The issue of health care affordability continues to be a major hot-button political and economic issue for the US. But while drug prices and the Affordable Care Act have been firmly entrenched in the crosshairs of public debate, what isn’t receiving nearly enough attention is the growing trend of technological innovations being introduced into the medical space that hold the potential to create enormous positive impact in modernizing healthcare treatment, driving significant efficiencies and bringing costs down. In some ways, Medtech takes a drastically different approach to healthcare, focusing on concepts like preventative care and precision medicine, as well as better targeted diagnosis. Incorporating strategic use of big data, artificial intelligence and even virtual and augmented reality allows practitioners to create more customized care for patients, which serves to reduce process and cost inefficiencies as well as an overreliance on prescription drugs.
For these reasons and more, the Medtech industry has been gaining more traction from investors, particularly within the startup community. To highlight the emerging themes of the industry, entrepreneurs and industry leaders gathered at the Atrium Hotel in Irvine, CA earlier this week for the inaugural Med Tech Monday. Hosted by Med Tech Directory, the event served almost like a one-day crash course for startups, investors and professionals with fast-paced sessions that discussed everything from cybersecurity in medical devices, raising capital, marketing best practices, millennials, and the outlook for the year ahead. It also featured a number of startup pitches as well.
“From my experience, the industry has fragmented so much, and so the theme of the conference is ‘Innovation, Collaboration and the Year Ahead,’” said Dan Golka of MedTechDirectory.com, which produced the event. ”The innovation is about things you haven’t seen, time and again. The collaboration is to bring the different people together, to bring the lawyers, designers, the medical device companies, the CROs, the FDA people, the investors, and the startups all together. Here’s the thing, there are marketing people that have met lawyers today that got deals put together. There are startups that have met alternative financing people and gotten deals put together. This is not just one segment of the industry. This is everybody in our industry. If you ask everybody, you’re going to be surprised what a varied audience we have here.”
Image of Dan Golkan via @meghanMalonso
MedTech Startups on Display
Among the startup presentations were Echo Laboratories, which makes the Revolve hybrid microscope that combines upright and inverted imaging configurations and is viewed through a mounted tablet. Capillary Biomedical is developing a fully-implantable automated insulin delivery system for diabetes management. Fischer Imaging, which is actually a 100-year-old brand the current owners acquired, offers a diagnostic mammography system called MammoCAT 2D with targeted X-ray and significantly higher resolution imaging. Another startup called Ceeable has developed a visual field test that can detect, classify, and monitor degenerative eye disease using nothing more than a tablet computer. Avento presented its Milk Tracker app, which is designed to be a comprehensive feed tracking system for babies in the neonatal intensive care unit. Lastly, CertanHealth presented its maintenance management system that helps hospitals and clinicians better allocate their resources to improve workflow efficiencies and reduce compliance fraud.
Of course, what most startups need the more than anything is growth capital, whether it be a business loan from a bank or money from investors. The panel “Finding Money for Your Technology” covered the many options available to medtech startups and featured panelists Rachel Baranick, Deputy District Director of the Santa Ana District Office of the US Small Business Administration, Ken Huber, Co-Founder & Chairman of funding platform CapStackWest, and Brian Anderson, Co-Founder of Harper Partners, which provides “fast funding” to startups through invoice factoring, AR financing and other forms.
Image of Certan Health’s Andre Clark via @BrianWhalen5
“It’s all about preparation,” Huber said. “You prioritize your three major options and hunt through those channels – friends, bankers, whatever it is. Build your due diligence package that lines up with your pitch deck, that lines up with your executive summary…Then develop and practice your presentation. I cannot tell you how many times investors see a CEO come in and you can tell he’s really, really busy but he’s not focused on the one thing he needs most: the money so he can push. The money is a tool; practice using the tool. How do I get to that tool? Get it so when you’re talking about your company, it’s easy and it’s simple.”
The Art of the MedTech Startup Deal
To help startups fine-tune their pitch, marketing guru Joe Hage of Medical Marcom laid out effective strategies that early-stage companies and entrepreneurs should adopt, especially through the digital landscape.
Joe Hage
“Know your target and be able to present to them why your investment is better than other investments, and why they should believe,” Hage said. “Your unique value proposition is the very first start. If you hire a consultant for anything and they don’t ask you what this is, and you can’t describe it, then you’re off to a rocky start… I talk about digital marketing because that’s where everybody starts these days, but marketing is marketing. How will you be known? How can you be found? When you are found, can you be engaging? And when you’re found and are engaging, do you give the prospect a way to get in touch with you? This really is the essence of what marketing is.”
But marketing isn’t the only important aspect of a successful deal. Startups have to consider all the potential risks that could potentially put a deal in jeopardy, not the least of which the growing concern of cybersecurity threats facing medical devices. In the panel “Internet of Things and Medical Cyber Security,” Marcell Hill, Global Senior Director of IoT and Software Solutions at Intertek, and Frances Cohen, President of Promenade Software, took a fascinating deep dive into cybersecurity issues in today’s medtech space.
Frances Cohen and Marcel Hill
“For those that are here today looking for venture capitalists and investment, or for those working for established companies, it’s critically important that you respect and understand that a potential breach—just a rumor of a breach—could lead to significant costs,” Hill said, pointing to St. Jude Medical’s rumored breach during its merger negotiations with Abbot Labs as an example, dropping the stock by 4.56%. “New threats are emerging every single day. Data breaches are all over the place.”
For this reason, Hill said companies should embed cybersecurity into everything they do, from product design and development to corporate culture and governance.
“I think now people are getting it,” Cohen said. “I would say even just five years ago, that wasn’t the case. Now it’s changed because the regulatory agency, the FDA, is looking at it very closely. I haven’t seen a single submission go through where they haven’t looked at that as one of their highest priorities, and the recent events that have happened in the news with Johnson & Johnson (JNJ) with their insulin pump, or St. Jude. That’s big news, and it scares people, so I think now it’s a little more interesting to people.”
The Next Phase of MedTech and Healthcare
Arguably, no major sector faces as much uncertainty in the coming year as the healthcare industry. In his presentation, Scott Hamilton of Executive Next Practices outlined a playbook of sorts in “The Next 100 Days.”
Hamilton pointed to five strategic trends for 2017. First is customer centricity, and knowing that the velocity of markets require constant retargeting. Second is the ability to adapt, and in fact, be “prodaptive” and ready to pivot when needed. Third is to be digital first, in that everything you do should be digitally oriented. Fourth is a focus on intrapreneurship, which is to empower your internal teams to innovate and grow. Fifth is the capital staircase, which is the ability to source capital from anywhere at anytime, depending on what the project is.
Scott Hamilton
“The first thing we can recommend to you is the obvious, pull your team together in a strategic retreat ASAP,” Hamilton said. “2017 is slipping very, very quickly. In the next 60 days, not 100 days, pull your team together across functions and get clear where you’re going to the team and how you’re going to communicate that to the world. Secondly, re-examine your value proposition with our 100-day template and don’t underestimate the misunderstanding of the marketplace.
“Here’s our game, and it ain’t checkers,” Hamilton said. “This game we’re playing is a game of chess. We need to be thinking multiple routes, all at the same time. We can’t be thinking in terms of linear progressions. The world is not operating as a checkers game. It’s all happening at once and it’s messy. So how are we going to take care of that?”
Hamilton then laid out a 5-step template for the next 100 days, which boils down to cementing your team’s value proposition and the way in which you communicate it to the market. It’s also important to not underestimate the lack of understanding in the marketplace as well.
Better Medical Practice for Better Healthcare
The day closed with Brian Meshkin, CEO of Proove Biosciences’ keynote address, in which he detailed the unintended path the healthcare system has progressed toward through the wide adoption of the 0-10 pain scale diagnosis, or the spectrum of smiley faces to frowny faces. On the surface, that may seem harmless, but when compared to how other symptoms and diseases are treated, it’s absolutely archaic.
Brian Meshkin
“When you’re in pain for a long time, you’re miserable, so there’s a 50% overlap between mental disorders and chronic pain, which is the leading disorder in America,” Meshkin said. “And disability claims as the population has aged and people are in more pain have gone to record level. It’s affecting every business in America as well as the Social Security Administration. So it’s affecting taxpayers as well. There’s a 60% overlap between mental health and addiction… So we now have an epidemic in the United States where three times as many people are addicted to and dying from the lethal narcotics that we as a system of taxpayers or employers are paying for people to get addicted to, than all of the illegal narcotics like heroin and cocaine combined. Sounds like insanity to me. But there’s a huge human cost to that. According to the CDC, it’s the leading cause of adult accidental death in America, and last year surpassed automobile accidents as the leading cause of teenage death in America. It’s a major, major problem that starts with a 1-10 scale of smiley faces and frowny faces. That’s unacceptable.”
This is why advancing innovation in healthcare, particularly through medtech, holds so much potential in fixing the country’s imperfect system. Meshkin makes the case that interoperability of digital health records can allow for computational diagnosis, in which doctors and clinicians and leverage AI to create customized treatment for each patient’s specific needs.
“As we look to the future and we think of the Brave New World,” Meshkin said, quoting Aldous Huxley. “Words can be like X-rays. If you use them properly, they’ll go through anything.” I think when we think of words, words are symbols of a thought. It’s a piece of data. And the power of data, the power of the words that we speak, the power of making that data understandable and actionable so it can be communicated and used in decision-making is very much like an X-ray. It’s diagnostic in nature, and if used properly in making decisions, it truly can go through anything.”
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