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The European Unitary Patent Package

7 min reading time

The European Unitary Patent Package

Reading Time: 7 minutes

Watch the video for the implications to your business.

My friend Stephen Carter from Mewburn Ellis gave a 10-minute talk about the European Unitary Patent Package at the 10x Medical Device Conference in May 2016 – before the Brexit vote.

If you have a European patent, or aspirations to get a European patent or licenses, this is going to impact you.

Stephen explained, in Q1 2017 we should see a “single patent that gives you protection across the whole of the EU. We also expect a single Unified Patent Court with jurisdiction not only over this new European Unitary Patent but also over existing European patents that have already been granted.”

Stephen Carter: Thank you Joe and thanks to all of you for sticking with the program and staying for what we call in the UK, “The Graveyard Slot.” So we are about to get in Europe and we hope Q1 of next year what’s referred to as the European Unitary Patent Package. And we’ll get into one of those but we’ve been waiting for it for an awful long time and to give you some context as to how long we’ve been waiting for it, so that little kid in the what my Mum assures me was a very fashionable outfit at the time back in about 1975 was when people first started talking about having a single European Union-wide patent. And here we are now in 2016 and finally it’s about to happen.

So what is this package? Well it comes in two parts. There’s the European Unitary Patent. So as Joe said, that is a single patent that gives you protection across the whole of the EU. Alongside that, we get the Unified Patent Court. Now this is a single court. It has several seats around Europe that is ostensibly single court which has jurisdiction not only over this new European Unitary Patent but also over existing European patents that have already been granted. And that’s one of I guess, the big take-home today. So anyone that currently has a European patent, has aspirations to get a European patent or licenses, a European patent, this is going to impact you.

Another important take-home is that the EU isn’t what you might consider the whole of Europe and it’s certainly not what the whole of the current European Patent Convention. It’s not all the countries that are covered by that. This new Unitary Patent doesn’t even give you protection across the whole of the EU because there’s a couple of countries that hadn’t signed out to it yet.

Spain being the noticeable one which probably will never join up. Croatia is the little sort of upside down U-shaped country down in the corner which probably will sooner or later. And then Poland is lagging behind a bit but everyone expects it to. But even if those EU countries sign up, you’re still not going to get coverage for the countries listed there that you can get coverage for the current European Patent System.

And so that system is going to carry on running alongside this new patent. So actually although Joe kind of build this as a simple vacation thing. We have a single patent. It actually just added another layer of complication to this system in Europe.

This is just kind of blatant advertising by me I suppose. These are a few of the companies that I help with their European patent needs.

And the other thing I wanted to point out was that so medical device patents are hot in Europe at the minute. Had been for a while. You see from this slide which is dated from 2015 from the European Patent Office that medical technology was the number one technology area for patent filings in 2015. It’s also the fastest growing technology area for patents in Europe. And it’s been growing pretty steadily over the last 10 years. And a lot of that is down to you guys over here. So you’ll see that 41% of the patents that are filed in this technology area are filed by US companies. So thank you for that.

So let’s just quickly go over what the current environment looks like for patents in Europe and what’s going to change about it. So this is the, if you like, the traditional model where you can still file and you still will be able to file national patents in national patent offices. So you can file your German application in the German Patent Office. Get a German patent. And that’s enforced in the German National Court likewise with these other countries.

Alongside that currently, we have the European patent system which a lot of you are very familiar with and this is the most common route currently to getting patent protection across the EU and in that broader set of countries. So you file a single application in the European Patent Office but once that grants, it splits down into a bundle of national patents. So you end up in the same position you are in when you follow the national route and you have to enforce those separately in the national courts.

So what’s going to change? The first part of the package that’s going to change is we’re going to get this new Unified Patent Court and that is going to be a forum where you can enforce and I guess importantly other people can attack your existing granted European patents.

So not patents that have come by the national route but patents that come by the European patent office. That unified patent court will have jurisdiction over them. For a transitional period which is 7 years initially and it could be added another 7 years on top of that, you have the choice of forums. So you can still go to the national courts if you want to and we anticipate that people will probably do that initially because they’re known forums, recognized forums that they understand how they work.

The other thing you can choose to do for that initial transitional period is you can opt your European patent out of the Unified Patent Court. So if you have currently granted European patents and you’re a bit nervous about this new court that’s being set up, you don’t know whether they’re going to be pro-patentee or pro-defendant. You can opt your patent out of that system.

So if you’ve got existing patents, the only forum will remain the national courts. You can at any point in the future choose to opt that patent back into the Unified Patent Court. So one strategy that we anticipate a lot of people will adopt is they will opt everything out to start with. They’ll see how the court is performing and then if they in anticipation of litigation, they will opt back in. And you can only do that once.

So if you opted back in, you’re then stuck in the system. Once the transitional period is over, then the Unified Patent Court would have exclusive jurisdiction. So you’ll be stuck with that court.

The other thing that’s coming in is the Unitary Patent. So that comes in and from Day 1, any unitary patent that you have granted will be under the exclusive jurisdiction of this unified patent court. It’s a decision that you could make at the point of grant of your European patent application. So the application procedure is exactly the same as currently. And what happens is once you get to the point of grant where now you would choose the individual countries that you want to validate in, one of those validation options will become the unitary patent. And if you go down that unitary patent route, then you cannot have the corresponding national patent which are greyed out there. What you can also do at that point is you can pick off the other countries that aren’t within this Unified Patent system.

So countries like Spain who although they are part of EU will probably never join the unitary patent system and countries like Switzerland, Norway which are not members of the EU but are available by the European Patent route.

So in terms of benefits, there’s a whole host of benefits and possible downsides. I don’t know if we’ll have time to go into many of them. One of the big benefits is if you’re someone who files geographically broadly in Europe, then you’re going to be massive cost savings in the renewals of the renewal fees downstream when you have your granted patents.

So that graph at the top right there, shows the difference between the renewal fees and the blue line at the bottom that you would pay for a granted unitary patent versus the renewal fees you would have to pay and these annual fees you pay in each individual countries. You’re covering all 25 countries and that signed up to the Unitary Patent.

The other benefit is central litigation. That’s a double-edged sword. So you can enforce centrally. You can get EU-wide relief. So you can get an injunction across the whole EU based on your unitary patent or your European pa
tents bundle. But the flipside of that is you can be attacked centrally. So that’s one reason why we anticipate lots of people will opt out.

So in terms of decisions that are needed and these are decisions that are needed sooner rather than later I suggest. One key decision is do you want to go down the unitary patent route or are you going to stick with the more traditional national validation. So that route remains open to you once the unitary patent comes in.

Factors that are going to come into play there are which countries are commercially important to you. If it’s … some of my clients, they basically focus on UK, Germany, maybe one other jurisdiction it’s probably actually going to be more cost-effective for them to stick with the current system and not use the unitary patent. But if you’re filing broadly in Europe by using the unitary patent, you’ve got access to those very large cost savings for the downstream costs.

But you also need to consider whether you want flexibility to drop countries later. So some people as product life reaches the end of its life, they maybe have started with a broad geographical coverage in Europe. They’ll cut the size of their portfolio. If you’ve gone down the unitary patent route, you can’t make that cut to stop with the unitary patent. And also I need to ask whether you’re prepared to be under the jurisdiction of this new court. And if you have made the decision you want to go down the unitary patent route, don’t think about it being something that’s just for the future.

If you have pending applications at the European patent office now, you can take steps to slow down the examination and the prosecution so that you don’t reach that point of grant and the decision point until Q1 2017 when we anticipate that these unitary patents will be available.

The other big decision, my final point is you need to decide whether you’re going to opt-out or not. And obviously by staying in, you have the convenience of EU-wide enforcement but by staying in, you also have the risk of central attack and the guest of honor will take home as you want to start reviewing your portfolios now because Q1 2017 is not very far away.

The end.

Joe Hage: Thank you Stephen.

How to Save Costs on Your 510(k) or PMA

6 min reading time

How to Save Costs on Your 510(k) or PMA

Reading Time: 6 minutes

Did you know 77% of the cost to develop a 510(k) device is spent in clinical research and regulatory submissions? It’s 80% for PMA devices.

“A lot of that cost is due to how poorly we handle data,” explained Jim Rogers, President of Nextrials, at the 10x Medical Device Conference.

Jim’s solution is “why didn’t we think of this before” simple: Re-purpose electronic health record (EHR) data as the source data for clinical research.

Jim: “FDA wrote a Guidance. It came out September 2013 to give people action items around using electronic source.” If you re-use the data you already have, you’ll:

  • Eliminating duplication of data entry.
  • Eliminating or reducing transcription errors.
  • Remotely accessing your source data.

And Jim anticipates your question: “There’s so many EHR systems, how could we ever begin to integrate with them?” Watch the video for his answer.

Jim Rogers: Hi. My name’s Jim Rogers. I’m the President of Nextrials. We’re a software and services company focusing on clinical research. And today I want to talk about the cost of doing clinical research.

As you can see here, some pretty frightening numbers. 77% of 510(k) devices, 80% of PMA devices, that cost is spent on clinical research and regulatory submissions. And a lot of that cost is due to how poorly we handle data. Everywhere from how the site records the data, how the sponsor collects the data, how we clean up the data and how we verify the data.

So what we propose is to use electronic health records to increase the efficiencies. Use electronic health records as the source data. A lot of the data that you are collecting for clinical research is already collected in electronic health records. There’s a number of benefits to using electronic health records as your source data.

Eliminating duplication of data entry. Eliminating or reducing transcription errors. And then another key ability that this gives you is the ability to remotely access your source data. So now your CRA’s are doing it remotely as opposed to flying out to the different sites.

Now these bullet points did not come from the Nextrials Marketing Department. They came from the FDA. The FDA wrote a Guidance. It came out September 2013 to give people action items around using electronic source.

Now I’m talking primarily about electronic health records. But if your devices are feeding information directly into the EHR, this applies to you and this Guidance applies to you.

A couple of key points in the Guidance is that the FDA states that they promote the use of electronic source data. Now the FDA does not use the word promote very often. So that’s very key. Another key point, they don’t expect, they’re not going to assess whether or not the EHR systems are 21 CFR Part 11 compliant. So they don’t have to meet that criteria to be used for clinical research.

So let’s break this down. Just like the sites, Electronic Data Capture has done a lot of wonderful things for the industry. Primarily, sponsors are the beneficiaries of that. What we’ve done though is we’ve made the sites do a lot of data entry which is tedious and time-consuming. They also have to learn to use multiple EDC systems. And this creates a burden on the sites and studies have shown 20%-50% of investigators would do one study and then they’re done. It’s just not worth it to them. But if we’re getting the data out of the EHR systems, we’re reducing the amount of data entry we’re asking them to do, the amount of training on different EDC systems is reduced and the data collection matches the site workflow.

And this is something I didn’t appreciate until we got in this. So here’s an example. You may design a form that has 20 data points on it. Those 20 data points exist on six different EHR screens. So now they’re going back and forth between screens trying to fill out one form. But if we’re getting that data directly from the EHR system, it’s pulling across all the EHR data to fill out that one form.

Data quality, something we always struggle with and again, whenever you’re doing duplicate data entry and I’m preaching to the choir here, you’re going to introduce error because the way it works at the sites is they’re over here typing into the EHR system, they’re swiveling around on the chair and typing that information again into an EDC system.

Studies have shown that that creates an error rate greater than 4%. But if you’re getting the data directly out of the EHR system in a valid data process, now there’s validation involved with this. You can’t just hook up any software. I’m not going to gloss over that fact. But this has interesting survey results. 92% of the sites said, more than 80% of the data you are asking them to collect is already collected in their EHR system. And 70% said, every data point you’re asking us to enter for you, we’ve already entered into our own EHR system.

Source Data Verification, a very expensive part of clinical trials. If you can access the source data remotely, you’re much more efficient and you can do it at a much lower cost. And think about this, if you’re getting it directly from the EHR system in a valid data process, you can trust that data better. If your primary efficacy data points are coming directly from the EHR, if your device is then putting data into the EHR and now that’s extracted directly out for clinical trials, the data’s much more reliable.

Now there’s a lot of misconceptions about EHRs because people think about how they used to be and this crowd is a little smarter than most but I hear people say, “Oh sites, most of them use paper charts.” How many here have their doctor use electronic health records that you know of? Mine rolls in with a laptop so I know he’s using it.

People think they’re just building systems or they’re just big Word documents we place in a paper chart. That’s not true. A lot of the data is structured. Some isn’t. Some is unstructured. I know Libbe is going to talk about unstructured data. And then the other thing, people throw up their hands and goes, “There’s so many EHR systems, how could we ever begin to integrate with them?”

So let’s look at where we are today. 70%-80% already have EHRs. Greater than 90% by 2019. And this was driven mostly by the American Recovery and Reinvestment Act where the federal government spent $11 billion in incentives to drive EHR adoption.

So how does it work? From within the EHR system, the site coordinator pulls up a CRF. It pops up on our screen. The EHR system in the background will auto-populate all the data fields that we’ve mapped. Now the data that’s not in the EHR, obviously those fields are going to remain blank. Then the coordinator will fill-in the missing fields, hit submit and it’s now in the EDC system.

So the implementation of this, the way we went about this is we know to gain acceptance, we’ve got to do most of the work as a software vendor. So for the site, all they have to do is point their EHR system towards our servers and set a configuration for the study. We do the rest.

So every year for the last eight years, we’ve been going to a software validation conference called Connectathon in the dead of winter January in Chicago, now Cleveland and these are all the EHR systems that we’ve validated with. You see some big names here. Epic, Cerner, Allscripts. Together they represent about 60% of the hospital market.

Now, that’s great for data collection but our goal is to have a clinical study done where the site coordinator never leaves their EHR system. They never login to an EDC or clinical trial database. So we’ve done extensions to the standards and the standards were designed by the FDA, IHE which is the standards group on the EHR side and CDISC, the standards group on the life sciences side.

So we’ve built extensions. You could now enroll a patient from within the EHR system. Even if it’s a randomized trial, you can enroll a patient. All the edit checks you typically see in the EDC system were run in the EHR. You could pull up all your queries and go through them and resolve them. Again, all within the EHR system. And what we found is the problem is not, not enough data. The problem is too much data.

We did a study and we went in to collect all the medications that were taken 30 days prior to enrollment on the study. You pull up someone who’s been around for a while, there’s a lot of medications in there. So we built a way to filter and select from multiple data points. We also built visual cues so you can look at a form and see which data came from the EHR and what was manually entered. And then the last thing, we built a flag to tell you when
the data is mismatched between the EHR and the EDC.

How does this happen? You collect the data. Week later, the coordinator changes that in the EHR. This system will break up both data points and you decide which one you want to use.

So we did a quick pilot, 4 sites, 40 patients, all in Greenway EHR. 75% of the data was auto-populated. The sites love the experience.

So just to wrap it up, we’re always striving for faster, cleaner data. It’s supported not only by the FDA but the EMA which wrote a reflection paper for E Source. It’s implemented by multiple EHR systems. It reduces the amount of work that the sites have to do and it reduces overall study cost.

Thank you.

Joe Hage: Thank you Jim.

20 Introductions in 60 Minutes (2016)

29 min reading time

20 Introductions in 60 Minutes (2016)

Reading Time: 29 minutes

The video and transcript follow.

A new and well-received feature we introduced in May 2016 was giving 20 of our guests three minutes to introduce themselves.

Joe Hage: Hi, my name is Joe Hage. I specialize in marketing communication and strategy, lead generation, and website development for medical device and related companies. So if you’re not satisfied with the quantity and quality of your leads we should talk.

Now whether we work together or not, let me give you these three ideas. First is all marketing comes down to three things, which is actually what I wanted to say. Number one is can you be found? So if I Google Markus will I find you or somebody else? If I Google the name of your company, is it going to be an Amazon choice or your website. So number one is can you be found.

Number two is once you’re found will you engage the person? So you got them to your website, if they click off immediately because you don’t look relevant, no one wins. Can you be found? Are you engaging? And third is if you do engage them have you given them a way to easily tell you who they are? Contact form is not exactly the optimal way. There are other things where they say, “I must have that white paper, I will give you my email address for that,” or a chat box which I personally love for a quick engagement.

So number one, can you be found? Are you engaging? And will you collect information?

Thank you. My name is Joe Hage, and I can be of service you can find me at dinner. Okay.

Jessica Boden: Okay. Hi guys, I’m Jessica Boden, I’m the President of StoneArch and we are a Minneapolis-based health and marketing agency. We’ve been in business for 32 years, our founder came out of Medtronic. Obviously Minneapolis is a rich market for medical technology.

We work across the healthcare continuum focusing from prevention to intervention so think on the prevention side therapeutic foods that are proving out to lower cholesterol to 02:03.09, all that good intervention side as well.

We work with large companies: St. Jude, Medtronic etc. but we also like working with really innovative interesting startups. We’ve got 40 passionate people that are really there to make a difference and positively impact health.

What makes us different from other agencies I would say it’s our commitment to help our clients be relentlessly relevant. So whether that’s helping tell a clinical story to consumers or the opposite, taking something that’s really complex and simplifying it and making it matter in a meaningful way.

So three things I would say about being effective in modern healthcare marketing would be your brand matters. I think sometimes it’s an afterthought for startups in particular where they think, “We just got to get something out there,” and it’s really not that important. We live in a brand-driven world, if you are not telling a provocative interesting compelling story from the very beginning, you’re going to struggle.

The second would be strategy before all else. It’s very easy to want to jump into tactics and create things from a marketing perspective. Take the time, do the discipline, understand your strategy, your unique value proposition, your positioning etc.

And the last thing would be get some outside perspective. Sometimes you’re too close to it you need to work with some folks that have expertise that you don’t that can ask the tough questions and help you.

Joe Hage: Let’s hear it for Jess. (Applause). Jeff you’re up.

Jeff Russell: All right well good afternoon everybody. My name is Jeff Russell. I’m the life sciences Industry Practice Director for a company called Armanino. And if I ask by show of hands if you’d ever seen that logo or heard of Armanino before you came to this conference, most people probably wouldn’t raise their hand.

So we are a diversified tax audit and consulting practice. Kind of like a smaller Deloitte, Top 25 accounting firm, I’ve just lost half the audience. But I’m here representing the consulting side of the business and so I just wanted to talk briefly a little bit about what we do, how we can help you and realistically how you can help me. And one piece of advice, instead of three pieces.

So from a consulting perspective we work with companies that are looking to make transformative change through technology. We are a Microsoft partners because Microsoft is kind of where we’ve attached ourselves from a technology perspective. So we resell and implement Microsoft business systems.

Being a Microsoft partner makes it really difficult to come up and give a three-minute speech and not use acronyms, so I’m not going to do that. But basically we bring technologies to the table to help manufacturers and med device manufacturers managing inventory, financial reporting, compliance, manufacturing, electronic device history records, things that people in this room are probably very intimately familiar with.

And so we work with companies, the people we can help are companies that are scaling are expecting profitable growth, rapid accelerated hockey stick growth. Or are looking for systems to help them with that, to help them scale. Companies that are looking to get off of disparate systems and on to a more unified platform. We help those organizations evaluate technology and ultimately implement solutions that will transform your business and give you the tools and capabilities that you need to be successful.

How you can help me is that I’m always looking for people in the industry that are kind of able to keep me abreast of changes. I try to come to as many of these types of conferences and read newsletters, but my patient is manufacturers and my patient is someone who’s having trouble managing the business because their systems are not doing what they need them to do.

And so the diagnosis that you’re able to get out on the field or that you have in your own experience is knowledge that you can bring to me that will help me be more successful.

So my one piece of advice for anybody in the room is that you should have a trusted advisor that’s part of your footprint for where you’re going and where your roadmap is as an organization. Technology should not be something that you’re reactive to, you should be proactive and ahead of the game and it will help your organization be much more successful.

So I will be outside after this session and still at the booth around the corner if you guys want to come by and visit.

Joe Hage: Let’s hear it for Jeff. (Applause). Leo you’re up.

Leo Eisner: Hi, I’m Leo. My company is Eisner Safety Consultants. We specialize in medical product safety and regulatory approvals. Our group does quality systems, regulatory affairs, lots of other things. That’s right.

Mary Brady who used to work at the FDA just joined our ranks, and she worked on the Home Use Guidance. And she did a great job; I worked with her a little bit on it. She also was in Patient Labeling and she’s all over the place right now. So if you need some help with Home Use, she’s a great resource.

I’m heavily involved in standards development. Medical electrical equipment and systems and also home care. There’s a lot going on there, keeps me real busy. So I want to talk a little bit about the standards that are going on.

The first one, very near and dear to me is IC 60601-1. I know it’s a mouthful medical electrical equipment and systems. It on its third edition with Amendment One. It’s going to go through another change. In 2019 there’ll be Amendment Two. A fair amount of changes at most, like about 130 items give or take. It’s going to get voted on in October.

Big new is fourth edition is coming in
2025. It’s a little far off for now but it’s a moving target and it affects you. Every time there’s a change it affects your products so you need to keep up on it.

Next standard that’s important to know about is 60601-1-2, a bigger mouthful. That’s EMC for medical electrical devices. If you have a product that is electrical going to the FDA next year you’re going to have to meet fourth edition. My EMC guys have told me that’s a design change, so if you’re not ready for it you better start now because you don’t have a lot of time. If you’re a home care product you need to meet at this point in time. There’s a lot of home care products don’t know that.

This morning, I think it was David mentioned 62366, the Usability standard. The FDA has decided no more with that. There’s a new version 62366-1 came out February of last year. And that’s the only version the FDA is considering as a recognized consensus standard.

Then the next standard I’m going to talk about it actually a technical report which is a guidance document. It’s not, it’s considered informative and that’s ICTR62366-2. It was published this April and it’s a guidance for the -1.

Joe Hage: Let’s hear it for Leo. (Applause). Carl is next.

Carl Mayer: My name is Carl Mayer, I’m the CEO of Energize Medical and we use our suite of proprietary portfolio or proprietary tools and platforms to accelerate electronic medical products to the market. And right now our platforms are focused predominantly on energy-based products such as radio frequency, ultrasound, those types of things. There was a mention of those products this morning and a few of the presentations, Lilac and Stuart.

And you may say, “Well accelerate time to market, what does that mean?” Well in 2015 our platforms cut on average 17 months in the time it took to commercialize medical devices for our clients.

So what are some examples of those products? One of them is a Class III electronic medical device. It’s an energy-based console with a complex five-fringe 10-electrode basket and sheath catheter. We develop the console, manage the program, plain sheet through clinicals through CE mark and that took approximately 19 months.

Another product that we also completed during 2015 was a Class II product with multiple probes, energy console, irrigation pump, and a hub in order to connect all the probes to the energy console. We completed that one too from clean sheet through clinicals through 510(k) submission all in about 18 months.

So those are just some examples of what we can do with our platform technologies.

Two things I would ask that you consider with respect to your medical devices: one is what is the cost of time to market? What is the value of getting to market one month earlier? When we look at those products I just mentioned, there’s 300 consoles per year that are sold, about 100 catheters per console, and each month is worth about $2 million in incremental gross profit.

The second thing I would ask you to consider is what’s important to you when you select development partners when you’re doing these types of developments? Technical skills, is it the facilities? For me it’s trust. What’s going to happen when things don’t go right during the program? And for those of you who have developed medical devices you know that things don’t go right during every program. So what’s going to happen? Are they going to be there for you?

I really enjoy medical device, I enjoy helping people. If there’s some way that I can help you please contact me. Either I’ll help you or I’ll connect you with someone who can. Thank you.

Joe Hage: Let’s hear it for Carl. (Applause). Moshe, what’s Kosher? (Laughter).

Moshe Engelberg: (Laughs). Thank you Joe for that lovely introduction. My name’s Moshe Engelberg and when I was in college someone asked me my name and I said Moshe Engelberg and they said, “You must be Irish.” And I said, “How did you know? Most people don’t know I’m Irish Catholic.” (Laughter). Anyway take advantage of it when it shows up.

Today 25 years ago I started a company called Research Works so it is a birthday. I’m pleased to say we’re still around. And I started the company out of frustration. I was in graduate school at Stanford and I kept going back to school because of how we did things in health. And I kept thinking McDonald’s gets us to cry over hamburgers and we bore people to tears literally over things that are really important, savings lives. There’s something wrong.

So I kept going back to school learn more and figure out how can we do better, and I started the company in order to do better. So really we exist for one reason, and that’s to help companies in the business of health save more lives and as a result of doing that make more money. There’s always a balance between mission and money, but my contention is you’re in the business you’re in because you care about people and you want to make a difference. You’re saving lives and that gets lost.

So a lot of our work as a consulting practice I head up a company, the company name’s Research Works. And we help again companies, medtech companies, health IT companies, payers and providers, some government agencies like CMS and CDC figure out what makes them different, why should people should care about them. If they’re making products that really satisfy an unmet need and solving a meaningful problem. Or if they’re just doing stuff because the engineers in the room and the company President says, “Let’s do this.”

So we ask the tough questions, we do the research to figure out the answers, develop the strategy, and figure out how to communicate effectively so people care.

So a couple of tips for you to consider. One is because we love we collectively fall in love with our stuff; we think everyone else should love our stuff. So we advocate a thing called ‘Two Paths to Persuasion’. You can get people to care about your product for the wrong reason, not just because of all the things it does, and it gets them in the door.

Second is this idea if you can’t fix it feature it. A lot of companies sweep stuff under the rug like, “We’re slower we’re more expensive” instead shine a light on that otherwise all the energy goes into suppressing it and there’s always value in what we try to hide.

What makes us different? Number one, we love our clients. We’re not going to work with clients we don’t love, and I mean that literally. This is Southern California, you can say stuff like that. And we’re selective so we don’t have hundreds of clients and don’t want hundreds of client. We do have room for one or two more, and our clients we work as partners for many many years: Philips Healthcare, Dräger Medical, and so on.

And the other thing that makes us different is we put a money back guarantee on every project; that makes us accountable for results.

Thank you very much.

Joe Hage: Let’s hear it for Moshe. (Applause). Let’s hear it for Don. That was a test.

Don DeStefano: Thank you. Good afternoon. So my name’s Don DeStefano. I am with LexisNexis Healthcare. And specifically why we’re here today is we offer medical device customers all the way from a small DME company up to a large Medtronic. The ability to specifically target physicians and facilities based on patient volumes for your relevant product. So if you want to call on 15,000 oncologists, you can, or you can use my data to target the top 500 breast cancer specialists in the US.

We can provide that same level of detail for a
ny CPT code or for any ICD 9 or ICD 10 code. One of our latest case studies is we helped a company with a $7,500 purchase, turned that into $750,000 in revenue in their first year. I subsequently saw them at a trade show and they had doubled their sales force. Now in fairness they went from two to four people (laughter) so.

So if any of you had participated in Mike Sperduti’s workshop yesterday, he said three things: Be brief, Be brilliant, Be done. I have given you at least two of those things.

Thank you.

Joe Hage: Let’s hear it for Don. (Applause). Mark.

Mark Arnold: Thank you. All right so I’m kind of out there, this is not the typical service … I actually don’t even really offer a service, I’m with a peer review journal called “Cureas.” We are one of the select journals where all of our publications are submitted within PubMed, the NIH database, which is the gold standard around the world.

One of the things that we do besides supporting MDs with publishing data, is we work with medical device companies and pharmaceutical companies to develop a portfolio of peer reviewed material that supports your technology.

So for those of you guys that saw Nick yesterday, you need peer review papers to get reimbursement. Well before that you need peer review papers to get cleared. You need papers to get reimbursement, and you need papers also to effectively position and sell your product.

So we can work with you and we’ll reach out to our community of practicing MDs to publish papers that document experiences with your technology.

So just a quick example, the most active program that we have right now is with a medical device company in the Silicon Valley. In four months we’ve got 21 peer reviewed papers published for these guys that validate their particular tool for a very specific application. Right. They’re going to be using in their sales and in their marketing to more effectively convert their leads.

So I’ll be here for the next day-and-a-half so you guys just give me a shout if that sounds interesting.

Joe Hage: Let’s hear it for Mark. (Applause). Thank you. Mike … Oh pardon me, Jon you are next.

Jon Speer: All right. So what is the single biggest business risk that medical device companies are faced with? Yap that’s right, it’s regulatory compliance. I mean we all heard David Amor talk earlier about Theranos and their FDA woes. Wouldn’t you like those FDA and regulatory woes to go away?

My name’s Jon Speer and I’m the Founder and the VP of Quality and Regulatory at Greenlight.guru. Greenlight.guru is a software platform designed specifically and only for the medical device industry. Our platform helps you manage and maintain your entire quality management system and a cloud-based software application as well as optimized feature set around design controls and risk management.

So if you care about compliance and you care about design controls, and you care about complying with ISO 14971 Risk Management, then you should find out a little bit more about Greenlight.guru. And guess what, that’s our domain name, Greenlight.guru. If you want a demo, go to the website, click the button ‘Request the Demo’.

I’m curious, how many of you in this room are consultants? Raise your hand. It’s okay, we like consultants. How many assuming are the rest of you medical device people, medical device companies?

Good news, if you’re a partner or a consultant we have a partner program. So you can use Greenlight.guru platform with all of your companies. If you’re a medical device company, guess what, we have a product for you too, it’s called our software platform so you should check it out.

I also have some content to give out. You can go to MedicalDevicesGroup.net, I did a webinar with Joe Hage back some time ago. It was on ISO 14971, Risk Management. You can go to MedicalDevicesGroup.net to get the replay of that. It was an excellent webinar, right Joe?

Joe Hage: I agree.

Jon Speer: All right. And you can also get a free Ultimate Guide to Design Controls and I can give you that today. It’s very simple, if you have your phone all you have to do is text Greenlight to 44222 and you will get the ultimate Guide to Design Controls today.

My name’s Jon Speer, I’m the Founder and VP of Quality and Regulatory at Greenlight.guru.

Joe Hage: Let’s hear it for Jon. (Applause). Mike Stanasek.

Mike Stanicek: Hello everybody. I’m Mike Stanicek. I’m the VP of Marketing of DNK Engineering. We are a contract design and manufacturing firm based here in San Diego but we also have a facility in Singapore.

In addition to our billings in RB, we also have an FDA-registered facility for design and manufacturing of med device activities.

We have over 150 engineers on staff, 450 total employees. And are very unique in that we do design and manufacturing all in one facility, and that’s kind of unique in our space.

We have a team of engineers of over 150 very experienced master level engineers representing all the disciplines you can think of. We also have a very strong quality and quality engineering program to ensure that all the compliance issues are maintained. This includes 501(k) submittals, audits of our sites if necessary for our client, DMRs, DHFs. All those types of things are in place.

Secondly we have a very strong set of program managers. We partner with our clients very closely to really align on the expectations for cost, performance and schedule. So those are very important and we have a very seasoned group of people that do that and we follow a very succinct process for ensuring that all the deliverables are met at each of the gate reviews to make sure the product is meeting compliance, regulatory issues as well as the schedule.

Finally, all of this has to be kind of tied together with really strong systems. We have a glue that we have developed as a proprietary system that ensures that that product is followed all the way from very early design through all the prototyping and manufacturing. This includes developing MRP, design rev control, as well as BAMs that we can actually transfer those BAMs to our supply chain on a global basis.

And in fact if we want to move manufacturing to Singapore we push a button and it happens. So we’re very integrated from that perspective to bring those products to market very quickly.

Finally, we’re very proud of the fact that we have done literally hundreds of commercialization products with clients across many different markets. And we’re most proud about the fact that 75% of our business comes through referrals.

So we’d love to work with any companies that have an opportunity to bring a new product to market, or just want to bring a product that needs a little more push in manufacturing, we can help bring that to bear.

Thank you very much.

Joe Hage: Let’s hear it for Mike. (Applause). And as a point of clarification that is a Bill Of Materials not an explosive bomb, if I’m correct.

Mike Stanicek: It depends.

Joe Hage: All right. (Laughter). Next up, four-time 10xer, John Eckberg.

John Eckberg: A year a year-and-a-half from now we’re going to have a tax, it’s going to be 2.3%. It’s going to be revisited upon this industry. The last time we had
this tax it raised about $1.8 billion. $1.8 billion is a $50,000/year job disappearing from the payroll of some company in this space in the United States every half hour.

It was a terrible tax, it was a bad idea and the people in Washington came to their sense largely because the LinkedIn group run by Joe and many of you others lobbied to have that disappear.

I’m going to need some help because I need you to revisit this in about a year-and-a-half. I also need someone a few people to break out a calculator right now. I used to be a reporter at the Cincinnati Enquirer, business reporter, and the rule of thumb was that if you saw me with a calculator look for a correction the next day.

The way I think we should replace this tax is to allow the repatriation of profits from US companies to come back in the United States. Anybody know what the number is of profits offshore? Anybody want to guess?

No, it’s $2.4 trillion. So that’s the number. So if we allow $2.4 trillion to come back in all at once it can’t happen. So let’s allow 10% of that to come in every year for 10 years. We’ll tax it at 5%. Do we have someone with a calculator going $2.4 trillion. Okay it’s $240 billion that will be coming back into the US, we tax it at 5%/year. What’s 5% of 240 million? Come on, there’s a CPA in here. What is it?

Joe Hage: 120 billion.

John Eckberg: All right, so we have 120 billion flowing into the tax coffers from that. We have 240 billion coming in. Divide 240 billion by $50,000/year job you end up with a pretty good number. If any of you all had your calculators our right now we would know what that number is.

You tax that wage at 240 million, if it goes to … 240 billion if it goes to salaries 23% it’s another big number coming into the treasury. In other words it would dwarf the 1.8 billion.

I appreciate everybody’s time. I wish one of y’all would have broke out a calculator but that’s okay.

Joe Hage: Let’s hear it for John. (Applause). Dennis.

Dennis Kroft: Over the next three minutes you’re going to say, “So what? What does it mean to me?” My name’s Dennis Kroft. I’m Vice President of Marketing & Membership for Life Science Washington. That’s the State of Washington on the west coast not DC.

We’re the trade association non-profit by choice for the life sciences in the State of Washington. We represent almost 700 member organizations. Caitlin Cameron raise your hand. Caitlin’s one of our board members and members there.

So as one of the largest life science associations in the country, therefore the world, we provide a lot of services to the medical device industry. Number one, commercialization. We give pro bono consultations to medical device companies to bridge that gap between startup and commercialization.

We have capital formation. We have our own angel network called WINGS. We have what we call the VIP, Venture Investment Partnership, where we bring in strategic organizations that meet with the medical device companies to invest or partner with them.

We have the WIN Network. We’re very big in three-letter acronyms up in Washington. Washington Innovate Network, it’s a mentoring program. It’s based on the MIT venture program. And what we do is we put startup CEOs with seasoned CEOs and get them along the way. We have over 60 networking events per year, almost sometimes two/week where you can come in to meet the who’s who of medical devices.

June 1st, Life Science Innovation North West, 1,000 people at our two-day conference. It is the largest fully integrated Life Science exposition in North America. So now you’re saying, “So what? Who cares?”

I want you to know that Washington has a very robust support of substantial medical device company … ecosystem. Over half of our core members are medical device companies. Why? What should that mean to you? Well you may need our services come on up to Washington we’ll help you out. More than that spread the word. You know someone in your network who needs our help. Tell them to come to Washington.

About 15% of our members are in Washington, so they don’t have to move they can just come there. So that’s the so what. And I remain Dennis Kroft from Life Science Washington.

Joe Hage: Let’s hear it for Dennis. (Applause). Thomas.

Thomas Meier: I’m Thomas Meier, I’m the Co-Founder of YouCanBiz gmbh, a company placed in Switzerland. For the last nine years I emerged out of a career path in a multinational environment in medical devices industry. Mainly in Europe but I’ve been an expert here to North America as well as to emerging markets worldwide.

Our company is a lighthouse structure meaning that we have antennas and lighthouses in many countries especially in Europe. And we have a dual business model. We work for Europeans to bring them across the Atlantic to North America or through the Pacific to Australia and the other way round to enable these companies making a footprint in Europe.

We work with innovation platforms in three countries and our segments that we work with are dedicated to the health technology industry. We work with small and medium sized companies well-funded or need in need of funding. And also with innovators that can be doctors that have no idea how to make a product out of their idea.

So we facilitate commercialization of new ideas, of material ideas abroad. And we also facilitate the internationalization of disruptive technologies and new companies gathering to, going for new markets and new horizons.

Other than telling you more in details I’m working with two analogies. Our toolbox is a very rich one, but coming from Switzerland you all know that device. And this multitool is exactly what we apply but obviously in another form for any kind of vertical services from idea to marketplace. Whether you need a validation, whether you need a prelaunch activity, a launch or post-launch we are there. And that’s why we call it You Can Do Business.

Last but not least if we work together we have a promise that we keep, and that’s why I’m referring to Stuart this morning. He showed you some socks and I will show you some socks too. So both feet on the ground and we do walk the talk, all right.

So I’m here also for the rest of the event, and thank you Joe for having me.

Joe Hage: Let’s hear it for Thomas. (Applause). Here’s Scott.

Scott Thielman: Thank Joe. That’s better. So we’ve learned from this conference that if you’re a leader in the medical device space with a startup or an established company you face a web of challenges: reimbursement, you’ve got research to do, you’ve got regulatory, you’ve got legal, and oh yeah there’s actually development and production and sales that have to happen.

Product Creation Studio is a development firm up in Seattle, Washington. What we do for our clients is actually let them sleep well at night with a peace of mind that we’ve got their back on the design and engineering parts. Those critical pieces that bring their technology off the bench or off the napkin and towards on a trajectory towards production.

So it’s not just that we provide great user experience design, industrial design, electrical, mechanical, software and embedded systems engineering. And it’s not just that we provide world class project management, account management services, it’s really that we put you at ease. Give you that confidence say, “We’re doing this the right way for this key piece of the p
uzzle so I can go focus and orchestrate the other pieces that I need to do to keep my young medical device company moving in the right direction.”

If you check us out a little bit on the web or other place you’ll see some notable names. There’s big companies like Amgen that we’ve worked with. There’s some notable companies that we’ve been critical in their histories with like Advanced Bionics and in the ultrasound front like Verathon Ultrasound up in the Seattle area. Our partnership with those companies was on key products that actually led to them being successfully acquired and so I feel like we made a contribution to their success.

I’m really excited about the up and comers that we’re supporting. Our work last year with a company called LumiThera was critical as they bring a product that actually is a therapy for macular degeneration to market. It enabled us to win an award at the MD&M West for ‘The Most Innovative Supplier’.

And there’s a company that if you haven’t heard of you’re going to hear of soon OtoNexus that’s bringing an innovative ultrasound-based diagnostic to the area of middle ear infection that is very exciting. We’re happy to be just one piece of their support as Caitlin Cameron the CEO she orchestrates this web of resources that has to get this amazing product to market.

So happy to talk more. I’ll be here through lunch and would love to meet more folks that are in that position that hot seat of orchestrating the magic to get the product to market and we talk about how our design and development services can help.

Joe Hage: Let’s hear it for Scott. (Applause). Next up Ross Bundy, winner of the 2015 Manufacturer’s Showcase.

Ross Bundy: Hi everybody I’m Ross Bundy, CEO and Co-Founder of Nanomedical Diagnostics. And as device manufacturers I want you to think about even the devices you have like your computer or even the devices you guys produce and think about what does that mean in a biological environment.

They don’t always interact, there’s a lot of things you’ve got to do to make that work, especially electronics. The materials you use in electronics like silicon and copper tend to poison and corrode biology and vice versa they tend to destroy the electronics.

Except for us. So we have a new sensor, we were talking about sensors earlier that operates in a biological environment but detects biomolecules and biochemistry in entirely electronic fashion. We use a new material that’s called Graphene, some of you may have heard of it. It was discovered just about 10 years ago. There’s a lot of news about what Graphene is capable of but what we’re able to do is use it like a transistor on a sensor.

And now Graphene unlike any other conductive material is stable in air and water. It will not oxidize but it’s also carbon which allows me to integrate capture molecules into the transistor and those capture molecules drive electronic signals.

So it sounds really interesting and a cool technology and what does that mean? What do I sell? So 10x is a fun conference for me. I started coming here when I just founded my company. My business partner and I had both just gotten married, both just quit our jobs and were leaning on our wives for support and operating out of his garage and we had barely anything to work with when I first came here.

The next year was the first time we ever presented the technology publicly at the 10x Conference and we won ‘Most Innovative Manufacturer’. We had just a few employees raised a little bit of money. So now I’m here today, we’ve raised a little more money and now have 12 employees, and we’re not selling the technology to academics who are enabling new forms of life science to be studied using our sensors, and we have about six publications in the cycle right now.

One of our academic collaborators was able to modify mouse embryos and measure individual embryos compared to their controls through, and understand the expression of those embryos in real-time while they’re still alive measuring one embryo at a time, which in the past had always taken them hundreds of embryos to do.

So it’s an interesting technology, we’re selling now into academia which has been great. Where are we going? Hopefully next year I’ll be able to talk about the success of our first life science product whereas what we’re envisioning is a product that as a 96 00:37:23 can fit into a robot pipette and a single robot can screen 8,000 molecules per day in a drug screening process, which today can take as many as four weeks to do. About 20,000 molecules we can do in about two-and-a-half days and for a tenth of the cost.

But we aren’t going to be a medical device company, we’re a diagnostics company. We’re very focused on Lyme disease, we’ve been studying Lyme disease and what we can do with existing biomarkers. And what we found is using these existing biomarkers we can significantly enhance sensitivity specificity and enable early stage detection, which is impossible today.

So thank you very much, and we’ll be talking to you next year as well.

Joe Hage: Let’s hear it for Ross. (Applause). Next up is Bob Kent.

Bob Kent: Hi good morning everybody. My name is Bob Kent and I’m President of Timmons & Company. Timmons & Company is a full service marketing communications agency. We’ve been in business for over 43 years, and we serve a wealth of clients from Fortune 100 companies down to startup companies and everything in between.

And often times in settings like this people will say, “That’s great, what makes you different than a lot of the other companies that are doing the very same thing?” And it’s a great question, and often times I come back to two simple things: one is that that we think, and the other is that we actually listen.

And as simple as they sound time and time again we’ve had our clients come to us and say, “Boy, I was working with this other team and they just tried to take this cookie cutter approach and give us the same thing that they were giving everybody else. And furthermore they weren’t listening to any of the feedback that we were trying to give them.”

So I think that’s one of the fundamental things that you need to be looking at when you’re looking for an agency such as ours.

Secondly, a little thing about myself. I actually began my career as an engineer so for many years before I took the helm at Timmons & Company I was responsible for business development, sales, marketing, product management and engineering for companies like Siemens and Philips and Taico and had global responsibility for all of these groups.

And so it helps me and my team be able to come alongside of clients like you and be able to understand the nuances of your business and what it takes to be successful.

A couple of things I’d like to share with you as you develop marketing because I know often times marketing is pushed off to the side. I get it, engineering is important, getting your product to market, but I want to come back to a study I read 10 years ago that still sticks with me to this day. In one twentieth of a second people were reacting to websites they were seeing and saying, “Ooh great company. Ooh terrible company. Ooh great technology, terrible technology.”

You get one chance to make that first impression, and if you’re not making a favorable first impression you really need to focus on that.

And secondly it’s about your value proposition. Understanding that you’re speaking to people. Don’t talk about you
r speeds and don’t talk about your feeds, listen to what’s important to them, speak their language and you’re going to have multiple people coming to your site.

So you need to have a user experience catering to each and every one of them. They want to see information differently, they want to process information differently. How are you giving them information and are you holistically looking at that? Are you giving them case studies and the white papers and the information that they want to hear in a form that they want to see it.

And lastly, are you keeping up with technology? A stat that you may not be aware of is YouTube is now the second most utilized search engine in the world. Three billion unique hits every month. People want to understand and process information differently. Are you incorporating video into the use of your marketing materials? And if you’re not, you should really seriously consider that.

I welcome the opportunity to speak to any of you about any of your challenges you might have, and I appreciate your time today. Thanks very much.

Joe Hage: Let’s hear it for Bob. (Applause). Next up is Karen.

Karen Anderson: Thank you. Three minutes, one person, three concepts. First concept begins with C. I can come up here and tell you what a talented and versatile writer I am, or I can get a Joe Hage endorsement and someone that you know and trust can come up and vouch for me. That’s Credibility. And it is the core, it is the one thing you cannot do without when you are communicating what your company does.

How many of you actually have a product or a service that you are actively marketing and selling? Okay, this is special for you.

After Credibility, the next most important thing, the next concept is begins with A, and it’s Audiences; Multiple Audiences. I know that all of you are great at talking to a scientific audience, and some of you are really great at talking to the FDA.

But so much reputation nowadays and so much actual sales is done by talking with CFOs at hospitals, CEOs at a small rural healthcare system. Or even in the case of say a cochlea implant for children, the parents of that child are going to be making a decision about what product they’re going to be implementing. And in that case you need to really be ready to talk to that audience.

That gets me to my third concept, begins with V, and that’s Voice. When you talk with the CEO of a hospital and you don’t want to talk about the wide bore on your MRI system or the number of leads on your diagnostic equipment because he/she don’t care. They care, “Is this going to make better healthcare in my community? Is it going to be affordable? Is my staff going to like it or are the nurses going to bitch?”

They really want to make sure that this thing, they want to hear in their language. They want it to sound like something they read in Forbes or maybe the Wall Street Journal. And that parent who is picking the cochlea implant for their child sometimes you get a PR firm and they write your case studies and you hear the parent saying, “We were so impressed with the increased mobility and acceptance. Our child is now living and thriving in a wonderful life in their school environment,” said no parent ever.

The parent said, “When my child was able to play with other children and jumped in that swimming pool my husband cried.” Now that’s the Voice.

I’m an expert at helping people … I know people who say that they would rather die than write a case study. They will, they will die if they don’t write those case studies. (Laughter). I’m there, I love those rural hospital CEOs. I have people I’ve interviewed who I am still friends with long after the client has moved by.

So yes if you want help with that please get in touch with me I’d love to talk.

Joe Hage: Let’s hear it for Karen. (Applause). Mr. Mike Sperduti is next, and my partner in crime.

Mike Sperduti: Hi everybody. My name is Mike Sperduti and I am the CEO of Emerge Sales. So who here would like to sell faster, more and more profitably? Excellent. That’s what we help our clients do. And we help them do that and see growth in 24 different countries around the world. We’re actually entering Japan this month which will be our 25th country.

Specifically what we do is the gentleman who talked about the new sales structure from the magazine, we have engineered a new sales process that helps our clients get to market faster. And so what we see and what our clients see and why they trust Emerge is because we can actually accelerate growth and decrease selling expenses. It’s a very powerful combination.

What makes us really unique is imagine a sales and marketing company who makes big claims like I’m making and imagine that they will guarantee that work. You give us your money, it’s safe, we guarantee it.

My name’s Mike Sperduti. My company is Emerge.

Joe Hage: Mike, what are you doing in August?

Mike Sperduti: In August I am with Joe, and I’m thrilled to be with Joe because another major need in this space is sales training especially for startups, mid-sized companies. Today is the toughest environment to sell, and so we’re going to teach you how to a seven digit phone number where you have no relationship with in a medical facility and turn them into a customer. The seven specific things that you need to do we’re going to teach you that process, and then Mr. Hage is going to teach you how to use his communication systems to make a better impression on your customers.

Joe Hage: Good job. August 8 and 9, isn’t it? In Philly.

Mike Sperduti: What’s that? August 8 and 9 is that what it is? It’s August 8 and 9.

Joe Hage: August 11 and 12 in Boston.

Mike Sperduti: In okay there you go.

Joe Hage: Let’s hear it for Mike. (Applause).

Mike Sperduti: All right thanks everybody.

Joe Hage: Caitlin.

Caitlin Cameron: Hello everyone. I’m Caitlin Cameron, Chair and CEO of OtoNexus Medical Technologies. And guess what, I’m not here to sell you anything. I’m actually here to talk to you about middle ear infections in kids.

So let me start with this. So who here has either ever had a middle ear infection or has dealt with a child who has had a middle ear infection? So you can see by the room this is absolutely ubiquitous.

Very nearly every child in America will suffer at least one occurrence of a middle ear infection severe enough to have to see the doctor. And the vast majority of those children will suffer repeat occurrences up to a dozen or more in childhood.

Middle ear infections are called otitis media. 17.6 million doctor visits a year are quoted directly to otitis media in the United States alone. It is the number reason for antibiotics in kids, it is the number one reason for surgery in kids.

The last time anybody cared enough to do a full study was 20 years ago, and at that time it was determined to cost us $5 billion/year just in the United States. We think that number’s probably 12-13 billion today.

Our solution is simple
and it is elegant. We use Doppler ultrasound well known and completely safe, and we apply it in a completely novel way to the ear. We are air coupling, this is important because trust me you do not want to fill a child’s ear full of ultrasound gel, much less dig it back out when you’re done so we shoot through air.

Air coupling, point-and-shoot, no pressurization, no pain, and in one to two seconds the physician is given the definitive objective diagnostic data that is required for the instant and accurate diagnosis of otitis media. And in particular differentiating when and when not to prescribe an antibiotic.

So as I said I don’t have anything here to sell you but I do have a request. Please carry forward our message of our simple and elegant, inexpensive and easy-to-use ultrasound device for the accurate diagnosis of middle ear infections in kids.

And also a request for introductions, maybe you or somebody you know has some contacts or somebody inside of perhaps one of the big medical device manufacturers who may be an acquirer for our company. Or in the big children’s hospitals or pediatric practices to whom we will sell our device.

Now we know how to get into these companies and we have contacts but you can never have too many contacts. So any such introductions are greatly appreciated.

And of course like all young companies soon we will open yet another round of funding and introductions to investors are always greatly appreciated.

I’m Caitlin Cameron, Chair & CEO of OtoNexus Medical Technologies, here to share with you our story of our simple and elegant ultrasound solution for the accurate diagnosis of middle ear infections in children and in adults. Thank you.

Joe Hage: Let’s hear it for Caitlin. (Applause). And all the way from Norway it’s Iacob.

Iacob Mathiesen: Thank you very much Joe, that was nice. So I’m Iacob Mathiesen. I’m a founder of a small startup company in Norway called Ottavio 00:49:06. We provide a novel solution for patients with poor peripheral circulation. So these are typical elderly people, many people with diabetes who have clotted arteries. We developed a system which basically sucks blood down into their legs and it does so using negative pressure which oscillates. And we just got our product CE-marked and we’re now testing it in various clinical settings in Norway and the UK and Germany.

And even this morning I got an email from a dialysis center is also using our device. And they started treating a 50-year-old dialysis patient who had a chronic wound. He’s been having a chronic wound for six years, they haven’t been able to heal it because of poor circulation. And he’s not allowed a kidney transplant because of this wound.

He’s been using our device now for five weeks and the email said that, “It looks like it’s going to heal, so the size of the wound is now half the size.” So that could make a big impact on him.

We’ve also tried it on several other patients with chronic wounds and it really makes a big difference to these patients with poor circulation.

I’m here to learn. Of course we want to try and file a 510(k) this year so that’s basically what I had to say.

But thank you very much for a nice conference Joe.

Joe Hage: Thank you. Let’s hear it for Jacob. (Applause).

Medical Internet of Things (IBM): Creating and Deploying Connected Medical Devices

22 min reading time

Medical Internet of Things (IBM): Creating and Deploying Connected Medical Devices

Reading Time: 22 minutes

It was a treat to feature IBM’s Kimberly Cobb at this year’s 10x Medical Device Conference.

Kim finds manufacturers who say, “We don’t want to be a medical device company any longer, we want to be a services company. We want our services to drive the demand for our devices.”

Are you among them?

Kimberly Cobb: Thank you Joe. First I have to say wow! Right, this has been a great conference. And I feel a little bit like Napoleon Dynamite up here, I have no skills. I don’t know Stephen Hawkings, I’m not a physician or a doctor, haven’t done tremendous research. I haven’t even thought about curing aging. Not a wonderful investor, my 401(k) seems to always be going down and not up these days.

So it has been really wonderful to be here and to hear all the speeches that we’ve had and all the wonderful topics that have been presented. And Joe put on a little brochure that I’m going to tell you everything you need to know about connecting your devices to the cloud and I’m going to do it in half an hour or less. So maybe I’m going to be superwoman after all if I can do that in half an hour.

So I’m going to try at least to give you some context and talk about the internet of things and the intersection with medical devices, and some of the really interesting things that are happening in market space today.

So first of all the Internet of Things is incredibly simple but also incredibly complex. From my experiences with talking to many many clients around the globe that are either in the Internet of Things realm or wanting to be into an Internet of Things business approach. What I’ve come to realize is that IoT or Internet of Things or connected medical devices really means very different things to different people, and it’s all based on what their goals are and what they’re trying to accomplish.

So to vastly simplify the IoT let’s think of it as like a coin with two sides. On one side it’s all about making what we call “dumb things” smart. So taking things and technologies and products that already exist today and instrumenting and digitizing them and getting information from them into the internet in order to make it more meaningful than just the to the device or thing itself.

On the flip side it’s also about taking things that are already smart instrumented, interconnected, intelligent which many medical devices already are today and combining these things together in some manner to create new and meaningful modes of interaction.

So in my sole humble opinion the IoT is really about the ability of humans, you and I, to engage and manipulate the physical world of things around us through the combination of technology such as sensors and devices and electronics and components within devices. And take that information that comes from those sensors and the devices, the data that comes from that.

And with some real-time analysis of that data, with combination of that data from other data sources, translating that into actions in order to create and deploy new and powerful experiences.

So it’s all about leveraging the human beings in the process. Some people say, “Well isn’t it sort of like AI or Artificial Intelligence?” And I really don’t believe so. I think that the power of an Internet of Things of connected devices is really going to be exciting and beneficial to humans and it’s going to inform us in ways that we’ve never thought of before in order to use our unique capabilities to drive better care, to solve some of the challenges and disease states that are out there today. So I think it’s a very interesting and compelling technology that we can bring to bear particularly in medical device and healthcare space.

And certainly the IoT is certainly disruptive as well but as I said I hope it’s disruptive in a good way. The idea of disrupting the traditional interactions with the physical world that we may have, new business models, new definitions of what a product or a medical device is, all of this can really drive incredibly personalized engagements with the physical world around us.

It can lower cost and improve performance and safety and efficacy of devices of systems or systems, and it can do so across the globe in many areas of intersections between health and care.

We actually see IoT also transforming whole other industries like manufacturing, retail, auto insurance, infrastructure oil & gas and those types of places. But certainly in devices where sensors and data can really enhance a human experience engage in value from the things around them. That’s where we see some significant impact from the IoT.

So what about you as medical device manufacturers or servicers or investors or wherever you are in the continuum, the IoT can really impact many areas of your business. So we see that it will impact how you gather and analyze customer data, so that may be patient data, that may be data from physicians, that might be curated data in medical journals, it may be free form data that you get from many other sources.

But Internet of Things is certainly going to change the way that you gather and analyze customer generated data and other data.

And it can change how you interact with your customers and your stakeholders, so it may be patients, it may be physicians, it may be your payers, provider networks etc. And it will certainly change how your products might be marketed or how they might be purchased, or how they might be reimbursed in the end result.

And we also see Internet of Things technologies changing the way individuals are developing and manufacturing their devices. And how these devices are serviced out in the field if it’s a device that can be serviced in some manner.

And 00:06:31 really have an impact on new product development so lots of companies I’m talking to today are thinking about the future. Five to 10 years from now what will my products look like? How will they be interacting with other devices? What kind of meaningful data and insights can I take from them? And how can I change the business models that I’m currently pursuing in order to really change the way my company does business?

So IoT we talked about devices and changes to devices. It’s not only about making dumb products smarter or smarter products better, we also see it allowing companies to advance the state of practice that they have in managing their assets or managing their devices or the performance of their devices.

So what if your devices could talk to you as a manufacturer? What if they could tell you that they’re complaining about something or there’s challenges with something or there’s new things that they could do? So taking event-driven information from sensors in devices and looking at the insight that that might give you could also give you avenues to preventative maintenance for devices.

And you might be able to do that on demand versus how we see it today which is usually by calendar schedules and that can be inefficient, or you might miss challenges with the product and not be able to be timely in the way that you react to issues.

So highly connected systems can be in a way a early warning system too. What’s happening with your devices when they’re being used and operated out in the field if you will. So combining that data you may be able to get some predictive insights into what the next generation of your product should do or be but also how you service them and how you fix them and how you prevent failures before it fails so to speak.

So we see Internet of Things also driving value just not in the connection and collection and use of data, but also as a critical component in managing assets, the products that are out there into the field. In some cases it might be not applicable if it’s a disposable product or something simple that’s replaceable, but many cases we also see medical devices that are huge, very expensive, costly to repair. And there’s a lot of data that could be taken from them and be predictive in the way that they go out and service these devices across the world. So two ways to think about the IoT as well.

So this underlining chart here is from Frost & Sullivan. So when I don’t know of something I just borrow it from the smart people who do. So I
borrowed the slide from them and I’m going to add two highlights here. And the reason for this is that I think in their study when they looked at the forces that are changing healthcare today as we know it and what’s going to be, healthcare is going to look like in the future, a lot of these trends really intersect with Internet of Things and connected and smart devices.

So one thing they’re talking about is the movement of information flow. More towards consumers that’s an opportunity for integrated systems and information from these systems. Move towards more of a patient-centric-based approach to care. And that’s an opportunity for what we see in wearables, analytics, mobile medical apps, provider services, personalized care. So can you take your medical devices, extracting data, and personalize information to the consumers and to the caregivers?

In a move to more of a decentralized community care, community-based care, home-based care. So we heard that in a couple of presentations today. So that’s an opportunity for taking your devices into smaller settings, home-based settings and instrumenting them so that they consumers themselves, the patients are asking for your devices and enjoying the use of your devices. And are able to do a lot more home healthcare, home diagnostics. And all that is going to be made possible through Internet of Things technologies.

And there’s also the move towards more collaborative care so less episodic care. You have a fever I’ll treat that with some aspirin, go home. Next thing you know you have a much larger challenge with your healthcare. So collaborating on your care on the whole person care that’s an opportunity for leveraging a lot of data analytics.

So if you have multiple devices that you work with or devices that you might interact with or even simple wearables that a consumer may have like their Fitbit or anything like that. If you can consume that data and leverage data, and move more towards care of that individual, whole care of that individual, that’s where we think we see a rise in connectedness in Internet of Things in order to gain that data to realize insights off of that data in customized care.

So all of these transitions that we are seeing in the healthcare market space, and this happening primarily in the US because of “Obamacare” right, the changes in the care and changes in reimbursement, but this is also across the globe. This trend more towards consumer base, towards information, towards preemptive care. And all of these transitions mean that medical devices and medical systems must become more interconnected and more personalized.

So the devices in the past that have been standalone, one size fits most not all, now really have to have communication capabilities. They have to have personalization capabilities. Quality outcomes have to be considered versus episodic care. So indicators of what’s happening within devices and the data you’re getting from them. You have to change the way you’re thinking about that data.

And so in turn this will mean that the Internet of Things and connected devices can provide opportunities for more cognitive analytics to be placed into patient care. And certainly opportunity from medical devices manufacturers to grab hold of new markets and interesting ways to market and sell devices.

So again another slide that I took from Frost & Sullivan, and they’re looking at the shifts in spending in healthcare so not just how healthcare is changing over time, but into the future how they think they see that swing in spending and reimbursement.

So let’s look a little bit further at the trends in spending to the left there, where a couple of things are highlighted. We see in their studies and I think this is representative of multiple studies. A swing towards spend and reimbursement in monitoring, in prevention, and in better diagnosis. So again a move towards connected care versus episodic treatment of single events. And this is where the money is spent in the healthcare industry but also how reimbursement is starting to change in order to reimburse for these types of things.

And at the same time as we see spend analysis and reimbursement analysis changing and the models changing over time, we see trends expand in the device fields. So miniaturization, sensorization, change in chips and devices, it’s become, all these things are becoming much more cheaper, easier to use, smaller, capable to be embedded in and on and around devices. And all of that is generating data, potential to generate data.

So more data is available from everything, from the basic things like fitness monitors and wearables right down to unique dedicated medical devices for certain capabilities. And this is really enabling devices to capitalize on some of these trends. These trends towards monitoring, towards prevention, towards earlier diagnosis. And the increase in spending on diagnosis comes about because of the increased amount of data available so it’s sort of a Catch 22, one thing is driving the other.

So with more data better diagnoses can be made providing the analytics that we can take from that data are applied and applied well. So again here is an opportunity for IoT and cognitive analytics technology to really change the way medical devices are designed, delivered and presented to market.

And if we look at the increase in spending on monitoring it’s again driven by the increase in available data so again same thing. More data more ability to do monitoring and better diagnoses can be the result of that. So with smart connected devices data can be monitored continuously in many ways. Not just oh I go into my provider’s office and, you know, they check a couple of things and I might do that once a year, once a month, if I’m having issues quarterly whatever it is.

You’re getting these slices of data and they’re not continuous and they’re not in some cases helpful in ways to really predict what might be happening with you as an individual as you interact with devices.

Or you go into a hospital setting you’re hooked up to 500 devices and you’re getting the slices of when you were there for care, what happens when you go home or go into another care environment? How do they make that connection between what has happened to you and the monitoring that occurred?

So we’re thinking and seeing that with Internet of Things and with data readily accessible and combinable there’s going to be some real changes in the way that people look at monitoring of your health. So it was very interesting when Dr. Lowe made his presentation and he asked how many people in the room had had their blood pressure monitored within the last year.

And almost everybody raised their hand. And he said how many people have had their brain monitored in the last year, and unfortunately for whatever reason I think one person raised their hand and I hope that they’re fine and they got the care that they needed and there’s a good reason for that.

But it made me think, yeah I don’t do regularly monitoring of all the things that I could do that might be indicators of what might be challenges in my future health. They could be predicted, and they could be changed, and my providers could be much more proactive with me.

So it’s very interesting to see the trends in spending and I think a lot of that is driven by the ability to access data and use data, and have data be mobile with patients as well.

And the report doesn’t really call out prevention, but again this is driven by extended monitoring and the capabilities that are involved there with healthy people as I mentioned. So there’s a lot of trending not just creating devices to treat a specific disease state or a specific medical issue but also devices that could be monitoring and contributing to greater health.

And that’s also a reimbursement opportunity for many medical device manufacturers. Changing from a device concept to more o
f a continuum-of-care concept. So can I leverage my device to be something that’s sort of constantly usable in a patient’s lifetime? So interesting stuff here, right?

So let me kind of go back a little bit about IoT. A lot of people say, “Is it real? Is it hype? I hear about it, I read it about, what exactly is it?” The question itself is interesting because there is a lot of hype in the marketplace. Seems like I go places and everybody is like, “Yeah I want to talk about IoT,” and then they don’t know what they’re going to do with it, or what it is, or what business value, or what ROI might come from it.

So the question is very interesting, but there is hard evidence from organizations spinning all different industries that clearly illustrate that there’s benefits and that there’s differentiation possible and there’s improved client or patient experiences possible, all enabled by an Internet of Things type of technology.

So IBM loves to do research, they do it all the time. So they go out and they ask lots of questions across all industries. So this is one study that I didn’t steal from somebody else, I just stole it from the smart people at IBM that did some research for us. And some of the surveys that they came out with let’s look at some of the top three fundamental ways that the Internet of Things is changing industries today.

And responses across industries kind of came to these top three things. And when we talk to customers that are implementing IoT strategies or wanting to, this is what they said. So the first thing is unlocking new revenue. So from existing products and services, connected products new products. So the idea is we can leverage Internet of Things to unlock new revenue; very important.

It’s going to create new practices and new processes for me as a manufacturer, as a designer. And it can vastly change my business model if I decide to do so. So one major medical manufacturer who I won’t name recently told me that, “I don’t want to be a device company anymore,” and you could have blown me over with a feather because that’s what they do and that’s what they’re good at.

They said, “We don’t want to be a medical device company any longer, we want to be a services company. We want our services to drive the demand for our devices.” So that was where I said, “Okay, now I know I’m still talking to the right people in the room not so scared.”

But they were looking at ways that they can deliver benefits from the data from their devices so how can I do things direct to consumers? How can I impact caregivers? How can I change providers’ mindset about who I am and what I do and what my products are? And ultimately can I impact reimbursement model so I can get paid more for the devices that I’m putting out to the marketplace?

So it was really interesting and they’re really on board with, “This is going to change my business model. I’m going to have services and capabilities attached to my devices that are going to really drive a change in the way I interact with the users of the devices and the consumers of my devices.

And a couple of statistics down there, in the interest of time I won’t read through all of them, but one of the most interesting statistics from the survey responses were that 62% of those that were interviewed believed that organizations that are slow to adopt IoT technologies will fall far behind their competition. So that’s a pretty good number. That’s people who are saying, “This is really going to change my industry and I have to pay attention to it so.”

So let’s talk more about devices, right, I’m in a medical device conference so let’s talk about it. Joe said, “Why is IBM here?” Right, so this is why we’re here. We see that the devices of tomorrow will look and feel very different from devices that came into existence just two to three years ago. So today’s products are more connected than was ever really thought possible or considered possible. As much as just a few years ago, right.

So products now can connect to the internet, can send data, they can connect to each other, they can connect to interconnected subsystems. You have to think about network connections and all these things. So what this means to individuals who are developing medical devices they have to consider interconnected systems, they have to consider interfaces, they have to design with connectivity in mind. And they have to think about the emerging technologies and behaviors that might be possible just a few years into the future leveraging Internet of Things.

So devices now have to be designed with data generation in mind, they have to be designed with connectivity in mind, they have to exist as part of larger ecosystems in many cases. Devices have to deployed against various different sets of platforms and protocols and APIs. And software is now no longer just something that might be embedded into the device. So this is where we see a lot of interesting things happening too. There may be companion devices with software, there may be mobile apps.

And I don’t know about you but most embedded software developers that I know are really not good at creating apps that they publish onto the app store and update on a regular basis. So it’s a whole different world. And if consumers get your apps that you may have created as a companion to your devices and they don’t like it, they’re going to rate it and they’re going to talk about it.

It’s an immediate feedback from your end users so there’s also that concept of, “I have to think about how the patients are going to be interacting with my device, the data from my device. And also how I’m giving them access to the device.”

And it’s not just the patients it’s the physicians as well. If device A gives me a whole lot better interface to the information flow from it across one patient or across all the patients in my practice will the same thing in a hospital provider, I might choose device A versus device B that doesn’t give me that kind of data.

So there’s this thought of, “I really need to change the way I think about my products and my systems and my software.” So for devices within the IoT obviously complexity rises but so does the ability to be disruptive and innovative in the space.

So how does one be successful in Internet of Things and connective medical devices? So you really need to think about delivering not a product, you are no longer a device manufacturer or a device designer, or a deliverable of devices. It’s not a product anymore, it’s an experience. An experience that various stakeholders are going to have with your devices.

So you really need to think about planning your device for instrumentation, for connection, for data use in mind, but you also need to think about the device benefits and how those will be delivered. So sensors, software, applications, human interaction, a device is no longer a standalone sort of black box.

Quite some time ago devices the important thing were really the hardware components, the electrical components, how those work together, maybe some software in there. Whole new world now. It’s not a standalone black box, there’s data access from a multiplicity of devices that might be connected. There may be mobile applications to be delivered and updated into all those various stakeholders I mentioned before.

And most importantly you have to really think about added value streams to your devices. So can I leverage data? Can I do meaningful analytics of that data and create an experience with my device? So a whole new sort of digital experience with devices now.

So the key is to deliver to all of the various stakeholders that you think of something that’s beyond just the physical in a whole new digital revolution of where your devices are going to fit and how they’re going to play and what marketplace you want to be in. So it’s really you need to think about moving beyond the physical nature of the product and all o
f the other ecosystem that’s going to surround it or that could surround it if you enter into that connected device market space.

So I mentioned a number of times data, and sometimes one of my colleagues sits in the back of the room counts up how many times I say data or Big Data and penalizes me because I keep talking about data. And everybody says, “Well isn’t it really about putting sensors and making my devices smarter and maybe I connect them to something?”

But it really that’s part of it, sure you have to design your devices to do that, but one of the key components of driving value or ROI from connected devices or the Internet of Things is really the data that you get. You get it from your device, you get it from other resources. And you combine that data with your device and that’s where you derive value from the Internet of Things.

So it’s really about being connected is not enough, having the data in the cloud somewhere not enough, not going to be a differentiation for you. Having a companion app, maybe it’s a bedside monitor that connects through Bluetooth and grabs that data, so that’s cool — not enough. If I have a really fantastic mobile app, still not enough. And that’s what a lot of people think about when they think about connected devices and Internet of Things is all of those components that go into that.

But it’s really about taking analytics against that data and driving yourself as a business up the analytics value chain. So you want to be able to move from the descriptive, which is on the left-hand side. What just happened? Blood pressure is high, glucose level is low, infusion pump X is infusing medicine Y, alarm is sounding, wave form is in this range or that range. Those are just, those are descriptive. That’s what is happening right now with a devices.

Meaningful data one point of data. Really what’s it’s about is moving from descriptive, what just happened to more predictive, and I hate to use this word in medical device areas but prescriptive. Only your physicians are really going to prescribe what you should do, but the data could really tell you inform you or inform the physicians what they should be thinking about and what they should be doing.

So this is really done through what we call ‘Cognitive Insights’ within IBM. So if you look at all of our commercials it’s all about cognitive, it’s all about a new level of interacting with data. So given all that we know from the data both real-time, trending over time, historical databases, consolidated data from perhaps other sources, data from connected systems, known disease states, successful care paths, let’s combine these known interactions with the devices etc.

And can we now more intelligently provide insights in order to more confidently inform the best recommended courses of action. So can we customize these insights for our patients, for the caregivers, for the physicians, for the clinics, for the hospitals, maybe for the payers so you get reimbursed well for our device.

So you really need to think about moving from just saying, “Okay I’m in the Internet of Things, I got a device, I connected it up, I got some data in the cloud.” It’s really all about, “Can I make that meaningful and can I move that into a business model that gives me some ROI?” Improves my device with this kind of insight is better than the competitor’s device with no insight. So that’s where we see some real shifts in what it means.

So let me move on a little bit to we were talking about IoT as a prominent market force, and how it’s influencing not just the nature of modern products and systems but I see it also influencing the way that manufacturers are designing and developing their systems. So more than ever clients and consumers we’re looking for products that are tailored to specific needs and customized and giving me these updates and this data all at the right time in order to make the right decisions.

So in a way we’re really looking at an industrial revolution moving from mass production of devices to more mass customization of devices. In many cases the devices will still be much the same but how we interact and work with the data is going to be vastly different. And we talked about how competitive advantage might be found in taking that data and doing a more personalized approach or user experience.

But we see the trend also in interconnected products and smart products machine and machine communication driving changes in research and development in the way you see people are designing their products. So designing and developing for the IoT really requires a shift in development focus. So I sort of made the joke nobody laughed about embedded software engineers not understanding how to put an app on Apple iStore but they really don’t. So you really have to think about how are we developing this product as a whole and what kind of capabilities do I need from a development process?

And shifting my development focus from the physical which is a focus on the hardware and the mechanics and the electrical engineering to more of an integrated product. And software and systems are going to play a much deeper role I think when we see that.

And so it’s also important to know that you can’t just develop a mobile app or like I said throw a device into, device data onto a cloud and claim you’ve got a strategy. You really need to think about how you’re designing that devices, and specifically in medical device it has to be done so that your whole system now is safe, it can be compliant if it has to be, it has effectiveness that I can prove.

So I cringe when I see somebody just develop something and say, “Okay I’m going to put my app out on the App store and it’s going to be fantastic and I’m going to make a really big change here.”

But I never wrote down the requirements, and I never did risk analysis, and I never really thought traceability or VNV 00:34:49 or systems tracking. Or what am I going to do when there’s issues with my app? Is that CAPA is that not CAPA? How do I deal with that?

So we talk a lot in IBM about something called ‘Continuous Engineering’ which is taking into account the whole system, and tracking and tracing all of that information. So people think it’s my quality management system, the tools that kind of support the quality management system. When you’re designing for IoT you can’t just throw all that out the window, it still has to come into play.

FDA is doing a lot or regulation around mobile medical apps and they’re trying to get their head around what this means and how they’re going to regulate it. It seems to change every day, so my advice too is thinking about value and thinking about changes in development process, but also think about maybe now is the time to mature my development cycle.

Ensure that I can prove that I said what I was going to do, I did it, I have traceability, I have proof, I can generate the documentation that’s necessary. If I have to go through some compliance steps for creating my device and connecting it and using that data across the Internet of Things.

So don’t throw all that out, baby out with the bath water, you still have to think about this. So combine those two things as you’re thinking about ways to change your business.

And so another thing about sort of traceability, I talked about traceability and design of the devices themselves, but this type of ecosystem also puts new demands placed on teams to think about the operation of the device once it’s out into the field, to utilize them to the best benefit. So we’re looking at also how can we take information that’s coming in through the data from user reports, from feedback, linking that into engineering data.

And more importantly can I change the outcomes of my product so we have to look at everything across the development process, ensure you’re doing the right things following the right processes and leverage IoT and this data to in
form and improve your R&D and your product roadmaps.

So connect all of the sources, don’t just think about, “Connecting my device to the cloud and getting some data,” think about, “Can I take that information that might be coming and use that to better my next derivation of products? And can I inform my roadmaps based off of the data that I’m getting?”

So a lot of customers I talk to don’t really think about the whole process and how one thing should be feeding the next. So I think that’s also important to consider. Connect and use all the information you can, is what I’m saying.

So to be successful in IoT type of world, a couple of things also to consider from sort of a technology standpoint. 00:38:00 discuss this briefly. So you really need to think about how will securely connect and manage devices whether that’d be through gateways or across networks, cellular networks or BLE networks.

You must think about your data, so data that you’re generating, data from other sources. Data can be structured and unstructured in many cases. You have to think about ways that you’re going to parse, translate, store, annotate, and use that data to your advantage. So when you’re looking to move into the Internet of Things world think about those.

You must also have an analytics strategy. So what actional outcomes do you want/need from your data? And you do need to manage risk, so you need to think about anomaly detection of data that’s coming through these networks. Some customers are looking at Edge analystics, “Can I filter and source some things at the far edge of the devices giving me data versus way up into the cloud?”

You need to think about key certificate types of protection as devices connect and data is being streamed. So not only do you need to exercise good engineering practices that I just spoke about in the previous slide with tools and process, but you also need to think about is the IoT platform and capabilities that you put into place. Does it have the rigor to be secure for what you need to accomplish, particularly important in the medical device field.

Am I getting the hook over there Joe?

Joe Hage: Not quite actually no-

Kimberly Cobb: How am I doing on time?

Joe Hage: We’re getting close. When a medical device company is ready to take the leap, they recognize they need to be in the space, do they call you first or do they call their design and development firm that’s deeply embedded in medical device VNV, FDA etc.? How does that partnership work?

Kimberly Cobb: Yeah, that’s a good question. Many of them call us directly and they may already have, if they’re a larger company they already have a lot of the expertise in FDA and getting products through but they don’t have expertise in Internet of Things and connecting the devices, or necessarily a lot of the data analytics. And I didn’t even get a chance to cover some of the really cool things we’re doing with data analytics like text-to-speech, speech-to-text, natural language processing you name it.

In smaller instances we’re looking at partnership with some medical device design and manufacturers so that they can help people that don’t have huge resources go through the design process. And they’re leveraging the IBM technology and making it consumable for smaller medical device manufacturers. So it’s a little bit of both.

And we have physicians, doctors, ex-FDA people all working within IBM so we have a huge healthcare division. Sometimes people don’t even know that. So we have a lot of expertise that we can bring to bear to advice and help clients as well that want to enter into this. It’s not all just technology.

Joe Hage: I see a future of many opportunities to share your knowledge with the Medical Devices Group.

Kimberly Cobb: Thank you.

Joe Hage: Kimberly Cobb, IBM.

(Applause)

The Theranos 483s: What We Can Learn

33 min reading time

The Theranos 483s: What We Can Learn

Reading Time: 33 minutes

David Amor, MS, CQA, principal at his firm Medgineering, kicked off the 2016 10x Medical Device Conference with a riveting talk about the Theranos 483 warning letters.

It was also a courageous talk – Former Theranos employees refused to give a presentation for fear of litigation and reprisals from the company.

David covered what a warning letter or 483 remediation project is, what a quality deficiency is, and how you can resolve them in a positive collaboration with FDA.

I also invited David back to present (with Jon Speer from greenlight.guru) at the 10x Medical Device Conference for 2017, our fifth annual event. Prices are deeply discounted this far ahead of the event if you’d like to register. (Full refunds until Valentine’s Day.)

Joe Hage: So please put your hands together for David Amor.

(Applause)

David Amor: Thank you, brave, well that’s not something I’ve ever been called but okay we’ll go with that. So thank you everybody for joining today, I am actually, it’s my first time at 10x surprisingly I mean I’ve been doing this for probably about eight or nine years now and I for some reason I’ve never stumbled upon here, which is a shame because it really is a fantastic conference so I’m really happy to here.

I actually want to start a little bit I was actually talking to my grandmother believe it or not, and I’m really from Miami, Miami, Florida so, not to different from San Diego except the people are worse probably, no offence. I’m from Miami, I had to say that. And really I think that what’s really hilarious is when I was a kid growing up Cuban grandmothers they are notorious for one thing.

I’m Cuban by background; my parents are Cuban from Cuba from Havana. Don’t ask me how they feel about the Obama Policy please for the love of God, but anyway. So when I was growing up one of the biggest things that I would, I remember on Saturday and Sunday mornings and throughout the week was my grandmother watching these TV Novellas, they call it, these little soap operas right.

The Americans have their ‘Young and the Restless’ and that type of stuff, well in our family was Guadalupe and all these really unique-sounding Spanish words and Spanish phrases. And I was talking to my grandmother the other night and it was about four or five days ago you know, and I was getting ready to come over to come over to San Diego.

And I said, “Abuela, I think am presenting on a topic actually that’s better than any novella that you’ve ever seen.” This thing is, I mean it’s a roller coaster of a ride and I, it’s not finished by any means and it’s incredible, the story of how we got to where we are with the Theranos company.

Full disclosure I actually wrote an article about a year ago for Theranos defending the company, so I actually was a, still kind of am a fan the technology if it works, but which is something we’ll get into, but I actually wrote an article defending the technology and defending the company a year back.

And then what happened is, I’ll tell you honestly and I hope if there’s people from Theranos in the room, God bless you. I really hope everything goes well for the company, I really do.

But otherwise, you know what happened is over the last year my faith has started to erode a little bit with continuous issues that have emerged, continuous findings, CMS violations, the clear exemptions status, I mean, all these different things have really started to pop up.

And I still hope really for the benefit of their investors, the benefit of the technology and for me personally because when I see a needle I want to pass out. So the first thing we’ll do is, who hasn’t heard about Theranos okay? Who is an expert in the Theranos case so I can stop talking to you? Okay good.

Alright, so we’re going to go through a couple of things here, we’re going to go through a little bit of an overview about the Theranos story for those of you who are not familiar which is good, so there’s not a ton of you who are experts in this case. So we’ll go through how we got to where we are today with Theranos.

And we’ll go through, as a Quality and Regulatory consultant you know I have to bring in the regulations to this, right. So we’ll go through some Quality and regulatory stuff towards the end, but frankly, its stuff that’s applicable to all of you, who’s in a medical device company? Yeah, well most of you, right, so, you’re going to have to learn this stuff anyway so might as well go through it in context of Theranos.

So with that being said, let’s just get started here, so, this is one of my favorite sentences and it is so apropos to this. In God we Trust, all others bring data absolutely. This is, if Theranos would have kind of followed this model I think we would be in less trouble than we are today.

However, if you look at what Theranos has been coming out with in the press and Elizabeth Holmes and her statements they believe that’s the case. And they might have valid data we just haven’t seen the extent of it quite yet.

So who knows who this is? Trivia question, William Deming sounds familiar? Father of Modern Quality … Okay, so he’s a very good friend of mine, not really a good friend of mine, he’s, I’m a little bit young for that, but that still he’s a good mentor good guy.

So today we’ll be going over a couple of things, the good of Theranos so what happened what is Theranos? Some of you are saying like, “You keep saying Theranos who the hell are these people right, or who the heck are these people? So, we’ll go through the good how they got to where they got, the bad and the ugly and that’s kind of all.

Really think about it this way, up until October 2015 everything was going swimmingly for this company. I mean there was, started emerged some questions about the technology and some questions about the founders and some questions about the scientists. But overall they were raising capital left and right, everything was going swell and then October 2015 something happened that really caused a huge downhill. And they’ve really been in defense mode ever since then, we’ll go through that.

And also what can we learn. I think one of the big take-aways is we see other companies struggling, we shouldn’t applaud that we should really say, Hmmh how can we prevent ourselves from going through the same issues?”

And the key theme of that part of the conversation will be, and this is kind of a surprise to a lot of people when I give this talk, but they key surprise here is Theranos is not the first company to go through this stuff. In fact most of the violations that the FDA cited within their quality, with their forty 483 deficiencies were really things that a lot of medical device companies struggle with.

Now there are some potential allegations of fraud and that’s not something that a lot of companies struggle with but overall in terms of just the quality systems deficiencies or the quality deficiencies, it’s not something that’s, “Oh! It’s the first time in the world we’ve seen this,” but because of the press and the way that the press has tackled this story it really has become something that a lot of people are now starting to learn, what a 483 is, what a quality deficiency is, and what we need to do to resolve them.

Who here has been through a warning letter or a 483 remediation project? Not fun, right? So six-month project manager always say, “Argh! Six months and we’re out,” and then six years later is when it happens, so yeah.

So this is Elizabeth Holmes. In 2003, Ms. Holmes dropped out of Stanford University, she was a chemical engineer. I still, regardless am a huge fan of her, I mean I think the things that she’s done regardless of, regardless of the company. Personally she’s a very strong character, she presents very well, she did a TEDMED talk a few years back that I thought was fantastic. So as a person I really actually admire her vision for this company.

In 2003 she drops out of Stanford Bio-med chemical engineering program sorry, she’s 19 years old and starts this company. At that point in time the company was not called Theranos it was called Real-Time Cures. And really the whole point of the company was to try and figure out how to extract a ton of information from a small pin prick of blood.

Everyone has had a blood test, you sit there for quite a long time and you get all these little vials filled up and we’ll see a comparison. Her goal was to see how can we make that process more seamless. So Theranos wasn’t even born yet but by 2006, there was a c
ouple of things that have happened, by 2006 they had raised almost $15-16 million. So did a Series A round and a Series B round.

Now the venture capitalists that raised that money are not what I would say are famous venture capitalists so the Peter Thiels of the world weren’t part of this deal. However, it did have some pretty good backing from some several well-established VC firms as well as private equity. And private equity was the reason that they ended up in this $9 billion evaluation which we’ll get to shortly.

But that’s Theranos, Theranos in 2006. Several patents, a company just on the rise, Elizabeth Holmes started to be featured in some magazines, but really the period between 2006 and 2013 was kind of what they call a stealth mode. There wasn’t a ton of press, there wasn’t a ton of publicity, there were a couple of articles that had come out in 2012 that were all very flattering of Elizabeth and her talents and she was named Top 30 Under 30, Top 40 Under 40 all these different minor things that really ultimately didn’t get picked up by the press, until a little bit later on.

So the Theranos promise, for those of you who are not familiar with the company, the key take-away is, today to take blood samples for different tests, you go to a lab or you go to a hospital or you go to your physician’s office. You might have somebody come to your actual house and take out blood, and that blood draw process is timely, it’s time-consuming, it’s extensive, they have to take out three huge vials depending on the number of tests that you have.

It’s pretty intense and if you have a fear of needles, one of the biggest issues with blood draws that has occurred over the last 20, 30 years the issues is really that a lot of people who should be getting diagnostic test, don’t end up getting diagnostic tests because of their fear of needles.

So Elizabeth Holmes who has a self-proclaimed fear of needles and grew up with an uncle who had several diseases that she wanted to help him get better access to, came up with this technology, or decided that there was this technology that was worth validating. Which was essentially collecting 1.3 cm-high vial called a Nanotainer, a nano-container, really tiny container worth of blood and being able to extrapolate any sort of test of battery of about 50 or 60 tests in the beginning from just that one tiny single drop of blood. So that was the key promise.

Some other key aspects of this specific company, pricing. So one of the things that you get when you have smaller Nanotainers is that you get to do, you basically get a menu. So her theory was instead of going to the doctor getting a prescription and saying, “Hey, go get this blood test,” her theory was, it should be like a grocery store where you have a menu, you say, “I want to know what my Potassium levels are. I want to know what my vitamin D levels are. I want to know what … If I could screen for this cancer, if I could screen for this.

Basically a menu of options that you would choose off the shelf essentially. And some of these options were priced about one-tenth or one-twentieth of what their reimbursed rates are on a normal basis. So obviously this was a huge huge win for the industry. So they got a lot, they started receiving a lot of press starting at about 2013 when that stealth-mode kind of emerged from its cocoon.

So about 140 of these tests starting at 2014 were under $10. So imagine you wake up one day you say I want to check my Creatinine levels and I want to do it for $10. So I go to one of the Walgreens which eventually partnered with Theranos and I take a little bit of blood and I get to check that out for $10. Not a bad deal, right? It’s like going to, I guess here it’s Vons, yes Vons and really buying something off the shelf. So that was the Theranos promise.

Another thing was this whole empowering of patients, so delivering the results right to you, not having to get screened out through a physician. This was really good, the patient empowerment movement was really emerging and 2005, 2006, 2007 and that continued with the Theranos promise. They basically wanted to make sure you had access to everything and you had transparency to everything before you actually underwent this test.

So, very promising, right. I mean if this comes to fruition who would be a huge fan of that option? I think everybody, that’s a really big thing. So this is an example of their blood test catalogue. So you see things like, for example, adenovirus DNA $29. Albumen, so that’s usually reimbursed at $30, that’s something else, $3.37. So they basically had this test menu where you can theoretically go, select your test and call it a day.

And this what the Nanotainer looks like. Their theory or their claim-to-fame was, “one tiny drop changes everything.” And again it’s a 1.29 cm container, how does it compare to other ones? Well this is what it looks like, so if you’re doing a blood draw, and again I just got my blood drawn two weeks ago. I am not a huge fan of needles but because I am big-boned, I often cannot get a needle draw through here, I often have to go through over here and it’s quite painful, it’s not fun.

So for me when I saw this originally a few years ago, I was like, “Man, this is awesome. I hope this pans out,” because sitting there while the lady is trying to stick me 900 times and say, “Uh sir, yes your patient profile is difficult to get this.” And I’m like, “Yeah, okay fine I’m fat, got it I understand.” So anyway, so that’s what this technology ended up looking like.

Now other good things started happening, the company started booming in 2013. Walgreens filed some partnerships with them. At one point they had hundreds of centers that were about to be open, and the goal was really, you’d be at a Walgreens, you go do this quick draw and you get your results.

I mean it was really kind of a, just like there’s like the mini-clinic theory for some of these other healthcare remedies, or healthcare maladies. The Theranos approach was the same thing but for blood containers. So that’s really where they started to emerge as a very very promising company.

At that point in time there was also a private equity firm that committed almost $400 million to this company. At that point in time Elizabeth Holmes became the “richest self-made billionaire in the world.” And basically at that point their valuation was $9 billion almost, $8 billion $9 billion depending on what terms you look at.

But more or less an $8 billion company which, funny enough in an article in Wired Magazine, the first cracks in the Theranos case started emerging. It started saying, “Hmmh, well, this is $9 billion company, we’re trying to look for peer review journals about their technology, we can’t find any. Okay fine, some companies like operating in stealth-mode where they’re very secretive, they want to … They don’t want to release anything, so let’s talk to some experts in the field, they surely must understand how this works.”

No experts in the field understood how it works. “Okay fine, so let’s talk to regulators, regulators definitely understand how this works, so they’re the ones regulating them.” No regulators refused … All regulators refused to speak on public comment regarding Theranos and similar technology.

So, this Wired Magazine article started, there was a couple of questions that started emerging fairly late in 2013 about this technology. Some of this also came from the two big players in the market, so Quest Diagnostics, LabCorp, 90% of you probably use them for your blood test. They represent about 20% of that overall lab market, the other 80% are in hospital, physician visits all that stuff, but 20% of a huge market, so you can imagine that they started raising their own questions as well which is interesting so.

At that point in time again, they were
an $8 billion Unicorn, everybody familiar with the term Unicorn? It’s a company that’s valuated at over a billion dollars. A lot of these unicorns, it’s a derogatory term, because they end up going bust.

At this time and point again, 8 billion, I want to keep emphasizing that, $8 billion dollars, $9 billion valuation. That means that people out there that were investing in this company without having valid data supporting the theories, they were able to put this price tag on this company.

Now one thing I failed to mention that’s interesting to know is that, the only way that this company Theranos claimed they can do their testing on that one drop little blood was through a proprietary mechanism called Edison. It was basically their own certified validated system, that was able to take this small blood drop and it’s the only system in the world that could have extrapolated all these different dozens of tests within that one drop.

That left a lot of scientists scratching their heads saying, “Man, that is fantastic. Your patents don’t really enable this technology so, if that’s the case I’d really love to see how this works, let’s see some peer-reviewed studies.” Radio silence, so keep that in mind.

2013, 2014 Elizabeth Holmes becomes a rock star, she’s a legitimate healthcare rock star. If you have not seen this phase before I’m surprised, you probably are on Facebook too much so please get off and look at your industry.

So, Fortune Inc., Wired, Forbes, funny enough one of the best articles that emerged about Elizabeth Holmes, one of the most flattering was from the Wall Street Journal. And for some of you who are familiar with this story will find out why that’s kind of ironic but Wall Street Journal featured Elizabeth in one of their articles and again, very flattering praise, everything was pitchy-keen perfect.

And I’m trying to find one quote that I love particularly that I’m going to say it for a little bit. But anyway, so 2014, 2013 she’s getting featured on all these articles, Theranos is blowing up, they find additional investors, they sign additional Safeway. There’s another area where 800 clinics are starting to get opened up for them to do their tests, I mean this company of just booming.

And then just when they were starting to get some, what they call haters in the field, right, FDA clears one of their tests. So they’re basically slamming it in everyone’s face saying, “Huh! You see that? FDA cleared one of our tests using the 510(k) mechanism which is a very stringent and complicated and world-class mechanism.” So that’s there. Okay, so they got FDA clearance, everything was going well.

Then this guy shows up. Anybody know who this is? John Carreyrou. Yup, so for months John Carreyrou from the Wall Street Journal had been calling … Again, let me be clear a lot of this is alleged because you cannot fully vet just like they haven’t validated their technology necessarily, I can’t validate some of his stuff, it’s all hearsay.

But he claims that for many months he was requesting an audience with Theranos, he was hearing rumblings in the back about how some of this technology wasn’t valid, he received some whistleblower cases, some whistleblower information from some disgruntled ex-employees. There was a lot of smoke that was starting to emerge about this company that it really couldn’t do what it claimed to do.

So John pursued this consistently over five, six months gave them several opportunities to answer. And he basically indicates that they never ever answered. So basically the bottom line here is, per his side of the story Elizabeth Holmes would take every single opportunity she could, as well as the rest of the Theranos staff to go into flattering pieces, to do featured articles where it was flattering about them.

However, when it came to his article which was questioning their technology a little bit, at that point he indicates he wasn’t planning on doing this destruction piece, he just wanted to get some clarity and actually help them. Because again Wall Street Journal was helping them get out into the public, they were doing a good service for them. So his goal was just to say, “Hey, can we just refute these things real quick and that way you guys have a smooth sailing?”

Some people on the other side say that he had a vendetta. Who knows? But long story short, he ends up publishing an article on October 2015 which really represents, I hope not the death nail, but really the beginning of the end for Theranos, if they end up being an end. I hope not because the technology is so cool and so novel that I do hope it becomes validated. But this was really the cascade of that negative spiral that happened over these last two years, or this last year sorry.

So the article’s entitled “Hot Startup Theranos Has Struggled With Its Blood-Test Technology.” Seems simple enough, nothing too crazy, it’s just saying, “Hey they’ve struggled with some of the technology.” But of the things that emerged from that article were very interesting.

The first thing was that several disgruntled employees said, “Hey, you know that Edison machine we’re supposed to be using to test our blood containers, we use it for less than 10% of our tests. We actually use off-the-shelf stuff from Siemens and from Roche to do our analytical tests in our lab.”

So that started 00:20:01 emerges an interesting comment from these disgruntled employees. Obviously Theranos’s pushback was, “They’re disgruntled employees, they want to just, they want to get back at us.” So that was one of the themes that started emerging.

The other thing that started emerging is that their knowledge of regulatory, compliance and quality practices were fairly deficient. And that will come to light here in a few minutes, but basically at the end of 2014 and by that time the article was published, it was clear that there were some issues with the way that Theranos was conducting their tests.

Now they never disclosed publicly before their fundraising that they were doing those tests with non-Edison machines with off-the-shelf machines. So you can imagine why that would be an issue. If you’re claiming that you can do a specific test or you can do something new that the industry cannot do by extrapolating, by extracting one drop of blood, test using a proprietary Edison tool and basically coming up with results at a lower cost.

Yet what you’re actually doing is extracting that blood, diluting some of the samples and sticking it into, and again allegedly diluting some of the samples and sticking it into off-the-shelf analyzers, then your technology isn’t really validated. So that’s what was emerging.

Now a lot of this was happening in parallel while Elizabeth Holmes was still building her brand. In fact, before the article came out there was a $200 million pledge from an investment group that was supposed to come out and it never emerged because of all these issues. So that was something that I think really did not board well for the company.

Now what happens is that when you have this phrase on your website “one tiny drop changes everything” and now it’s really “maybe” because we’re not sure, a couple of things ended up happening.

A company did a GAP analysis essentially of Theranos’s website pre-October 2015 and post-October 2015 and found seven major changes within the website. And a lot of it was … What do you think the changes were? Give me one example of a change in verbiage or text.

Audience (Female): 00:22:13

David Amor: Sure yeah, making the language more vague. What else?

Audience (Male): 00:22:16

David Amor: Yeah that so language that vagueness. Also started saying basically claiming that they could do things without … They could potentially do with Edison, Edison was one way of many to get the samples. A lot of dif
ferent redactions from their website that really came up during this time frame.

So as you can imagine Theranos fired back a ton of back and forth. Studies were finally released by a lot of these labs that had been saying that Theranos’s test data was not valid.

One of the biggest difficulties is, so remember how I told you that most of their tests were not conducted on their Edison machines. So the ones that were conducted on their Edison machines had significant differences between those tests and tests that were done at typical laboratories or traditional laboratories.

So you can obviously tell that this is a major concern. If you’re getting a lab test for Alkaline phosphatase and your test with Theranos is significantly different than a test you get at a clinic, that can drive a different diagnosis decision. So that’s very much an invalid test. The test is not getting you results that are actionable by a physician.

So this again was the biggest reason that Theranos was again becoming under scrutiny. Now Theranos had an answer for all of this, so in full transparency they do have an answer for absolutely everything that I’ve presented. So if you’re interested in that go to the Theranos website, there’s some information there, do your own due diligence blah blah blah.

But long story short having done this for a bit, there was some stuff there that was a bit questionable. So the full transparency they have been able to answer all these allegations. Not successfully because you still don’t find one big person, a well-known physician, a well-known diagnostic expert defending them. However, this is the case.

So more importantly just this year in January 2016, CMS found significant quality deficiencies with one of their, with several of their labs. And in fact to the point where they’re potentially revoking a lot of their tests so they do not get Medicare coverage which is a, which would be a huge blow for this company.

So CMS got involved, FDA, we haven’t talked about FDA yet but all these different agencies. New York Health Department got involved. A lot of these agencies started basically coming up with independent inspections and reports about how Theranos’s tests were invalid.

And this was the most recent piece of news and this was just this month where Theranos founder, Elizabeth Holmes was under consideration for being banned. Now whether this happens or not, if I had to guess I’d say it probably would not happen unless they don’t resolve their deficiencies in a timely manner.

However, one of their biggest issues has been when they get a deficiency notice, they have not been able to respond in a timely manner so their CSM deficiency had 10 days for response. The FDA when they issued their 483s they had several time frame for response.

Whenever they get asked for peer review journals by an independent publication or an independent organization entity, they have X amount to respond and they usually have failed to respond in a timely manner.

This is what we’re going to focus on the rest of today because this is our world, we live in FDA world. And anybody in an IVD company or a diagnostic company? Okay, so you guys know that medical devices include IVDs 00:25:42 regulations and this is our world; we live under FDA.

We kind of skipped over the FDA aspect of this remember FDA cleared Theranos’s product, you saw that clearance, I didn’t make that up, they cleared it but we’re going to get to why that’s very important.

In October 2015 not only did this Wall Street Journal article came out but boom! Perfect timing, FDA issues two 483s. Everyone familiar with what a 483 is? It’s basically systemic deficiencies within your quality system in your facility.

So this was issued and what I’m going to go through is really some take-aways from these 483s that we can learn about, because a lot of these 483s again are not new. So let’s go through some of them.

There’s fact and fiction in this Theranos case study. The fact is that there are systemic issues at Theranos; it’s clear. Some of the stuff is very basic. How can a company be valued at $9 billion without having a post-market surveillance program?

That’s like a very basic part of medical devices. That’s in special controls. You’re doing a 510(k) you get post-market surveillance. You probably learned that yesterday in the 510(k) workshop. So really that’s a fact, you can’t deny that.

The fiction is that these are unique or first see with Theranos. In fact, if you look at their different types of deficiencies: design control, complaint files, CAPA and regulatory deficiencies.

This is the FDA Trends and warning letters and 483s over the last few years, 2011-2015. So you see kind of some common hitters here: Design Controls, CAPA, Complaint Files. God if companies ever figured out how to do Complain and CAPAs and Design Controls I’d have no job so please please don’t pay attention to this right now. Go back to sleep.

This is the common recurring theme in medical device companies. I’m going to highlight in red which ones Theranos had issues with. At least they received their stuff correctly, that’s good so that’s interesting.

But can you tell that a lot of these issues are not issues quality 00:27:51 deficiency that just Theranos has, a lot of companies do. I mean again I’d say it jokingly but a lot of our work that we do is FDA remediation work so we go to companies that have these issues and fix them. So it’s common, it’s not a matter of if it happens, it’s when it happens.

In fact, if you look at some of these: CAPA, Complaint File, Design Control, Production Process Control isn’t on here but process validation is another recurring issue with companies.

It’s also part of the Quality System Inspection Technique from FDA. So Quality System Inspection Technique for those of you who may not familiar is basically the FDA’s manuals to its inspectors on what are the big focal points of the quality system.

And it lists five different sub-parts. Guess what some of those are: CAPA, Complaints, Production Process Controls, Design Controls, they’re all there so it’s not just companies struggling, FDA acknowledges that these are some of the most critical aspects of being a medical design developer.

So let’s go through some of these observations or deficiencies and see how can we prevent them, how can we avoid them? The first one, design validation did not ensure that the device conforms to defined user needs and intended uses.

So what’s really difficult here is, is the right product being built? Now in context of what you heard for design validation, maybe you don’t know exactly what A2030 says about design validation. Do you think that their design was validated?

Well again we don’t have exposure to their private records, but from what it looks like from the public, again allegedly, the design was not validated properly. It didn’t show that it can actually extract that blood and do those tests in a way that was comparable to a laboratory test.

Remember they were cleared using the 510(k) mechanism meaning thus had to prove substantial equivalence to some other test, lab test. And you saw on that previous comparison when they were put up in independent test versus a typical lab test they failed.

So just by that they were not able to meet their intended use, their indications which in this case was to diagnose certain disease states, certain molecules, certain entities using their technology. So in that point their design was not valid.

One of the things to do when you have this type of issue, one of the things that I find always when a company gets cited under A2030 for design validation is that they fail to separate what their intended use, what their indications say versus what their technical requirements are. They seem to bucket that all together and put it into one document, into one area.

And one of the things that we try to do as companies is make sure we identify who those stakeholders are, who those users are. The users can be the patients, the physicians, it all depends. And those are really what the FDA considers concept documentation per the FDA guidance.

That’s kind of the first step, understand how your intended use it translated to these user needs because ultimately that design validation is going to be performed against these needs.

So that’s one of the first things that you can take a look at within your company is do we do a good job of distinguishing between technical requirements and some of these higher level conceptual requirements that the FDA calls concept documents. So that’s one of the things to consider.

And the easiest thing to ask yourself is are you going to go to a doctor and the doctor is going to say, “Hey, I want a catheter that has a tensile strength of 10 neutons.” No, they’re probably going to say, “Hey, this thing probably shouldn’t break, because we don’t want to kill our patients.” That’s something that’s a user need and that’s something that will be validated through design validation.

Translating those into technical requirements and to design input requirements is that second step. So for example if Theranos had an IVD a Nanotainer and that Nanotainer was supposed to keep a certain volume, that might be a technical requirement. The user need that corresponds to that might be, “Hey, we need sufficient volume to do these tests.” So you go high level, lower level more in detail.

And then design validation itself: Benchtop testing, Clinical Trials, Usability studies, Simulated use testing. It didn’t seem that Theranos really was able to demonstrate to FDA that they did a lot of those things that’s typical of design validation. So really that’s why they were cited under that observation.

One of the key things for design validation is to perform these tests under simulated use conditions. So if Theranos was cited for not performing their design validation testing under simulated use conditions. What that means is you can imagine if you’re doing an assay, this actually happened to me once. We were performing, we were doing an assay for combat zones and within the test plan the combat zones were in Afghanistan and Iraq. So what do you think is something that might be different about those environments versus Minnesota where I’m currently from?

Temperature, right? So if I test this, if I use this assay outside which this assay in particular was used outside often within -20 degrees, which unfortunately is my reality for several week, do you think it might give the same results as if you tested it in 120 degree Fahrenheit? Maybe but we don’t know so we had to validate that.

So that’s simulated use conditions. Ensure that when you’re doing your medical device development you do that. And you obviously heard of some of that yesterday, but just kind of driving the home point … the point home.

Now the other thing that companies fail to do and Theranos failed to do this as well is to perform testing on what’s called Production Equivalent Units.

Production Equivalence is essentially you ask yourself this question, “Hey, the stuff that I got on the market, that’s going to go to market is it the same stuff that I use to test for design validation and to submit to FDA those results with?”

And if your answer is no or you can’t really justify why they’re equivalent, that’s why you’re going to get cited for that particular observation. So how do you do that?

You can do a bomb gap analysis, you look at your building materials. Are they the same product? No. Then why is it, why can’t I say that this material that was used for design verification and validation is “production equivalent.”

Well it has the same tensile strength, it has the same material make-up, it should perform the same as the one that we’re going to go to commercial with. Fine cool.

Use environment. Again there’s a new standard that came out ICE 62366-1, it’s a usability guidance. It’s something that everyone should be aware of. When you’re doing your testing make sure that you do human factors and that really shows that you’re considering the use environment. So all this is part of what Theranos could have done to avoid that issue.

And design input requirements were not adequately documented. We talked about design input requirements a little bit, but basically they didn’t define the product fully. So what that could mean is that in this case they didn’t translate those user needs into those more technical requirements as this observation claim.

This is another big aspect of the observations. Who knows what 14971 is? You guys probably all know it, you guys are all experts in it. Okay, using a consensus standard or a consensus-recognized standard by FDA, or in EU just the harmonized standard is really a good way of showing compliance to risk analysis.

So how do you assess and determine which risks are acceptable? Have you done Risk-Benefit analysis? One aspect of Risk-Benefit analysis which is part of risk analysis is hey what’s out there that does these same tests? It’s a comparison. Alternate therapies. In this case Theranos’s alternate therapies would probably be the diagnostics being run at different clinics.

So they would be, they would want to say, “Why is ours better or as good essentially as those?” So that’s part of the risk analysis, it’s really understanding what are the potential design issues within your product and what are the risks associated with them? And that’s part of the things that they didn’t do.

Now another observation that they had here was documents were not reviewed and approved. So this is one of the biggest things with startups it’s document control, getting things signed off, changes, getting issues, getting design changes, process changes, who approves them? How do you demonstrate that you’ve signed off on them?

Some companies use manual process, some companies use enterprise quality management systems so all these different types of Grand Avenue, Greenlight.guru. All these different platforms that you can use to do document control. Theranos failed to adequately document that their documents were reviewed and approved by somebody.

So essentially if Elizabeth Holmes were having a bad day and she said, “You know what, I want to change the way this process works,” she could have walked in there, changed the process and it never would have been approved by somebody.

So that’s what document control does within your quality system and that’s one of the things that they were cited for.

With document control having a dedicated document management system is the key to prevent those type of observations. It can be manual but a lot times you have an EQMS solution that can help you figure out electronic signatures, electronic records, maintain them, get them approved by the right people. There’s always help in that type of solution.

So this is one solution that I like to use called Greenlight.guru but basically you can kind of put all your stuff into one platform and say, “Hey, I’ve got a couple of documents routing for approval right now. We can’t make this design change until we get the VP of quality, the engineering manager, and the VP of Clinical Labs to approve this.”

So that’s one of the ways that document control can be effective within your company so you don’t get those types of observations that Theranos did.

Another observation here. Devices for which listing is required have not been listed. So this was their Nanotainer. Remember how I said FDA cleared their products? Remember? Okay, so here’s the thing, if you look at the actual clearance letter, I’m going to read it here, “Theranos today announced that it has received the US Food & Drug Administration’s clearance of its test system and test for herpes simplex 1 virus. Okay, why is this important?

If I’m a company and I say that I have 150 types of tests that I conduct using this one drop and I get FDA clearance for herpes simplex, am I allowed to now use this product for the rest of the 149 tests?

Who says true? Who says false? Oh good, you guys are smart. You guys all attended that workshop yesterday so I’m sure you guys are experts in this now. But basically yeah, this is what happened.

So regulators were claiming, “Hey, hold off for a second. We cleared you for herpes, we’re not …” Sorry that sounds really bad, we cleared you for herpes. “We cleared your product for use with herpes simplex, not all these other things that you’re saying.”

If that’s the case you either have to do two things, you have to validate each one of those tests individually or provide some sort of rationale or strategy that, “Look, 30 of these tests we’re doing one test and it’s comparable to these rest so all are validated,” but they didn’t even do that. And obviously there’s been several FOIA freedom of Information Act request for the response.

But long story short, intended use within your 510(k) is critical, so if your indication or your intended use in this case is for this specific disease state for diagnosis, you’re not going to be able to leverage that for the rest of your tests. So that was one of the keys that Theranos got in trouble for.

Clinical rationale as well. So this is a really interesting case that came up in the Scientific American where a huge panel of different physicians and laboratory technicians as well as PhDs in the matter, in the subject matter said, “Who told you,” or basically saying to Theranos theoretically said, “Who told you that blood taken from your finger is different than blood, is the same as blood taken from veins, from other veins.”

Their argument was there are a lot of molecules that you can draw analogous conclusions from if you pin-prick versus systemic blood. However, there’s a lot of proteins, lipids and other molecules that you cannot. In other words this panel came out and they said, “We have been asking for information for years, we’ve never received information. You guys must have this,” I’m paraphrasing, “You guys must have this phenomenal new-age technology that allows you to basically extract 150 type of tests from your finger, and that’s really not the case.” So that was one of the big things that came out.

Long story short, when you’re developing a test or you’re developing your indications in your intended use, you should have clinical rationale for that. I mean I know it sounds like a duh, but you’ll be surprised at how many times a company will emerge with a technology and they won’t defend their clinical rationale for selecting that technology. So that’s something to keep in mind.

Okay, so Complaints. Long story short this observation was, “Hey, you guys have no way of looking at complaints. You guys don’t assess complaints. You don’t have a formal post-market program.”

Now post-market program is part of being a Class II device. So whenever you kind of upgrade in classification for FDA so you start with Class I you end up in Class III, the types of controls you have to follow also increase. In Class I you followed General Controls. That’s things like listing your product, make sure that you’re not misbranding or adultering any of your product. Kind of some very basic, “You have to do this as a medical device manufacturer.”

As soon as you hop into Class II and you designate yourself as a Class II device that requires a 510(k), you’re going to have to file something called Special Controls. And that includes a little bit more detail but not something that a $9 billion valued company should not have invested in. So we’ll talk a little bit about what that is.

For General Controls here’s a couple of things that you need to follow as a medical device manufacturer. The first one is adulteration, misbranding, device registration and listing. What was that observation? What did it say? You failed to register and list one of your medical devices that Nanotainer because that Nanotainer you said works for this specific disease state but not for all these others. So frankly that’s what’s considered a misbranded or adulterated product. A product that is found to be deficient for its quality system and not really meeting its intended use that it was filed on.

So those are three things that Theranos even under General Controls did not comply with, so that’s a huge issue.

Under Special Controls that observation that I told you, the No Complaints Program, they did not implement a postmarket surveillance program. So what that means is once you get your product to market, you have to have a unit or at least designated individuals who are responsible for collecting complaints, customer feedback, and assessing whether or not they’re critical or they’re high-risk enough. Which in this case they didn’t have proper risk analysis so it would have been tough anyway.

But in this case you really have to do that. That’s part of being a 510(k) cleared product; having that postmarket surveillance program. Patient registries, performance standards, special labeling requirements, all this was stuff that they got clearance on for one product, but when it came to their quality system inspection, they failed some of the quality system regulation requirements. And one of those was postmarket surveillance.

So another thing is that CAPA, Corrective And Preventive Actions were not documented. So who knows what CAPA is? Who deals with CAPA on a daily basis? So long story short, when you get bad info or you get info about a potential quality system deficiency or a product deficiency or other type of non-conformance, you have to evaluate it to determine whether or not you need to take any sort of corrective actions to address it, and then preventive actions to make sure it doesn’t happen again, it doesn’t recur.

However, preventive action also includes, or actually specifically is looking at other areas of your quality system of your products to determine to make sure that this doesn’t happen, this type of issue doesn’t happen again.

So that being said CAPA is a lot of the work that we do in remediation. And there’s a couple of things that I usually recommend for CAPA which is the easy way, the easiest way to defend yourself within an FDA inspection or notified body audit. The first thing is an escalation process so a lot of people say, “Hey you know what, everything is a CAPA. Everything requires corrective action. Every non-conformance needs to be escalated.

That’s not true. In fact if you look at the two types of guidance that I’m going to look, I’m going to show you, long story short with corrective actions and preventive actions, the actions you take should be commensurate with the risk of the product, the rest of the issue, and we’ll go into that a little bit here.

But here are some things that might trigger you to have, to implement a corrective action or preventive action. Is it a high risk? Has it happened again? So if something happens over and over and over and you don’t fix it, what does the FDA think? Well you really don’t, you don’t have good management controls over your system. Your quality system is deficient because you don’t address this thing that keeps happening over and over again.

So doing trend analysis saying, “Hey, this specific issue has happened multiple times,” that’s something that might trigger a CAPA.

Now if you look at this CAPA guidance, some of you are not familiar GHTF, Global Harmonization Task Force, they’re now called something else, IMDRF, sorry. They change like every 10 years.

But basically their guidance suggests that the manufacturer should process corrective actions or preventive actions commensurate with the significance of the non-co
nformity. So one of the key things at your company you take away from this from all this hubbub basically is not every single type of nonconformance needs to have a corrective action issued. You can trend it, you can track it, you can determine by risk whether it’s critical. This is something that’s in that guidance as well as the AAMI Quality System Compendium, which is a manual that I love to use.

Says the same thing, “The potential nonconformance escalation should be appropriate for the magnitude of the problem for the risks encountered. Now a lot of these problems that Theranos is encountering, a lot of those are probably internal CAPAs. If they keep getting postmarket complaints, this Wall Street journal article, these other inputs, those are probably CAPA-worthy. Things that are high risk to the company, high risk to the product, they should probably escalate those.

And I’m going to skip over a couple of things in the interest of time. This is just a kind of escalation criteria. You take all these different inputs from audits, complaints, reviews, service and you basically determine if you need to escalate those nonconformances into your CAPA system for improvement.

So I have to skip a lot because I have some time left and obviously I don’t know how to control my time. So we’re going to skip through a couple of other things.

Purchasing controls and quality audits are things that they got in trouble with. I’ll send you these slides so you can take a look at it.

The last thing I’ll talk about though is this which is Management Responsibility. So one of the things with your quality system is your quality system grows. When you’re a small company you might have a tailored quality system that’s lean, that focuses on the four major subparts: Production, Process Controls, CAPA, Complaint Files, Design Controls. As you grow, as you become a $9 billion valuated company, you might want to implement a more robust quality management system.

And that’s part of what this aspect of the quality system regulation or subpart G under subpart B really talks about. How does management determine whether your quality system is suitable and effective? That’s done through management reviews, audits, and other internal and external influences.

So when you’re looking at suitability, is the quality system appropriate for our company? You know one thing that Theranos could have done is if they’re doing a management review they could determine, “Hey, we just got a bunch of 483s from the FDA, CMS is on us. We probably have to determine whether we have some quality system deficiencies that we need to address. And in fact one of their responses did indicate that they’re going to address them.”

Effectiveness. “Are we meeting our quality policy and objectives?” Interval and frequency. ” How often do we need to look at our quality system?” Let me ask you a question, if I’m a Class I dental floss manufacturer, am I going to take a look at my quality system more or less than Theranos who just got two 483s? What do you guys think?

Yeah so my management review might be once a year or once every two years if you will. Once a year is usually the minimum, is the minimum, but Theranos might be doing quarterly management reviews right now because they’re getting such negative publicity and negative issues with their products. So that’s one of the things you want to consider when you’re doing management reviews.

Last but not least, one of the key take-aways, is anybody an investor in this room? Okay, so one of the things that I do that I really enjoy in my job is doing due diligence for companies for investors who are looking to put money into a company. If any of these investors who would have looked at Theranos prior to their investment in 2014 and 2013 would have done a little bit of digging, they would have realized that doing quality and regulatory due diligence is a critical aspect of this process.

It’s understanding what’s their regulatory path, how their quality system looks, so they don’t get to this October 2015 timeline and basically everything hits the fan.

One of the things I very much encourage you, if you’re an investor or even if you’re a company looking to get investment, have an independent due diligence strategy with somebody. Hire a consultant, hire somebody internally, hire one of your board members to do this assessment so that you prevent these type of issues that Theranos went under.

And last but not least can Theranos come back? 23andMe is personal genomics personal gene health company. They got cited by the FDA a couple of years back now 2013 as well. The key difference is they’re now selling their director consumer kits after resolving their issues, resolving their deficiencies, validating their product. It’s not analogous, quite analogous but it’s very similar because they basically were questioned on, “Hey, do we want everybody to have access to this data, and is the data you’re providing valid?”

They underwent a two or three-year remediation effort, and I just actually ordered my 23andMe kit a couple of months ago, I’m still waiting for the results.

So it’s something that companies can come back from. They didn’t get hit as hard from the press.

But the key takeaway here just to end is basically if you’re going to get promoted in the press, especially by the tech press, you’ve got to be able to learn to live and die by them. You’re get brought up by them, you’re going to get crushed down by them as well, so you’ve got to take the good and the bad.

Yep, and that’s kind of the takeaway here. So when you raise $9 billion make sure you have a quality system that’s robust. So that’s it for me.

Joe Hage: Dave, you are a very gifted speaker.

(Applause)

You’re a gifted speaker, a brave speaker, thank you.

David Amor: If I end up dead tonight you know where to go.

Joe Hage: No but don’t leave the podium just yet. While we’re out of time I do want to ask one question. You mentioned one of the things that you do is you help companies do due diligence before investing. Quick plug for yourself, what else might we hire you as a consultant to do for us?

David Amor: So right now the focus of my specific practice is I do a lot of work in combination of a products so 505B2s are kind of our preferred mechanism. It’s basically a combination product, a drug and a device which who regulates it from FDA. Depends on that primary motive action, is it primarily a drug or primarily a device. When you stick them both together you basically submit to the FDA branch that is that motive action.

So we do a lot of that work, the regulatory strategy, quality system strategy as well as other regulatory and quality stuff which I won’t bore you with because you’re probably going to fall asleep so.

Joe Hage: Okay. Thank you. David Amor.

David Amor: Thanks everybody.

(Applause)

Joe Hage: Nice job.

David Amor: Thank you.

:::The End:::

A Cure for Aging?

28 min reading time

A Cure for Aging?

Reading Time: 28 minutes

Dr. Bill Andrews, CEO of Sierra Sciences, and Liz Parrish, CEO of BioViva Sciences, discussed “A Cure for Aging?” at this year’s 10x Medical Device Conference.

Liz starts with a statistic: 100,000 people die of aging each day, noting, until recent history humans would die from infectious diseases. As science improves, so does our ability to live longer – until we die of complications from old age.

Can we cure these complications?

Bill gives easy-to-understand insight into the role of telomeres in our death and his work with Telomerase, an enzyme at the core of his work to extend human life.

Treating biological aging as a disease, Bill and Liz combined forces to create BioViva Fiji and are building a large-scale production facility and clinic to provide a gene-therapy approach to cure aging.

They expect human trials in a year’s time.

Liz Parrish: We’re very happy to be here and we’re very happy to be presenting together because we’ve never got to do this before. Bill’s been a friend of mine for a while and we have a mutual interest in telomerase. As a matter of fact, he’s the specialist and I’m the entrepreneur. I’m the person trying to get these technologies to you.

And this morning the talk was great because we talked about an aging population, we talked about innovation, the problems with regulation. And all of that coming together is much of what I deal with every day.

So did you know that every day over 100,000 people die of aging? That’s a lot; that’s 3 million a month. It’s the biggest catastrophe; it’s the biggest epidemic on the globe.

But it’s not until recently that we’ve actually had the bandwidth to realize that in fact this is something really encumbering the human race. We’ve had our hands full. As a matter of fact just a couple of hundred years ago we didn’t predominantly die of aging at all, we died of infectious disease.

Humans naturally die of infectious disease; we don’t die of old age. Very few, very few like 1-3% of people used to die of old age. There were no names for those diseases.

So a cure for aging that sounds really science fictiony but it’s really science fact. As the video pointed out this has been done in animals, has been done in human tissue, and now we’re trying to do it in humans, and I’ll tell you why.

So these up here are the symptoms of biological aging or the diseases of biological aging. These are the things that we die of predominantly now in industrialized countries. As a matter of fact a third of this room is set to die of heart diseases, the other third is set to die of cancer, and the rest will be lucky enough to pick something else off of this map.

Sarcopenia will wreak havoc in all of our lives if we live over 65. That’s muscle loss over time. This leads to things like frailty and broken hips infirmary.

Right now we have a very reactive healthcare system. We haven’t been able to produce or generate many cures. As a matter of act the big bump in human lifespan is because of immunizations and antibiotics. That’s why we live this long to see these new prevailing diseases encumber our lives.

So how do we innovate in a very tough circumstansive regulation and start tackling these diseases now? These diseases are highly costly to society.

As a matter of fact, the costs are increasing every year of these aging diseases. So certainly we’d all like to mitigate disease and we’d like to live a long healthy life. But it’s not just solely self-importance at this point; it’s an economic crisis we’re headed towards.

So by the year 2020, this is coming up on us very quickly, there will be more people on the globe, the whole earth, over 65 and under 5. The under-5 year-olds go on to be 15 and then 25. They become the workforce for the 65 year-olds who turn 75 and 85 and up.

We actually can’t afford the cost, and most of these young children are not coming from our industrialized countries. The healthcare system looks like sometimes a hundred persons stacked on top of one 5-year-old that will be responsible for the cost associated.

And as a matter of fact by 2050 in the US it’s projected that at this rate 40% of the GDP will be spent on these aging diseases? What if we could get the health back for these people? What if we could keep them in the workforce? What if we could keep people viable and youthful and strong?

It’s a real game changer. If people are retiring at 65 but some people will live the maximum of 120 years, what will they live on? What will be their contribution? We can see here that the population over 100 years of age is going to increase by 1004%. And on one hand you might feel really great about that. You’re more likely to reach 100 than ever before in the history of mankind.

But you’re going to run into 100 being infirmed and sick and with a lot of debt. As a matter of fact we’ll spend 80% of everything we spend in healthcare in the last year of our life, and with this prolonging of what I would consider unhealthy lifespans due to the lack of therapeutics, that can actually be exacerbated up to 10 years.

So okay, we definitely want to solve this problem so what would curing aging be? Certainly we’re not talking about curing chronological aging; we want to talk about curing biological aging. And I’m going to turn to the smartest man in the room and hear from him.

Bill Andrews: Let me grab the mouse. So I’m going to be talking about telomeres and I want to first point out that the 1004% is not going to be because of the efforts of mine and Liz, that’s going to happen anyway. And the problem is is that everybody is going to be unhealthy because we’re not going to really be improving the health of the older people, the number one focus we want to do is we want to improve health and life extension as a side-effect of keeping people healthy.

So Telomeres is a brand new field of science, very exciting field. It’s mostly unrelated to everything else you’ve ever heard of, unless you already know about telomeres.

But what I want to do is I want to go through the basics of what telomeres are, and a lot of people already know this but I know from the cocktail hour the night before last and stuff like that, I did meet people that have no idea what these are. So I’m going to go over very carefully what telomeres are so people here is on the same page.

Telomeres are things that are very small inside of us. And they when we zoom in on a human being we first see that a human is made up of 100 trillion cells. And pretty much there’s going to be a recap of what you just saw on ‘The Immortalists’ movie.

Most of the theories on why we age say we age because these cells age. And so what we have to do is we have to find a way to prevent these cells from aging.

So most of the research that gets done in my company which is called Sierra Sciences, is to look at human cells growing in a petri dish and then this is later extrapolated to bigger things.

So we zoom in even further we see that every cell contains a nucleus as most of you already know. And the nucleus contains these blue thing called chromosomes or the genes are, they give us our hair color, eye color, everything like that.

But it’s made up of a long single-strand DNA molecule and when we look at one chromosome there are two DNA molecules and two arms: there’s a bottom arm and a top arm. And these arms each contain a very long strain of beads called DNA which typically is about 100 million bases in length, and bases are units of DNA.

And think of it like a really long shoelace except to fit inside of this chromosome is all clowered up like a slinky. Okay on your shoelaces you have these caps, and the caps protect your shoelaces from falling apart. Well chromosomes have the exact same thing, and they’re called telomeres. Telomeres shown here in yellow; those are what telomeres are.

Now as part of the DNA molecules wind up like a slinky. If we unravel that slinky in the telomere, we find that a telomere is about 15,000 bases in length whereas chromosome is about 100 million bases in length. So telomeres are pretty small things but they’re super super important. And they’re 15,000 bases at least when we were conceived.

And then here’s where all the troubles began. When your cells divide and each and every time your cells divide, the telomeres will get a little bit shorter. So there’s a lot of cell division that occurs from the time you’re a single-cell embryo to newborn baby that by that time your telomeres have shortened to 15,000 to 10,000 bases, a tremendous shortening of your telomeres.

And the problem doesn’t stop there. I mean it’s okay because it’s just like cutting the caps on your shoelaces in half, the shoelaces are still ok
ay at that point.

But they get shorter because we have to grow up, become adults and that’s going to take lots of cell divisions. So after years and years and years of cell division, your telomeres get shorter and shorter and shorter. And when telomeres get down to 5,000 bases, your cells lose the ability to function, they enter a phase called senescence. And when you have a lot of senescent cells that when you die of old age.

And let me go over that again. Conceived at 15,000 bases, born at 10,000 bases, die of old age at 5,000 bases, I think I said that right. And this is not a theory anymore, this is solid fact. My colleagues won the Nobel Prize in medicine for discovering this.

Every lab that does cell culture is aware of this problem. When telomeres get really short it induces something called the ‘Hayflick Limit.’ Or when scientists trying to work on human cells in a petri dish, they can’t work with them very long because every time the cells divide the telomeres get shorter. When they reach 5,000 bases they have to throw the cells away and get new cells. And so this is a big problem.

What’s really important is that even though I’ve been interested as said in the modulus, I’ve been interested in aging my entire life. I’ve always been uneasy, I just the twos and twos didn’t add up when I heard every theory about aging. Mostly related to the environment whether it’s internal or external.

Something was wrong because why do people who live on the north and south poles age at the same rate as people who live on the equator when the environments are very different? And why do cats and dogs age at different rates than humans when they’re in the same environment? The environment didn’t add … I’m sure environment has something to do with it, but it doesn’t explain the whole story.

I decided there had to be some kind of clock that’s ticking inside of us. And in 1992 I was attending a conference like this and I heard a scientist talk about the fact that telomeres get shorter, so I jumped on that bandwagon instantaneously.

Now it’s not just aging we’re talking about, as we said before we’re talking about health in general. But now every disease I’ve ever heard of has now been published in scientific peer review journals showing that the length of your telomeres affects your ability to 00:11:55 get them including things like the common cold.

And that’s because our immune system is very sensitive to telomere lengths, when we go under immune senescence it’s because the telomeres get short. Animal studies have now shown that you can make the immune system strong again by lengthening the telomeres.

But the point is is that every disease is affected by the length of your telomeres. And some of these have been shown to be affected by the telomeres, some have been still suggested, we don’t know a cause and effect yet.

But I believe that there’s a lot of benefits going to be gained when we figure out a way to lengthen telomeres in humans.

And I want to point out at this point we’re not really a medical device group of people, okay so I assume we’re here mostly for entertainment. But I do want to say that measuring the telomere lengths is something that’s going to be a big business pretty soon. And it already is several companies doing this.

I would say personally there’s got to be tremendous improvements in the system, but this will be a big business for medical devices I think in the future of being able to take a blood sample or any kind of tissue sample and measure the length of the telomeres.

So you all keep that in mind while I focus on trying to figure out how to lengthen them, oh that’d be great.

So the question I want to ask now is, and this might help in trying to figure out how to develop a device, why do telomeres shorten to begin with? Well I said every time your cells divide they get a little shorter. Why is that? Because people think it’s something chewing them away, but it’s actually mostly not that; there’s a little bit of that but it’s mostly not.

So what I want to do is I want to use an analogy. I could spend a lot of time talking about DNA replication and Okazaki fragments and earning 00:13:46 primers and things like that. But instead of talking about all that within a replication, I just want to use an analogy of a brick wall.

So you’ve got a cell and it’s going to divide to make two daughter cells. Well everything inside that cell has to be duplicated first so that the two daughter cells have everything that the parent cell had. Well that includes this long chromosome, this 100 million base chromosome.

So I want you to think of the … So the DNA has to replicated, duplicated or replicated. Think of the DNA replication as making a new row of bricks on a brick wall. Think of the top row bricks as the chromosome, the cell’s getting ready to divide so it’s got to make a new copy of itself.

And you’ve got a brick layer in the case of the cells called DNA polymerase I and it goes along and makes a copy. So let’s get rid of the other bricks and get rid of the cat, and now the brick layer comes along and he’s laying a new row of bricks.

And this happens throughout the chromosomes, it’s 100 million bases as I said. It’s got to be accurate; any inaccuracies will lead to mutations etc. And it’s just a long tedious process even though it’s going on in several places at the same time.

What we want to really see is what’s happening over at the very end of the chromosome at the telomere. And we find that there’s a very unfortunate decision that cells made and that was to put this brick layer on top of the wall because you can’t lay a brick in the last place you were standing and you fall off the wall.

Okay, what happened here now is this new chromosome is shorter, and this is why chromosomes get shorter every time a cell divides. It’s because the new chromosome you can’t duplicate the very tip of the chromosome. The DNA polymerase I literally falls off and leaves the tip of the chromosome bare, so the new chromosome is shorter.

This happens every time. Okay, the cell’s going to divide again, again the brick layer comes along and again the brick layer is going to fall off time after time. Telomeres are getting shorter and shorter and shorter.

And there’s absolutely nothing you can do about this yet, no matter how well you eat and exercise, do everything your doctors or yourselves tell you to do, you cannot stop this. I call this basal level telomere shortening, meaning this is a rate of telomere shortening that you can’t go slower than at the moment.

Of course that’s what me and Liz are trying to figure out what to solve. Okay so this is one thing.

Now if you are so inclined that you want to accelerate your aging, that’s easy. Anything related to an unhealthy lifestyle, psychological stress, obesity, smoking, lack of exercise, name it, all these things cause degeneration of free radicals that will actually cleave your DNA and make it shorten faster.

Now I’m going to come back to this but these are things that you want to do as much as you can to keep your telomeres long. You want to meditate, you want to destress, you want to quit smoking if you’re smoking, you want to lose weight, you want to take a lot of different things like anti-inflammatories, antioxidants. All these things without them will cause you to have accelerated telomere shortening.

This is where this enzyme Telomerase comes in. This is, when I first got in the field I discovered this enzyme, or my team discovered this enzyme called Telomerase. It’s an enzyme that will actually lengthen telomeres.

So since the middle the beginning of the 1990s we’ve been actually able to lengthen telomeres and show that telomere shortening wasn’t just the result of aging, it was the cause of aging because when we lengthened them human cells in a petri dish became younger by every me
thod of measurement imaginable.

I’ll come back to how we’re doing this but this is an important enzyme so I want you to, as I said in the modulus there’s two things: telomeres and Telomerase. Telomerase is the enzyme that lengthens the telomeres. This is just showing a cartoon, the Telomerase enzyme is shown as a factory here adding bases onto the very tip of the chromosome.

So you’ve got the lengthening and the shortening going on, so let’s go back to this brick-laying model and what is happening here is in cells that produce Telomerase that brick layer is still going to fall off at the end of the wall. But shortly thereafter like an angel Telomerase comes in and replaces that brick.

So this is happening inside of any cell that’s producing Telomerase. Now I want you to think about the fact that if you have low levels of Telomerase, then not that brick won’t be replaced every single time it’ll just be replaced some of the time. So telomere shortening will still occur but just at a shorter rate.

And then we’ve also found that if we actually produce lots of Telomerase inside of a cell, every brick gets replaced but even more so that angel starts making that new row of bricks longer than the old one. And that’s when age reversal starts occurring. That’s what we’ve seen in mice studies and human cells, and I’ll come back to that in a minute.

So I want you think of this as tug of war. You’ve got shortening and lengthening going on at the same time. So even though the cell’s producing Telomerase, that telomere still gets shorter but then Telomerase later comes in and re-lengthens it, so you’ve got this tug of war shortening and lengthening, shortening and lengthening. So you have the shorteners on one side and lengtheners on the other side.

Now in all of us the normal thing is we don’t have any lengtheners. Every cell in our body just has these shorteners so we have this tug of war going on that’s continually getting shorter and shorter. And shorteners win and we die of old age, or we get cancer or heart disease or all these other diseases that have been associated to length of your telomeres.

Now there are things that I’ve mentioned, antioxidants, Vitamin D, exercise, things like that. Well you can reduce the number of shorteners, but you can’t reduce it more than what I call that basal level telomere shortening where there’s still like two people pulling, slowing down the rate of shortening but it’s still occurring.

And it turns out that if you do, if you have the perfect genetics and live the healthiest of lifestyles, you can slow this down to about 50-100 bases per year. And that will allow you to live to be 125 but not any longer. There’s no way that, there’s no recorded, in recorded history that anybody has ever lived longer than 122 so far.

So you are still limited and your health declines. Even the 122-year-old person was very unhealthy. My goal is to make certain that we all are playing tennis, dancing and having the time of our lives when we’re 150 and older.

So that’s one way to reduce the shortening. Now the way that we are working on is to add lengtheners and that’s the enzyme Telomerase. It’s the only normal way to do it, there’s other procedures called ‘old pathways’ and things like that has have occurred in some type of cells. but the way we can do it without causing mutation through to our cells is do adding lengtheners and that’s by the enzyme Telomerase.

So there are products already in the market that do stimulate a little bit of Telomerase, and it’s essentially to having one lengthener against two shorteners. Well the shorteners are still winning. There isn’t a product on the market right now that will lengthen telomeres, cause the net result of your length. They do lengthen them but not enough to overcome the shortening.

So it just lowers the shortening rate down, which is still good, so I encourage everybody to do everything they can to get there. To decrease the number of shorteners and increase the number of lengtheners.

Now what my company is doing research on and Liz’s company is doing research on is trying to add more lengtheners. And eventually when we can get to a tie that should stop aging if humans are anything like their cells in a petri dish because it’s worked really well in human cells in a petri dish and some other things I’ll mention in a minute.

Now what we really like to do is add even another lengthener, and this way lengtheners win. The telomeres get longer and the shorteners lose, and this is when we expect to see age reversal.

And the only way so far that everybody, and any scientist in the whole world has been able to solve to be able to do this is through gene therapy. My company’s working on other approaches and hopefully one day we’ll have that there too, but right now the only way to get your telomeres longer is through a process of gene therapy.

And we’ve been doing gene therapy in my lab since the 1990s and we have 00:23:12 one case … So I’m not going to go into a lot of detail about all this stuff but I want to make it clear that anybody who’s doing anti-aging research consider these major milestones, major problems that have to be solved if you actually want to cure aging.

One is extend the Hayflick Limit. I could spend half an hour talking about what that is but it’s … We actually with gene therapy delivering Telomerase to cells actually have exceeded what’s called the Hayflick Limit which is a major milestone in aging. We did this actually in the 1990s.

We also reversed aging in human tissues. We grew human skin on the back of a mouse and treated it with Telomerase and found that the skin became younger in every way imaginable, every method of measurement imaginable.

Dr. Ron DePinho at Harvard using gene therapy turned extremely old mice into young mice. You can Google this you can find … In fact there’s a lot of information I’ll be talking about more where you can find more information about this.

But this has actually be successful so far. And what was surprising in all this he was able to show that every other theory about aging ended up being reversed just by lengthening the telomeres. Oxidative stress, mitochondria dysfunction, you name it, all these other things disappeared. He called it telomeres are the kingpin.

Now Dr. Ron DePinho is not just any kind of cracker 00:24:44 because the field of anti-aging is just filled with them, he’s the head of MD Anderson at Texas. He’s a very respectable scientist.

So now he’s done … What we and he had done all this but nothing else has ever done this. You keep hearing theories about people are saying they’ve cured aging but all they’ve is like increase the energy of the mitochondria inside of a mouse cell or something like that. That’s not reversing aging, we’re not reversing aging until we see a 90-year-old person walk in a room here and look 24 and act 24 again. That’s when we’ve cured aging; that’s what Liz and I are trying to do. So nothing else has ever done this.

And with that point Liz, tell us how you’re going to make us all benefit from this.

Liz Parrish: Okay. So let’s talk a little bit about what gene therapy is. Is anyone familiar with gene therapy? Yeah it’s been in the news a lot more lately than it had been for quite a few years. With gene therapy today we take a human gene, our target gene, in this case the gene that creates Telomerase and we put it into a vector. And that vector then is injected into you and it delivers the genes to the cell, and then the cell starts making the target enzyme, the Telomerase.

And so it’s a very elegant science. This is the wave of the future. I believe that this is the how we will get most of our medicine in the future. Much like immunizations and antibiotics we’ll be going for gene-boosting therapies and they will be real preventative medicine.

So how are we going to do this? This
is my company’s logo here, my company is BioViva and we’re a gene therapy company that treats biological aging as a disease. We are teaming up with Bill at Sierra Sciences and his many years of science behind this therapy. Actually essentially founding the science behind this therapy.

And Chase Life Extension Foundation, these are colleagues of ours in New Zealand. And they are very ambitious and motivated to help us create the technology and the platform of the future where you can come to get therapeutics.

We are coming together to create BioViva FIJI. So this is our new strategy. For opening a clinic to the world to give them access to these therapeutics. This is a place where we can run trials on Telomerase-inducing gene therapies and see how they mitigate the diseases of aging and hopefully restore the human body to a youthful state. And move the therapeutics into consensual care and preventative medicine.

So today gene therapy is raising millions of dollars and there’s actually no wonder why. Pharmaceutical to-date in the last 50 years have created 97% of amelioration of diseases through their products. That means we’re just treating symptoms.

The last speaker was talking about a reactive healthcare system. We wait until people get sick and we give them drugs that only moderately help their disease. As a matter of fact the efficacy of most drugs that go through the FDA is rather low, with some of our most promising cancer therapies only affecting 30% of the population.

I don’t have that slide on this reel but I do have it if you want to see it. 97% of non-cures and yet in the last year we have six potential cures for disease in the pipeline using gene therapy; in one year. We find the gene, we target it, we put it in the cell. The cell becomes the drug factory creating what you need to be healthy.

And right now most of the drugs going through are actually for treating cancer, which is fantastic 42% of them, and the rest are generally for monogenic orphan diseases. Monogenic means that there’s one gene that’s the target issue, like Adrenoleukodystrophy. This is the one that says “Lorenzo’s Oil” Disease.

This is a disease in young males about one in every 21,000, but it’s fatal. And by delivering the proper gene, these kids live. It’s very exciting. This industry by the year 2025 will be an $11 billion industry in the US alone. It’s fantastic. The future looks bright, the future looks beautiful.

A lot of the questions that I get is doesn’t Telomerase cause cancer. And of course I don’t believe that it does but we’re going to again defer to the expert.

Bill Andrews: Thank you. Let me start off with I think one of the main reasons why there are people out there that think that Telomerase causes cancer is because when I, my team first discovered Telomerase we first put it into human cells, skin cells in a petri dish and showed that they got younger.

But we also put what’s called the antisense into cancer cells and showed that we could kill every cancer cell by causing it to die of old age. I was actually awarded second place for National Inventor of the Year for that discovery.

But when people started hearing this they started saying, “Well if inhibiting Telomerase kills cancer cells, then Telomerase must be the cause of that cancer.”

But it’s not, and I can actually spend an hour talking about this. And I do speak at cancer conferences and stuff like that and go over this great detail with doctors explaining exactly this. And believe me every one of them knows after I get done talking that Telomerase doesn’t cause cancer.

But I just want to quickly just summarize a few key relevant points. There is no clinical data whatsoever published anywhere that shows that Telomerase causes cancer. The data all shows that lack of Telomerase causes cancer.

Where do we get cancer? And it’s because our telomeres get really short and when our telomeres get really short it induces chromosomal rearrangements. We can have tens of hundreds of mutations, rearrangements in every cell in a cancer population because of the short telomeres. This has been published a lot in 2015 and 2016 that short telomeres cause all the mutations that lead to cancer. So keeping telomeres long is the really important thing.

And let me just say that for every study that’s ever suggested … In fact no study, except maybe sometimes you read in the discussion section where they’ll just refer to an old study, no study has been published that even suggests that Telomerase causes cancer since before 2005. But for every study that suggests that Telomerase might cause cancer, there are hundreds of studies that show that the lack of Telomerase does cause cancer.

And this is something so we now know and there’s lots of literature supporting that … I’m bringing this up because some of you may have heard somebody say Telomerase causes cancer. I want to tell you there’s no data, nothing suggesting, and actually all the data suggests exactly the opposite. If we produced Telomerase inside of our cells we’re going to decrease our risk of getting cancer, we’re going to increase our ability to fight cancer if we already have it by lengthening the telomeres in our immune cells.

And we’re also going to be able to allow our bodies or our cancers to not adapt to any kind of change. When you treat a cancer with something like a chemotherapy or whatever kind of thing, with all these mutations occurring, one or two of those cells are going to figure out a way to survive whatever you’re hitting them with. But if you keep the telomeres long they won’t.

So three things: one is it decreases the risk of getting cancer, increases your body’s ability to fight the cancer, and increases your chances that the cancer will not come back.

So these are really really important and …

So do you want to talk about anything else because I can talk hours on this one? Do you want to talk about anything that people say we shouldn’t be doing this?

Liz Parrish: I just think that there’s been a lot of critiques and concerns about healthy lifespans. Our job is health, the other issues we certainly can solve with time. I think that that’s most of what I want to say. Of course I want you to consider your most important currency, one that you’ve probably not considered before and that is time and we hope to lengthen yours; your lengthy time here on earth.

Let’s see, what sort of information do we have?

Bill Andrews: Well there are people that say things like, “Won’t the world be overpopulated if we cure aging?” And then there’s others that say, “How will the young ever get jobs if the old never get weak and feeble? The old people they’re just going to get better and better and better because they’re still going to be really young, and the young will never be able to get jobs.”

There’s all these kind of problems. There’s also people that are saying that religious groups might be very opposed to this. Turns out that the Catholic Church actually published a chapter in my book supporting it, saying this is part of what they want to see happen.

But there’s a lot of these kind of things going on, and I don’t know, my personal belief on the thing is that if we win, let’s not say if, when we have a cure for aging, 100 years later the world’s suffering from every kind of problem that you can imagine occurring, nobody’s going to say, “Let’s vote to ban the cure for aging.”

Because the cure for aging is going to be good. And if it’s going to be good then I’m thinking it’s going to be good now. It’s worth doing. We already have major problems and a lot of the problems like what Liz was talking about something called the Silver Tsunami where we’re just getting a lot of old people.

Those are really big problems because who’s going to care for these people? I think the number one profe
ssion 30 years from now is going to be taking care of the old people unless Liz and I succeed at what we’re doing, when we succeed at what we’re doing.

Liz Parrish: Exactly.

Bill Andrews: So to learn more I do have a book called ‘Curing Aging’, it’s available on Amazon.com. It mostly is answering all the kinds of questions that people ask when we get done talking.

You can also watch ‘The Immortalists’ as you saw, it’s actually like two hours long I think. It sort of goes into a lot more detail than what you just saw.

And then there’s our individual websites that you can go to: BioViva-Science.com and Sierrasci.com to learn more.

So thank you very much.

Liz Parrish: Thank you.

Bill Andrews: If you have any questions.

(Applause)

Joe Hage: Your first review comes from my mom who found you fascinating, no offense Joe but yeah she was all over this.

So having seen your movie and getting to know you a bit, I know that funding has been challenging for you with all this promise. Can you talk to us a little bit about that struggle and dot dot dot.

Bill Andrews: Let me go first here. You know, we were very well-funded before the 2008 economic crisis and we made major progress and stuff like that. This gene therapy is coming along really well but it’s not going to be affordable by everybody. And my company’s mission is to find something that’s affordable by everybody and which would be a small molecule of drug or natural product.

And so we’ve been struggling trying to do that but since 2008 it’s been really difficult. We actually spent $33 million on our research up until 2008, and then we haven’t gotten any investors. We’ve actually taken some of the discoveries that we had, licensed them to other companies and they turn them into products.

And we get our funding now from the royalties from that, but it’s not enough to get ourselves back to where we were before 2008. And I’ll tell you, we would be one year away from having a pill ready for people to take that would actually lengthen telomeres and then we can see what happens within a year after we get the amount of funding that we need.

But you’re the entrepreneur, you tell more about it because you’re more really closer to the problem.

Liz Parrish: Right, so we brought in early money very quickly and then we shut down our search for money and we ran the first human test with these therapeutics. As a matter of fact I was the first person to take a what would be considered a lower dose of the human telomeres activating gene therapy and a myostatin inhibitor.

I took two gene therapies to treat biological aging to prove that they were safe and that we were ready to embark on treating the world.

We have now come back up, we’ve breached, and we’ve partnered with a company called Deep Knowledge Life Sciences who will be our funding mechanism. And there’s a lot of interest in what we’re doing now because we’ve certainly proved some amount of safety. I certainly have been continue to be in fantastic health.

We have some preliminary data that we’re weighing out the benefits of Spectrocell imaging of my white blood cells that then show potential small increase in telomere length. So this is very exciting news for us and it has created a big buzz but of course we want to deliver on the promise and not just talk about it.

So we have partnered with DKLS. And the second thing that we’ve done is I’ve been globetrotting around the world and this kind of comes back to the first speaker. We’ve been going around the world with world leaders, a global consortium of top personage, even people from the UK government that are trying to help companies like mine find a regulatory zone where we can prove safety and efficacy in short order and get these therapeutics to humans.

This is it’s called the Global Longevity Initiative, the GLI, and we have met with presidents and prime ministers and we continue that march. And these people are actually very receptive. They want to be innovative companies and innovative countries that actually bring therapeutics to the world that show the biggest promise over anything that we’ve offered before.

Of course we would like to start in compassionate care and then move back to preventative treatments. So we have a game plan. We’re very hopeful about it, and DKLS is determined to help us as a company find the investment that drives the costs down on these therapeutics so we can treat more of the world within the next five years.

So that’s a very long answer to a very short question.

Audience 1 (Male): So hi, it was very fascinating. I just have a technical question about how you are getting your genes into the cells and what do you need to get it into all the cells. Otherwise I expect you would get some old cells and some young cells and what is that going to look like.

Liz Parrish: Right, so Bill can you answer the science questions?

Bill Andrews: Well we already have some young cells and old cells. Everybody because of the fact that only one chromosome, the new chromosome gets shorter and the older one stays longer means as a result you’re going to have a whole population mixture of different things. So you’ve got young cells and old cells in every person, it’s just the percentage of old cells over the young cells that really makes the difference.

So our goal is to get every cell infected and hopefully delivery through the blood is the best way to do that. But even if we don’t we think that we’ll still get most of them and the old cells will end up dying and the young cells will take over.

Then there’s also of course the cells that don’t divide, those cells actually do have telomeres shortening too mostly by the accelerated telomeres length measurement that 00:40:55 saw. But they’re more affected like the nerve cells they’re affected by Schwann cells or other types of glial cells. They protect them, but those cells do divide and those are affected by telomeres length, but they’ll die off and other cells replace those as long as we have the telomeres long in some of the cells.

Jon Speer: I appreciate all the details and the information that you shared, it just really is fascinating. And you touched on it a little bit but the socio-economic factors that the problem you’re trying to solve that it has on jobs, you mentioned that.

But also things like social security and just overpopulation and things like that. Can you go into a little more depth into that because I can imagine that would be an area of a lot of resistance too.

Liz Parrish: Yeah absolutely, it is very important and on this presentation we didn’t really talk about that and we do have many of those answers because it’s part of being in this profession.

There’s not only the savings of keeping people working and active, there’s actually the savings of mitigating these diseases. So the US government would save $4 trillion in one presidential term by curing these diseases. So it’s kind of money in the bank that’s just not having to be delved out to begin with.

And I believe that Bill also addresses this in his book that the economic savings on mitigating the diseases of aging could create actually sabbatical, a 10-year sabbatical in the mid-term of your life that the government could pay you to have to reeducate, to relearn or go and travel the world and be ready for that second half of life work that you’re going to be doing. So there are a lot of benefits.

Also we are working into a burgeoning society that’s looking at doing very many new things, space travel and things like that that seem like a technology of tomorrow. Where companies are alrea
dy being funded for mining asteroids and things like that. We’re looking at workforces to start to go to Mars. It seems a long ways off but it will be here before you know it.

I’d like to talk about the overpopulation issue because in 1960 the club of Rome got together and they decided that by the year 2000 we’d actually be eating each other.

This didn’t happen and as a matter of fact we’re coming in to more abundance with technology as it comes, but they created a catastrophe scenario for the human race but they were something that they overlooked and actually none of us could see it. And now we do we see it actually very clearly.

It doesn’t matter where on the earth a population or culture is, it doesn’t matter if they’re in the middle of the jungle and you’ll never meet them or they’re your next-door neighbor. As lifespan increases birthrates go down, everywhere on the earth. This is reflected in every single place.

There’s a beautiful graph again that I don’t have to show you but I can get you if you’re interested, and it shows the decline in birthrate over the last several about a hundred years; it’s staggering. This is a natural consequence of living longer we have less children.

And of course I love children; I actually got involved in BioViva to cure childhood disease. I didn’t know about things like longevity science when I got started, but this creates a world where maybe every child would have a better opportunity in the future.

So that’s just a few things touched on. People will certainly still have accidents, infections disease will certainly still nail our populations read hard. So when I was talking about how we used to die, how we naturally die as a society is before the age of 30 of infectious disease. That was about 90% of what happened to everyone outside of accidents and the very few that died of old age.

In 2010 we got infectious disease down to 3%; only 3% of the population dying from it. It’s considered so abnormal, and we’d just like to take the next step in science and that is to knock off the next big killers, reduce the amount of suffering.

And I’m sure that many of these problems that will arise from this that many of them that we already have will be solved with more time, with more manpower.

As a matter almost every big industrial revolution did not just happen by human ingenuity, it actually happened by lifespan. Did you know that? As we increased our lifespan we went into the first big industrial revolution that changed everything.

So take that into consideration and hopefully we’ll create a better world.

I see that Joe is like, “Please stop.”

Joe Hage: Well we do, I regret that more hands went up than we can accommodate so we’ll take one more question from David Cassak.

David Cassak: Well maybe this is not the best question to ask. I was just wondering your lab work how are you measuring the effect of practically of reversing of aging. Do all organs age at the same rate? And might we wind up in a society where brains deteriorate fast … The physical body reverses aging but brains don’t. Are there long-term implications? Do you have any evidence that everything in the body will reverse aging at the same rate?

Liz Parrish: What’s interesting is of course we are interested in aging all the way through. And of course most of the questions we get are from more of the vanity industry of anti-aging. A lot of people say, “Will my skin look younger? Will my hair not be as gray?”

And it’s really important, this is a very important conversation because we want you to be youthful all the way through. We do have a plan to embark on. This would be almost like the 100,000 Genome Project. This would be a plan where we actually MRI our patients before and after treatment.

We create a database of thousands of patients of all very ages because there’s actually biomarkers just in that. We obviously do blood work, we do telomeres length testing, we have a protocol for all of that, for kidney function and body function.

But believe it or not whole-body imaging of what the organs look like, what the brain looks like, I have a fantastic slide of a 27-year-old with what we consider a healthy brain and next to an 87-year-old who doesn’t even have any signs of dementia and the brain is different.

So yes, we want to go through the whole, slice through the whole body and see what looks like. And that was what Bill was talking about with Ron DePinho, the mice did show increase in every organ including brain size.

Joe Hage: Bill, some closing thoughts.

Bill Andrews: I just want to say I want to answer everybody’s questions, I usually am the last person to leave the room, but I won’t be able to right now because of time. But I do have business cards, if anybody has questions you can contact me but I’ll be here for a few hours too but I don’t want you to come and ask me questions when somebody else is speaking.

So get my business card from me and you can contact me I’ll answer your question.

Joe Hage: Very generous with his time. Dr. Bill Andrews, Liz Parrish.

Liz Parrish: Thanks.

(Applause)

3D-Printed Medical Devices

26 min reading time

3D-Printed Medical Devices

Reading Time: 26 minutes

Katie Weimer from 3D Systems gave us a gift: The most informative update on where we are with 3D printing for medical devices.

Katie explained 3D printing is now commonly used for anatomical models, personalized surgery, patient-specific implants, bracing and casting, mass customization of medical devices (like hearing-aids), regenerative medicine, and bio-printing.

Katie Weimer: Thank you everybody, it’s an honor to be here. So, what I’m going to talk about today is a pretty focus talk on 3D printing and healthcare. How many of you guys, as you know most of you from medical device companies have used 3D printers? A few, good. How many of you have you own them? A couple, yeah, good.

So I’m going to talk specifically on 3D printing and healthcare, really want to talk about the future but before you can talk about the future I think it’s our due diligence to talk about where we’ve been, what’s current today and then where things may or may not be going.

So you guys all know 3D printing, same thing additive manufacturing, digital fabrication, rapid prototyping, all of those mean essentially the same thing.

I think 3D printing has kind of taken over as the Industry’s standard term but when you look about, look at additive manufacturing 3D printing as you guys, most of you who know who raised your hands, it’s about layer by layer by layer addition of material, until you essentially grow the part, so it’s exactly the opposite of milling, right? Where you take a chunk of something, wood, metal for an implant and you waddle it down, 3D printing is the opposite, right? You grow it layer by layer only growing what you want.

So you look at the history of this, right? This patent, actually somebody else presented on this and I kind of stole the slide but the patent is back to 1892, contour relief maps, right? This is the very first pattern, you know, well over a hundred years ago, talking about creating a 3D dimensional object in a layer by layer fashion, I think it’s very analogous, very synonymous to what we are talking about with 3D printing. So where are we in medicine, right?

So, when you talk about 3D printing in healthcare, you cannot talk about it without talking about the invention of CT scanning as well, because most things in healthcare, 3D printing and healthcare is about patient specific models implants, and none of that exist without the invention of the CT scan. So, 1971, Sir Godfrey Hounsfield invented the CT scan. What came next, right?

Actually before 3D printing was invented, there was a surgeon Dr. Geoffrey Marsh, who, what he would do is take the CT scan, it comes in layer by layer, right? When you get a scan, and he would actually shape out each layer and then stack them in metal plates, cut out each layer, stalk them together to create an anatomical model, he did that back in 1980.

That’s really, I think the first time, this type of layer or fabrication was used in healthcare, 1983 of course Chuck Cole invented 3D printing and then you can see pretty quickly after that over 30 year evolution, we went from basic anatomical models that started in 1988 all the way to really sophisticated things like in 2003, I’ll show you Dr. Salia used a pretty remarkable anatomical model to separate conjoined twins and all the way through today where we are doing complex implant, complex anatomy models for training and simulation and many other healthcare devices.

So I thought that this was a pretty good snapshot of the history of 3D printing in one slide, so you fast forward to 30 years, you know that something is mainstream officially when it’s on Grey’s anatomy. So I know you guys probably saw this episode last year, right? I’m not going to make you raise your hands. But this is actually a pretty phenomenal moment, right? When it does go main-stream and it’s on something as popular as Grey’s anatomy.

They actually has a 3D printer in the hospital, a patient of course had a very exaggerated deformity of the heart and it printed out a model to be used in the operating room, sounds pretty farfetched but it’s done thousands of times a year now. Very, very common practice, so everywhere you look you see something else on 3D printing and healthcare, see you guys are pretty familiar with.

So how exactly is it being used today as a medical device, this is a medical device conference. It is very safe to say that 3D printing is now a common use for manufacturing medical devices, where? Anatomical models, personalized surgery, patient-specific implants, bracing and casting, mass customization of medical devices, like hearing-aids, I’ll talk about that and also regenerative medicine and bio-printing.

So I always steal this slide but do reference Mr. Mat D’ Prima who’s kind of an FDA specialist on 3D printing. He gave this slide or presented this slide last year and I think it’s a pretty phenomenal slide especially for this group, right?

So most of you, would you guys have known that there is over 70, and this was a year ago and so this number is much higher, over 70 additive 3D printed additive manufactured devices cleared through 510(k), right, that’s probably a lot more than most people would think, a majority of those 510(k) clearances are for orthopedic applications, I think most of us would believe that.

And a significant increase in 510(k) clearance, 2011,2012 , that’s really kind of the uptake of this, so five years ago, it really started to take off in the industry and you can see the different printing technology and I’ll talk a little bit about this, not to bore you but just to maybe educate you a little bit on what the technologies are but you can see a lot of them are powdered-bed fusion, so taking a powder and centering and melting it together and most of them are done in polymers and titanium, so those are the kind of the hot topics for 3D printed medical devices.

So, according to the FDA there’s 5 main types of 3D printing. And if you know this, great, if you don’t know this we don’t need to memorize it, it’s just more of an education because most people think 3D printing is like one thing, one platform and it’ not, it’s actually several different platforms that make up the industry, material extrusion, binder jetting, material jetting, sterile orthography, and powder fusion. So what the heck I’m I talking about, right?

So material extrusion is really, I think the cheapest and easiest types, I’ll start off with that. It’s really, might mind how I explain it; it’s kind of a glorified hot glue gun, so somebody in the front row can agree with that. It’s, you start with the solid material and you kind of melt it as it come out the nozzle on an X Y axis and you just, you know, with that contour you start to print out your part, increasing in Z, increase in your height.

What is a type, you know, so, this is a pretty common application for this, it’s a very cheap way to print detailed parts, this actually a prosthetic hand printed by a group called Ignable, so I’ll talk about this at the end. What’s another type, Binder-jetting, also known as color-jet printing. This is pretty cool, because all it is, it’s a pretty cheap powder, it’s just like printing on paper except instead of printing on paper, you are printing on a layer of powder and then the powder or the paper drops and you print on it again, you ‘re printing full color and a glue.

So essentially you are gluing together this powder, layer by layer. So what can you get from this, a pretty beautiful model right, so this is the full color model of the heart divided in 2, so you can see from an education and training perspective and even from a patient and surgeon perspective, this can be a pretty powerful model all done through this color-jet printing or binder jetting.

Material-jetting, a different kind and again, we’ll go through this pretty quick, but just to teach there’s a different kind, it’s an additive process with droplets of material are deposited on a layer by layer basis, typically with a support material as well. What you can get from this are some pretty advanced polymers, right? So this is where you can start to print inflexible materials, can be very cool especially when you are looking at things like organs, so this i
s a kidney tumor, right?

So the tumor is hard and the material around it is soft and I’ll show specific case studies on this in a minute. Sterile orthography, this is what Chuck Cole invented 30 years ago, so it’s a liquid vat of resin. Just a big box of resin and everything the laser touches it cures, so all the liquid around it will stay liquid, the laser will trace on the top of the surface and grow as the part goes down.

And what you can get from this is a really accurate model, also some, many have like we do have, cleared this for use in the operating room, so it’s passed cleaning and sterilization validations, you actually take this to the operating room. But another thing you can do is to add extra energy to part of this polymer, its UB sensitive and actually change color, so all in one print, you can get a pretty extravagant like this of conjoined twins where you want to look at the vessels between the two bodies, and so it used for pretty advanced surgical planning, I think it’s pretty phenomenal.

And then the last one is powder fusion, so that you tear this SLS or direct metal printing, that’s this powder fusion, so again in a layer by layer fashion, you are starting with bed of powder and you centering it or even welding it essentially together if you are using an electron beam and you can do some pretty sophisticated models and metals, which is really the cutting edge for medical devices in orthopedics today and also some powder, so in the bottom you see a cranial implant, that’s polymer based.

So that’s kind of the summary, so thanks for hanging with me, that was like the educational portion of the day so I’m glad we were able to hang through that.

You can see the different wide range of medical devices and these are all medical devices that were printed today using 3D printing. And of course as you guys know they range, 3D printers themselves, they range from, you know, a couple of thousand dollars up to a million dollars in price and all that varies with the different technologies.

So let’s dive in to the first one, Anatomical models, I think this is really the most basic and the most common use of 3D printing in healthcare today, so what I’m I talking about, so you start with the CT scan of a patient, again you know very few patient specific medical devices and something is, and uses the technology of 3D printing has much of a purpose unless you can start with that medical imaging data.

So what we do is you take that CT scan, you guys all know again, you go in and get an MR CT that comes in, in a layer by layer fashion, but you have to convert that into a 3 dimensional model before you can do anything with it, dimensional model before you can do anything with it, and that is why you are certain to see 3D printing and healthcare today, it’s a lot more than just the printer right?

So we take this CT scan and we go through this image processing, what we call, and I’ll show you the details of this later, and then you go into model design, because sometimes, let’s say you are doing a shoulder, if you just got the bony anatomy and you put it in a printer it may fall apart right? Because the ligaments aren’t there so it would just be this, you know, a couple of bones that fell apart, so you’ve got to add struts and color and labels and then you take it to the 3D printer, so again, this is that standard example I love to give.

You can see how powerful something like this is in something like conjoined twin separation, and this is maybe an extreme example, but actually there are kids all over the world that have this cranial, facial diseases and disorders and imagine being a surgeon and having a patient like this and not having the ability to preplan what you’re going to do when you’re going into the operating room.

So look how powerful, like in Petero’s case, he has a craniosynostosis so his skull fused together early and along a fused sutures and so the surgeon actually sees, can use the medical model to draw out where they are going to perform the operation, actually physically cut on the model, practiced before going into the OR and you can see a pretty phenomenal result, obviously a very talented surgeon as well but something like having a patient specific accurate one to one ratio anatomical model that can be sterilized and used operating room, how powerful of a tool that is.

Here is another example, Grace, also the same surgeon Dr. Salia, she had an extreme cleft of the face, as you can see now, a pretty difficult operation, so we got a 11:46 looked at this digitally and you can see he took this medical model to the operating room and used it as a guide in the OR to help perform this operation. So there’s all different types of medical models and we’ll talk in the end about how we really think this technology will be democratized to the hospitals and into the hands of the clinicians, a very, very powerful use of these models.

Another start-up company and this is very interesting one I wanted to be sure to show you guys, this is a surgeon who has a start-up company, he’s a plastic surgeon, so these people come in for plastic surgery and they want to visualize maybe what their nose will look like after wearing a plastic. Very hard to do, right? How do you project to someone and what they might look like after, and actually what they do is take a 3D scan of the face, full color, run it through a simulation program and then print out a model of that patient.

So you come in and you say, here is what you look like now, here is your simulated post-operative result, what you may look like after surgery, again a very powerful example of how 3D printing is used in healthcare, and I have a video here.

(Video playing)

When we saw the models, our imaginations just flew off the charts, and what these soft flexible models that are completely individualized allow us to do, is to really do the surgery that we are about to do on the patient, removing the cancerous area and preserving the healthy tissue on a model, rather than doing it for the first time on the patient, we were in the operating room one day, doing a robotic kidney surgery.

And we were thinking to ourselves, boy, it would be great if we could feel or see this 2 dimensional image that we’ve been looking at on a screen in our hands, and with our partners at 3D Systems, we were able to make it a kidney and the kidney tumor that not only looked like a kidney, that not only was 3 dimensional that we could feel and touch in our hands but it felt like a kidney.

Katie Weimer: So you can see this is a really powerful concept, not only for the surgical planning aspect of it but also patient education training, imagine being a resident and not getting to, you guys have maybe been, we are medical devices, right? So you’ve see the OR you’ve seen how difficult it is sometimes to participate but from a teaching perspective, this is really a game changer, so I think this last video really explained it well.

So let’s take it to the next step, so not just talking about printing and anatomical model but going in to what we call personalized surgery and how 3D printing is being used, so just, let’s think about the value proposition, so why is there a need for personalized surgery in healthcare, so from the patient’s perspective, right? They want the best surgery possible, personalized to them, makes total sense, that’s what I would want for myself.

The surgeon, they have to provide the best care possible to the patients but they have to optimize how much they can do on a day. The hospital to remain competitive they must still cut cost while still maintaining a high level of care and the Insurance company they want to continue to fund high level of care for the patients but at decreasing rates and new treatments must demonstrate value.

This is huge especially for technologies like 3D printin
g. And then the medical device company is like, us to remain competitive we must innovate provide better care at a diminishing selling price, so there’s really a good value proposition I think for the need for personalized surgery in healthcare. Who started it off, I really should attribute this to the dental implant industry, so before you go in to get dental implants, again, millions of these are done worldwide in a year, right?

Very, very common application, before they would just look at your teeth maybe do a CT scan, and visualize mentally, where they are going to drill to place those dental implants and now a majority of that is done using pre-surgical planning, where you actually pre-plan, you get the digital version of the implant you are going to use, you digitally pre-plan it, as you can in the upper left hand corner, that’s your plan, that’s what you say you are going to do and then the 3D printed drill guide that’s patient-specific, plan-specific, you put it right on the teeth it tells you exactly where to put those implants, this is really the start of it.

I’m going to give you an example of this, walk you through a case study of a boy named blessing through what we call a virtual surgical planning. So again, we start off with medical imaging data, you guys are catching on to that, right? And then before you hit print on the model, you go and you actually manipulate that data, somehow. You have it in digital format, so why not take and run through the full surgical plan and print out patient-specific model guides templates to use in the operating room, we have the ability to this now.

So here is a boy named blessing, I actually got the opportunity to meet him, a couple of months ago at our grand opening ceremony, a very bright young boy from Africa who unfortunately had a landmine explode sort of in his face, so he’s left with very little anatomy, very, very bright, actually an engineering student in Idaho now but obviously he can’t chew, he doesn’t have teeth, he can’t breathe very well, he can’t speak very well, he’s lost 11 nerve sensation in his face, it’s a difficult future for this young man.

So using what we call this digital called thread, he starts with a medical imaging data, you move into the medical image processing, you get online and do a virtual surgical plan where you pre-plan the entire thing then you do a 3D printing and then you can actually start practicing before going to the operating room, right? What a noble concept?

So here’s medical imaging data and finally I’m showing you what I’m talking about for imaging processing, since it’s a very typical CT scan and what we can do is to pick up the bony anatomy separate from airway, separate from the skin, using what we call thresh holding so each one of those is the little black or white pixel or everything in between.

So we are starting to pull out the anatomy of the patient because what we have to do is to create a 3D dimensional model so we have something to print, so you can see, we are pulling out the jaw bone, that’s the jaw bone, here’s the teeth, I think even if you are not familiar with CT scan you can recognize the teeth in this patient, and then here we are tracing the nerve, so you can see the power of what we can get from one good CT scan, one good set of medical imaging data.

And then what we do, we know the size of those pixels, we know the field of view, we know the slice spacing, what we can do is then calculate that exact patient anatomy in a 3-dimensional structure. So that’s what we do we start with that and then we take it virtual surgical planning, and this is a screen shot and I’ll show you, and this is actually blessing with the surgical team up in the screen, doing a surgical plan remotely, with a certain engineer from Golden Colorado.

So what are they looking at, they are starting with Blessing’s anatomy, so here’s that patient again, you can see, basically he had a piano wire holding his jaw together, he’s lost all his teeth in the bottom, so the first the surgeons are going to do is go in and resect out some bony anatomy to clean out the edges. So you’ve got a nice clean surface to do the reconstruction, and then what they going to do is actually take part of blessings fibula and leg bone, and use that to reshape his jaw, and we’ll talk about maybe, why things like bio printing in the future may enhance surgery.

But we’re pulling enervative data here, what you see in green is what a normal jaw should look like and then we are going to take the fibula bone and then digitally recreate what his jaw should look like. Now this seems like a crazy operation, you guys have to know that this operation is done without surgical planning, today, so the operation itself is very common, so what we are adding is digital tools, right, this looks pretty complicated. How powerful it is to have this digital preplanning before they go into the OR.

So at this point all we have are pretty pictures, we have Blessing’s anatomy, what you see on the right is the VSP post OPS so the simulated Post-Operative result. So this is what the surgeon says they want to do when they go into the operating room. So, very powerful, it’s the first time they’ve been able to visualize that.

So what we are going to do is to take that anatomy and we are going to design, patient specific, plan specific guides, that are exactly for blessings’ and we are going to print them and use them in the operating room, so the patient specific surgical tools. So pretty powerful concept, and here’s some of the examples we’re going to do, we’re going to simulate the plate, the fixation try to put it all together, the cutting guides and jigs that go on the bony anatomy.

And then we take that to the 3D printer and you can see, this is an example of sterile orthography, I think it’s a little bit dark but so you can see those models in there, so this is a pretty typical build overnight, we load up the machines they 3D print all night, so this is sterile orthography so everything the lazy is touching is getting hard, everything around it is not being touched, so it only draws out exactly the anatomy and some support structures, so it just dropped like a tenth or .15 millimeters.

And then it’s going to do it again, over and over again, thousands of times till at the end you have your 3 dimensional model in physical format and then it runs through a set of post processing that then allows that to be shipped as a medical device with instructions for use, how to clean it, sterilize it, use it in the operating room, so this is a pretty standard case, we’ve actually done thousands of these at this point, fibula free flab reconstruction of the jaw the craniofacial area and all of these are 3D printed medical devices with a cleared 510(k). They go and they are used all the time in the operating room.

So here’s an example I did put too many surgery pictures in here. You can see Blessing on the lower left, the medical device is being delivered to the hospital on the upper left, in the middle picture you see the surgeon using a 3D printed guide to cut the patient’s fibula bone and then you can see the reconstruction on the bottom right, with that medical model again being referenced in the operating room.

So, a pretty powerful concept. So here’s blessing holding his 3D printed model. So I don’t know if any of you guys saw this patient, pretty phenomenal man named Patrick, who’s a firefighter, at Tenaci, he received a full facial transplantation at the NYU hospital, just last August, we were fortunate enough to help Patrick, with the use of our digital planning and 3D printing technologies, through a virtual surgical planning, but what a powerful idea, those of you that don’t know, full facial transplantation is certainly not that common.

So Patrick has lived over ten years maybe a little bit long and he went through a lot of preoperative
counseling and testing to make sure he was a candidate for this, because this is an ethical moral type of operation that needs a lot of scrutiny before going into the operating room. So what they do is they take a donor, so much like you would donate your kidney or your heart, you can also donate you face.

And so, a young man at New York and this is all public information, so I’m not telling you something I shouldn’t, he was a bicycle messenger who got into an accident in New York and his family was generous enough to donate his face Patrick for this full facial transplantation. So he was a brain dead donor, and what you see on the left is his skeleton. So what they have to do is not only take the skin of Patrick, they are going to take some bonny pieces as well, and they take muscle and nerve and re-transplant it onto Patrick.

So what we helped with is we, one; we were able to digitally fit, how well is the donor going to march Patrick. Like we all come in different shapes or sizes and we are very complex, so we were able to digitally align every two patient’s anatomy to see how good of a fit was it was and then we made 3D printed guides that you can see would review the guide or what’s in that red color, then they we placed on a donor, placed on the recipient to dissect the bones.

So whenever you brought the face to Patrick it fit perfectly. It was really a time saver and really helped in the success of the operation but a really powerful use of the technology because we all know in the medical device company it’s all about the patient and seeing studies like this that keep us going. This is very common in knee-guidance as well, so many l knew that it comes from the orthopedic side, you’d be familiar with this and all of the major orthopedic companies have knee guidance and most of them are actually 3D printed.

Instead of doing a custom me, what they do is pre-size pre-fit and pre-place the knee X-ray to your CT scan, it is about; increasing the patient’s outcome for the person getting the knee replacement but it’s also about reducing the amount of product that is in the OR. So before I didn’t know if you were a size 8 or size 10 or size 1, so I had to have a range of five to fifteen, that needed to be in the OR when you went in to get your knee replacement.

But now I know you are exactly a size 8 because we took your CT scan and X-ray and converted it to a 3 dimensional model, we preplaced exactly where your knee, should be positioned for the best anatomical result and then we could reduce, maybe we have we have 7 8 9 in the OR, so reduced overhead, someone said up to 80 percent pretty powerful concept. And again they transfer that to operating room using this patient’s specific knee guide that will the drill this some pilot holes and cut some plains and then allow some standard instrumentation to finish up the work and you know where that off the shelf knee should be placed.

I think one of the most powerful concept of 3D printing and pre-surgical planning, is this idea that, for the first time ever, there is a 3-dimensional document that says you the surgeon, this is what you said you were going to do when you go into the OR. So know what we can do with post-operative imaging is we can said you are going to do and here’s what you actually did. And so that’s what this image is showing.

And for the first time you can actually take and say, so what you see in blue, let me explain it real quick, is what we said that we were going to do, this is the surgical plan, and what we see in green is the actual result. So first, surgeons, to get this feedback loop is very powerful, we gave them guides and jigs to cut exactly where they should cut, we gave them surgical plan before they went into the operating.

And then you get a result like this and then you say, wait a minute, where did I go wrong, what can I do in the future to do cases like this better, so I think this again a very powerful concept of the use of that technology.

So, one of the hottest trends in healthcare is printing in metals. So here’s a case example of a patient’s specific hip, so again we know that we can get a patient CT scan converted to 3-dimensional model.

What we can then do on that anatomy is 3D print or design a patient specific implant and then 3D print that patient specific implant in metal so that it’s exactly tailored. So not only when we have an anatomical models, we now have surgical guides, we have 3D printed long-term implants that are used in the operating room. One of the things we would like to say with metal 3D printing is complexity is free, those of you guys in orthopedics know that many of the implants that go into the OR are manufacturing steps.

It’s one manufacturing steps to a solid part, it’s another manufacturing step to add on a porch structure and then you may add on another biologics as well. But with 3D printing we say complexity is free, it doesn’t matter if they’re all the same size or there are slight variances, as they’re patient specific, complexity is free, so we can do this very economical today. And actually another one which is surprising, many standard implants, not patient specific implants, but standard implants with complex structures, like spine cages are 3D printed.

Because actually the economy the economics of 3D printing that complex shape is cheaper than doing it with standard methods. Here is another example of a patient specific spine implant, somebody had a collapsed disc, they needed to go into surgery and have this spine disc implanted, so what we were able to do digitally it was actually, take that patient’s anatomy, what you see in the upper right and actually move it apart a little bit to more simulate their normal spine structure because it has collapsed overtime.

Their disc has eroded and we actually digitally adjusted the spine with the surgeons input obviously and then designed a patient-specific spinal implant, this is a company out of Germany doing this. So I think it’s just really powerful case example about 3D printing is being used in metals. This concept is really fascinating, how you can use 3D printing in bracing and casting, so here is a patient population that really has it tuff, so this is a female wearing a scoliosis brace.

Those of you who are familiar with this scoliosis, typically it’s treated its most common in young females and it’s typically treated at that growth age when they are young women. So ages, maybe 12, 10 to 15 months say, during that high growth period and the only way you get better as a young female braces with scoliosis braces, if you wear this awful brace up to 20 hours a day, could you imagine, and some of you are shaking their head whether you’ve had it or know somebody. It’s all about compliance you have to wear the brace to get better.

The brace is hideous it’s hot its poky metal rods, imagine being a female having to wear this. But what if you can make the brace beautiful, what if you could use 3D printing to scan the patient, the young female could pick out the pattern, she loves flowers, she loves flowers at her scoliosis brace, let’s making low-fitting and breathable so it’s not so hot when she’s wearing it, if you make it beautiful what happens? She wears it more, it’s more comfortable, it’s patient specific, it’s made just for her.

So this is not only beautiful but she’s getting better because she’s wearing the brace more. So it’s a really powerful concept where complex design patient-specific imaging anatomy with 3D printing could do pretty phenomenal things with a really neglected patient population today. And let’s take this a step further to bracing and casting, a lot of us, whether you’ve had it yourselves or your kids have all being there, I had a 12 year old boy who broke his wrist, I mean by day 3 that thing smelled horrendous, right?

Like its awful, but what if you can have a brace like thi
s young girls are wearing this fracture cast that you could spray off with a hose that you could unhinge for a second and wash underneath there and then just place it back on. And what about this boy on their right again, this company called unique is doing pretty amazing things. He has a prosthetic on his leg, but what you can do is get a covering for that prosthesis, maybe he likes Iron- man and he wants to 3D print Iron-man prosthesis to wear around on his leg it’s cool as an expression of him.

We are doing this today with these medical devices, and again to go back to this group called Ignable. Has anybody heard of Ignable, this is a really powerful group? SO what they are doing, kids that need hands prosthesis, so what they are doing is providing a low cost alternative in fun and great alternative to traditional hand prosthesis. So what you can do and what I can do if I had a 3D printer like you guys that raised your hands before, could be a part of this. What they do is pair up people that have 3D printers with kids that need hands.

I have a 3D printer, I would love to use it for this purpose and I can sign up and help John who wants some Wolverine 2D printed hand prosthesis. And it’s a very fun and very exciting thought process and it’s done very cheaply, so this is maybe $25 worth of goods. You can do it certainly on a lower level and then you could obviously make it more and more extravagant depending on the printers and the technology that you have but this is the type of result you can get, all 3D printed with again some strings and wires attached at the end.

So they call it this maker, pay it forward, maker philanthropy and I think this concept is very powerful, now that we have this technology that can do very complex things at a very low cost I think it’s going to change the game for some of these, again this is a medical device, right? And then as we are winding down here, I want to talk about mass customization. So many of you guys, may or may not be aware of the hearing aid industry, so it’s actually been going on for a few years.

But most hearing aids they take a scan of your inner ear and then they 3D print patient-specific hearing aid shells that are designed and they print, thousands of these everyday same thing with Invisilign. So you guys all know this technology, so actually the aligner itself is not 3D printed but all the teeth mold that use, so it’s just like braces for those of you who do not know Invisilign, it’s like the new brace thing.

So instead of having the wire, you put in a series of trays that take you from step one to step 28, when your arch is perfectly in-line. And again you may have 12; you may have 50 of these different trays. So they use 3D printing on a mass scale thousand a day to 3D printing these teeth molds, and then they use to 34:45cast the aligners themselves, again I think it’s a great proof of mass customization.

And again, this is useful in this industry, so this is a hot one going on to, custom 34:56, take a scan or a picture of your foot and then 3D print a shoe in soul, and this is a startup company I wanted to add because I think it has the potential to be a part of this mass customization CPAP, you guys are familiar with the growing epidemic of sleep apnea most adults, CPAP, these custom, they are not custom, most of them are not custom today but these mass oxygen and essentially oxygen mask you wear at night.

But most of them are pretty hideous looking if I am to be honest and most of them don’t fit patients very well so they actually do not help the patient as much as they could because you are losing a little bit of oxygen, due the bad fit of the mask. So this company called Meta-Mason is using a scanning and 3D printing technology to cast out these silicon patient specific CPAP masks.

So the last kind of main area I want to talk through a little bit just to give it a full appreciation of 3D printing and healthcare is the pharmaceutical and bio-printing Industry and I’m just mention these briefly. It’s mostly the work of other people, but you guys saw this probably last year, the first 3D printed drug that was approved by the FDA, that’s seizure medication so, the idea of this is you can 3D print with the drug you can tune in on that patient-specific drug that they need and also can be an efficient way of manufacturing as well.

So this is the first 3D printed drug I think one of many that is to come, some pretty phenomenal work of 3D printing of organs, so Anthony Atala’s group out of Wake Forest, they are doing some pretty phenomenal 3D bio-printing of organ kidney and liver tissues. Organovo doing human liver tissue printing, I love this one, organ body on a chip, so what they can do is print these cells on a chip and they can use these cells structures that are representatives of many different organs in the body so essentially a make-up of the body.

And they can use this for testing cures for viruses or other drugs that, based on epidemics, large diseases that they want to test, they can test these one these body on a chip instead of testing on the animals or testing it on humans so it’s a pretty phenomenal idea and lots of very interesting stuff going on in skin 3D printing and then ears and then as well as and this has gotten a lot of attention from Scott Hollister’s group doing the tracheal stent, I think a lot of us have seen this in healthcare.

So that was just a snapshot. So I’m going to end with localizing the technology, although a lot is done at medical devices today, I really do feel that this technology is going to be localized to the hospitals. And how we handle that and how we collaborate and how we evolve as medical companies I think is very important. For example the Mayo Clinic has started a collaborative 3D printing in medicine, so radiologist are really taking this and owning it, because it’s kind of an extension of a CT scan when you go back to medical models, right?

And they’ve also started journal of 3D printing and medicine and we are seeing more and more hospitals that want to take 3D printers into their own hands, use them, and print their own medical devices in the hospitals, I was talking to the guy earlier about regulatory quality, hospitals aren’t necessarily known for their extravagant quality systems nor does the FDA govern hospitals, right? So I think it’s a really interesting evolution of 3D printing and healthcare.

But it’s going that way and we have to be a part of it, and then two more things to end on building evidence on 3D printing. So most of the things I talked about like anatomical models, they don’t have insurance re-imbursement codes, it’s a new technology, it doesn’t have insurance support, so many of the medical device company are coming together to help hospitals and clinicians to out on these studies to building evidence for 3D printing so we can get things like re-imbursement and then for rapid 3D printing.

(Video plays): “The objective has always been to disrupt conventional manufacturing….”

Katie Weimer: So this is really what I think the future of 3D printing in medicine is, taking what we do today and doing it 50 times faster, what used to take hours literally now grows in minutes, it changes the way that we make medical devices for patients, right? As technology become more local and as 3D printing technology become 50 times faster, it’s a whole different medical device industry than it was years ago, that’s a great ending note, so thank you guys for listening for the last 40 minutes.

Joe Hage: So, a few questions for the audience, who thinks it was worth my persistence to get Katie here today?

Katie Weimer: Thank you guys.

Joe Hage: Who thought, that was really cool when you saw things you hadn’t imagined before? Now importantly I want to ask this crowd in particular, who hear heard
an idea, that inspired you that you think you can bring back to your businesses? I expect fewer hands here, because of the, it’s not an immediate application for most folks, I guess my one question in the interest of time would be, how might you address the other 80% percent of the room that, saw what’s possible but right now they are not seeing how it works for their business, it’s a broad question but perhaps you can attempt it.

Katie Weimer: No, it’s a very common evolution of this technology, we do what we do today because it works in system medical devices are sticky, right, once you get something cleared, once you get it to market for good reason it’s difficult to change, so it does take time, and I think what you’ll see first is the evolvement from an engineering perspective how you used to think about designing something based on the constraints of a milling machine don’t exist anymore and it takes time for this evolution to take place.

So it’s a very common evolution but I think, keep at the back of your mind know that it’s not unknown, I think people in medical devices are scared of the unknown but I think what I showed today is it is a common tool in medical devices, there are people that can help, consult, there are people that can help you to use this technology in medicine, not just in aerospace and automotive where most of us thought 3D printing lived.

Joe Hage: Ladies and gentlemen, my new best friend, Katie Weimer.

(Applause)

Katie Weimer: Thank you.

How and Why We Must Challenge FDA

27 min reading time

How and Why We Must Challenge FDA

Reading Time: 27 minutes

Veteran device CEO Joseph Gulfo says, “The FDA must be challenged (when appropriate) because it operates in a highly political environment and has strayed from its original mandate.”

The original mandate, according to Section 1003 of the Federal Food, Drug, and Cosmetic Act, is to “promote the public health by promptly and efficiently reviewing clinical research and taking appropriate action on the marketing of regulated products in a timely manner [and that] there is reasonable assurance of the safety and effectiveness of devices intended for human use.”

But today’s FDA does much more than that – and that’s the problem.

Here’s his paper, “The Proper Role of the FDA for the 21st Century.”

And here you can email Dr. Joseph Gulfo directly to see how you can help on this important crusade.

Joseph Gulfo: As you know Joe’s very very persuasive when he read my book and complimented to me it’s very sweet and he asked me to come out here. And I said, “But Joe May 4th is my birthday,” and he said, “What are you? 10 years old?” and …

Audience: Happy Birthday.

Joseph Gulfo: Thank you. And he said, “Look, just come out pose a provocative question, show your book, get some audience input, and do me that favor.” I said, “Okay.” So what’s the provocative question?

Is the FDA too big to challenge?

And the answer is a resounding no, and Joe thank you. Okay.

So we define what we mean by challenge so do we challenge on a pro-product basis? Absolutely.

But do we do the more daring thing of challenging on the broad philosophical basis which our trade organizations are not doing; nobody’s really doing effectively in my view.

And that’s what I’ve done now, I’ve started an institute, I’m part of a think tank where I’m a visiting scholar with economists and I’ve written some papers, we’ll get into it in a little while.

So let’s talk about challenge. Everyone remember Sedasys? J&J, a device to monitor anesthesia propofol so that you wouldn’t need an anesthesiologist. This is a great product. J&J in their restructuring’s stopped promoting it however. But if you look at the path it was arduous, they filed a PMA, they had a beautiful panel 8:2 on the merits, 9:1 that nurses can use this without an anesthesiologist being in the room.

FDA issues a non-approvable letter if J&D filed a petition for supervisory review which is a very formal way of challenging. They forced the agency to give them a non-approval letter so that they could then file for an appeal. Appeal that means dispute resolution that’s big stuff.

The FDA granted that they would do the appeal and then there was clearly discussions between the company and FDA and J&J retracted the appeal and a year later they got it approved.

So J&J was quite successful in challenging the FDA. But that’s J&J.

The prior one that went this route is called Cardima and they didn’t do it so well. Since 2007 was the last time they lost they went all the way to dispute resolution they lost zero to five and the company went bankrupt.

All right, so is the FDA too big for small companies to challenge?

J&J can challenge the FDA especially if you have the goods, and I think that’s one of my main messages. If the quality of what you have is solid I think you absolutely have to challenge the FDA.

Often big companies don’t challenge the FDA as you know because they have nine other products before them and they don’t want to risk it.

But let’s take a look at some of these other companies. Cardima, not so good. Did 23&me didn’t put much of a challenge. Should they have? I actually think they should have. Theranos, no I don’t think they should be challenging the FDA, you guys talked about that yesterday.

Sprout Pharma challenged them and got the female Viagra approved and a lot of political pressure on that. Epigenomics we’re going to talk about that later. They also challenged the FDA in a formal way and they won, we’ll get into it. And Sarepta Therapeutics I don’t know if anyone’s following the Duchenne muscular dystrophy drug, I know it’s a drug but that’s very interesting. I’ve written a couple of editorials that will come out though the next couple of days on that.

So definitely I believe when you have the goods, when your product is unassailable the problem is every program has warts on it; every program has a few warts so it’s really a judgment call. But I definitely think on a product basis we have to challenge the FDA but I really want to get into on the more important I think the philosophical ideological challenging the FDA because I think it will make the product challenges less frequent if we can solve the ideological issues.

So yes I’ve written this book, Innovation Breakdown, I’ve gotten three products approved. The drug for bladder cancer. I ran a few companies the drug medical device and biologic approved for prostate cancer and a device this book is about MELAFind, a PMA device. I write a lot, I wrote this book, I have a second book coming, I write a lot of editorials and I teach cancer biology and a few other things.

Okay so there’s a book review on the Wall Street Journal and the reviewer posed the question at the end. He said, “Considering all that he’s been through, he still believes in a strong FDA and it can be fixed with just a few tweaks.” He’s wrong.

So notwithstanding what Joe said, I am a moderate in this. I have these people at the FDA I have tremendous respect for, I have respect for the fact that they do most of the things that I don’t think are appropriate out of fear. So I am moderate, I don’t think it should be blown up, but I do think that we need fundamental change. So we’ll talk later do you think I’m wrong and can we challenge it.

So this is the, it’s the stock chart of MELA and also the time and events. And I can give a whole presentation just on this, I’m not going to but I will just tell you that … Okay so when we went public we first got a binding protocol agreement with the FDA, very very rare. Anyone ever hear of a binding protocol agreement? Okay, it’s very rare to get.

We invested a year to get it; I didn’t take a salary during that time. The two people I paid during my first year at the company was the regulatory lawyer to help us do that and a reimbursement consultant to make sure we knew we were doing reimbursements; two most important things I think.

All these milestones you can read we were doing well. Even through the downturn in the market we came right back. We were a $300 million company and no revenue. Single product one company … Excuse me, single product public company. Now as per Reg FD if you know the SCC rules, anything that’s material to an investor has to be disclosed. What isn’t material in a single product company?

Everything’s material so our saga played out in front of the world and we often were on the front pages of Wall Street Journal, Fortune and other magazines, so and here our fortune. So here we were expecting a panel day.

We had a tremendous interaction with the agency where they not only told us that we’d be going to a panel meeting in the next quarter, I asked them I said, “Is there any way … I see you have a panel scheduled for tanning booths. It’s the right group to talk about this. It’s a 00:09:08 device on May 25th on March 25th so I suppose you’ll have us March 26th.”

My branch chief whom I have great respect for and like very very much said to me, “No comment,” so that meant he confirmed that was the case. And I said, “Look I’ll tell you what I’m worried about. If everything goes well, I don’t want to be presumptuous; if everything goes well will you have enough time to approve it by May 5th?”

And he said to me, “Joe I’ve heard Thanksgiving, I’ve heard Christmas, I’ve heard New Year’s, I’ve never heard May 5th. Why do you need this approved by May 5th?” and I said, “Because that’s Melanoma Monday. That’s when the American Academy of Dermatology publicizes the heck out of skin cancer 00:09:47.”

He said to me, “Joe, the FDA PR office would love to do a joint announcement with you on the Melanoma Monday so I’ll tell you what, we’ll get all the paperwork done before the panel. If it needs to be tweaked yeah we can get it done in whatever weeks that would be, like nine weeks.”

I thought I was dreaming so I said, “What do you mean by the paperwork?” and he goes, “You know the labeling.” Now I didn’t disclose that, because I didn’t have it
in writing. Thank God I didn’t disclose that.”

So here I am waiting for a panel day, instead of a panel day I got another not-approvable letter and it was a shock and the company really, it never recovered from that.

So we filed a supervisory review and we got called and said, “Let’s make a deal and the deal is if you retract the supervisory review we’ll give you a panel date but one of the elements of our supervisory review is you broke the law. You’ve got to give our first product the panel.”

So he said, “Tell you what we’ll do, we’ll give you a panel if you retract the supervisory review.” And I said, “Thank you, I appreciate that. If you retract the not-approvable letter you’ve got a deal. Done.”

Never retracted the not-approvable letter, so we went into a panel meeting with a non-approvable letter extant. I don’t think it’s ever happened before or since.

And we won at panel. Now you have to read that, it is a section here called ‘The Greatest 15 Minutes of my Life’. It happened at the panel, it was just ridiculous and a little bit … But we won at the panel which I think is huge. Again if you’re going to take on the FDA, if we lost the panel I don’t think we’d have a leg to stand on.

So we won at the panel meeting and then the people part of the review team that loved the product and we went back and forth and fought a little bit but we had a good relationship. Came up to me after the panel meeting, they were embarrassed and they said to me with smiles on their face, “We look forward to working with you. This was great,” but they never responded to my letters and things and now the clock’s ticking.

So I assumed that the denial letter was being written notwithstanding we were approved at panel. So I filed an NDA amendment to modify the claim based on … Normally you do the horse trading at the end but I wanted to push a pause on the clock so I filed an amendment. Still not word, filed another amendment on commitment to a training program. Again just trying to stall a little bit.

And our team – if anyone watches Scandal we put a team together that Olivia Pope couldn’t have put together – and these weren’t one of my ideas. And so we filed a citizen petition in the middle of the review because there was no mechanism, there was no other mechanism for appeal.

J&J can say, “Damn it! Give me the rejection letter and then we’ll come with an appeal.” I couldn’t do that as a single product company. So we filed a citizen petition.

Now all through this stuff, all those machinations I’m losing investors, I’m losing the real blue-chip fundamental investors. Every time your valuation goes down a little bit when you’re in this level, you fall out of the range of the indices, the index funds that have to hold you. When you’re above 300 all these funds have to grab a certain percent of every company in the index. When you’re at 250, so there’s like 250, 200, 150 and as we’re coming down as one fund’s leaving others are leaving. It’s horrible; you couldn’t control it even though we were having some good things.

And we got to the end of the road and we did get it approved. We were left with very few shares authorized and we had, we were in the hands of the deal players. A deal player is a fund that will give you money at a discount the market and take warrants. They’ll sell the stock immediately within a week or two so they’ll make a nice spread and then they have an upside on the warrants.

So you’re in the hands of the deal-players and the shorts. We were incredibly attacked on the shorts and we launched the product not with as much money as we would need to do it and we needed more money to during the missionary phase of the work.

What I loved was I got 62 letters from doctors saying that they wouldn’t have detected the melanomas they had. Actually not, 62 are things we heard sometimes at scientific meetings a doctor would come up to us and say, “If I didn’t have that MELAFind I would have missed this melanoma.”

So there were 62 melanomas I was aware of in the first year that wouldn’t have been caught without us and it felt great but by that point when you read the book I was, I needed to worry about Joseph Gulfo and I needed to leave the company, and I did.

All right so as you know raising money in medical device companies even if you’re public is very difficult. If this were a biotech company in one financing I would have raised $120 million, no I did $160 in 11. And the way you do that, in nine years, the way you do that any of you out there you have to stay close to your investors.

And I remember one investor saying to me, “Joe what I love about you is even when you had bad news you came and visited me.” I think it’s very important for all of you, stay close to your investors, it might be painful at time but it really pays out.

So the way we were able to challenge the FDA and win was on a couple of things. The first was we had a binding protocol agreement which in writing said, “This is what defined safety and effectiveness which was sensitivity and specificity.”

There’s an out clause in binding protocol agreements that if there’s a new scientific issue the FDA can back out of it but they’re supposed to have a meeting with you they never did.

So one of the big parts of all the things that we did in the challenge is we cited the fact that they broke the binding protocol agreement and the FDA instructed the panel to ignore the binding protocol agreement. Yes we had it all in writing, thank you for yeah literally.

The other ace in the hole we had was as we arrived for the panel meeting, I remember actually on the train ride down from New York to D.C. I cried the whole train ride because the person had a clinical ME she would turn the page as we’d look at FDA slides and every so often I’d go 00:16:26 I’d have even like a even a more intense cry than when I was on as I turned she turned right back 00:16:32, “What are they doing?”

And one of the things they did was they redefined safety and effectiveness.

Safety in the Regs is this, they changed it to the definition of effectiveness and they developed a new definition of effectiveness to include lesions in the study that the machine rejected. They tried to concoct it that was intent to treat.

Meanwhile if the machine wouldn’t read on it, how could it be? So one of our experts at panel one of the biggest name in melanoma got up to the panel and he said a story.

He said, “You know I have friends who deal with breast cancer, they’re radiologists. Not one of them ever told me that when a mammogram is unreadable do they call a patient and say, “Great news! The mammogram’s not readable.”

No they call them and say, “Sorry you’ve got to come in for an MRI because the density.” So this point was that you get the point.

So because of these two facts we really rode them hard and we got covered by a lot of media, we got great hearings by people inside the Beltway not just elected officials but think tanks and others and we won.

But in the end when you’re a little company I think the FDA always wins, and certainly happened to MELA.

So I believe in my heart FDA must be challenged for many reasons but on this I’m saying of course when appropriate because it operates on a highly political environment.

It’s not just about the data, it’s not just about your products or the product before you. With Sarepta it’s not just about their drug, it’s about IDA 00:18:14. FDA already caved in to the women’s rights groups on approving the Viagra for women. Do they want to be seen to be caving two in a row, cave-in to the D&D group?

So it’s not just about what you’re doing, it’s about a broader broader thing. I had to
do intensive inside the Beltway activities, there’s a word I’m refusing to use, twice. My last two drug approvals I had to do that, we hit every end point. So I do believe that there’s a tremendous political component and the FDA because of fear, which I’ll get into, because of fear and it’s really not their fault, but it has to be fixed.

Have strayed into areas that they don’t have a mandate to be in. Okay, so what is their mandate? If you open up the Regs this is FDA’s mandate.

Okay let’s just see here, it’s to promote health. So why don’t you all read that, promote health, and this how we’re going to promote health. Now notice here for devices especially reasonable assurance, reasonable assurance.

Now if you go on the FDA website at the time they since changed it. Andy von Eschenbach, former FDA Commissioner and I have been really saying a lot about this mission stuff. They’ve now changed it to their mission is to promote and to protect but at the time they changed their mission to protect. And it’s not, that’s not what Congress told them to do.

And if you just read and down here they gave themselves … So go back up here. Promote health and there’s three words, three words on urgency. Not only promote, promote it in a prompt, timely and efficient manner.

Damn it! Congress wanted new stuff and they wanted it fast. That’s what that says but FDA said, “No, we’re going to promote it and we’re looking for comparative effectiveness. We’re even looking for better prices.”

That’s not their mandate, so the FDA has clearly clearly strayed and very few people talk about this. It’s very problematic.

So every now and then you will find an article written that really represents the truth. There’s so much written by various outlets. There’s outlets that I just wouldn’t talk to anymore because it was obvious that they had a point of view that really lays it out.

So this is from FierceBiotech and it talks about how, it says here that the FDA likes to say that devices are approved as fast or just slightly slower than Europe and they point it to this product, the valve replacement.

And truth be told that was the second generation, the first generation was on the market in Europe four years before approved in the US.

This is from FierceBiotech not from me. And this … I’m sorry FierceDevices sorry. And this is one heck of a product. I mean look at this recent data on patients of intermediate risk, it’s really really a great great product, and US patients were denied that.

The other thing I’d like to say is this is the medical marketplace at work. After the product was approved it was really really well-defined who it’s optimal for. It’s optimal for intermediate risk not the high risk. This is the way the system is designed to work.

What about the WATCHMAN device, 10 years, 10 years. And what really annoys me about the WATCHMAN device, I know we have a couple of docs in the room, the last time I saw a patient we were still calling a PTPTT 00:22:04 now you know. But it was horrible to try to get a patient on Warfarin to have appropriate anticoagulation; you just simply couldn’t do it.

So all the drugs you see and now this device where they compared a Warfarin and there’s not … The P values are just off. The fallacy of that is on a clinical study yes patients take their Warfarin. The nurses call them if their PTPTTs out of whack because they’re coming in monthly and not every three months in clinical practice they get retweaked.

So on clinical trials the results of Warfarin are much much better than they are in clinical practice. So the WATCHMAN had to be approved for those who couldn’t take Warfarin. And I think that’s not right. I think that’s it’s a great device and it got limited and for 10 years.

This came up yesterday, so what does all this stuff that we just talked about do?

What it does is it constricts funding to devices. And look what’s eating device’s lunch now? Now we have LFID coming in in a big way, and apps, and things like that; things that don’t need FDA approval. And Sergey Brin is the one who really said it best. He said, “I’ll never get involved in anything that requires FDA approval.”

But that’s not good for us, because I don’t want to preempt myself for now but this is what’s happening. And so gosh darn it, we better speak up. We better challenge and it better not just be when there’s a drug that hit … sorry, device that hit every endpoint in the whole bit. It’s got to be a more global macro ideological challenge I believe.

This is in the news, this is good, this helps our sector when you have acquisitions and things. But what I really liked about this article was 40% of adults in the country will have some form of heart disease by 2030. We need more devices and we don’t just need them for the ultra-acute end, we need it for that as well.

Okay so what goes on in Washington again why we have to challenge is not helpful.

So here you have 21st Century Cures are people following that? Are you reading it? I read the whole bill, it took a lot, but here is a proposal for breakthrough therapy of devices and you can read the full criteria.

Okay but guess what, same criteria from 2008. We already have provisions for this; they’re in the Regs.

So why do we need all this 00:24:53 over breakthrough devices? I got expedited review for MELAFind. Back then there were six ways you could expedited review, we satisfied four of the six. So what’s all this? It’s a PR effort. It’s the same thing going on in drugs and devices, same exact thing.

Where nothing part of the breakthrough therapy for drugs and devices wasn’t already on the Regs. In fact if you lay out the four expedited programs, they all have the same first sentence and the provisions are just cosmetically different.

Okay so the Senate Health Committee decided to move forward with some of the 21st Century Cures Provisions. And the first one I want to see some more jaws drop.

Can you imagine that Congress need to put in a law to retrain all FDA personnel on least burdensome approach? Least burdensome approach is 101. It’s what you guys do every day. Why does that have to be in the law?

It has to be in the law because FDA is not practicing it. Why are they not practicing it? They have congressional oversight, that’s why. So this dropped my jaw there and now we have the breakthrough therapy stuff which I just showed you is not necessary. So are these really needed? Okay now let’s go to the other side.

You have this, all this is going to do is give you more health IT and apps and all that kind of stuff which I like, I don’t them making diagnoses but I like that’s okay. And I think this is fine I mean I think we need a lot more on combination products but that’s about, that’s good. But what are we going to have now between breakthrough therapy and the this kind of stuff? What’s happening?

We’re seeing investment in HIT and apps go way up with the breakthrough therapy. The same in devices is going to happen from drugs. I was at a conference I teach cancer biology so I go to all the cancer companies I can see so at one conference I was there were 100 cancer companies presenting. I couldn’t see 100 I think I saw 45 of them.

You know how many diabetes companies there presenting? We had small companies, three.

Obesity companies, five.

Why? Because the easy pathway on drugs and biologics is for these ultra-niche cancer claims that then you throw in a mutation or two and you get deep carving. That’s what’s going to happen with devices. So what’s going to happen?

Most of the stuff we consider medical devices is getting left out, it’s not covered.

And I think this is a huge problem and back to t
he theme of the talk, do we need to challenge? Yeah, we’ve got to challenge.

As I said the trade groups I remember when I was going through with MELAFind I remember when I wrote the book I said to some of my D.C. insiders, “You’ve got to get me into see 00:28:20 man, you’ve got to get me in.” “Joseph, they don’t want to see you.” “What do you mean they don’t want to see me? I wrote a book.” “They like what you went through, they get to buy you at a song for going through that.”

So it’s very disheartening. So what happens? We move to products that don’t require challenge and those are very incremental, and then we run into the risk that reimbursers won’t pay for them because they’re so incremental. So we’re not getting innovation and all your efforts you’re not getting paid for it.

Or we do the ultra-breakthroughs. Let me tell you what happened with drugs and biologics. In 2014 breakthrough therapy I think came out in 2012, 40% of all new drugs and biologics for orphans were for little niche diseases. In 2015, 48%. What do you think is going to happen next year? Even more. You have major major companies projected. Major companies like Bristol-Myers are going to be the leaders in specialty drugs. No one’s doing anything about heart failure and diabetes. Same thing is going to happen to medical device.

So what do we do? Speak out. I’m speaking out, I write these medical innovation impact index alerts where I bring up stuff like we’re talking about. Vincent DeVita speaking up, he’s a very well-known oncologist and he makes a great point. The incrementalism of just attacking one mutation at a time or using one drug when something else fails.

We know to get cancer you need eight mutations. Your body has to accumulate, actually it’s eight pathways that have to be affected, it could be done by four or five mutations but the point is why aren’t we treating cancers with four or five agents? That would be innovation. We’re not because that’s not, the regulatory system’s not geared up for it.

Patient groups are magnificent, patient groups are really really great. They need a little direction but they’re excellent. And philosophy has to change, I’m coming out with another paper with the think tank in D.C. that’s going to offer definitions of effectiveness and we’re going to get into that in a little while.

Proper Congressional oversight instead of fire alarm oversight which I’ll get to in a second. We need police patrol oversight and I’m coming up with another proposal for shadow panel meetings. What I thought was really interesting with Sarepta. 36 experts, 36 experts in the 00:30:57 wrote a letter to the FDA in advance of the panel meeting in support of this drug. And at the panel the panel voted seven to three against it. There’s clearly something wrong with the panel system.

I mean Sarepta is too small a company to be able to have paid off … We’re all accused of paying off … They’re too small a company to be able to pay off 36 of the top D&D doctors.

So again the FDA has changed its mission to protect health, and again I’m not defending the agency, out of fear, out of fear. We have to fix that, but let’s go back to what Thomas Aquinas said about, “If that’s the highest priority then what are we even doing?” What are we even doing?

So this is really interesting to me, a company Epigenomics has a blood test for colon cancer. Every once you have a colonoscopy, in fact mine to do because I have follow-ups I’ve got to go every two years, but every one over the age of 50 should have a colonoscopy but a lot of people don’t do it. So you have a stool test by exact sciences and this group came up with a blood test.

And basically what they’re saying is if you’re for people who don’t get a colonoscopy let’s at least do something. So they did a great trial, they compared the performance sensitivity and specificity of their drug, excuse me, their diagnostic in patients going to colonoscopy so you could define the sensitiviety and specificity. FDA agrees with them, they go through the whole thing, big trial, great results.

And the FDA says to them, “Well, you know we don’t really like the results because we want to see whether your product increases utilization of colonoscopy.”

What are we talking about? What are you talking about? You see the FDA has replaced, I’m going to show you in the next slide later, they have replaced effectiveness with kind of the utility.

So the company asked the FDA they went back and forth at the agency. Finally they filed the supervisory review and they won. So it was rejected and finally they won. And the FDA didn’t know what feedback to give it so they just decided, “Let’s just review what we have, 00:33:19 and put it in.”

Again I wrote this paper called ‘The Proper Role of the FDA in the 21st Century’ and it got picked up by the Boston Business Journal. When I first saw the title I shook a little bit because I didn’t know where he was going with it because I am Italian, Scalia’s Italian, assuming I subscribe to every thought, it’s okay I do like 00:33:47 but I didn’t know where this was going.

But I love where it went as an originalist; I am an originalist. We have to get back to the letter and the spirit of the laws, the original law. So yeah again the FDA is now ordained themselves as the arbiters of clinical utility and that is not the law. So this is the paper, I’d love all of you to read it.

Joe I’ll give you a link for it. And I have a follow-up paper coming out. This paper sets the problem up which I’m going to go through right now and we have the follow-up with the solution which I’ll give you a graphic from that one.

So in a nutshell the FDA in my view our view is straying from its public health mission which is good safety and effectiveness all based on average patient trials. That’s fine into the private health decision-making between a doctor and a patient.

And this private health decision-making is where personalized medicine happens based on safety and effectiveness or drugs and devices whether or not they should be used in a particular patient.

So the FDA is definitely encroaching on private health decision. And basically this is how it’s done. In the good old days not too long ago safety and effectiveness this is what safety and effectiveness meant. And because of fear we have new definitions basically of safety and effectiveness. No more.

Safety and effectiveness now is safety determined by benefit risk not by considering the true safety of the product. Benefit risk is in the guidelines in the law but it was not used to extend here where you’re not even basically looking at whether a drug is safe for use by the conditions prescribed.

And then effectiveness is clinical utility. Clinical utility patient outcomes both of these have to be proven in large-scale, large-scale trials both for devices and drugs and biologics and that’s wrong.

So what we contend in this paper is that FDA’s role in the medical marketplace is to put new products on the top of the funnel based on safety and effectiveness. Then you have early adopters, patients, drug companies and device companies want to differentiate their product from others on the market doing larger studies. Once they’ve gotten through the hurdle payers now, payers now saying, “Well I’m not paying for that. Show me there’s a difference.” Okay run a pilot with the payer in.

All these things then take all the approved products and we riddle them down to the ones used the most, the ones that are most useful. And what we contend in the paper is the FDA has moved itself by moving itself into moving into clinical outcomes and things, they’ve basically moved themselves to wanting to be here.

They want on approval, on approval to b
e able to say to doctors to dictate medicine, “Use it this way. This is the appropriate.” Basically they want to be able to prove with guidelines, “This is when to use this, it’s how to use it.”

And that’s not the system because often as you all know it takes years for a new product, drug biologic device to settle into usage, to settle into the marketplace where they actually learn who is best to be used for. So if FDA is moving here, and they are, that’s why the pre-approval requirements are going up, are just off the charts.

And what drives us all is what I call a vicious cycle of oversight. And what typically happens is some catastrophe happens on the outside there’s either some macro event like Ebola or something else. Or more importantly when a drug or a device, the meshes and various drugs, cause problems.

What does the FDA do? What happens? Congress calls in the FDA and beats the living daylights out of them, just beats them up. I’ve just testified at a Senate hearing I made the point.

Even with Avandia a great drug, FDA did the right thing with Avandia and they still got beat up for it. So even sometimes when they do the right thing they beat you up for it.

So FDA goes down the Hill, gets their head handed to them. They go back home and what do they do? They recoil, they’re not going to let that happen again. And how do they recoil? You’re all nodding your heads so I don’t have to beat this to a dead horse.

And then what happens? And then now Congressional oversight, the police patrol oversight fails. The police patrol oversight is what keeps an eye on are they practicing least burdensome approach.

So that fails and then what happens? The next time law gets written and we’re writing law every five years now with PDUFA and MDFUA. The next time law gets written the recoiling gets incorporated into the law and this is what we have.

And no one’s talking about this. I find it very upsetting.

And what do we get? We get mounting regulations. And what does that do?

Mounting regulations and this is really really germane more to devices than drugs. There’s in the law it even states that if you can do it aftermarket, do it aftermarket. Basically it almost says it that blatantly. Drugs too there’s a balance of pre-approval requirements and post-approval but what all that I just talked about has done is this.

We’re now pre-approval requirements much more than post-approval but post-approval big as well and just mounting. And this is why drugs take longer to be approved and the costs are going higher and higher and I’m sorry you made a great point this morning when we were having breakfast. And then we’re not even capturing things people aren’t even developing because of this. So all this innovation is not happening and we don’t know how to capture that.

So some people are doing things about it, the Right-to-Try movement. Right-to-Try says if you’re dying gosh darn it let people have access to drugs that have at least gotten through phase one. Zeke Emanuel doesn’t like that, I don’t know why. I don’t know anyone who doesn’t like that. I know why the drug companies don’t like it because if they do have a heart and they do let someone use it who’s on death’s door.

We have a technical medical name for patients like these ‘Trainwrecks.’ And you give an experimental drug to a train wreck patient, if they weren’t in failure they’re going to be soon. You get the whole point, and so those captured as adverse events for the drug, and even sometimes get the company put on clinical hold. So the companies don’t want Right-to-Try either. That has to be fixed and I’ll be down in D.C. next week so at this briefing on Right-to-Try.

This is really interesting so this is back to the D&D so Nice. Everyone knows about NICE in the UK. NICE basically doesn’t want to pay for stuff. NICE is paying for a D&D drug that got approved on a conditional basis. PTC therapeutics drug. This drug FDA refused to file, didn’t even take it to a panel yet it’s approved in Europe and NICE is even paying for it.

And at the Sarepta meeting panel meeting last week they stated a study, they didn’t do a randomized study but they compared to another group of boys in Italy and Belgium versus boys on a trial. Four-years study doing biopsies so you’re doing a randomize. The kids on the trial after four years walked on average two football fields longer in six minutes than the other kids. Panel members still voted against it. The 36 experts wrote a letter to get it approved.

And so I’m done. My solution is we need to define for FDA what effectiveness is.

This I worked out for drugs and biologics, I’m working on one for devices.

If anybody has ideas I’d love to hear them but I think we have to define, we need a law what safety and effectiveness is. And fine, if you sponsor want to spend the money and go and get a claim in clinical outcomes, go for it. That label will be coded green and if you just do one for 00:42:17 signs and symptoms that label will be coded black. So it’s a solution that’ll be in the second paper that I’ve written.

And I’ve written a second book, it has nothing to do with any of this; not quite. It doesn’t have a lot to do. I’ve always managed small medtech biotech companies and the publisher of this book called me and he said, “Well you have a lot of management lessons in here, why don’t you write a book on pulling that out for little companies and put it in and write another book.” Which I really went to town on the difficulties and challenges in managing little companies. That’ll be out in September.

And if you want Joe I’ll come back next year, even on my birthday and I’ll talk about that, but thank you very much.

(Applause)

Joe Hage: So during your presentation Mom walked in.

Joseph Gulfo: Oh, Mom she didn’t know that 00:43:15 yesterday.

Joe Hage: Is that right? And she leaned over to me and she said, “Is this guy supposed to be interesting?”

Joseph Gulfo: My mother died in 2006 so it’s good to be reminded of what having a mother is like so thank you.

Joe Hage: And I replied to her, “He is one of the speakers I’ve had in four years.”

Joseph Gulfo: That’s very sweet, thank you very much.

Joe Hage: Seriously in fact, I left your presentation midway through to get stragglers out of breakfast to make sure they came and heard this.

Joseph Gulfo: Thank you, okay.

Joe Hage: What can the people in this room, first of all do you … Did he make a very compelling argument here?

(Applause)

What can the people in this room do to help this originalist on his crusade?

Joseph Gulfo: I’d love ideas. I want to write, I already I came up with the framework for the drugs and biologics on the various categories of approvals … Sorry, categories of substantiating effectiveness. I’d love if anyone has ideas I’d love to hear what you think they would be. I think we’ve got to separate devices and diagnostics.

One of the things that really bugs me about diagnostics they did with Epigenomics they’re doing it some others that just because you can measure something prove to me, prove the clinical utility of that measurement. I think that’s all. I don’t mind it if a company wants to do that but if you just want to measure what the parameter is I think you should have basic approval. So input on what the different levels of effectiveness for devices should be I could really use so.

Joe Hage: What is the best way to give you that input?

Joseph Gulfo:
My email, I’ll leave some cards around.

Marc Fine: Yeah hi Marc Fine from OtoNexus. Quick question about panels. It seems like this vague anonymous beast but does it come down to individuals?

Joseph Gulfo: The panel?

Marc Fine: Yeah that person the human being on the panel who’s got it in for you or has their own agenda.

Joseph Gulfo: Listen, I’ve been I’ve run three panels in little companies where I was the main presenter and it’s I had a panel where at half-time the FDA came up to me reviewer and said, “Joe, I’ve got three things for you: number one that was a phenomenal presentation we’d like every company present the way you did. Number two you’re an honest guy you presented your bad equally to your good. Number three you got it in the bag.

We came back in the afternoon, one panelist slapped the table and said, “I don’t care how good the data are. Complete response it’s the completely wrong entry point for this disease. 11 to zero unanimous no.” One panel member and he told me later it’s a guy I published with in the past, he told me later, “I was just trying to make a point about XYZ,” and I said, “And you took my panel, you used my panel to make a point?”

So you have that. You have panel members who love being panel members that they want to fall in line with what the FDA wants. You have others just wanting to be quoted. It’s a bad system, it’s a really bad system.

Joe Hage: In his talk Joe mentioned that he’s done this before, before MELA Sciences.

Joseph Gulfo: Yeah, I didn’t need this one, I already had, I already had my painful period.

Joe Hage: They just tried to get it in and yeah.

Joseph Gulfo: Yeah.

Joe Hage: And you were actually kind of brought in as a ringer, like if there’s a guy who can get this through this is the guy. So for those who aren’t as skilled as you are to have this kind of challenge, it’s beyond daunting.

Joseph Gulfo: And I hate to say this because I don’t want to sound, that’s why I wrote the book. The message of the book is if innovation is this difficult that I had to go through what I went through to get this product through, we’re not going to have innovation. If we continue to make it be this difficult we’re not going to have real innovation, and that’s really the message of the book.

Joe Hage: So given the events that transpired, and I’m sure you’ve had plenty of time to ruminate on this, knowing what you know now is there something along the way that might have changed the outcome? Had you this, had you not that. Given the personalities, given….

Joseph Gulfo: I really think we got caught up in a macro event at FDA. The FDA just got a new Head of Devices who put, who wanted to come out with a whole … All of us were in the same boat at the same time where they wanted to come up with new guidances and devices. I know a VC who told me, “I went down and I got on my hands and knees and I said to them, “We don’t care where you set the hurdle, don’t care, but just don’t tell us you’re going to be changing things. We don’t know what to do with that, we don’t know how to structure our investments.” And they didn’t care.

So I think that we just, we really were in the wrong place at the wrong time and I know that’s a little bit of a cop-out but I honestly don’t know what I would do differently with the FDA. I know what I’d do differently in a company, read the book, I should have done a little more diligence on XY or Z, I should have done better market research. It’s very hard, one of the very provocative things I think is how do you do real market research with the end user when you don’t have your final product yet?

And I think that’s really where we fail, I’ll explain. The experts advising us told us we don’t need help with freckles, we don’t need help with these kind of things, we need help with the atypical pigmented skin lesions. We put it on the market, guess what the docs are doing, they’re putting it on freckles. We need training for freckles.

How could I … To me that’s the big mistake I made. How could I have gotten that input before I had a working prototype? How do you do that? Market research with the end users not from the experts is really really key. So I made mistakes but I’m not, I can’t say I’m the regulatory side.

Joe Hage: Dr. Joseph Gulfo will be speaking at 10x in 2017, let’s hear it for him.

Joseph Gulfo: Oh that’s very sweet. Thank you very much Joe.

(Applause)

Best Time to Sell Your Medical Device Company

25 min reading time

Best Time to Sell Your Medical Device Company

Reading Time: 25 minutes

Deborah Douglas spoke at our fourth 10x Medical Device Conference in May 2016.

A main takeaway for me seems obvious but those who go-it-alone probably ignore it: Multiple bidders make for higher prices. Deb said, “For an average seller, our firm will talk to 300-400 buyers.”

Watch her full presentation below and click through for the slides and transcript.

Joe Hage: Deborah Douglas is the author of a book I’ve read called ‘Ripe: Harvesting the Value of Your Business.’ Please come on up, Deborah.

There are some voracious buyers out there but you have to know when to sell and how to sell, and this is what this young lady does for a living. Let’s hear it for Deb Douglas.

Deborah Douglas: It’s great to be here today. You guys serve an industry segment that has been extremely hot in the M&A world recently. I read an article in the Wall Street Journal three or four months ago that said nine out of 10 middle market executives and above would be impacted by M&A activity in the next decade. I would say that for medical device companies that’s probably in the next four or five years. It’s really a hot segment.

The object of today is to tell you a little bit about how you can end up being on the winning end of those deals regardless of your position. All your companies will sell or combine or acquire somebody probably in the next few years. It’s effective business life that growth is nourished much more quickly, much more readily, much more profitably from an acquisition than it is just from internal activities.

Our firm, Douglas Group, gets a really good idea of that. We sell companies, middle market companies typically 20 million to 250 million in sales kind of is most of our market; we sell them very well. We’re good at it and we love it. We kind of feel like it’s doing a good thing for the world. We feel like business owners are kind of the heroes of the economy, they invest money and they guarantee debt, and they provide jobs and opportunities for people and they improve goods and services all over the country. And they certainly fill the public tax coffers with money.

So we feel like what we do which is make sure that the gold, the pot of gold is there at the end of the rainbow is really a good thing and we love it. I have a daughter who was home from college at Cornell a couple of years ago. Had all of her friends to St. Louis to visit. They sat around the breakfast room table chatting about love and life and government and everything. And I couldn’t help as I hovered around the room throwing in little comments here and there.

And finally my daughter just said, “Wait!” She stopped everything she said, “You have to understand my mom’s basic philosophy, she thinks there is some kind of really healthy selfishness that’s good for the world.”

And it’s true I do, I think that’s a fact. When we talk about timing for potential sale we’re talking about something that the object of the game is probably for most business owners really to make money. It’s a good thing and we like that.

I had a friend as I was growing up, he was from Communist Russia in the old ways when communism was pretty grim. He liked to define free enterprise as exploitation for the common good, and I think that’s kind of a good definition.

The M&A opportunity that you want is the one where one plus one becomes three. And that can happen for a number of reasons. It can be because a company finally put together has the resources it needs to really grow it. Especially in this industry in particular it takes a lot of money sometimes to get out there and get, and maximize results and it really can help to have an acquisition.

The benefit may be cross-sale to customers where you have two companies that can sell the products into one another’s customer base. It may be two companies with very different strengths that can capitalize on one another’s strengths. We had a medical device developer with no sales or marketing a few years ago, literally none, was kind of in the early startup stages. They were acquired by a company that had a powerful marketing and sales force. Their sales literally tripled in three years. It was a neat combination, a good business combination.

Owners also really want to protect employees, it’s way more important than employees ever realize I think. We sold a company in Philadelphia a few years ago and it was too little for us, most of our companies are 10 million or bigger in sales, these guys were about seven million in sales, but they had great earnings like a third. They were growing like crazy.

We sold that company we had probably about 20 offers on the company. Most were 10 to 15 million, two offers were north of 30 million: one was 35 million, one was 32 million. The $35 million offer was from a strategic buyer, a competitor of the company. The 32 was from an equity fund. The owner chose the $32 million guys $3 million less just because he thought they would be better for his people. So it’s kind of a neat outcome and people can get that.

The best protection any owner can get for his employees is probably to sell for a premium price. The buyer who pays a premium price wants your people, he wants to take good care of them, he wants to invest in new equipment, new marketing, all kinds of things. So he’s really a good guarantee for people. These buyers put in new marketing channels, new equipment, all sorts of things that can make a big difference.

Timing.

We get a lot of inquiries from sellers about when should I sell, what’s the right time.

The volume and magnitude in this industry has been just huge in recent years; it’s been wonderful. In part that relates to general economic conditions. Demographics the populations of the world are getting old and feeble and benefit from new medical devices. That’s a great help to people. The stock market volatility actually helps the market in our case, the market for middle market companies.

People don’t feel real secure relying on the stock market with its ups and downs the swings as their future earnings. They like to invest in real ownership of a little piece of a company hence all the private equity funds today. You didn’t see that 25 years ago, you see a lot of private equity activity now.

In recent years interest rates have been a big boon. I mean half the deal price typically comes from borrowings. It’s really nice when those borrowings are really inexpensive. It helps price for the seller. Evolution of medical technologies, there has been so much that has changed and developed recently that’s really good in this segment in particular. There’s been a huge increase in the number of or in the access to international markets.

25 years ago I founded this firm and at that time it really was kind of unusual to have good access to international markets. Today just about everybody does, and it really helps that the growth prognosis tremendously.

The time to sell is when the trend is up. If I look at companies over a long term they grow kind of gradually then they level off a little bit and then eventually they drop down. You want to sell sometime in that upward path, somewhere along that way it makes a big difference.

The timing could be everything, we were approached – this is a long time ago – by a company with a guy who had $60 million in sales, good profits, steady profits and he was approached by somebody with a $50 million purchase to purchase his company.

Well he talked to us and we were helping and the buyer wanted him to commit to working one year to transition the company. Well he decided he didn’t want to retire in a year, he was only 58 or something. So he passed on it.

About a month later he had a stroke, he was out of the business completely for the better part of nine months. The business went down, it had all kinds of problems. He had never had any borrowings before.

His people started borrowing money, he was up to six or seven million in debt n
ine months later. He came back into the company, he tried to revive it he couldn’t. A year-and-a-half later he came back to us and said, “Okay now I want to sell,” but he had no value anymore!

It was not making money, he had debt, it was really in bad shape. We ended up, we did sell the company for when we got enough to cover his debt, barely, no more. So his value had gone from 50 million to zero in about two years; it’s really sad.

Sometimes it works the other way. We had a company that we sold a few years ago in the Memphis area. It was a nice company, good progress, good sales, good growth, $30 million in sales. But the really winning thing about it was that it’d just gotten a great new contract with a big really desirable customers. We took it on. We thought we’d get at least 30 million for it. We had a lot of offers, we ended up selling that company for 67 million all-cash.

It was purely timing, he had just gotten this great hot new customer and everybody wanted the hot new customer so it made a big difference. Also we kind of like cash deals. Everybody always makes the expression “Cold hard cash,” cash is warm. We think it’s soft, we think it’s nice, we think that cash is a good thing and we try to head in that direction always.

When you think about building value … Or excuse me, when you think about the recent M&A headlines there has been a huge amount of growth in recent years and it’s a great time to sell a company. People ask, “Is it really a cyclical market?” Yeah it is. What’s the cycle? I don’t know, six to eight years, something like what we see surges up and down. We have people that ask us, “So where are we now?” Well we’re obviously in an up cycle. “When will it end?” I don’t think I know that, that’s kind of hard.

I feel very good about 2016, less so about 2017 and 2018, it will probably go down somewhere along the way.

If you’re developing a company that has very new technology, timing is pretty important. You need to get catch the excitement enthusiasm about that wave to come for a new technology; it makes a big difference.

We had a Hillsborough product years ago that we worked for the company. A guy came to us, he had about $5 million invested in this product. It had just gone through all the trials and it was just about cleared for sale. He had a offer unsolicited for $50 million for his company.

Well he looked at it and he said, “You know it could be worth 200, 300 million in a few years. I think I’ve got to wait it out and see what happens.”

Well he did wait it out.

His patent wasn’t quite as strong as he thought, there were a lot of adjacent products coming on to compete with him; he didn’t do very well.

He ended up selling the company three years later for about $3 million. It’s really sad. Sometimes the dream and the hope for what that future could be for the technology is better than the real thing.

Sometimes owners sell just because they’re ready, they’re tired. We had a guy that we sold the company for in Texas a few years ago. He had a beautiful plan, big company, it was doing very well.

When I went down to visit his plant his COO picked me up and introduced me and brought him to his office and introduced me to Jim, the owner of the company. And he said, “I want to introduce you to Jim, he’s the father of this company.”

And Jim said, “I want a blood test.” Then it gets to be kind of frustrating sometimes. We ask him, “Why are you thinking about selling? What are you doing? What has happened in your life that makes you really think it’s the time now?”

He looked at us and said, “Well, Lady, I used to run three miles every day before I went to work. I’d stay at work till 8:00 or 10:00 every night, get up the next morning do it all over again.”

He said, “I’m too tired to do that now.” And said, “Shoot! Today the most exercise I get is I fill up the tub, pull the plug and fight the current.”

He just wasn’t ready to keep working on it anymore, he was just tired. That made him a good seller I mean frankly he had built that company for 20 years’ time. He had put all of that energy into it, he was ready to cash in.

When we think about what we do to build value I guess the first most important thing I would say is probably building a focus, building a one point that you’re kingpin of.

I talk to at least 20 new buyers a week, every week week in week out. And probably three fourths of them use the word ‘niche’ in the first three sentences. Everybody wants a company that has a really established great position with a really focused niche in their business.

Aristotle Onassis had a saying he said, “The secret of great business is knowing something that nobody else knows,” and I think there’s truth in that.

Our Texas guy, Jim had a comment about it he said, “You’ve got to be focused.” He said, “There’s nothing in the middle of the road but yellow stripes and dead Armadillos.”

Patents have huge value but again you have to think about the timing on selling a company with a patent. Buyers who have a really strong foothold in one area the great kingpin of heart care products loves a new heart care ad. They want something that will enhance that niche, make it even stronger, make it even more powerful and they may be the kingpin players for US seller.

Buyers also look very hard for management power. They really it’s become so important in recent years much more so than it was even 10 years ago.

I don’t know if any of you read Plastics News, Plastics News has a new spot on ‘What Keeps Owners Up at Night’ and practically everything that they say talks about how do you obtain great people. How do you keep them? How do you get them enthused and happy about what they’re doing? It’s a very important piece of business today.

Sometimes I think owners don’t fully appreciate how important that is. We sold a company in San Francisco a few years ago; it was a great company. Different kind of customers than yours, they were mostly computer giants: Compaq, HP, Apple, all the big computer guys. And we got about 10 offers on the company. We invited three of those guys up to tour to see the plant.

Well the first one that came through went through the plant and said, “Oh this is beautiful this is great.” They got into a private conference room, he was asking the questions he says, “You have to tell me one thing, I don’t see how a company that deals with these big hard tough customers possibly does it to keep such great margins. What do you do?”

The owner crossed his arms sat back said, “It’s all right here,” (pointing to his head) and the buyer was gone. 30 minutes later they left and never came back. The buyer doesn’t it all right here, they want a group of people that they can count on, that they can build, then they can make something with going into the future.

Those of you who are in a particularly high-growth area I think those people things are even more important; it becomes really critical. Those of you who are middle managers in those companies, there can be some wonderful opportunities as a result of the acquisition, possibilities.

When we think about what buyers want, there are probably three main things. First of all they want earnings power; absolutely. Secondly they want growth potential, why? It makes more earning power. And lastly they want something that gives them a big competitive advantage in the marketplace; it makes a big difference for them.

Sellers always ask me what’s the rule-of-thumb pricing. They want kind of an automatic number they can use to figure out what their business is valued. There are rule-of-thumb pricing mechanisms that are okay but they probably all go away when you get the right competition. I would s
ay rule-of-thumb for a medical manufacturer might be 5.5 to 7.5 times EBITDA. By the way that’s half a multiple higher than for a non-medical product; just a little bit up.

It can vary quite a bit depending on the competition. If the potential is amazingly strong for some reason, all of the rules of thumb can kind of go out the window. We had a company a couple of years ago with 30 million in sales making 5% making about a million-and-a-half dollars in sales. We sold that company and they had some really niche products that fit into a certain customer mix that everybody wanted. We ended up selling that company for 80 cash. We sell like a 25 mil 00:19:11 I mean it’s ridiculous, it makes no sense at all but you know what we had a lot of offers in that range. They were all fighting to get that company. If you get the right competition it can make a big big difference.

So what do you do if you have a company and you’re ready to sell? What is the process? Most business owners sell a company once in their lives, not many times. They really don’t know what to expect as they go through the process. I’m going to kind of walk you through what our process is and it’s not golden, it’s not what everybody does but there are a lot of commonalities to people who sell.

By the way let me get a feel for how many people here own a business? Pretty good number. And how many are middle market say within a business? Okay, how about advisors to business owners? Okay, I’ve talked to a number of people here today who are kind of advisors of business owners and I think this stuff fits for them as well very nicely.

As I talk to you about the process I will tell you that the best seller reps are kind of tough guys; it’s really a tough process. Their job is to protect you and to protect the value of the company you have and to make it safe. There’s a quote I like here, there’s a weird quote. Al Capone said, “You can get a whole lot more with a kind word and a gun than with a kind word alone.” I like that. We try to be the gun, we want to be the power behind that seller to make sure that he’s going to do well.

We sold a company some years ago in Louisville, Kentucky and the owner had … A lot of times buyers wait really long to hire anybody. These guys had come to us with an offer in hand of 10 million, that’s really later than they should come. And it was about a $10 million company, 10 million offer it was pretty good, but it had some big new customers, it was growing really well and we thought we could do a lot better. So we said, “Yeah, we’ll sell it, we can do a lot better than that.”

And the owner said, “Okay, but I don’t want to talk to any other buyers. I only want to talk to the one guy who already made me the offer because I really like and they’ll be good for my people and they’ll be good for the company long-term.” I said, “No then we can’t do it, there’s no way to get that buyer to raise his offer if you can’t get competition. His job is to buy as cheaply as he can, he can’t pay you more just for fun.”

The owner finally said, “Okay you can talk to other buyers but I’ll probably just take their offer whatever it is.” So we ended up going to work, bringing in other suitors for the company. We ended up selling that company pretty quickly about two-and-a-half months later for 25 million in cash plus 15 million in earn-out to the same buyer. I mean I would have thought they would have been humiliated the raise of that, I was amazed. But it happens, I mean the competition is all they needed.

And we had another company we sold about a year-and-a-half ago. It was a little company, came to us with an offer in hand of 13 million. They wanted us to sell the company and they said, “The only thing is you have to exclude from your fees any fees if we sell to that guy for 13 million.” And we said, “Well we’re not going to exclude anybody, what we do is create the pressure for them to get real and buy. We’re not going to do that but it’s okay no harm no foul. If you like the guy’s offer just take it, if it doesn’t work out come back to us in a few months.”

Well they came back to us, it was really about nine months later, they had accepted an offer from the guy with a letter of intent. They gave them six months of exclusivity, six months the guy had to close. He came back at the end of six months he said, “I need 90 days more,” they gave him 90 days more. Then they came to us about day 80 of his 90 days and said, “Okay we’re ready now, go ahead and take it.”

So we took over the deal, we brought in other offers pretty quickly and we find out by the way the $13 million offer was 20% cash 80% notes which is bad, cash is good, notes are bad. So he came to us and said, “Well I really wanted to bid on that company, I was going to buy that company. We did all this work, you can’t just count us out now,” and I said, “Well it’s okay you’re not counted out but I’ll tell you if you’re going to come back now with an offer we’d love to see it but the offer is going to have to be all-cash at close and it’s probably going to have to be more than 13.”

The guy came back to us with an offer of 15 million all-cash at close and we closed in 30 days. It was amazing it was great, but he would have never done it if he didn’t have competition making him do it; it makes a big difference.

Now owners, all of you owners in here you all get calls constantly I know. Every week, week in and week out every owner gets a million different calls from people probing to see if you want to consider sale. Well 75% of those calls are from people that are intermediaries that are calling to see if he might be receptive to sale and if so they’ll quickly pick up the phone and call five buyers they know and say and try to get a finder’s fee for finding him.

So they’re not very careful about confidentiality. They don’t know much to tell the seller. We always tell sellers, “Use those calls find out first of all who the buyer is.” Here’s a list:

Who are you calling for? Are you calling for yourself? Are you the CEO of a company that wants to buy me?

Are you an intermediary that’s been hired to do this job for a company that wants to buy me?

Why do you like us? Why do you think we’re a fit?

What do you look for in a company? What do you try to avoid?

What else have you bought in the last year or two? What did you pay for what you bought?”

If you can get that kind of intelligence that’s good for somebody, for the day when you decide to go and sell. It’s healthy, it’s helpful. It’s sometimes hard to get that information but it’s really worth it.

When we go through the selling process we probably spend the first two months doing two things. One is we gather information on the company. We gather information on financials by segment, by products, by geography, all different kinds of sorts of how you make it do money. How’s it coming to you? We spend a lot of time doing that. We develop information on people or charts descriptions of key management, all of those kinds of things.

Information on facilities, equipment, real estate, values, location, growth, capacity, all of those kinds of things; we spend a lot of time doing that. That information is kind of critical to the process and we really make sure there’s very accurate and very meticulously put together. We want it to be truth. Buyers only pay premium for truth and it pays to have truth.

Sometimes our clients find themselves a bit embarrassed about the things they don’t do very well like guy who I know sales staff 00:26:42 he doesn’t talk about it, he was like really embarrassed to even bring it out. But frankly if we find the buyers who can fix the problem they like it, they pay more for the problem. It’s really true. So it can be a great help.

We also spend
a lot of time working to identifying buyers during that first month or two and we spend a lot of time; people don’t believe. For an average seller, our firm will talk to 300-400 buyers, a lot of people. No some we talk to for five minutes and some we talk to for an hour.

We’re trying to find out all the things we can about what they want to buy and what’s a perfect fit and what do they think a good margin is for a company like this.

What do they think a good EBITDA percentage is? What do they think a good growth rate is? All of those kinds of things tell us how likely it is fit for our seller.

A lot of our clients come to us right away and say, “Oh I know who the buyers will be. It’s one of these three or four guys.” Really common and they were always wrong. I’ve learned over time they think of the guys that are most like them that are out in the marketplace or they tell me, “Well so and so would pay a fortune just to have us gone.” No they wouldn’t, not usually. People don’t pay just to have you gone; they pay for earnings capacity you can add.

The best buyers are usually the ones that are off-center, the ones you haven’t thought about. The ones that don’t know anything about what you do and can’t do it. They get more when they buy you, they get a new capability. They are much more enthused and they pay a much bigger premium for your company.

As we go through the process of probing buyers we’ll ask, “What makes the perfect fit? What do they want to avoid? What are good growth and profit percentages? What directions they want to go in the future? What do they think the most promising markets are for next steps? What’s their history with 00:28:50 acquisitions and what have they paid for what they bought? What’s their sort of rule-of-thumb pricing?”

If we talk to 300 buyers we’ll probably find 30 that are just right. We chair those with our clients; our clients enjoy that process. They like to know who’s buying who and why, it’s kind of fun gossip so they enjoy that piece. Usually they’ll agree on those top 30 with us and be pretty content with that.

If we’ve identified buyers really well, the next step we do is we go to the 30 and we get to sign non-disclosure. It’s got a client number, no name, no location; they don’t know who our seller is yet. They sign our NDA and then we start to share real information.

We’ll typically start that with just overview information maybe a two-page narrative and a one-page financial. If we chose really well, every one of those guys is calling us back the next day, and that really is the beginning of the competitive prices. That’s where the horse race starts.

When they come back to us they’ll all come back to us very quickly asking for more info. They want financial statements, they want all charts and they want info on people and they want info on the plant and what the equipment is and all of the stuff.

Then we begin to share that information in earnest with them. They ask questions, we’ll answer the questions, they all are asked to come and visit the plant.

We won’t let them do that; if we did that every seller we have would have 25 one-day long tours with buyers coming to their plant.

A, you couldn’t possibly keep it confidential, people would be really worried about what are all these people doing?

B, the owner couldn’t work on his business for a month. You can’t do it, it doesn’t make sense. We will be very careful not to let them do that.

When we get down to maybe the top 10 then we think are really coming along and really ready and really pressing us hard for a visit, we will ask them to submit a letter of interest. It’s non-binding a letter that says what the price is and what the key terms are.

From that letter of interest we’ll pick the best two or three to invite to come. By that time we really kind of know what’s going on and have a strong sense of what we want to do.

Each buyer who visits will bug us for immediately right after for a letter of intent. A letter of intent does nothing for the seller; it’s a bad thing not a good thing. Letter of intent always has exclusivity requirements. They want you to not talk to anybody else. Well you can’t do that too quickly you have to be darn sure you know who the buyer is, what all their terms are, the details of their terms, if they have the money to do it, all of those kinds of things before you choose a buyer.

When we have a letter of intent request from a buyer who has visited, if our client loves that buyer as much as he loves him, we’ll try to do it. But we’ll require a non-refundable deposit. Maybe 250,000 and the buyer doesn’t get it back if he changes his mind for discretionary reasons. He gets it back if we give him non-truth but we don’t. He gets it back if the plant burns down, if there’s a material adverse event but he doesn’t get it back because he changed his mind.

We do those deposits probably a third of the time. A third of the time we can’t get anyone to do a deposit but we’ll continue without exclusivity. We’ll go ahead and let him do due diligence and say, “Good we’ll go forward to award 00:32:45 close but we won’t agree to chase the other buyers away.”

Sometimes maybe a third we have to take exclusivity with a buyer.

If we have to do that it’s dangerous because some of those buyers will decide not to later. They’ll get halfway through the process and cost us a lot of time and money then say, “Ah never mind.”

That’s painful. All the other buyers who had bid before that are gone, they’re always gone I know this I’ve done this for 25 years I know it. It doesn’t mean you can’t sell the company but you’re going to have to go back and find new buyers, it’s a lot of trouble. So it’s a bad thing when it happens.

When we get to the point of sending a letter of intent we try to work out a lot of the details like will the owners transition?

How long are they going to work?

Will the company buyer lease the building often owned by the owner separately? Well limitations is the buyer okay with 00:33:42 reps and warranties. Buyers always have reps and warranties the seller has to make to say that things certain things are true. If any of those turn out to be non-true they’re going to be able to come on the seller financially. So we need a limitation on that both the time period and the amount that can go forward.

How will the due diligence be conducted? Will the buyer continue to keep it confidential? Buyers sometimes want to talk to people; we’ll let them do that.

Sometimes if they want to talk to the one key guy who’s going to run the company after the owner retires you might have to allow that. Or many owners will allow the CFO to know what’s going on just because the owner couldn’t get all the info without the CFO.

But you don’t want to tell too many people, it does no good and can do great harm. I’ve seen lots of owners sorry they did it; I’ve never seen any owner sorry he kept quiet. It pays to keep it very quiet.

Does the buyer need to talk to the customers? Buyers often want to talk to customers. You don’t want to let buyers do that.

Now pretty often we will have to allow some kind of customer satisfaction survey that the buyer can listen in on to make sure they’re comfortable that we have good relationship with customers. But usually I try to do that in the last week or two before close so it doesn’t do too much harm.

Then sellers think they’re done but they’re not done.

They get to the definitive agreement; I mean this is a 150-page complex pain-in-the-neck document that you really have to pay attention to.

I probably read that 150-page thing on the average 20 times. I probably change something on every page of it, b
ut you know what, in 25 years we have never once had a client sued and we’ve never once had a client who didn’t collect all his money.

That’s because we spend the time to be really careful and really meticulous about those documents. It makes a big difference and it saves our clients from a lot of pain. There’s nothing like selling a company and then dealing with a lawsuit for three or four years afterward. We tend to get pretty unhappy.

One other thing I’d like to comment on a little bit is the retained ownership stake. There are so many equity funds out there now and you guys read about it all the time, equity funds that buy a piece of somebody. It’s a big deal and it can be a good opportunity for an owner. Equity funds typically like for the owners to reinvest, to stay in for a 10% or 20% or maybe 30 some percentage to keep.

It’s kind of scary for owners but part of the benefit is that to stay in for a 20% for example doesn’t cost you 20% of the deal price. We had a deal last year we sold for $50 million and the owner wanted to stay in for 20%. Well he thought that meant that he would have to put $10 million in. Well it didn’t, the equity fund did the deal with about half cash from his bank account and half debt.

So he put in 25 million of cash 25 million of equity. To keep that 20% our owner only had to put in the 25% of the equity of 25 million. So our owner had to put in five million. He got 50 million he put back in five, he netted 45 million and he owned 20% of his company. Not a bad deal I mean he liked that.

And we have sometimes great results. We sold a company last year that employed an injection 00:37:22 that we did well on and they wanted to keep a piece of the business. The owners kept 20% two guys kept 20% of the company. I just talked to the owner one of the owners, April 15th really recently, and he said it’s been the best thing that he could imagine.

He said, “Everything we don’t know how to do they do, and they get the resources for us to do it. Everything that we know how to do and that we do well they leave us alone on.” So that’s perfect. It’s a great opportunity. He’ll do wonderfully on that company. It’ll probably sell in five six years but I bet you he’ll do very well on it, it’s very nice.

There are a lot of other issues on an equity fund that you want to find out. What if the owner retires before the equity fund sells? Will he get bought out? How much will they pay him?

What if the equity fund fires the owner? You’re no longer around the company, you’re out on the beach or on the bench so do you get bought out at that time?

And if so what do they pay you for what you get bought out? Will the equity fund allow them to give equity to other key management? Owners really like that, they really want to have their key people bought in the same so it makes a big difference.

There are a lot of issues for the equity funds that make a big deal but we have now probably six equity fund sales we’ve done where the owner made more selling his little piece, his 10 or 20% five years later than he did the first time for the whole rest of the company. That’s pretty neat, that’s a pretty good opportunity. That’s pretty wonderful for the sellers.

We sold a company 10 years ago to a guy who had a 10% employee COO. The employee got 10% that was a million-and-a-half dollars at the time, he got that million-and-a-half but the buyer also wanted to keep him so they gave him a bunch of equity incentives to let him keep earning more stock.

He did well in six years he had earned about 25% of the company. I just heard recently they’re going to sell now, they’re going to get $40 million, he’s going to get 10 of it, no debt. He gets $10 million. What a neat thing for a key second-in-command guy! I mean it’s wonderful.

In conclusion if you’re the owner of a great medical company today the market has never been stronger. If you’re key management for a company like that, there are opportunities now that you have never, would never have had in past years. There’s no really easy right answer to all the M&A questions that will come up but there are some really neat opportunities for people today.

Thank you.

Joe Hage: That was a great talk. Please stay.

(Applause)

So my first question of the audience is who knows someone right now that would do well to know Deb? One two three four. I’m just taking a mental picture of these hands.

Deborah Douglas: One of our associates, Jason Bean, – raise your hand Jason – is back there and he’s got a couple of books so if anybody wants a book tell Jason and we’ll get them with you.

Joe Hage: These will be autographed?

Deborah Douglas: Of course.

Joe Hage: Oh excellent, Deb. So I want to ask a question of you.

Deborah Douglas: Shoot.

Joe Hage: I was at an event in Dublin a few week backs and I met a venture capitalist and I asked him what was the best way to approach him and how could people who wanted to get his money get it. And he said something that was very interesting to me, he said that not only is he looking for at least a five times return, but he needs an exit of at least 350 million to do the math.

And he said that the average exit for a medical device company over some period, I don’t remember that, was 140 million. That delta was striking to me.

And you mentioned some sales in the 80 million or so category so where do you fit in to that kind of dynamic and what happens when a company is VC-backed?

Deborah Douglas: I would comment that VC companies typically look for companies that they can buy for less but trade at a much higher multiple. We deal more with existing substantial companies that are already in place. They have an ongoing business, they’re not … They’re more than an idea, more than a patent. They actually have some volume in place, and it’s a different kind of business, it really is.

Shiv Skulka: For younger companies I was curious if you could tell us what sort of IP portfolios did they have? Are you looking at like 20 patents or 100? Just curious because we’re early stage right now.

Deborah Douglas: I’m sorry I didn’t hear the first part.

Shiv Skulka: IP portfolios like how big are their patent portfolios?

Joe Hage: Them being the companies she represents?

Shiv Skulka: Yeah, the companies that are being bought.

Deborah Douglas: They really vary hugely. Most of our sellers probably don’t have very deep patent portfolios. They’re companies that are 250 million or less in sales. Usually they don’t have 20 patents they have four.

Shiv Skulka: I see. So they don’t get a … Do they get a revenue multiplier or patent, intellectual property multiplier?

Deborah Douglas: We’ve done deals where we actually sold the company but retained a commission, a royalty if you will for the owner for a long time. Some of those have done really well but it depends on how much the patent really takes off and how good it is long-term. If you feel strongly about it, it might be worth trading a few million in cash for what could be tens of millions going forward for a patent royalty.

Joe Hage: I look forward to sharing your presentation with my group. Deborah Douglas.

How to Give a Medical Device Pitch

30 min reading time

How to Give a Medical Device Pitch

Presenters Jeffrey Kraws – Crystal Research, Sean Schanzten – Healthfundr, and Rick Baron – Zynerba in collaboration with Joe Hage and the Medical Devices Group

Reading Time: 30 minutes

I sat through a terrible pitch last week. Too bad he didn’t watch this 10x video first.

Joe Hage: I’m not really good with introductions and you deserve one hell of an introduction and as do you. Jeff is … I’ll dramatically understate. Jeff’s an analyst and Sean is in the crowdfunding space. Fairly represented. You’ll tell us more. Rick you’ve met. Gentlemen.

“I’m a startup. I got 20 year-olds on staff. We’re excited about things. We need to raise money. It’s so hard. I get a lot in my position, ‘Joe, do you know anyone who can…?’”

Where do you start? Thank you.

Jeffrey Kraws: I think we’ve got a very interesting panel here. Obviously from the experience standpoint, everybody sitting on the stage here has been doing investing, worked at companies and been very successful doing it.

What I’m going to try and do is I’m going to talk to you a little bit about things that you should do and things that you shouldn’t do as a company out there looking for money. Both a private and a public company. This pertains to you.

And Rick is going to go through a lot of the things that we just touched upon which is some of the things that he sees that they like and some of the things that they don’t like.

I mean he has it from all angles as well both being the CFO, both having headed up a company, being a money manager. He and I both look at things I think it’s safe to say more from a public company standpoint because we deal with a lot of public companies.

And then we’ve saved sort of the best for last which is the guy in the middle who has a crowdfunding application and company that he’s doing right now to really help private companies get out there and anything in between.

We work a lot with a company that’s doing a lot of the crowdfunding in the crowdfunding space and that’s the Reg-A people. Bill Hambirk, the WRH and like them a lot, I think they’ve been able to do a lot for private companies. If you’re on the bigger size and you’re getting ready to go public, then you should definitely be talking to me.

But just a couple of anecdotes that may seem pretty simple, Rick and I were both on a presentation that will go nameless for now but I had asked the CEO a very pointed question which was I think it was how much does this cost and when will you be able to get it to market or when it’s going to market.

And I preceded to get like a 10-minute non-answer and I can tell you speaking for myself and for Rick that I see probably 8, 10, 12, 16 company one-on-ones today.

So just assume that I already know this.

I already know that you’re going after a large medical market with unmet medical needs.

I already know that you think you have the best medical doctor out there on planet Earth and he’s the world’s expert in this area.

I also know that your management team has gazillions of years of experience and are the best at everything they do and have a proven track record and have done this.

I also know you have strong IP and I also know you’re going to do this at a cheaper cost than anybody else.

Faster, better and oh my God, do you know that company A and company B got sold for this much? Their stuff is crap. Our stuff is the real deal. We got all that.

I hear that everyday all day long.

So one of the things that I would encourage you to do is just assume that Rick and I and Sean have been in presentations like that. I’ve been in thousands and thousands and thousands of those presentations.

It’s funny when I looked up at Bill Gates the other day and was watching the video. I always used to say when I started doing this in the 80’s that we had not cured a major disease in the last 100 years. Of course smallpox, Gates you heard him say one, right?

So imagine all the presentations I sit through and imagine the fact that that’s pretty much where we are right now.

So one of the things for the companies and the CFO’s and the CEO’s and the BD people probably keep in mind here is that when you’re dealing with business professionals, when you don’t answer a question, it’s not good.

You want to answer the question very specifically and very succinctly.

And if you don’t know, Rick and I like hearing those words. I’m sure Sean does too. Don’t take me on a 10-minute story. Just say I don’t know. I’ll get back to you. And then get back to the person.

When it comes to presentations, it’s very important that your presentations also are succinct.

I told Rick a story the other day and it was a true story. I’ll even mention the guy’s name. It was Pat McBaine of Gruber-McBaine. I consider him to be one of the toughest brightest portfolio managers on planet Earth.

I was a young spry kid who was named number one on Wall Street for picking stocks. I’ve been top ten now for the last 29 years. It’s a pretty good accomplishment in the healthcare and I figured I’m going to walk in, I’m going to talk to this guy and I’m all ready for this presentation and the guy walks in literally takes his watch off and goes, “You’ve had 60 seconds, go.”

At the end of 60 seconds, I said to him like 10 seconds, “Are you kidding me? I’ve got 60 seconds?” He goes, “You’ve got 50 seconds.” Got up at the end of 60 seconds and left the room.

So you’re not going to always run into those people but you have to get your slide presentation down to where it’s not 30, 40, 50, 60 slides. If you’re going to get into a due diligence meeting and you want to do that, that’s great.

But guys like Rick, guys like Sean and guys like me, we’re not trying to be difficult with you. It’s just that if you can’t tell your story in a few minutes, then you know, it’s like a Shark Tank thing.

You need to be able to tell your story in a succinct fashion. Make sure your slide presentations don’t have mistakes in them.

It sounds simple but I can’t tell you how many slide presentations we run into where percentage signs are missing. Numbers are inverted, persons’ names spelled wrong, the title spelled wrong. Count on this being professional.

You’re going at people and trying to get them to write you a check. So when you’re going at people trying to get them a check, you want to answer the questions that are being asked.

Don’t do a long-winded story.

When you get to a personal level, then you can talk to them about your family, et cetera.

We’re in a presentation a while ago and the guy said, “You want your resume to be like Bill Gate’s CV.” They don’t want to see “loves fishing.” You can talk about that sort of stuff but just keep it crisp. Keep it business. Keep it professional. Because you’re asking these people to write a check for you.

The other thing that you want to do is you want to keep in mind the perspective of what these people have… which is you want to keep in mind the perspective as they probably own a lot of companies in the space.

So they’re probably aware of the competitors and in fact the company that you’re going to refer to as garbage… may be one of their largest holdings.

So you probably don’t want to do that.

Portfolio manager told me once, he goes, we’re in the business of determining whether something’s cheap or expensive so we’ll tell you whether something out there in the marketplace is cheap or expensive and…

… don’t make a reference to it that if they sell for a billion dollars, we’re so much better than them. Our market valuation should be X.

It isn’t right now. It’s okay to make a comparison and say that there are competitors in the marketplace that have 3.7 billion dollars’ worth of market valuation and we think we’ll be competitive in the marketplace and we think we’ve got a good product and here’s why.

But bashing is just not sort of looked upon favorably when you’re going in there.

It’s sort of, carry yourself with class, and just be confident in what you’re doing, make sure you’ve thought everything through from beginning to end and have people on your team ask you questions that would be difficult questions that you may face when you walk in to us so that you’ve actually practiced those answers.

So that when I say to you where do you see your growth coming from in the next three years, how big do you think you’re going to be, what are your revenues and what sort of cost is it going to take you to get there from a capital standpoint, you can say, we think in three years we’ll be doing a 150 million in sales. We’ll have whatever, whatever, whatever. Our margin should be here and I think it’s going to take us $18 million of additional capital to get there.

Practice those sort of questions. We look at horizons of 1, 3, 5 years and usually beyond that, you’re usually guessing.

So just those are thoughts that we have as far as things that we see that I think can help you and be persistent. I mean don’t be overly persistent. Understand that we get gazillions of emails and we’re not ignoring you.

But if you approach somebody with a standard straight short succinct letter and you can address it in a short fashion what you think the area of opportunity is for us, we’re interested in making money. We’re interested in having investors make money.

And that’s one of the things that the research that we write actually does for you.

So that’s what I have. Rick?

Rick Baron: I’m going to actually act like a real CFO now. But with one thing, before I go into a meeting, I actually Google the person I’m meeting with and I try and find out whether they’re investing in industries like me. That’s if I’m not out with a bunch of bankers who can get me that information.

So in this case, Google is your friend. So you know what companies people have been associated with and you know perspective and you know whether the person’s PhD, an MD, a BS or has no formal education beyond high school.

So that’s one thing.

The other thing is, as a CFO, these two guys to my right are my best friend all the time. I don’t really like them a lot. I met them a little bit. No. But they’re my best friend and I’m going to be really differential to them because I’m the guy that goes to them and asks for something.

So I’m more interested in what they do and how they do it sometimes and then letting them know what I can do.

So I’m more interested for instance because I think this group is largely at the angel and the crowdfunding level and like what do you do for a living? It’s your turn.

Sean Schanzten: My turn?

Rick Baron: Yeah.

Sean Schanzten: I’m actually going to ask a question real quick to get started. Who knows what crowdfunding is? Who knows what angel investing is? Okay. Everyone know there’s different types of crowdfunding. Somewhat familiar with that? Okay.

So Kickstarter is what everyone knows in crowdfunding. Go out, you put your little campaign up and you raise money sort of pre-orders for what it is. There’s also another type of crowdfunding that’s donation crowdfunding like what’s going on for Nepal right now. And then there’s a third type which is relevant to what I do which is equity crowdfunding.

And so, my company Healthfundr is a bit of melding of traditional angel investing and crowdfunding.

So we’re like a force multiplier for offline success. Not Kickstarter.

So that’s kind of the baseline I’d like everyone to understand a little bit before I get into much details that we take traditional offline investing and make it better with technology by you get a really good investor in. That first angel that you’ve been trying to hustle and bother for months and months and they finally write that check. You can then take that success and say, “Look, I’ve already got someone that really knows my space, what I’m doing and reach a broader audience of potential investors.”

And that’s the reality if you’ve heard of Angel List or any of these other platforms out there. The reality of how deals get done on these platforms is exactly that. I maintain relationships with all sorts of offline angel investors and angel groups and other places and most of the companies end up getting traction on the platform come from someone that’s already invested in the company offline.

And so that’s a bit of a … I know there’s a lot of misconceptions typically about crowdfunding that it’s this, if I make a pretty video and lots of pictures and throw it up, it will take off.

That’s very much the exception and most angel money does not end up in companies that way. It ends up in companies online by someone hustling offline. Getting an investor that has a signaling value to them.

Either because they’re prominent or they know your space really well and then taking that online and reaching a broader audience of potential investors.

And I know it sounds like a lot of people are at the angel stages. Has anyone ever presented to angel groups or individual angels or anything like that? It’s a very small number.

So maybe we can focus a little bit on kind of the angel world. Angels typically are part-time investors. They’re not VC’s, they’re not spending all their time doing things. They don’t take meetings for a living.

And so Jeff here takes 8-16 meetings a day. Angel investors do not do that.

In fact, typically, they want to be warm introduced to them through someone they know and trust because they’re giving up golf or they’re giving up time with family or something else to meet with you.

And so the incentives are slightly different as to why they’re meeting with you. But when you do get meetings with them, they’re typically going to be much more likely to close than a meeting with a VC or someone else that takes meetings for a living. That’s what VC’s and bankers, they take meetings for a living. Essentially.

And when companies come to us and they already have that investor, it’s a good demonstration that they know how to hustle and impress people because they’ve been able to attract someone that knows their space pretty well and say, “I’m going to put my money in at a very early stage. When you’re likely highly risky.”

And pitches to angels are often going to be slightly different than pitches to purely financial investors or to VC’s because their incentives are different.

They’re investing their own personal money. It may not be a large amount but it’s a meaningful-to-them amount and it could be as small as $25,000. It could be as high as $250,000. But it’s typically meaningful but they’re also typically investing especially if they’re your first money in because they really really like what you’re doing and they really really like you and can see themselves being involved with you for a while.

Most of the really good angels I know are able to really dive into a company and help them sort out regulatory issues. Help you get your pitch down. Help you get financials in order because you probably don’t have your financials in order like Rick does or your plan on how you’re going to get to market and we see lots of that.

Really great angels are passionate about whatever you’re doing, can help you sort through that at the earliest stages, can help you make introductions to people that can help you prevent making bad mistakes.

And so when you’re pitching angels, there’s as much pitching the actual ‘we do this,
this is why we’re better than that, this and this. But this is why you should be involved because we’re doing something that’s really great and this is why.’

You want to be especially honest with them because angels all know each other in a typical region. And if you are not straightforward about what you’re doing or about the status of where your product is or whatever, anything. Like it’ll spread like wildfire. Especially here in San Diego for example where there’s a very large, very tightknit group of angel investors in the life sciences as compared to other places in the country.

So that’s a little bit of kind of the offline pitching type world. The whole online world is all very fragmented right now. It’s not mature. I’m a startup just as much as any of you that are starting startups. I mean I left my big law firm job a couple of years ago to start this.

And so a little bit of understanding about the different types of platforms that are out there might be valuable to understand what to look for and where you’re at.

We talked about the different types of crowdfunding. You’ve got rewards kind of the pre-orders. Kickstarter doesn’t allow medical devices on it. You have to go to Indiegogo.

So that’s a simple thing.

Also if you’re not consumer-oriented, don’t waste your time. We’ll just put it that way. You need to be consumer-oriented because that’s what drives Kickstarter and Indiegogo and pre-order campaigns. You’re not going to get a lot of traction most likely if you’re building a very clinical device or something else that’s a little bit more hard to understand.

Joe Hage: You want to tell them about Scanadu just as a point of reference? They won’t all know.

Sean Schanzten: Scanadu is a really good point of reference because you can literally say, “Oh it’s that tricorder from StarTrek thing that like you put in your head and it tells you whether you’re going to get cancer.” It doesn’t actually do that and they haven’t represented that but that’s the storyline that kind of makes it out into the world. It’s science fiction. It gets picked up by CNN Money. It gets picked up by kind of general populous type PR outlets.

And as a result because it is very consumer-oriented, something you can have at home to help diagnose your own sickness, that’s how the public took this. And they really latched on to that because there is that storyline that I could control my health a lot better than I would otherwise and if you look across any of the rewards crowdfunding campaigns that are even ostensibly related to healthcare, they’ve all have this very consumer element.

So if you’re not that, maybe that market’s going to develop in the future, I don’t really think it is. I think it’s going to continue to be more like what Healthfundr does which is kind of online amplification of offline angel investing.

So you’re going to be on the equity side. In equity, there’s a couple of different models. There’s, I always use Angel List because everyone knows what Angel List is or most likely to know and that they are very much you attract an investor that’s very prominent and you can then reach into the kind of the insider Silicon Valley network to help fill out your round. And that’s how Angel List rounds happen, how syndicates happen.

So you need to get a syndicate lead or someone very prominent on Angel List and they’re not in the business of selling your deal.

There are other platforms like Seed Invest or Onevest. Ones like that that are bankers essentially. Online bankers. They will sell your deal. You pay them a commission. They’re underbroker dealers and they’re going to take a much more active approach but they’re going to cure it really heavily upfront as well.

And so it’s either going to be venture model type like Angel List where it’s some sort of syndicate or it’s going to be a banker model and you need to kind of understand what that is because the way that you approach getting traction is going to be substantially different in each of those.

Jeffrey Kraws: I think one of the important things also that Sean and probably Rick would agree with is that a lot of the angel people that we see, it’s because somebody in their family was affected by it or it’s because they have some commonality whether it was a kid, whether it was them, whether … there’s a lot of times the angels will take a very attached approach to this.

So don’t be afraid to really as he said, be very honest and be very open about what it is you’re doing because when we talk about … Gates talks about only one major disease being cured in the last 100 years, these people are in this because they have a vested interest in doing it. They’re just not financially into it the way necessarily maybe with the public company but they have a very vested interest in getting this out there.

The other thing that I would mention is that when you take a look at these platforms, you really want to if you can with your device, try and get somebody who’s actually very big in the area you are either to endorse it, to be a shareholder, to be a supporter, to be very vocal behind it because of the PR.

If you can get somebody at USCD or USC or Stanford or wherever it is who actually does a lot in the space in the area, it will help bolster your credibility and also help moving you towards the next level which is even though you’re early, you may also get some traction and some help than in partnering or getting bigger companies to take a look at you.

It’s tough to get a big company to take a look at you if you say, “Hi. We have $30,000 in the bank and we’ve got this sort of idea and we’re not there yet.”

But if you can actually get somebody who’s a thought leader, who’s an expert in the space who actually looks at these things and does the scientific research for a living, if your science is that good and as long as you have IP to protect yourself and you get them to sign the appropriate NDA’s et cetera, don’t be afraid to bounce it off the 800-pound gorilla because your champion is going to get a reach of a lot of people.

I mean Rhonda referenced me as the analyst when she was talking about the analyst the other day. Well, and any given TV appearance depending on where I am, I get 300 million, 600 million viewers. My Aljazeera appearance, my CMBC global appearances 3,000 plus times on television. I’m getting 600 million people.

I don’t know who’s out there watching it. There’s some people watching it making cakes but there’s some people watching it who are very interested in the space and the idea.

So get a spokesperson. Get somebody if you can who has a vested interest in the area who can reach the bodies because it is a numbers thing.

Rick Baron: So I’m going to defer a little bit. Startups are hard. Angels and investors are harder. In a startup mode, I honestly would say provided it was coming from appropriate legal source and under the right regs because I’ve never met anybody who would want to invest in a company that I won’t talk to. It’s exhausting.

Joe Hage: Say that again? I don’t follow.

Rick Baron: No, you want to … you’re funding a startup, the three of us here represent a really high-fluting and successful element. Look, I’ve raised a lot of money but my experience in the beginning was very much like any entrepreneur here and you’re going to want to talk to people that have money.

So you take meaningful meetings, you try and find someone with a passion for your product, define the product by perhaps the disease. If someone has diabetes and it’s an insulin pump, your first audience of investing is maybe a person with
that disease.

Alzheimer’s, go look at the Alzheimer’s association for people who want to cure it or at least define it.

Some of the products do that. But don’t turn down meetings with people that have money.

That’s the first step.

Jeffrey Kraws: I did not say turn down meetings with people with money.

Rick Baron: No, no, no. No one did. Always meet and be persistent. When you raise that last round that you just finished, when you get your $3 million or $5 million, you’re on your next round.

Jeffrey Kraws: Right? That’s how it starts. Just when you finished.

Rick Baron: Yup.

Jeffrey Kraws: It’s time for the next.

Joe Hage: Sean you wanted to …

Sean Schanzten: I was just going to say, and depending on where you live in the country or depending on the prevalence of this is there’s … it’s worthwhile thinking of the different types of angels. There are the passionate kind of what Rick and Jeff are talking about right here and then there’s a very very small subset of angels that are sort of professional but at least active. They make lots of investments.

From the tactical perspective actually, moving your company forward, those ones can be extraordinarily valuable and then they tend to really like what you’re doing but it kind of goes along with the Google who you’re meeting with because if you see someone that’s made 30, 40, 50 investments as opposed to no investments, your pitch is going to vary dramatically based off of that.

Jeffrey Kraws: And just realize that once you get out there and you do this, I mean we’ve had some exceptions. I mean WRH Hambrick did very great job taking ex-biotech public with us a couple of weeks ago raising them $180 million at the $700 million valuation mark in the New York Stock Exchange. They never had a dollar of easy money put into them. Very difficult to do that. To be able to get a company that far.

Realize and be able to accept in your own mind that once you go out and you’re taking this money in that yeah it’s your baby but if you really want to get it someplace, owning a small portion of something that can be really big is more important than owning everything and thinking you’re going to hold on to every single share you’ve got and you’re not giving it up because it’s worth more and not getting it anywhere.

Sean Schanzten: Research valuation online.

Jeffrey Kraws: Right. We’re ready for questions.

Joe Hage: Yes. Ross has one.

Ross Bundy: Hi! My question’s for Sean. So I’ve known a number of angels over my life and then was talking to quite a few as I was raising the round that I’m at and actually been raising this round for over a year even though I started a few months ago.

And one of the things I heard a lot about from angels was they’d invest in a company and then they may not hear back from that company for 3, 4, 5, 6 months, they’re like, “What happened to my money?” Like, “I don’t know what’s going on.”

And so what I realized and what I’ve tried to do with our investors is I do a newsletter to give them updates every single month and I email them personally and I’ve done events at our new facility when we open it so they can see like their money is being spent well or making progress and my reluctance when I’ve looked at equity crowdfunding wherein it’s mostly because I’m not seen … maybe I’m just not seeing it but is that I realized that the check-writing is in the middle of that investment process and there’s the ongoing long-term engagement with the investor.

And so from an equity standpoint, my concern, I’ve tried to stay very geographically around where I’m at so I can go meet people and talk to them in person even after they’ve written me checks.

And my concern with equity crowdfunding is someone goes in Montana. It’s kind of hard for me to go out to Montana to meet with them on a regular basis when I’m working here in San Diego.

So how does the equity crowdfunding platforms address that after check-writing, ongoing investor engagement?

Jeffrey Kraws: Actually I’m going to help with that.

Well one of the things that has been very helpful is you need to have some sort of communications program in addition to your regular writing.

I mean the reason that Rhonda pushes the research angle, the reason that Rick talks about research because I don’t know where those audience is going. We’ve written on 30 somewhat private companies but being able to have that sort communication and that dialogue and have the product out there is very helpful afterwards.

Otherwise you’re going to spend your entire budget just trying to see somebody in Montana. And the private investors usually love this sort of thing because it’s something they could usually only get with a public company.

Sean Schanzten: Yeah. So the broad answer to your question varies from platform to platform. Some don’t do anything. We actually package all the investors into a single purpose investing vehicle and we act as their institutional investor essentially to maintain that relationship. And so when it comes to like a formal shareholder actions, my signature of somewhat of the company, when it comes to ongoing communications and introductions and someone through Healthfundr and we think that the whole equity crowdfunding concept of how everyone kind of understands it in the layman’s term is a bit overblown.

What we think the actual future of this is is that there’s technology can make financial institutions exist that wouldn’t exist otherwise and part of that is ongoing relationships.

I mean a bunch of our compensations tied to carry interests. At least up until now it has been. And because of that, we haven’t sent to stay involved with you and we will act like a normal investor. Like a more institutional investor and kind of harass you and ask for updates and all those sorts of things but also make introductions more proactively and think strategically about the things that the company needs because startups are sucky in a lot of ways.

Jeffrey Kraws: And remember what Rick was saying because it was very very true. Right when you finish that round or whatever you get in there and you’re working on it, you’re automatically starting to work on that next round. You know.

It always takes longer. It always costs more and it’s just always, it’s more difficult.

So try and lay out some targets for yourself that you’re really going to achieve because it’ll help you when you go back to those people. Don’t think you’re going to be some sort of superhero and say you’re going to do it in six months when it takes a year because if you really think that thing’s going to take a year, you might go a little bit longer than that because that way if you do it ahead of time, it’s great. You’re not going to be punished. But you’re starting to work on that next round already.

Rick Baron: And from an investor perspective, I would recommend you look at it from their eyes. I rarely know of any company that does monthly reporting. My quote would be, if the SCC wanted me to, they’d tell me.

So you might want to look at what you’re capable of doing from a CEO perspective and what is reasonable. A year is too long. Monthly maybe really too frequently. Frequently I would recommend that it’d be based upon normal calendar or corporate milestones.

So if you say that I will be in trials in a quarter or something, sometime in that quarter you
should send out a newsletter. Or annually.

So be careful what you promise. It’s overpromise and underdeliver. At some point you’re going to be too busy to do it monthly.

Signal everybody in advance of stopping monthly and say I’m going to move to quarterly.

So just tell people and deliver.

Joe Hage: One of the things that struck me about what you’ve been saying is there’s – and I’m a marketer – so I hear what I want to hear. There’s a lot of marketing in approaching you. You are our customer and we are persuading you that we have the best product that’s worth your dollars.

I really liked what you said before Sean because you used the word ‘amplify.’ That your platform is an amplification platform and if you’ll indulge me a quick marketing moment, social media, a term I detest, is just other places to say, “Hey everybody, go look over there.”

And so, there’s been some … in my group, we’ve talked about crowdfunding and just as you said, I’d mentioned Scanadu. “Hey everybody, it broke records. But you got a prize at the end.” And there was a lot of back and forth. “Yeah well that won’t work for me.”

And you’re kind of saying the same thing. I think. But, recognizing at the same time that just as I can … we’re recording this. I’m going to put it on my website. And at some point, I’m going to go on LinkedIn and say, “Hey everybody. Go check out this amazing content that I have somewhere else.”

Same thing for your platform, right?

Sean Schanzten: Yeah and platforms are a highly regulated area right now.

Joe Hage: What is …

Sean Schanzten: Highly regulated?

Joe Hage: No I heard you. What do you mean by that?

Sean Schanzten: Well there’s lots of rules that the SCC puts forth about how you can raise capital in private markets. And without going to too many details, essentially in the past, you cannot talk about it. Even now, a lot of companies don’t talk about it.

And so we have to walk this fine line about we amplify what Healthfundr is to bring people through the door but then on any given deal, we’re not going out and broadcasting to the world. We’re going to the investors already on the platform and saying and so it’s reaching a broader audience because people have trust in Healthfundr the platform as a source of potentially good deal flow on things to invest in.

So it’s a unique type of amplification.

Jeffrey Kraws: I mean in March 25th 2015, when Reg-A Plus came into being, in the SCC cleared the way for people to do basically two tiers of financing.

The first tier of financing is offerings up to $20 million and the second tier’s offerings up to $50 million. And they very closely regulate what you can say, how you can market, what type of investors you have to go to, you have to remember that for these type of offerings, you have to go to accredited investors and you better not be soliciting someone who is not an accredited investor or you’ll have big problems.

Joe Hage: Cesar, you have a question?

Cesar DelAguila: With all respect, I have never been in a meeting with investors or angel investors so I don’t know how really that goes. But I’ve seen several chapters of the Shark Tank and I don’t think they are angel investors precisely.

So what’s the difference between your meetings and a Shark Tank meeting?

Jeffrey Kraws: Well I’m actually good friends with Barbara Corcoran. We just had dinner not long ago. She’d appear to the WPO, YPO thing. And I think that there isn’t a whole lot of difference I think other than that may be sort of amplified for television but it’s your same sort of meeting where it’s what I said at the beginning. Which is it it’s concise. It’s to the point. You’re trying to sell them in a short period of time. They’re all very successful people who are making their own decisions about doing it and I don’t know what everyone else wants to add to that.

Sean Schanzten: So yeah I think I agree. It’s very much amplification of typical investor meetings but and the reason why Jeff’s talking about staying high level is you’re just trying to get people to take the next step with you.

And so if you think of Shark Tank, it’s kind of that initial quick coffee meeting that’s going to get someone intrigued and willing to spend more time with you. You very much want to have that same I mean I actually have a friend that pumps himself up like playing like loud fast music before he goes into investor meetings. I mean and he treats it just like he’s working out because he wants to get that excitement and story across in that first meeting so that person will take that next discussion with you.

Shark Tank I think most mimics in a kind of dramatized for TV version that first, I want to get you to think that what I’m doing is sexy so that you want to take to have a longer conversation with me about it.

Rick Baron: I think they do a good job in the array of personalities. You have a little bit more time than two minutes to pitch something when you go into a situation. Generally they have some information in advance whereas it seems sharks don’t have that. I kind of think of raising money as have you ever been in a job interview or have you ever done an interview of someone for a job?

I mean either side of that is you’re pitching yourself, your company. And that’s what you’re going to do and you’re going to get some people who are totally disrespectful. I wouldn’t have had the patience that Jeff had with the gentlemen that put down his watch because what Jeff didn’t tell you was, 2, 3, 4, 5 years later, he had an opportunity to go back to that same person in a much more challenging situation and he was prepared for the 60-second question.

So you learn from each one and you know, investors have reputations too. You can get an idea of who you’re talking to by talking to lots of people. I’m sure there’s a book and please, no disrespect. There’s probably a book on pitching investors for dummies. It’ll lead you through the way that you do it and then you got to do it what’s comfortable for you.

Jeffrey Kraws: Hey, and you know what, entertainment value, I mean I love Shark Tank and I was actually watching it last night while I was doing some work. But when Barbara comes out to dinner and talks to our YPO group and I get to attend and stuff, it’s phenomenal because what those sort of things teach you and I think my panel would agree with me is those questions that you see like when you see people go, so what’s your plan for growing your business? You only have 10,000 in sales. How are you going to get to or who’s going to manufacture or what are your thoughts?

Those questions that they’re asking and Rick’s absolutely right. It’ll come in a longer fashion but those are questions you’re going to get asked.

So if you want to have like a practice run and I don’t know if you need a … you’re going to pump yourself up with music, that’s great and go in because it is what Rick said which is, it’s an interview.

But the questions that you’re seeing asked on television, I’m not saying those are the exact questions you’re going to get but I’ve never seen one of the questions asked out there that you’re … unless you’re doing it for a fact. Those are the types of questions you’re going to get when you get in there.

And some of the problems that some of these people have had when they’ve got on Shark Tank where they’ve gotten the investment or whatever is a lot of their sale
s have gone through the roof.

There was this lady who had cake sales and you’re talking about the success she had but then that almost ruined here because it was great that her and Mom are making cakes and they can make like I don’t know, 150 cakes, 200 cakes, 250 cakes every two weeks or something but in Shark Tank and there’s orders for 5,000 cakes or you guys don’t face that with your medical device type things necessarily out of the box but you really have to think about really having yourself involved with what the long-term planning is.

It’s great if you can learn from the experience of your meetings and it’s great when you can do something but you have to think about whether you can scale something and you’ve heard that over the last couple of days too.

Joe Hage: Jon Bengtsson is Chief Operating Officer for Naked Prosthetics. He’s self-funded. He’s just South of Seattle. He has a question for you.

Jon Bengtsson: I’ve been through a few startups. This is my first medical device one. We make a prosthetic for finger amputees and so far we’ve been organically growing and self-funded. And I was just curious as to what your take on taking … we’ve been approached by VC’s and angels and giving up that kind of control for what we’re looking at as more of a funded growth to do something globally.

At what point in when you’re looking at companies do you consider that that’s the right time to do it?

Sean Schanzten: I mean really it’s up to you like what type of company do you want to have because as soon as you take someone else’s money, you’re going to feel this responsibility to turn it into a lot more money and usually raise money even if you raise money at a reasonable valuation, you’re raising it at a valuation that has the expectation of you being 10 to 30 times larger than what you are at that point. And if you don’t want to be that type of company, don’t raise outside money and sometimes you just need that much and that’s the only path that’s available but some don’t.

I don’t know that there’s a right time other than you see a potential opportunity to supercharge growth for one reason or another or you need it to get to market or whatever and you’re willing to say I want my company be 10 to 30 times larger than it is today.

Jeffrey Kraws: I’d add to that that when you run out of room as far as you’ve gone to your friends and family and you’re sort of exhausted that you can’t go any further and you realize you’re about ready to have a partner, i.e. boss, i.e. someone who’s going to have a say about what you do and you’re okay with that and you don’t have any other alternatives but to do it, then that’s probably your time.

Rick Baron: I’m going to give you a much different answer. How much money do you need? Please don’t answer these questions. How much money do you need and for what purpose?

So there was an interesting group on LinkedIn. A discussion of when do I raise money about 60-90 days ago and I don’t really participate as someone that enters the blog and what I found lacking was, what’s the plan? What do you need it for? Those types of things.

Ross is now finding the fact that he raised money he now has to write a freakin’ newsletter once a month.

Joe Hage: It sounded like he likes it though. He likes it? He likes it.

Rick Baron: I’m one of those investors. I’m really upset it only takes you 20 minutes but it’s how do you want to devote your time? What do you need the money for?

The more informed and experienced the investors, sometimes there comes other demands like control. That’s when they might want to put in a CFO and there’s goes your life because you got to hang out with someone like me. There’s a whole slew of things that it’s a give and a take.

The other thing I’d like to say to everybody is that your batting average in raising money only needs to be 1 out of 120. It doesn’t have to be Hall of Fame baseball. 3.33 might be get you in the Hall of Fame but if you just get, you could be 1 out of 1. That’s 1,000. So you’re persistent, you find and you come up with the best deal over time.

Joe Hage: Does it fall on C-suite yes, but does it fall specifically on the CEO to be on all those calls? Because you’re making stuff too. You’re their boss. You’re at the head of a lot of the decisions.

Ross Bundy: I would answer that to say that it depends on the type of CEO you are. But a lot of CEO’s especially at like our stage, I’m setting the soul of the company and the vision of the company so you need someone who’s out there to pitch that. Some CEO’s are really more on the operational side. So maybe you have your marketing person do it or whatever if you have that. But right now, I do all that.

So yeah. I have to be there because at the end of the day, a lot of investors aren’t investing in you maybe have a great idea but they’re really investing in your ability to execute on that idea. So they want to at least know that you’re there and you have that vision.

So I would say yeah.

Joe Hage: And you’re a new father. And you look surprisingly well-rested. I don’t get it.

Brett Goldsmith: Okay so I’m Brett. I’m Ross’ technical counterpart and I wanted to add to this part of the discussion. So there’s some doctors and engineers in the room and this kind of stuff while interesting, I do not find fun.

So I recruited Ross to fundraise and his job was to get me the money to build the lab and build the chips and all that kind of stuff. And so for my point of view, that works great. And even at that point I give up a lot of control in what I was doing just to bring out a business partner, so after that step, losing more control to bring on financial investors was a small step for me.

Joe Hage: That’s interesting.

Sean Schanzten: So the worst part about fundraising is having a CEO? That’s what you’re saying? I’m just kidding. I’m just kidding.

Rick Baron: Well Ross you raised the money so what’s your next job? No I’m just kidding.

Jeffrey Kraws: We like to have, you know, it’s really the nine funds that I’m working with and from a research perspective from our company, we definitely like to have the involvement with the CEO. We like to have the key decision people, the founder, the science people. We like to have them all partake because you really … one of the things that helped made me successful and Rick eluded to it earlier and it’s true which is surround yourself and betting at a good team. And it is the team that did that but I surround myself with people who don’t have my skills but when I’m making an investment, I always always bet on the jockey. Always.

I’ve seen many many examples in my career of things that have gone and it blown up where the CEO and the CFO have been able to go back and address it and change and fix something and make something out of nothing.

We won’t sight companies that I thought were disasters that ended up being huge successes. And I’ve seen guys who are terrible jockeys. Take things that should’ve have been a given and just destroyed them.

So having the CEO involved to me and having the founder involved is very important because if I’m writing a check for myself where I’m thinking about writing you on research, I want to make sure I know who’s driving the ship because I can’t watch you at the end of the day and I don’t want to be in the front page of the Wall Street Journal with you having done something really stupid and
me being the large investor having written that report.

Sean Schanzten: Angels typically hate meeting with non-founders and non-CEO’s.

Rick Baron: My deal going into at least one company was, look, I love doing the investor stuff. It’s obvious to you that I’m not really introverted and too shy. But my deal with any company is that you don’t want to hear from a finance guy. You want the visionary especially at the stage companies that we’re all in. Those are the people that sell. Those are the people that are really driving. It’s not some guy that can count numbers.

So you signed on, it’s yours.

Joe Hage: What I really enjoyed about our conference is, to a speaker, I want to hear more. But we’re out of time. I’m really grateful. You have such diverse backgrounds. As we close, I want to give the mic one last time to Sean for the people out there in TV land to tell us about Healthfundr so that they know should I get in touch with Sean and how would that help me?

Sean Schanzten: So raising angel rounds sucks. For the investors, for the entrepreneurs, it’s just … it’s like hurting cats on cocaine. I mean it’s terrible. Everyone’s running off on other directions and so Healthfundr, what we’re trying to do is through technology and relationships take that process and make it more efficient so that once someone has funding into their company that represents kind of smart money as it were, you can get more smart money or more just kind of financial investors falling into you.

And so the best way to get attention on Healthfundr, anyone can go and create a profile. It takes 15 minutes. That puts you into the workflow but to be blunt, you’re probably not going to get a lot of attention unless you’ve raised a bit of money offline, you’ve pulled together a great board of directors, you get a team like all around you because otherwise, you’re just data through a website, to our review team. That’s not anything tangible.

And 10 to 1 we probably if you pulled together someone good, you probably know or degree away from them.

Joe Hage: Jeff you wanted to make a comment?

Jeffrey Kraws: Yeah. Anybody out there looking to go into the marketplace needing help growing their business, looking for advice, looking to garner that increased exposure, to utilize the analyst, feel free to contact me at Crystal Research Associates. Jeff@crystalra.com.

Joe Hage: That’s very generous. Can we hear it for our panel? Thank you very much.

[Applause]

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