UCSF Life Sciences: Week 7 Devices Resources, Activities and Costs


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UCSF Life Sciences: Week 7 Devices Resources, Activities and Costs

  1. UCSF Lean Launchpad For Life Science and Healthcare Startups Medical Device Track Class 7 Resources, Activities and Costs November 12, 2013 Allan May Chairman, Life Science Angels amay@lifescienceangels.com UCSF Lean Launchpad - Allan May ©
  2. CRITICAL RESOURCES  Physical/Tangible  Intangible  Human  Financial UCSF Lean Launchpad - Allan May ©
  3. 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 ©
  4. 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 ©
  5. 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 UCSF Lean Launchpad - Allan May ©
  6. MEDICAL DEVICES: THE CRITICAL THREE ELEMENTS Compelling Clinical Need Technological Intellectual Solution Property UCSF Lean Launchpad - Allan May ©
  7. INTELLECTUAL PROPERTY STRENGTH IS DIRECTLY CORRELATED TO EXIT VALUES Blocking Freedom IP To Patentability Operate Strategics want patent coverage, not just saleable products UCSF Lean Launchpad - Allan May ©
  8. 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 UCSF Lean Launchpad - Allan May ©
  9. 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 UCSF Lean Launchpad - Allan May ©
  10. 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 ©
  11. 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 ©
  12. 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 UCSF Lean Launchpad - Allan May ©
  13. 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] UCSF Lean Launchpad - Allan May ©
  14. 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 UCSF Lean Launchpad - Allan May ©
  15. 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 UCSF Lean Launchpad - Allan May ©
  16. 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 offense UCSF Lean Launchpad - Allan May ©
  17. 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 ©
  18. 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 UCSF Lean Launchpad - Allan May ©
  19. 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 UCSF Lean Launchpad - Allan May ©
  20. 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 ©
  21. 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 ©
  22. COSTS Metrics that matter Cash to each major milestone – needs thorough justification Cash to cash flow breakeven Cash to exit Monthly or quarterly burn rate UCSF Lean Launchpad - Allan May ©
  23. UCSF Lean Launchpad For Life Science and Healthcare Startups Medical Device Track Class 7 Resources, Activities and Costs November 12, 2013 Allan May Chairman, Life Science Angels amay@lifescienceangels.com UCSF Lean Launchpad - Allan May ©