Improving outcomes – the benefits of medical device start-ups
Innovative technology is the only way the healthcare industry can deliver improved patient outcomes at lower costs. Elly Earls speaks to Sagentia's Paul Wilkins and Toby Wilson Waterworth of the Atlantic Accelerator about how small medical device start-ups that create these innovative devices can successfully navigate the long, complex road to market.
The healthcare industry is at a critical juncture. Historically, efficiencies have been created through consolidation, but with governments increasingly focused on delivering better patient outcomes at ever-reduced costs, this model has ceased to drive the economies of scale it once did.
"We've got to a point now where consolidation doesn't work anymore, there has to be a new way of looking at things," said Toby Wilson Waterworth, CEO of Atlantic Healthcare and one of the founders of the Atlantic Accelerator, a network of industry experts which matches companies developing innovative and potentially disruptive technology with expertise they need to accelerate their route to market.
"We're at the cusp of a revolution in healthcare and it is technology that will allow the industry to move on into a new paradigm."
But technological innovation will not be delivered by the established blue chip device manufacturers. Rather, it is the struggling start-ups on which the industry increasingly depends.
"The blue chips tend to rely on start-ups as their source of innovation," noted Paul Wilkins, senior consultant at the medical product division of technology and product development company Sagentia.
"Since 2008, we've seen a lot of large R&D programmes either cut back or stop altogether and the way blue chip companies are finding their next generation products is often to buy a start-up that has proven a technology."
'Proven', here, is the critical word. No longer are the industry's big players interested in investing in early stage medical device start-ups that merely offer the promise of world-beating technology, they want solid evidence.
"They're now waiting for start-ups to go through clinical trials, show genuine efficacy and safety and demonstrate validated commercial promise," Wilkins noted.
The question then becomes, how on earth do these small start-ups get from an innovative and potentially life-saving idea to an exit that means their product is in a position to actually reach the patients at which it is targeted?
Early days: the importance of the right business plan
A carefully thought through business plan is an early tool that is absolutely essential to any start-up's success. While it is key to have a very clear understanding of the pathway the company will have to follow to eventually reach commercialisation, including how much the process will cost and what the various milestones and value inflection points are along the way, it is also essential to remember that the business plan will change.
"It's not a stake in the ground that's fixed, it's driven by who has invested, how research is going, the general macro-economic climate and competitors in the marketplace," Wilkins remarked.
The right business plan is also crucial for successful marketing. "In some ways, start-ups are stuck between a rock and a hard place with their business plan," Wilkins said. "It's both a key document for them to hang their hat on and a marketing tool, so it needs to be attractive to investors."
For Wilson Waterworth, it is therefore very important for start-ups to be open to outside help, even at this early stage.
"If you're going to attract serious investment and serious people, you've got to be open to people helping you through what you don't know," he emphasised. "If you've not done it before, you need to surround yourself with people who have."
Fragile balancing act: creating the right resource mix
Once the first chunk of investment has been secured, it becomes still more important to enlist the help of outside experts. While scientific or technological expertise may have been appropriate to get a start-up to the point of demonstrating initial technical feasibility, the next stage of development could be very different.
"What may have been appropriate resourcing to get to that first bit of funding might not be the right resource mix to get a product developed, through regulatory submission and out towards the market place," Wilkins explained.
"Balanced resourcing is a key method for start-ups and those who move from getting funding to getting to the market place most quickly have a very capable team."
Wilson Waterworth agreed: "I find that the people who tend to be successful are those that have a very open culture. They use the benefit of other people's experience, pull that together, and draw their own conclusions to move forwards."
Working together: how to get your product commercialised
There are several development milestones a start-up must go through before its founders can even begin to contemplate commercialisation - from feasibility demonstrations to the creation of pre-production prototypes and from clinical trials to FDA submission.
While getting through clinical trials or receiving FDA approval are huge achievements for any start-up, commercialisation is where they are really taken out of their comfort zone.
"They need to think about how they manage the reliability of a product, what quality management processes they have in place for production, how they market the product and how they distribute the product," Wilkins explained. "It's very rare for a start-up to do that off their own back - they'll either set up a partnership with a distributor or deliberately exit through a blue chip."
This is where an organisation such as the Atlantic Accelerator can help. "Start-ups have seen us a means of getting access to whatever they need in terms of growing their business," Wilson Waterworth explains. "For some, this is international connections for commercialisation; our experience and connections are truly international."
For both Wilkins and Wilson Waterworth, pulling together as many connections as you conceivably can to get through the long, complicated process of getting an innovative medical device to market, is paramount.
Indeed, as Wilson Waterworth concluded: "The start-ups that are successful have very experienced people on-board and deep international connections. That's how you build a truly global company."
Opening doors: how the Atlantic Accelerator has helped medical device company Life MT
For Carol Fitzgerald, CEO and President of Life Medical Technologies, which is focusing on the manufacture and sale of BreastCare DTS, (an easy-to-use device produced under patent which has been FDA-cleared as an adjunct to mammography and other procedures for detection of breast diseases, including breast cancer) raising funds has been the most difficult part of getting the company's product closer to market.
Creating strategic relationships has been instrumental in overcoming this hurdle. "Networking is critically important for credibility, funding ties back to those kinds of relationships," Fitzgerald said. "Having the support of a group such as the Atlantic Accelerator has really helped us."
Fitzgerald started working with the Atlantic Accelerator when Life MT was in the midst of finishing its final round of funding. "We had already raised about $8m privately, we had our 510(k) and we were building a new manufacturing line," she noted.
"We were looking at strategic partners globally and it was great to have the expertise the Atlantic Accelerator could offer us. They've introduced us to potential distribution partners and they're working with us to look at having manufacturing operations not only in the US, but also in other countries."
For Life MT, which aims to deliver its first product to patients by the end of 2012, openness has been of critical importance to the company's success so far. "Being open and fluid as opportunities approach is essential," Fitzgerald concluded. "It's about being flexible."