Critical Success Factors For A Medical Device Company

For A Medical Device Company

Critical Success Factors Product idea Business plan Funding Personal factors People Product development FDA approval Reimbursement Product champions Financial performance Free “stuff” Business protection Stark law

Product idea

Business plan

Funding

Personal factors

People

Product development

FDA approval

Reimbursement

Product champions

Financial performance

Free “stuff”

Business protection

Stark law

Business Plan Explains business vision. How you envision the company in 3-5 years. Need to understand market. Product need, market size, competition, technology application and differentiation. Business plan should address all functional areas and fit them all together. Include financial plan-P/L, cash flow, balance sheet. Understand the risks and how to manage them. Enables review and evaluation of concept. Update strategy to reflect changing conditions. Adapt and be creative. .

Explains business vision. How you envision the company in 3-5 years.

Need to understand market. Product need, market size, competition, technology application and differentiation.

Business plan should address all functional areas and fit them all together. Include financial plan-P/L, cash flow, balance sheet.

Understand the risks and how to manage them.

Enables review and evaluation of concept.

Update strategy to reflect changing conditions. Adapt and be creative.

.

Funding The best source of funding is $ not spent unnecessarily. Manage the cash. Idea –sweat equity/angel funding Product development and marketing-venture capital/government grants Company growth-venture capital and foreign market IPO Investor exit strategy-IPO or sale of company Mature product-R&D and acquisitions

The best source of funding is $ not spent unnecessarily. Manage the cash.

Idea –sweat equity/angel funding

Product development and marketing-venture capital/government grants

Company growth-venture capital and foreign market IPO

Investor exit strategy-IPO or sale of company

Mature product-R&D and acquisitions

Personal Factors Emotional intelligence Family support Leadership skills/make tough decisions Functional, few negative distractions Value relationships/ maintain network Determination Personal ethics Ability to communicate Ability to execute/project management

Emotional intelligence

Family support

Leadership skills/make tough decisions

Functional, few negative distractions

Value relationships/ maintain network

Determination

Personal ethics

Ability to communicate

Ability to execute/project management

People Need for domain experience Product champion/scientist Medical advisory board Board of directors Advisors Corporate governance Product development/ engineering Process development/FDA approval/quality Sales and marketing Clinical Funding/financial Legal-patent, regulatory, corporate

Need for domain experience

Product champion/scientist

Medical advisory board

Board of directors

Advisors

Corporate governance

Product development/ engineering

Process development/FDA approval/quality

Sales and marketing

Clinical

Funding/financial

Legal-patent, regulatory, corporate

Product Development Engineering Clinical trials/PMA Subsequent changes 510k process Letters to file

Engineering

Clinical trials/PMA

Subsequent changes

510k process

Letters to file

FDA Approval Europe vs. USA Product approval-510k process Manufacturing process approval June 15, 2006 update by FDA Quality control process approval Marketing restrictions--off-label use

Europe vs. USA

Product approval-510k process

Manufacturing process approval

June 15, 2006 update by FDA

Quality control process approval

Marketing restrictions--off-label use

Product Champions Doctors, doctors, doctors Hospital Other medical professionals Nurses Professional papers Speeches Conferences News releases

Doctors, doctors, doctors

Hospital

Other medical professionals

Nurses

Professional papers

Speeches

Conferences

News releases

Need for Reimbursement Hospitals need to be paid Doctors need to be paid Medical device company needs to be paid Increasingly tight reimbursement policies Best options from an investors perspective: Product category is already approved for reimbursement Breakthrough must offer such compelling clinical benefits and cost reduction that the reimbursement process will be as smooth as possible.

Hospitals need to be paid

Doctors need to be paid

Medical device company needs to be paid

Increasingly tight reimbursement policies

Best options from an investors perspective:

Product category is already approved for reimbursement

Breakthrough must offer such compelling clinical benefits and cost reduction that the reimbursement process will be as smooth as possible.

Reimbursement in Business Plan Begin planning for reimbursement strategy at the earliest stages of the company formation; it should be a fundamental part of the business plan. Consider the data requirements for supporting a reimbursement submission when formulating clinical trials. The data to support reimbursement may be significantly different than the clinical data. Work with an expert on reimbursement strategy: Regulations are extremely complex Rules and winning strategies change frequently Must stay abreast of best practices Focus is on economics of a procedure, not just clinical outcome.

Begin planning for reimbursement strategy at the earliest stages of the company formation; it should be a fundamental part of the business plan.

Consider the data requirements for supporting a reimbursement submission when formulating clinical trials. The data to support reimbursement may be significantly different than the clinical data.

Work with an expert on reimbursement strategy:

Regulations are extremely complex

Rules and winning strategies change frequently

Must stay abreast of best practices

Focus is on economics of a procedure, not just clinical outcome.

Reimbursement Cycle Detailed understanding of process is needed. DRG’s/CPT’s established to provide for reimbursement Can device company provide guidance on DRG and CPT to be used? Payment For Medical Device CPT for Doctor’s Services DRG For Hospital

Detailed understanding of process is needed.

DRG’s/CPT’s established to provide for reimbursement

Can device company provide guidance on DRG and CPT to be used?

What Are DRG’s/CPT’s? DRG Diagnosis Related Group Developed by CMS CMS=Centers for Medicare & Medicaid Services Reevaluation/new rules currently underway-October 2006 CPT Code Current Procedural Terminology Developed by American Medical Association Requests for changes presented to committee Payments based on what is “normal, customary and reasonable” as determined by CMS or insurance provider. Frequently also used by private insurers for reimbursement.

DRG

Diagnosis Related Group

Developed by CMS

CMS=Centers for Medicare & Medicaid Services

Reevaluation/new rules currently underway-October 2006

CPT Code

Current Procedural Terminology

Developed by American Medical Association

Requests for changes presented to committee

Payments based on what is “normal, customary and reasonable” as determined by CMS or insurance provider.

Frequently also used by private insurers for reimbursement.

Financial Performance Cash flow. Cash is king!! Market penetration = revenue growth Salespersons – feet on the street to grow revenue Revenue growth vs. income-sometime contradictory!! R&D expense-how much is being invested and in what?

Cash flow. Cash is king!!

Market penetration = revenue growth

Salespersons – feet on the street to grow revenue

Revenue growth vs. income-sometime contradictory!!

R&D expense-how much is being invested and in what?

“ Free” Stuff Web sites and news releases of competitors Analyst reports on industry and competitors Web sites of regulatory agencies and trade associations FDA=www.fda.gov CMS=www.cms.hhs.gov AMA=www.ama-assn.org AdvaMed=www.advamed.com

Web sites and news releases of competitors

Analyst reports on industry and competitors

Web sites of regulatory agencies and trade associations

FDA=www.fda.gov

CMS=www.cms.hhs.gov

AMA=www.ama-assn.org

AdvaMed=www.advamed.com

Business Protection Patents Trade secrets Trademarks Noncompete agreements Nondisclosure agreements Code of ethics

Patents

Trade secrets

Trademarks

Noncompete agreements

Nondisclosure agreements

Code of ethics

Sales, Marketing and Clinical Sales vs. clinical Is marketing necessary? Who does a doctor want to talk to? Relationship building

Sales vs. clinical

Is marketing necessary?

Who does a doctor want to talk to?

Relationship building

Stark Laws Address consulting and professional relationships between doctors and companies. Example of risk-U.S. Department of Justice subpoenas issued to orthopedic companies. Hospital Doctor Device Company

Address consulting and professional relationships between doctors and companies.

Example of risk-U.S. Department of Justice subpoenas issued to orthopedic companies.

Stark Law’s Basic Prohibitions A physician cannot: Make a referral To an entity For the furnishing of “designated health services” The may be payable by Medicare or Medicaid (or insurance companies in some states) If the physician (or the immediate family member of the physician) Has a direct or indirect financial relationship with the entity Unless an exception to the Stark laws applies

A physician cannot:

Make a referral

To an entity

For the furnishing of “designated health services”

The may be payable by Medicare or Medicaid (or insurance companies in some states)

If the physician (or the immediate family member of the physician)

Has a direct or indirect financial relationship with the entity

Unless an exception to the Stark laws applies

Ten Perceptions That Can Kill A Company You have a great idea and raising money will not be a problem. You can get it done quickly and at a low cost. Dilution is a bad thing. You have the best talent on the street. You do not need patent protection, the trade secrets are significant. “ Build it and they will come.” Success in the market is totally based upon technology superiority. It is a low risk and expedited regulatory pathway. Scientific founders should continue as CEO forever. Management and boards are strategically aligned. Venture capitalists like risk and have unlimited funding.

You have a great idea and raising money will not be a problem.

You can get it done quickly and at a low cost.

Dilution is a bad thing.

You have the best talent on the street.

You do not need patent protection, the trade secrets are significant.

“ Build it and they will come.” Success in the market is totally based upon technology superiority.

It is a low risk and expedited regulatory pathway.

Scientific founders should continue as CEO forever.

Management and boards are strategically aligned.

Venture capitalists like risk and have unlimited funding.

Success