UCSF Life Sciences: Week 7 Devices Resources, Activities and Costs
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Transcript of UCSF Life Sciences: Week 7 Devices Resources, Activities and Costs
UCSF Lean Launchpad For Life Science and Healthcare Startups
Medical Device TrackClass 7
Resources, Activities and CostsNovember 12, 2013
Allan MayChairman, Life Science [email protected]
UCSF Lean Launchpad - Allan May ©
CRITICAL RESOURCES
Physical/Tangible Intangible Human Financial
UCSF Lean Launchpad - Allan May ©
PHYSICAL/TANGIBLE RESOURCES Research labs and manufacturing facilities
Federal and international laws strictly control and regulate medical device research and manufacturing
A number of submissions, approvals, and inspections are required Virtual medical device companies can sometimes
skirt the need for investment in physical infrastructure Management in separate locations Outsourced R&D Outsourced low volume manufacturing Outsourced clinical trial run by a CRO
Works best for “pure product” plays where company is “built to flip” Limits exit possibilities since essentially no Plan B
UCSF Lean Launchpad - Allan May ©
HUMAN RESOURCES Some resources focus on Personal Success
Mentors Teachers Coaches
Some resources focus on Business Success Clinical, Scientific and Business advisors Executive Chairpersons
Difference between investors and advisors The critical importance of an A Team
Includes Consultants and FTEs The critical importance of Company Culture
UCSF Lean Launchpad - Allan May ©
FINANCIAL RESOURCES
Self funding Non-dilutive financing
SBIR; STTR; SBA, etc Friends and Family Crowdfunding Angels and High Net Worth individuals Angel Groups Venture Capital Funds Corporate Venture Capital Groups Venture Debt Bank Financing Vendor Financing
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MEDICAL DEVICES:
THE CRITICAL THREE ELEMENTS
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INTELLECTUAL PROPERTY STRENGTH IS DIRECTLY CORRELATED TO EXIT VALUES
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Strategics want patent coverage, not just saleable products
CLINICAL NEEDS ARE USUALLY ADDRESSABLE BY MULTIPLE TECHNOLOGIES
Don’t chase clinical needs with technology Be technology agnostic
Find the technology that best addresses the clinical need and has the best patent coverage A better clinical solution with weaker patent coverage will
have a harder time being commercialized than a less good clinical solution with stronger patent protection
Core patents can often be augmented with strong follow-on patents that enable the technology to better conform to the clinical need
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TYPES OF INTELLECTUAL PROPERTY
Trademark Protect branding and marks Stronger if registered
Copyright Prevents duplication but not much else
Trade Secrets No registration; dependent on non disclosure
Contract - NDA Patent
Government monopoly
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THE ROLE OF THE NDA Non-Disclosure Agreements or Confidential Disclosure
Agreements are critical for early stage companies Use them in hiring employees, consultants Raising capital (where possible)
These are contract rights, not intellectual property rights Your only recourse is damages for breach of contract
Never let an NDA take the place of a Provisional Patent filing Do not talk about the core of your IP unless and until your
patent(s) have been filed Talk about What you are doing; not How you are doing it
UCSF Lean Launchpad - Allan May ©
INTELLECTUAL PROPERTY CONTROLS RELATIONS WITH STRATEGICS
The intellectual property landscape in medical devices tends to be heavily patented
Major medical device companies have vast patent portfolios They tend to play hardball on IP Their basic approach will be to go around your IP if
reasonably possible Your IP needs to be thoroughly locked down before
you engage in any discussions with strategics Not just filed, but optimized to include all other alternative ways to
accomplish a similar result, and/or to block other appoaches
UCSF Lean Launchpad - Allan May ©
HOW TO PREPARE YOUR INTELLECTUAL PROPERTY
You can/should do much of the background work yourself You know your science or engineering better than any lawyer will Research all of the key words in your core technology concept Research papers and journals to find relevant articles and publications Keep detailed records of everything you looked at and your comments
and share these with your IP attorney
Patents of concern need to be thoroughly investigated Pull the file wrapper and investigate the prosecution history in the
patent office to understand how the claims were narrowed in order to obtain that patent
Drafting around existing patent claims is an art unto itself
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CRITICAL ACTIVITIES FOR MEDICAL DEVICE COMPANIES
Generate Data Bench, Pre-Clinical and Clinical
Conduct a Clinical Trial Obtain Regulatory Approval Obtain Reimbursement [Conduct a Cost Outcomes Study]
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MEDICAL DEVICE STARTUPS ARE DATA GENERATING MACHINES
The practice of medicine is “Evidence-based” Demonstrating Safety and Efficacy of medical devices requires
hard data with clear endpoints The highest level of evidence (and most expensive) is a
prospective, randomized, placebo-controlled, double blind study Lesser levels of evidence can be acceptable depending on the type of
device But the data generated in such trials will not be usable for regulatory
clearance The value of your company and technology will be bracketed by
the strength and clarity of your data Major risk to startups: Equivocal Data
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MEDICAL DEVICE COMPANIES MUST DESIGN AND EXECUTE A CONVINCING
CLINICAL TRIAL Safety can be demonstrated with a pilot study Efficacy must be demonstrated via a pivotal study
It is possible to generate evidence of efficacy in humans in smaller, less rigorous studies, but such data will not count towards regulatory approval
FDA approval is required TO COMMENCE a human study on Significant Risk Devices in the US IDE = Investigational Device Exemption allows the collection of safety and
efficacy data under agreed study design protocols The clinical study must meet agreed primary endpoints with
statistical certainty 0.05%
Most clinical trials are inadequately designed and/or fail to meet their primary endpoints
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CLINICAL TRIAL RESULTS CONTROL THE LABELING UNDER WHICH THE DEVICE
CAN BE SOLD The scope and specificity of the clinical trial
endpoints control the marketing and sale of the medical device Only what has been proven in the clinical trial can
be claimed The medical device will be labeled for use only as
supported by the proven claims Marketing and selling “off-label” is a
criminal offenseUCSF Lean Launchpad - Allan May ©
FDA REGULATION OF MEDICAL DEVICES
FDA's Center for Devices and Radiological Health (CDRH) is responsible for regulating firms who manufacture, repackage, relabel, and/or import medical devices sold in the United States
Medical devices are classified into Class I, II, and III The basic regulatory requirements that manufacturers of
medical devices distributed in the U.S. must comply with are: Establishment registration, Medical Device Listing, Premarket Notification 510(k), unless exempt, or Premarket Approval (PMA), Investigational Device Exemption (IDE) for clinical studies Quality System (QS) regulation, Labeling requirements, and Medical Device Reporting (MDR)
UCSF Lean Launchpad - Allan May ©
FDA REGULATION OF MEDICAL DEVICES (2) The 3 categories of devices are NSE devices – Non-significant risk, which do not require
clinical trials and can be marketed with out approval 510k devices – Devices for which there is an existing
predicate and so can be approved with no, or lesser clinical trials Recently, due to highly publicized failures of some devices,
the FDA has begun to require more and more extensive clinical trials even of 510k devices
PMA devices – Novel devices for which no predicate exists and which require clinical trials
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REIMBURSEMENT IS REQUIRED TO EFFECTIVELY SELL MEDICAL DEVICES
Reimbursement is the Number One concern of venture capital financiers
Both public payors (Medicare and Medicaid) and commercial payors (Blue Cross et al) have rules to control what is reimbursed at what rate
Coding, Coverage, Payment Reimbursement is also based on evidence and
data generated by clinical trials CPT = How the physician gets paid DRG = How the hospital gets paid
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PCORI (Under Development) Patient Centered Outcomes Research Institute Known otherwise as Cost Effectiveness Studies, or
Comparative Effectiveness Studies, or Health Economics Studies, or “Death Panels”
Cost Outcomes studies are already required in many countries and so a fact of life
They will become increasingly required in the US in order to obtain reimbursement, and perhaps regulatory approval itself
Many medical device companies are already expanding clinical trial design endpoints to encompass cost outcomes data in order to avoid conducting a separate study
UCSF Lean Launchpad - Allan May ©
COSTS• Phases: Development, Product intro, Revenue ramp• Fixed Costs – capital, project expense, overhead
o Virtual model highly desirable
• Variable Costs – mostly applies to Revenue phase• Unit Economics – may be the simplest way to
evaluate the business (for you, investors and acquirers)
• Bottom-up analysis, not top-down• Specific to your proposal, not industry averages
UCSF Lean Launchpad - Allan May ©
COSTS
Metrics that matterCash to each major milestone – needs thorough
justificationCash to cash flow breakevenCash to exitMonthly or quarterly burn rate
UCSF Lean Launchpad - Allan May ©
UCSF Lean Launchpad For Life Science and Healthcare Startups
Medical Device TrackClass 7
Resources, Activities and CostsNovember 12, 2013
Allan MayChairman, Life Science [email protected]
UCSF Lean Launchpad - Allan May ©