1. Ontario Commercialization Initiatives in Medical Technology Moving from Backwater toward Leadership John Soloninka, PEng, MBA President and CEO HTX – The Health Technology Exchange

2. Common Views and Key Messages Procurement Gaps Commodity products and innovative/disruptive products demand different approaches Commodity cost minimization assumptions stifle innovation Need a path that encourages innovation. Systemic Gaps Silos sub-optimize by preventing cross–system joint optimization. Legacy business models and reimbursements are antiquated and strongly resist innovation System-wide business cases need to be facilitated. Market Gaps Receptive local markets are irrelevant to MNEs, but crucial to SMEs Larger Medtech ecosystems (US, Europe) value SMEs as part of the food chain Canada has few MNEs that do true R&D in Canada, and so there are few incentives for collaboration between MNEs and SMEs in Canada. Policy Gaps Unsustainable cost curve demands change now…there are no quick fixes We must transition selectively from pay per device or pay per procedure, to pay per outcome. We need to put systems in place that converts the health system into an engine for economic growth. There has been a great deal of recent improvement, taking us from backwater towards leadership. 2

3. What is the MedTech Sector? (Medical and Assistive Technologies)

4. Canadian Examples Luminex – Gene-based Diagnostics for CF, Respiratory Viral Infection and many others. Sentinelle (Hologic) Custom MRI coil system for Breast CA Dx and Bx Guidance Epocal – POC Lab on a Chip. Prix Galien Award Winner 2010

5. Canadian Examples Novadaq – Intra-operative dynamic cardio-fluorescence imaging Visualsonics (Sonosite) – Ultra-high Resolution Preclinical Ultrasound

6. Canadian Examples Cryocath (Medtronic) – Catheter-based Cryoablation for Cardiac Arrhythmia IMRIS – Advanced, High-Throughput Neurosurgery and Imaging

7. Medtech: The Highest Return, Highest Salaries, High Multipliers Image Source: YorkMedtech Partners Why? Shorter innovation cycles (~1/3rd of Pharma) Lower total investments (~1% to 10% of typical Pharma) High margin products Sophisticated, platform technologies and barriers to entry High M&A activities leading to more viable exit strategies 7

8. Ontario’s Medtech Cluster 1,100 Companies; 3rd largest Med Research Cluster NA Ontario: 13M residents $46B+ Public Health Budget $20B Private Healthcare $66B+ Total (Est.) Health Spend $4B AHT Revenues $1B AHT Trade Deficit

9. Enhancing Ontario’s Medtech Cluster 9 Strengths Ontario is 3rd largest medical research cluster in North America $4B sales, 22,000 people, 1,100 companies (11 of top 20 MNEs) World class research Oncology, Neuroscience, Orthopedics… Diagnostic Imaging, Electronic Health Records… Genomics, molecular imaging, regenerative medicine… Many good “cluster” attributes Weakensses Weaknesses in innovation value chain Very few “anchor” MNE manufacturers Barriers to local procurement Canada is 2% of the Global Market…competition is fierce We starve too many early stage companies with too few dollars We lack investment to get to commercialization

10. Barriers to Ecosystem Collaboration: Linking Customer Needs to Innovators MOH-LTC MRI MEDT RESEARCH CIHR, SRED, Universities, HSCs MARKET NEED Patients, Providers, Payers INNOVATION SRED, IRAP, Health Science Centres, Companies REALIZATION Patients, Providers, Payers COMMERCIALIZATION Companies, Angels, VCs, Banks DEVELOPMENT Companies, Angels

11. Ontario Medtech:Moving from Backwater to Leadership Ontario has so many attributes of a world-class Medtech Cluster. But some things, until recently, have been missing…. Ecosystem linkages Commercialization expertise Critical mass, collaboration and focus MNE engagement A committed group from Government, Industry and academia are building our medtech ecosystem and infrastructure. ….Let’s explore key components and examples 11

12. Ontario Medtech:Moving from Backwater to Leadership Centre for Imaging Technology Commercialization Ontario Brain Institute EXCITE – A globally unique program in healthcare technology Assessment Tapping into MNE global Expertise GE Pathology Imaging Centre of Excellence Where do we go from here…particularly regarding funding! 12

13. Ontario Open for Business:Ecosystem Innovation Open for Business Industry/Government Collaboration to “raise all boats” Unprecedented Collaboration MOHLTC, MRI, MEDT MEDEC, HTX, MaRS CAHO, OHTAC, MAS MNE and SME Private Sector One key outcome: EXCITE Excellence in Clinical Innovation and Technical Excellence Pre-market health technology assessment and comprehensive evidence development for disruptive technologies Given privileged access based on alignment with health system priorities 13

14. Controlled Diffusion of Innovative MedTech is critical to “Bending the Cost Curve” of Health Care 46%  in hospital costs for technology-related CMGs vs. 23% for non-technology 6%  in utilization rate for technology-related CMGs vs. 3% for non- technology (Hay Group 2003) Less effective technologies must be displaced by superior entrants to reduce cost. Current Impact of Layering New Technologies on to Total Current System Costs Ideal Impact of Technologies on Total System Costs Adapted from: Ontario’s Evidence-based Approach to the Uptake and Diffusion of Health Technologies Dr. Les Levin, Head MAS, MOHLTC

15. Things are Becoming Tougher for Medtech:Payers are Demanding Payment for Outcomes

16. EXCITEExcellence in Clinical Innovation and Technology EvaluationLinking Customer Needs to Innovators MOH-LTC MRI MEDT Define Priority Problems, Ongoing RESEARCH CIHR, SRED, Universities, HSCs MARKET NEED Publish Problems to Innovation Community Patients, Providers, Payers EXCITE will draw MNEs from across the globe, bringing investment, partnerships, ideas and collaboration. It will provide Ontario SMEs with powerful data supporting global market entry. EXCITE is Unique. INNOVATION For Disruptive Technologies, provide limited preferred status SRED, IRAP, Health Science Centres, Companies REALIZATION Patients, Providers, Payers Select Candidate Technologies With High Disruptive Potential COMMERCIALIZATION Companies, Angels, VCs, Banks Use Pre-Market HTA To define Reqt’s for Global Markets DEVELOPMENT Companies, Angels

17. Ontario Brain Institute "We're turning our best research and ideas into new products and services that will create good jobs and improve the quality of life for Ontario families. We're supporting this work to help export our discoveries to the world." – Dalton McGuinty, Premier of Ontario Novermber 2010, Sunnybrook HSC Ontario Brain Institute Focused innovation – while solving critical health system problems $15M in seed funding from MRI Linking all Ontario Neuroscience assests in public/private partnerships Parallel collaboration with Israel Focus is critical for outcomes and commercialization Diagnostics and Imaging Prosthetics and devices Brain fitness and training 3-7 years commercialization Private sector funding being secured from the start Corporate, philanthropic and government 17

18. GE PathologyCentre of Excellence Collaboration: GE, Omnyx, UHN and other HSCs, HTX, OICR Global centre for Pathology Commercialization Infrastructure and image capture, storage and transmission Workflow for pathologists, integration and reporting Computer-Aided Diagnosis 3 yr $17.2M project (phase I). GE attracted to outstanding research, health system integration, and world class field evaluation. PICOE is also a commercialization platform for others. 18

19. Shrinking Canadian LS VC Investment :“Last VC turn out the lights!” 2006-2010 But the US is proportionately even worse off… but absolute numbers remain much higher.

20. We fund too many small deals…Building “Piers” rather than “Bridges”

21. Note that Subsector analysis of Canadian and US angels will show great difference in experienced entrepreneurs knowing the space. US medtech angels are from medtech. Canadian angels are from IT or resources, etc.…may not know the market.

22. Government has a Role:Rebalancing Needed?

23. HTX was created to fill critical funding gaps Ontario and Canada’s superior levels of investment in research are being lost through inadequate commercialization and realization, including lack of access to the local Healthcare market. Funding is attracted to good ideas, with good management teams addressing healthy, receptive markets. Local money shortage is critical, but addressing connectivity within the ecosystem is even more important to attracting available capital from Canada and abroad. VC Funds Severely Limited

24. ABOUT HTX

25. Q&A