commercial enterprises can improve their commercialization strategic mandates please contact me at:

debra.chanda@launch120.com (416) 500 2681