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How the world’s largest medical center invests in medical device innovation (and how you can benefit!)

How the world’s largest medical center invests in medical device innovation
(and how you can benefit!)
presented October 12, 2018 by Lance Black, MD, from Texas Medical Center in Houston


Dr. Lance Black: So, because we don’t take equity, we don’t charge.

We’ve had companies come through who are your typical accelerator companies all the way to companies who are 30, 50 strong, who’ve raised their Series A, Series B, who want to use Houston as either their US launching pad or a new sales channel, or just a new market that they can evaluate.

When you have 10 million patient visits per year, [we’re our] own market, as you can imagine.

PDF Click here for a copy of the slides.
I’m here to talk about something pretty exciting. It’s actually a parking lot company. And you may be asking, “What the hell is this guy doing, talking about a parking lot company?”

And really, there’s one word: is innovation. And I know we’re kind of sick of hearing about innovation. Everybody wants to be innovative. It’s a hype word. Every hospital, every business, every business unit is putting innovation on their forefront. But really, I contend that innovation may be easy to define. But sometimes it’s difficult to tell unless it’s in retrospect.

It’s kind of like to me defining a law, but not understanding the spirit of the law. So, what is innovation? Implementation of novel and useful ideas that are going to be for the betterment of society, in this case for healthcare.

So let me start a little bit of backdrop, the great city of Houston. I did not know this when I moved there two years ago, but it is the most diverse city in the US, over 140 languages are spoken inside of Houston. It’s more diverse than New York City and Manhattan, which is pretty crazy. What does this mean? Great restaurants, good food, but it also creates an environment, or a culture of innovation and we know that diversity, not just based on race, gender, ethnicity, but a culture where there’s diversity in thought, diversity in personality, innovation, bubbles up, innovation grows.

We can’t mention Houston without talking about the energy industry. We’re actually the energy capital of the US with over 4800 energy firms within the city of Houston. So, if you’re an engineer, and you’re in Houston, chances are you’re petroleum, you’re mechanical, you’re working on oil and gas, had something to do with this oil boom, several hundred years ago, or 100 years ago.

Lastly, it’s the space city. Who here knows what the first word spoken on the surface of the moon was? That’s what Governor Perry thought, but he’s actually wrong. It was “connect,” connect light, I think it was the first term used. Then later on “Houston, Tranquility Based here, the Eagle has landed” is the famous line that people sometimes quote, but that came after several technical words. So, Houston was not the first word even though that’s what it says. But we are definitely a city known for the space industry. NASA, obviously, the Johnson Space Center is located in southeast of the city limits.

And so why am I mentioning all this? Well, first and foremost, just to kind of give a little plug, I’m actually sitting as a scientific advisory board member on the mission to Mars and space health. So, talk about innovation. Think about 30 years in the future when we’re going to be traveling to Mars for astronauts, a six-month journey there, 12 – 18 months on the surface of Mars, six months back, what kind of medical technology do they need? What are they going to have to have in place so that if something does happen in space, none of which the plan is right now we’re going to be physicians, how are they going to take care of themselves? How they’re not going to go –with my biggest concern is their mental health — how are they not going to go crazy? If you have four people in a room for six months? I think anybody would go nuts. In fact, they’re doing studies right now where they’re sticking four people in a hotel room and it got up to about 90 days before things start breaking down, and people start going a little crazy. So, they’re trying to figure out team dynamics and everything in place, how do you, how do you a qualify or how do you overcome that problem? I mean, imagine you can’t even speak to your family members without a 90 minute, or depending where you’re at, delay, so it’s kind of hard to have a conversation like that.

So that’s the backdrop and it is not, this is not a pitch to sell you on Houston how amazing of a city it is, although I’m learning that that is the case, but really it’s a backdrop for what I’m about to tell you next which is the audacity a cotton gin former had, and he had done really well on the cotton gin industry and he said “you know what, I’m going to buy this swampy part of the land just south west of downtown Houston and I’m going to make it the world’s best, most innovative medical healthcare system”. And everybody was like, seriously, kind of laughed at him, but he had this intention because his family had suffered through some health care issues and he really wanted to leave a legacy. He really wanted to, as most of us do, have value and what we bring and have value once we’re gone from this earth, that we can point to or our families can point to and say “it’s because of that person that this exists”.

And so he bought this land, and he posted this sign on the empty swampy land, “Texas Medical Center, coming near you” basically. And what he did is through a foundation, and many of you may know the hospital MD Anderson, but through the foundation known as the Anderson foundation, same name, he set up a third party TMC corporate organization that he bequeath the land to, and he said “Okay guys, you take care of the land. One condition, the land is for free to anyone who has a mission to change healthcare, innovate, and conduct research”. He said, “give the land away, I want you to take all this land that I’ve, you know, kind of drew a circle around, it’s about two square miles, and give it away!” Now it’s on you, as this real estate company, to make a sustainable business, and to pay yourselves and to be able to support the land and everything that goes around real estate. So, what did they do? And that’s kind of the innovative part I’m talking about here in a second, but the rest is really history. From that first open land available to anybody, can you imagine how else to get hospitals to come to your lands, like “Hey, you can have this for free!”

Amazing things have been occurring all the way till present day, and I have a medical city, and I’m going to tell you a little bit about what this medical city entails, but just in the background is downtown Houston, in the foreground is a Texas Medical Center. It truly is a medical city. The history is astounding, the legacy that’s been left or continues to develop is astounding! In 1964, Dr DeBakey does the first coronary artery bypass graft. In 1968 Dr Denton Cooley, first human heart transplant. And I don’t know if you guys know, and if you don’t, but if you look up the Denton Cooley and the DeBakey debacle, the conflict, the fight that went on between them, between Texas Heart and Methodist I believe. Methodist hospital, interesting story, that’s a whole other lecture on its own. They were really competitive but also friendly. But that competition, they were racing to be able to be the first to do something, to be able to create the new artificial heart, to be able to, to implant the next LVAD. That competition bred innovation and it’s set a really a legacy for the Texas Medical Center. In 1971, Texas Children’s collaborated with NASA to produce a plastic isolator bubble for this child who had severe immune deficiency, and you guys probably all know the story of the boy in the bubble. That’s where it came from. 1976 Dr “Red” Duke came up with an idea for Life Flight which was the first air transport ambulance service. And it goes on and on and on.

Then fast-forward to a few years ago in 2014, our community looked back and said “There’s some amazing things happening and we’re having a difficult time just keeping up with it. There’s hospital on top of hospital some are competitive, some are duplicative some friends, some are not friends, how can we support this amazing medical city?” And from that came a couple of things that I’m going to talk to you about here in a second, but I wanted to kind of show you some of the names that are now part of the Texas Medical Center: Baylor College of Medicine, MD Anderson, Texas Children’s, A&M, to Memorial Hermann. Some of these names I’m sure you’ve heard before, any one of these health systems could stand alone and be considered innovative and amazing within themselves. But they’re right next door to each other, and what I mean by right next door to each other. So, if you do a two square mile circle, within just south west of downtown Houston, you would capture 61 institutions, 21 of which are hospitals, academic centers, and research institutions, including the rest, all of which are dedicated to healthcare. So, you literally are walking on the street looking at these different organizations. And by the way, they’re all independent and they’re all competing with each other. 10 million patient visits per year in this health system. 15 million developed square feet. This numbers wrong, 9200, it’s now over 10,000, and before I came to San Diego, I looked up the entire San Diego County and I counted how many beds are included in all the different hospitals, they have 7000, they just went up 2000 as of two years ago. So, within two square miles, we have more beds available than the entire San Diego County has. And why am I telling you all this? Because the critical mass that’s present within Houston is a playground for innovation. It’s a petri dish, and I’m going to tell you how we’re kind of leveraging that and exploring that as we go along.

So that 2014 conversation with the community leaders included the sea level suite folks, and each of these institutions, included community leaders, included those who had any decision-making power within the Texas Medical city. And we said, “What do you need? Where are your strengths Where are your weaknesses? How can we combine certain things? How can we fill in certain gaps?” And we came up with these five themes. Really straightforward, practical themes. One, of course, innovation, everybody wants to be innovative. Two, health policy, we want to be able to set the standard, we want to be able to be forward thinking in how health policy comes down instead of being reactionary clinical research. Imagine, this is an example, 21 Hospitals, so TMC corporate has a Clinical Research Institute, their first goal is to create a single IRB to have access all 21 hospitals. Talk about a multi-site opportunity that’s just under the umbrella of this third party TMC corporate and they’re actually making really good progress. So, a quick step back before I finish TMC corporate. Remember, is a real estate and parking lot company and I will tell you why parking lot is important here. Fourth, genomics. Fifth, regenerative medicine.

Parking lots, OK. So now you have land, you’re going to give it away for free, but you got to have some kind of income capital to continue to sustain yourself to maintain that land. We’re essentially like a little municipality, we provide security, we do landscaping, the roads are our roads and other cities’ roads, we have to take care of all that. Well, how do you do that? We created a crap ton of parking garages. And we make over 90 million a year in parking. When you have 10 million patient visits per year, when you employ over 115,000 people, including physicians, nurses, technicians, etc. They all need a park somewhere. So that’s the great to me, that’s the genius that really allows for this, some of these programs to be kicked off. And now as a third party, who owns the land we can, we have this godlike view, we can look down and say, you know, what we’re going to try to make you guys work together, we’re going to force collaboration with these five themes supporting us, because these are themes that you guys told us you need. And I’m going to focus on the Innovation Institute, that’s the one that I work for. It’s the one that really got off the ground the fastest and the soonest, about four years ago, and I’m going to show you how we kind of are, forcing collaboration to an extent, but it’s a welcome force, if, you know what I mean.

So, the TMC Innovation Institute really, we can say, is shaping the future of health, because we’re uniting not just these institutions, but we’re uniting, promising innovators, researchers, scientists. Incredible stuff is happening in the Medical Center, but half the time one organization doesn’t even know what the other organization is doing. Right next to each other, it’s really kind of interesting. And so now we have this perspective, we can kind of filter through that and see who’s doing what, and how to combine, how to separate, how to challenge what they’re doing, and really support innovation. So, we do that in a number of ways. We have five different programs, and you can think of these programs really just at from a stage of supporting start-up companies at different stages within their life cycle. So, we focus primarily on medical device and digital health. Our partners focus on therapeutics, and diagnostics, and we’ll walk you through what each of these programs mean, and how they affect innovation. So, this is our campus, it’s about a mile south of the Medical Center, it’s about 700,000 square feet. Guess what, we own it.

So, it’s really good to own real estate in this business. So, we can do everyone with this building, it’s actually an old Nabisco cookie factory, originally turned into just overflow. So, for the hospitals who needed a little bit extra space, so they’re building an extra wing, they can lease a stays, they can lease a room to be able to, you know, have the Change Manager take place while they have someplace to go. Then we started to push them out slowly. we occupy now about 250,000 square feet with all of our innovative efforts. The idea is to overcome this empire building to be an innovation neighborhood.

So TMCx is our kind of most well-known program, it’s a medical device and digital health accelerator. The program lasts four months, we invite companies from all over the world to participate, February to June we focused on digital health companies, August to November we focus on medical device companies. We don’t charge anything, we don’t take any equity. That has caused us to be somewhat stage agnostic from an accelerator standpoint. Generally, an accelerator obviously, gives a little bit of financing up front, then takes a certain percentage of equity, and they do that with certain types of companies, because not all companies are willing to give up that kind of equity for, let’s say, $100,00, 6%. So because we don’t take equity, we don’t charge, we’ve had companies come through who are your typical accelerator companies, all the way to companies who are 3050 strong, who’ve raised their series A, series B, who want to use Houston as either their US launching pad or a new sales channel, or just a new market that they can evaluate. When you have 10 million patient visits per year, it’s its own market, as you can imagine.

And so, we’ve been able to really capture a unique piece of the accelerator puzzle here. Now, we get about two to 300 applicants per cycle, and we accept 20 to 25, so not everybody comes through as accepted. But more recently than anything, we’ve been seeing a high propensity of people coming from the west coast and the East Coast international. Houston itself, we don’t have that many folks. Actually, in this Co Op, we have 23 companies, I think Houston based or Texas based, 9 International. The majority are West Coast, some East Coast as well, and what the West Coast companies are telling us is, it’s crowded in Silicon Valley, it’s crazy. We’re competing against 27 other start-up companies. You guys have a Greenfield, it’s like a playground, like I mentioned earlier.

So, we’re getting really good feedback. To date, we’ve supported 88 companies, we’re now somebody another 23. So, we’re going to add well over 100, after this cohort is over. We’re on our seventh cohort, those companies have collectively raised about 130 million, before and after the accelerator. This is a number that we’re really proud of right here. 220 customer engagement. The way that we measure that is through formal agreements that these start-ups have with our institutions. As a third party, we can’t force collaboration, we can’t say,” Okay, start-up A you’re going to go work with Memorial Hermann, Memorial Hermann is going to do a pilot study with you, or they’re going to support you through some kind of co-development effort.” We can’t do that, unlike some other accelerators can. So, at first concern, are these hospitals responsive? Are they going to work with these start-ups? How are they going to appreciate innovation? Are they going to look at it like we look at it? And right off the bat, we’ve noticed that they’re willing to engage almost at the outset of the cohort because they see TMC acts a filter. These guys have looked at a bunch of start-ups, they understand what’s good, what’s bad, they’re vetting them for us, and they’re pushing it forward. So on average we get per company two to three letters of intent, or formal engagements, or some kind of pilots, that these companies walk away within four months of a time of, within a form of time period. We thought there was no way hospitals are going to move that fast, it was going to take 9-12 months and these numbers are going to come slow, but it’s been pretty impressive, and we’re pretty excited about it

These are our companies, from out last medical device cohort. This is TMCx five, we’re now on TMCx seven, and I wanted to just kind of show you that we don’t have any particular therapeutic focus, we don’t have any necessary requirements for stage except one, which is you have to be fully dedicated to your company, or at least have one founder that is, and you have to works as prototype, whatever that means. We just want to make sure that this is not a side project. This is not something a professor is working on, or a physician is working on the side, but it’s something that they’re fully dedicated to supporting. So that’s our minimum requirement.

The other thing is we, these companies represent therapeutic areas, all from ob/gyn to cardiovascular to at home use, to direct-to-consumer to direct-to-hospital, variants of business model, variants in therapeutic focus. We’re just looking for the best companies, we were looking for the most disruptive companies, ones that we can really support and live with four months, which includes their personalities. So, we screen a lot of crazy entrepreneurs out because of that, but I want to let you guys hear from them for a minute.

So, let’s start with a couple of them. Poly Vascular. This is a really good case study for us. This is a company that came out of Baylor College of Medicine, that we had to convince to be a company. It was a physician and two researchers, two engineers, that worked for Texas children’s and Baylor, and they’ve been working on this heart valve for some time. And they didn’t know, they had no idea how to commercialize, and Baylor had no idea how to commercialize it, not talking about Baylor, but they just, in this case, didn’t know how to do it. And so, we convinced them, like, “listen just form an LLC come through our accelerator program and we’ll support you.”

I am Henri Justino with Poly Vascular, and our aim is to transform the care of children with congenital heart disease by developing an entirely new generation of valves made of medical grade polymer. The most commonly used valve is a human cadaveric valve. Our body’s immune system really targets this tissue and destroys the valve, sometimes very rapidly. The valve we’ve designed is entirely devoid of any biologic tissues. our approach would allow us to deliver these valves in a minimally invasive fashion that can last over 200 million cycles and even grow with the child. We saw a gap in the care of children with congenital heart disease and we said let’s roll up our sleeves and do something about it.

So, I’m really proud of that company because I feel like they wouldn’t exist, had it not been for us just kind of pushing them along and getting them out. So now they’re doing really well, they’re hiring their CEO because they realized that they can’t run a company on their own, but they’re born through our program and they’ve been able to kind of see what they’ve been working on. The research is actually something that’s commercializable and it doesn’t need to sit on the shelf of an Office of Technology Transfer and hope for licensing. You can actually do the activities required to bring it to patients sooner and faster. So pretty exciting company. This one, vitals, I make fun of them because it looks like vittles, if you guys are from the south of that is, but this is a company that was born in South Africa. They thought, because like most of us do, that Silicon Valley is where things happen and they moved to Silicon Valley, and they found themselves struggling because of all the competition, because of the crowd and it’s because of the kind of the green innovation that’s taking place there. But there’s just too much of it for them so they came through our program and have subsequently moved to Houston, so I’m going to let Werner and talk a little bit about vitals.

My name is Werner and I’m the founder or Vitls, and with Vitls we’re developing a platform that enables healthcare providers to continuously and remotely monitor their patients’ vital signs. It’s unobtrusive, it’s very thin, we built a ton of sensors into the device, Temperature sensors, PPG sensors, accelerometers. We monitor body temperature, pulse, RR intervals, respiration rate, blood oxygen levels, sleep and movement. hospitals that implement a contact free or continuous monitoring can save up to 20000 dollars per annum per bed. What we would like is to run our pilots with TMC hospitals and then commercialise our device.

So, these companies, they come through Houston for the better part of four months, it’s really six weeks, where I put them through some significant curriculum and programming. In fact, Jon Speer is one of our advisors and he teaches some of the classes related to quality. We have something we couldn’t do without, you know, these advisors, is we have 250 folks that support us, ranging from specialist physicians to regulatory quality experts that are willing to get back and commit to the innovation that’s taking place in Houston. And so those advisors, actually the ones that do the teaching, they’re the ones that sit in the panels, workshops, all the office hours, and really nurture these companies as they’re going through the process. My job along with some of the other strategists is to support them one-on-one while they’re going through. So, identifying some of the milestones they want to achieve for themselves, while they’re going through this four-month program. Because, as we all know, four months is a snapshot in time, right? We don’t want it to be, here’s four months, here’s a bunch of curriculums, learn it and then leave. We want to provide some stickiness, some opportunity for relationships to grow. So, if they’re coming from outside of Houston, there’s a willingness and desire for them to stay. And so that’s exactly what happened to Werner. He got his pilot with Texas Children’s, and he’s actually starting to run it right now. And so, it was because of that relationship that he actually chose to move his company to Houston.

One last example, another one that I’m proud of, Alleviant Medical. And I’m going to talk a little bit about the program that they went through which is called TMC Bio Design, very reflective of Stanford’s Bio Design. But they went through a program that we have that’s intended to build out start-up companies. Then, they went through TMCx, and then, they used some of our other programs. But I’m going to let, I think Jake, tell you a little bit about their project or product development.