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UCSF Life Sciences Week 1 Devices

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  • 1. UCSF Lean Launchpad For Life Science and Healthcare Startups Medical Device Track Class 1 Value Propositions October 2, 2013 Allan May Chairman, Life Science Angels amay@lifescienceangels.com UCSF Lean Launchad - Allan May
  • 2. THE CORE VALUE PROPOSITION  A Compelling Clinical Need  Not just a genuine, verifiable, clinical need  There are 1000’s of clinical needs that will not support a viable business model  A Compelling Clinical Need is one which makes a dramatic difference in patient outcomes, not an incremental difference  A Compelling Clinical Need provides the headroom necessary to discover viable business models UCSF Lean Launchad - Allan May
  • 3. THE CORE VALUE PROPOSITION (cont’d))  Clinical needs are driven from the bottoms up, not the top down  Who is the patient type for whom it would be malpractice not to use your device?  Clinical needs are technology agnostic  No one cares what technology you are using to solve their compelling clinical need UCSF Lean Launchad - Allan May
  • 4. VALUE PROPOSITIONS CONVENTIONAL  We used to think:  Improve clinical outcomes and charge a premium price  Now we know:   Improve clinical outcomes and reduce price, or Match existing outcomes and reduce price UCSF Lean Launchad - Allan May
  • 5. VALUE PROPOSITIONS – NON-CONVENTIONAL  There are Value Propositions Not Much Talked About:     Increase physician revenue Shift procedures to less expensive settings or less expensive care deliverers Shorten hospital stays Decrease unreimbursed hospital expenses  Are there tensions and inconsistencies between these concepts?  Yes!  Do different stakeholders view Value Propositions as having different value?  Yes! UCSF Lean Launchad - Allan May
  • 6. MEDICAL DEVICE COMPANIES HISTORICAL PERSPECTIVE  >90% of successful medical device exits involve acquisitions  Achieving cash positive operations or IPOs are possible, BUT:   Tend to involve relatively simple products and business models that can achieve cash breakeven but cannot scale, or Can scale to large, sustainable companies but require 10s of millions of $$ to do so  Meaning there is a high risk of diluting out founders and early investors  So, you get to decide whether to design your company to “flip”, go cash positive, or “swing for the fences’ UCSF Lean Launchad - Allan May
  • 7. SO VALUE PROPOSITIONS DEPEND ON THE DECISION YOU MAKE REGARDING THE KIND OF COMPANY YOU WANT TO BUILD  Companies built to flip mean much different thinking about  Value Proposition  Customers, etc  BTW, acquirors hate technology that lowers prices and are really looking to improve margins  Regardless, you need to refine and validate your Value Proposition for corporate acquirors UCSF Lean Launchad - Allan May
  • 8. COST/REVENUE TO THE PROVIDER/HOSPITAL IS THE DRIVER  Physicians and Departments are losing influence over hospital buying decisions  Finance departments and technological evaluation committees are calling the shots  The Big Conflict is between Payors who demand cost comes down, and existing major strategic players who are doing everything possible to maintain price and margins UCSF Lean Launchad - Allan May
  • 9. Proving Cost Reduction Claims  Every medical device startup is claiming to reduce costs  Cost reductions need to be definitively proven; they will Not be assumed  Proving claims regarding cost/outcomes is much harder than stating them   Randomized, Double blind, Placebocontrolled, prospective studies Very long time horizons, extremely expensive (75% of all capital raised), and many confounding factors UCSF Lean Launchad - Allan May
  • 10. Types of Cost Reduction Claims  We reduce cost Day One  We reduce cost over the patient’s hospital stay  We reduce cost by reducing complications or rehospitalizations  We reduce cost over the course of therapy for the patient  We reduce cost over the treatment of the patients condition  Guess Which Wins? UCSF Lean Launchad - Allan May
  • 11. GAINS, PAINS, FEATURES: EXAMPLES OF EACH GAINS:  Enable physician to treat a patient group or provide a therapy not possible today (versus another method of doing something that is possible today –better outcomes)  Enables physician to offer existing patients more services or to acquire new patients with new services  Also means some other physician loses a patient; see turf battles and saboteur PAINS:  Substantially decrease adverse effects, morbidity, or hospital readmissions FEATURES:  Ease of use (putz factor)  Extent to which fits into or changes current workflow or protocols  Impact on payment to the physician user  Fewer steps (allows more patient throughput, ie, more income) UCSF Lean Launchad - Allan May
  • 12. UCSF Lean Launchpad For Life Science and Healthcare Startups Medical Device Track Class 1 Value Propositions October 2, 2013 Allan May Chairman, Life Science Angels amay@lifescienceangels.com UCSF Lean Launchad - Allan May