The New Playbook for Healthcare Innovation CIMIT Innovation Grand Rounds Massachusetts General Hospital ZEN CHU Accelerated Medical Ventures ELAZER EDELMAN, MD, PhD MIT / HST / Harvard Medical School / Highland Capital MICHAEL GREELEY Flybridge Capital Partners MARSHA MOSES, PhD Children's Hospital Boston, Harvard Medical School JOE SMITH, MD, PhD VP, Emerging Technologies, Johnson & Johnson COSAT

New Playbook for Current Climate Innovation Landscape Value Drivers & Milestones De-Risking Early Stage Medical Ventures Development Teams Clinician Innovation Roles Panel Discussion © zen@acmedx.com

Innovation Landscape

Value Drivers & Milestones

De-Risking Early Stage Medical Ventures

Development Teams

Clinician Innovation Roles

Panel Discussion

Innovation Landscape Match Resources to Opportunity Size Market Size of Opportunity Low Capital Required High Big Opportunities Complex Solutions, Fragmented Services Philanthropy/NIH Basic Research Grants Unknown Mechanisms $100MM $500MM Large Established Companies Integrate Whole Solutions Venture-Backed Companies Focused Teams to Prioritize & Execute Discrete Product Product-Line Extensions License or Product Acq Royalties © zen@acmedx.com

Market Size of Opportunity

Innovation Landscape Adapt with New Information & Experiments Market Size of Opportunity Low Capital Required High Big Opportunities Complex Solutions, Fragmented Services Philanthropy/NIH Basic Research Grants Unknown Mechanisms $100MM $500MM Large Established Companies Integrate Whole Solutions Venture-Backed Companies Focused Teams to Prioritize & Execute Discrete Product Product-Line Extensions License or Product Acq Royalties May Discover New Applications & Technologies May Discover New Larger Opportunities © zen@acmedx.com

Market Size of Opportunity

Stem Cells Philanthropy/NIH Basic Research Grants Unknown Mechanisms Gates Foundation Off-Label Uses Ortho Lumbar Disc Market Size of Opportunity Low Capital Required High Big Opportunities Complex Solutions, Fragmented Services $100MM $500MM RNAi for AMD Cystic Fibrosis Ischemic Stroke Gastric Bypass Unfocused & Requires Segmentation Aortic Abdominal Aneurysm Segment To Focus Patients, Disease State, Providers © zen@acmedx.com

Market Size of Opportunity

Incremental vs Breakthrough Plenty of Incremental Value, Different Strategy © zen@acmedx.com METRIC INCREMENTAL BREAKTHROUGH Funding $$ $$$$$$ Market Size Varies depending on funding needed >$100MM No current therapies Time Needed Adoption & Exit Shorter Match opportunity to strategy Longer Regulatory path dependent Value @ Exit Less More Major Risks Window of opportunity Execution quality & critical path Competition Technical/Clinical unknowns Market adoption hurdles Reimbursement Success Factors Focused execution Management experience Manufacturing economics Patents, Franchise Value Market adoption, Std of Care Investor expectations Patent Protection Less More Competition More Less

Value Built Far Past Invention Value Time Critical Milestones Acquisition/IPO Exit Reimbursement Published clinical results Market Introduction Salesforce hired Europe & Japan distribution FDA Approval Manufacturing ramp Human pivotal study Corporate partnership First human data First Hiccup & Danger of Momentum Loss CEO hired Pilot manufacturing Patent grant First FDA meeting Regulatory opinions Money raised & team hired Animal testing Clinician feedback Patent disclosure Prototype/Reduction to Practice Market Analysis Idea © zen@acmedx.com

Clinicians Essential for Innovation 22% of surgeons innovate - von Hippel, 2003 Physician-invented = higher impact - Chatterji, 2008 99/100 top Medtronic products originated by MDs Anticipate Path Standard of Care © zen@acmedx.com

22% of surgeons innovate - von Hippel, 2003

Physician-invented = higher impact - Chatterji, 2008

99/100 top Medtronic products originated by MDs

“ Physicians and engineers often have no sense of the requirements to create a company…In a start up environment, more is not always better. Hiring the appropriate people at the right time can determine success or failure.” - Thomas Fogarty, MD – Founder & investor in over 30 medical companies Professor of Surgery, Stanford University © zen@acmedx.com

Physician Roles on Team Value Time Acquisition/IPO Exit Reimbursement Published clinical results Market Introduction Salesforce hired Europe & Japan distribution FDA Approval Manufacturing ramp Human pivotal study Corporate partnership First human data CEO hired Pilot manufacturing Patent grant First FDA meeting Regulatory opinions Money raised & team hired Animal testing Clinician feedback Patent disclosure Prototype/Reduction to Practice Market Analysis Idea Conflicts of Interest Critical Milestones © zen@acmedx.com

Accelerate Clinical Impact Time is Life Value Acquisition/IPO Exit Reimbursement Published clinical results Market Introduction Salesforce hired Europe & Japan distribution FDA Approval Manufacturing ramp Human pivotal study Corporate partnership First human data CEO hired Pilot manufacturing Patent grant First FDA meeting Regulatory opinions Money raised & team hired Animal testing Clinician feedback Patent disclosure Prototype/Reduction to Practice Market Analysis Idea Critical Milestones COMPRESS TIME TO MARKET FASTER CURES © zen@acmedx.com

Which Risks to Prioritize? Value Time Market Risk Reimbursement Physician & Patient Adoption Packaged Solutions Regulatory Risk Safety & Efficacy Management Risk Technology IP Risk © zen@acmedx.com

Which Risks to Prioritize? Value Time Market Risk Reimbursement Physician & Patient Adoption Packaged Solutions Regulatory Risk Safety & Efficacy Management Risk Technology IP Risk Largest Risks Must Be Addressed & De-Risked Up Front Before Funding VCs & Investors Manage & Invest With These Risks © zen@acmedx.com

Prioritize & Translate Innovation Value Time Market Risk Reimbursement Physician & Patient Adoption Packaged Solutions Regulatory Risk Safety & Efficacy Management Risk Technology Risk 2) Team Execution 1) Plan in Reverse © zen@acmedx.com

Invention is Spark… but Development Drives New Therapy Prioritize efforts in the landscape Approach clinical innovation empirically Map entire value chain & risks Match opportunity to funding & team required Innovation at every level Tough times require execution discipline Experimental rigor, same best practices Adaptation as new data learned © zen@acmedx.com

Prioritize efforts in the landscape

Approach clinical innovation empirically

Map entire value chain & risks

Match opportunity to funding & team required

Innovation at every level

Tough times require execution discipline

Experimental rigor, same best practices

Adaptation as new data learned

See One, Do One, Teach One ZEN CHU Accelerated Medical Ventures ELAZER EDELMAN, MD, PhD MIT / HST / Harvard Medical School / Highland Capital MICHAEL GREELEY Flybridge Capital Partners MARSHA MOSES, PhD Children's Hospital Boston, Harvard Medical School JOE SMITH, MD, PhD VP, Emerging Technologies, Johnson & Johnson COSAT © zen@acmedx.com

ZEN CHU

Accelerated Medical Ventures

ELAZER EDELMAN, MD, PhD

MIT / HST / Harvard Medical School / Highland Capital

MICHAEL GREELEY

Flybridge Capital Partners

MARSHA MOSES, PhD

Children's Hospital Boston, Harvard Medical School

JOE SMITH, MD, PhD

VP, Emerging Technologies, Johnson & Johnson COSAT

Backup Information © zen@acmedx.com

Time is Life © zen@acmedx.com ACCELERANT DECCELERANT REGULATORY Device 510(k) Predictive animal models New materials & claims Unclear endpoints CLINICAL Existing human data Reproducible published studies Non-superiority Entrenched behavior No practice benefit REIMBURSEMENT Existing Codes DRGs Private-pay, consumer Cost-Benefit Studies MARKET Reduce skills needed Physician buying power Unambiguous diagnostic Capital equipment purchase Hospital Sales Cycle Disincentives to change SALES Focused physician popul. Existing distribution Learning curves Entrenched behavior

Clinical Opportunity Evaluation Clinical Merit & Adoption Current therapies, Physician-adoption hurdles Untreatable problems & populations, sub-segments Prevalence vs. incidence & other objective metrics of clinical need Independent clinical champions Stage of Development Reduced to practice Prototypes, animal data Human data Manufacturing feasibility and economics Commercial Potential Defined product, market size, unambiguous diagnosis Time to market, regulatory pathway, reimbursement Interim milestones and risks Protection & Competition Patent & prior art search Public disclosure, scope of protection, FTO Natural product line extensions, product/procedure cannibalization © zen@acmedx.com

Clinical Merit & Adoption

Current therapies, Physician-adoption hurdles

Untreatable problems & populations, sub-segments

Prevalence vs. incidence & other objective metrics of clinical need

Independent clinical champions

Stage of Development

Reduced to practice

Prototypes, animal data

Human data

Manufacturing feasibility and economics

Commercial Potential

Defined product, market size, unambiguous diagnosis

Time to market, regulatory pathway, reimbursement

Interim milestones and risks

Protection & Competition

Patent & prior art search

Public disclosure, scope of protection, FTO

Natural product line extensions, product/procedure cannibalization

Typical Early-Stage Medical Failure Non-optimal Design Process, Clinical Focus Technology-focused origin => Solution looking for a clinical problem Wedded to technology, scientific & engineering bias among founders Initial patents filed prematurely Tech focused rather than clinical approach Prior art poorly mapped & early IP overvalued Funding raised, paths & milestones committed, expectations set Regulatory path not mapped Consultant opinion, but little FDA feedback Clinical endpoints and patient recruitment either too slow or not clear Lack of predictive & robust animal models Clinical feedback not complete Clinical need, economics, practice implications, design prototypes Solution not matched to expedited proof and approval paths Clinical Advisors not matched with staged milestones Too late to give meaningful feedback on chosen roadmap Feedback doesn’t impact design modifications Respected names promoted, but feedback mismatched to stage Advisors used in early development dropped later for clinical phases © zen@acmedx.com

Technology-focused origin => Solution looking for a clinical problem

Wedded to technology, scientific & engineering bias among founders

Initial patents filed prematurely

Tech focused rather than clinical approach

Prior art poorly mapped & early IP overvalued

Funding raised, paths & milestones committed, expectations set

Regulatory path not mapped

Consultant opinion, but little FDA feedback

Clinical endpoints and patient recruitment either too slow or not clear

Lack of predictive & robust animal models

Clinical feedback not complete

Clinical need, economics, practice implications, design prototypes

Solution not matched to expedited proof and approval paths

Clinical Advisors not matched with staged milestones

Too late to give meaningful feedback on chosen roadmap

Feedback doesn’t impact design modifications

Respected names promoted, but feedback mismatched to stage

Advisors used in early development dropped later for clinical phases

Accelerated Medical Ventures Lean Team, Focused Process, Alignment of Purpose Rational Device Design Process Market opportunities, driving trends Clinical needs, gaps, undertreated Favor Accelerated Regulatory Path Actively engage FDA feedback early Clinical endpoints, clear & quick, for downstream claims and sales support Human clinical data ASAP if needed File & Source Intellectual Property Sophisticated mapping & filing of IP Choose technology & engineers later Only after clinical needs, approach, predicates specified Prototypes for quick feedback & testing Design for manufacturing & scale issues Right Team, Properly Aligned, Working Quickly Rational Portfolio Approach Products vs. Company analysis Spin out companies with plan, early data, clinical plans, rapid funding, ramp team Driven by entrepreneurs & VCs Closely participating VC, early alignment Large funds avoid EIR costs from mgmnt fees Deep pockets to fund, build team quickly, but only when & where appropriate Multidimensional MDVC Clinician Advisors 10+ MDs specific to Project/Company/Domain Recruit multiple clinical design perspectives Meaningful early-stage feedback Virtual Organizations For Each Project Anti-Incubator - Not a real estate play! Co-locate with VCs for ideaflow, alignment Outsource labs, testing, prototyping, regulatory No obligation/mis-incentive to create companies © zen@acmedx.com

Rational Device Design Process

Market opportunities, driving trends

Clinical needs, gaps, undertreated

Favor Accelerated Regulatory Path

Actively engage FDA feedback early

Clinical endpoints, clear & quick, for downstream claims and sales support

Human clinical data ASAP if needed

File & Source Intellectual Property

Sophisticated mapping & filing of IP

Choose technology & engineers later

Only after clinical needs, approach, predicates specified

Prototypes for quick feedback & testing

Design for manufacturing & scale issues

Right Team, Properly Aligned, Working Quickly

Rational Portfolio Approach

Products vs. Company analysis

Spin out companies with plan, early data, clinical plans, rapid funding, ramp team

Driven by entrepreneurs & VCs

Closely participating VC, early alignment

Large funds avoid EIR costs from mgmnt fees

Deep pockets to fund, build team quickly, but only when & where appropriate

Multidimensional MDVC Clinician Advisors

10+ MDs specific to Project/Company/Domain

Recruit multiple clinical design perspectives

Meaningful early-stage feedback

Virtual Organizations For Each Project

Anti-Incubator - Not a real estate play!

Co-locate with VCs for ideaflow, alignment

Outsource labs, testing, prototyping, regulatory

No obligation/mis-incentive to create companies

Sources of Critical Feedback BOSTON INSTITUTIONS Center for the Integration of Medicine & Innovative Technology (CIMIT) Robert Langer Chiefs of Hospital Departments Harvard Medical School Harvard-MIT Health Science & Technology Faculty & Advisors Harvard Business School Faculty Partners Healthcare Ventures Tech Licensing Offices MIT$100K leadership MIT Deshpande Center VCs & CORP DEVELOPMENT Leading East & West coast med tech VCs Richard Ferrari, DeNovo Ventures Richard Foster, McKinsey & Co Healthcare Med Tech Incubators/Acclerators Corporate Venturing groups Entrepreneurs on both coasts Windhover Publications Editor MA Governor’s Life Science Initiative OTHER INSTITUTIONS Gates Foundation Milken Foundation & FasterCures Stanford Biodesign Stanford Medical School Biomedical IDEA Competitions Yale University Medical School Faculty © zen@acmedx.com

BOSTON INSTITUTIONS

Center for the Integration of Medicine & Innovative Technology (CIMIT)

Robert Langer

Chiefs of Hospital Departments

Harvard Medical School

Harvard-MIT Health Science & Technology Faculty & Advisors

Harvard Business School Faculty

Partners Healthcare Ventures

Tech Licensing Offices

MIT$100K leadership

MIT Deshpande Center

VCs & CORP DEVELOPMENT

Leading East & West coast med tech VCs

Richard Ferrari, DeNovo Ventures

Richard Foster, McKinsey & Co Healthcare

Med Tech Incubators/Acclerators

Corporate Venturing groups

Entrepreneurs on both coasts

Windhover Publications Editor

MA Governor’s Life Science Initiative

OTHER INSTITUTIONS

Gates Foundation

Milken Foundation & FasterCures

Stanford Biodesign

Stanford Medical School

Biomedical IDEA Competitions

Yale University Medical School Faculty