Venture investing in medtech and digital health: Here’s advice from the trenches

Medtech entrepreneurs agree that it’s still tough to find funding at the Series A level. Here’s their advice about how to find it.

Bill Evans

[Image is public domain]

Competition for medtech venture investing is fierce, at the same time that traditional investors pull back from the space.

To get to the bottom of what’s going on, I reached out to entrepreneurs at the Series A stage, as well as bankers, startup accelerator programs and industry observers. The result is a three-part series:

Read on the find out about the best types of investors to have and how to find them, what types of organizations offer valuable help, regulatory tips, the special issues in digital health and advice on running your startup.

Get the full story on our sister site Medical Design & Outsourcing.

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Venture investing in medtech and digital health: What the entrepreneurs see

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Medtech entrepreneurs at the Series A level agree that the funding environment remains challenging. 

Bill Evans

Entrepreneurs at the Series A funding level tend to report that their part of the funding lifecycle remains very challenging, as has been for the last decade. They also report that many A Round investors are angels, often knowledgeable of the sector such as medtech executives, and physicians and surgeons active in the startup’s area.

The is article No. 2 in a three-part series about medtech investing trends:

  • Part 1 looks at what is driving the underlying trends.
  • Part 2, the present article, looks at these trends from the entrepreneur’s perspective.
  • Part 3, coming soon, gives advice from the trenches, to guide entrepreneurs looking to tune up their business plans to be in the best position when Series A comes around.

Get the full story on our sister site, Medical Design & Outsourcing.

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Move carefully to the exit, veteran medtech sellers warn

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Beyond their altruistic and sales goals, medical device startups generally keep an eye out for the exit. Getting there requires planning, patience and persistence, according to a couple of medtech executives who’ve been through it.

Martha Shadan headed Plymouth, Minn.–based Rotation Medical, a private company sold to Smith & Nephew in December 2017, just three years after launching its regenerative shoulder repair treatment. Bob White has been through two exits, selling privately owned TYRX, a New Jersey-based maker of surgical infection prevention products, to Medtronic in 2014 for an up-front cash payment of $160 million, and public company Entellus Medical of Plymouth, Minn. in February for $668 million to Stryker. Founded in 2006, Entellus makes a family of minimally invasive balloon device products, including its flagship Xpress device, that are designed to treat blocked sinuses.

Shadan and White spoke at the DeviceTalks Minnesota event this week in St. Paul.

Get the full story on our sister site Medical Design & Outsourcing. 

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7 ways you can doom your medical device startup

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Randy Nelson has worked with medical device startups for more than a dozen years through his Evergreen Medical Technologies (St. Paul, Minn.), as well as the University of Minnesota’s Carlson School of Management.

A product development veteran of St. Jude Medical and Boston Scientific, Nelson has pretty much seen it all when it comes to the ways a medical device startup can doom itself to failure.

Here are his top seven.

Next>>

(And find out more from Nelson at DeviceTalks Minnesota, June 4–5 in St. Paul.)

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How to protect your medtech startup’s innovations

Building a strategic patent portfolio is crucial to success for a medtech startup. 

David J. Dykeman, Greenberg Traurig

[Image from Unsplash]

When it comes to starting and building a medical device company, a strong patent strategy tied to business goals can be the driving force behind venture capital investment, strategic collaborations, and mergers and acquisitions.

In order to safeguard its intellectual property (IP), every medtech startup should consider these five tips for protecting and leveraging its innovations.

1. File early and file often

Fundamental to a strong patent portfolio is establishing solid patent protection for a company’s core technology. First, one or a series of patent applications should be filed providing the broadest possible patent protection covering the core technology. As the core technology evolves, incremental improvements and varying applications should be patented to form a “picket fence” of protection around the core technology.

Medtech startups should file patent applications as early and as often as their budget permits. This has been particularly true since the passage of the America Invents Act in 2011, which brought the United States into conformance with the rest of the world as a first-to-file country. Thus, a key is to file patent applications before any public disclosure that could limit patent coverage. To ensure both U.S. and international patent coverage, a patent application should be filed before the invention is first published, disclosed, used or offered for sale. Savvy companies file patent applications early and often.

Get the full story on our sister site Medical Design & Outsourcing. 

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Medical device startups: Here’s how you handle regulatory and reimbursement

The two “Rs” — regulatory and reimbursement — are critical elements of the environment in which a medical device product is developed.

Bill Betten, Betten Systems Solutions

[Photo by Simon Launay on Unsplash]

This is the fourth in a series of articles that discusses the design of innovative products in the highly regulated medical environment.  But the “environmental” factors of regulatory and reimbursement actually influence all stages of the development. They impact everything from the process to the plan and the requirements. You need to consider their influence at the earliest stages of the development effort.

This series focuses on the definition and execution of product development activities post-funding and includes the following:

For the purposes of this article, I’ve included regulatory and reimbursement together, but they impact the product in very different fashions, particularly when international markets are considered.

How to handle regulatory

Let’s first consider the regulatory impact on the product development process.  While I’ll use the U.S. and the FDA as the example, virtually every other market in the world has some form of regulatory body that impacts the medical product development process.  The FDA is responsible for protecting the public health by assuring the safety, efficacy and security of human and veterinary drugs, biological products, medical devices, our nation’s food supply, cosmetics and products that emit radiation. They are also responsible for advancing public health by enabling medical innovations and by helping the public get the information required for the use of medicines and foods for the maintenance and improvement of health.

First, what constitutes a medical product?  Section 201(h) of the Federal Food, Drug, and Cosmetic Act defines a medical device as:

“… an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component, part, or accessory, which is … [either] intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals … [or] intended to affect the structure or any function of the body of man or other animals.”

Read the full article on our sister site Medical Design & Outsourcing. 

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Study of medication adherence with AI-supported selfies highlights potential for clinical trials

AiCure’s tool uses a form of artificial intelligence for facial recognition to confirm that patients have taken the correct medication.

The expanding ecosystem of microbiome startups

More funding and another powerful pharma backer have entered the microbiome space, showing that at least some investors and pharma execs believe the field can begin converting preclinical ideas into valid human therapies.

Finch Therapeutics

Somerville, Massachusetts-based Finch Therapeutics announced a new agreement with Takeda Pharmaceuticals on Wednesday, a solid endorsement of its sophisticated bioinformatics platform.

Along with oncology and central nervous system disorders, gastrointestinal diseases are one of Takeda’s three therapeutic pillars. As part of the deal, Takeda will pay an upfront $10 million for exclusive worldwide rights to FIN-524, an investigational drug for ulcerative colitis, and any follow-on products for irritable bowel diseases (IBDs). Ulcerative colitis is a form of IBD in which the immune system attacks the lining of the large intestine.

Finch’s science taps into the high-potential, highly-unpalatable concept of a fecal transplant. It involves transferring a microbiota rich stool sample from a healthy individual into someone with severe gut dysbiosis.

It’s a smart approach, given how little we know about the many thousands of microbial strains that occupy our guts. Instead of adding them to a therapy one-by-one, scientists can take a sample ecosystem that is already known to work. Finch then has a feedback loop in place to determine how patients responded to the different donor cultures.

“By working from clinically annotated datasets of donor and patient microbiota before and after fecal transplantation, we can look for the patterns in changes to the patients’ microbiota associated with targeted clinical outcomes,” said Finch CEO Mark Smith in an email forwarded by a company representative.

It underscores how variable our microbiomes are, whether we’re healthy, sick, or somewhere in between.

Smith cited a 70-patient randomized control trial of fecal transplants performed at McMaster University (Moayyedi et al, 2015). Five donors were used in the study, but just one, Donor B, had a demonstrably large therapeutic effect. Without Donor B, the study would have failed.

Just how much Kombucha was Donor B drinking? And how do we learn from the strength of that participant’s microbiota? Finch is working to answer the latter.

Azitra

While gut bacteria and the microbiome are often used interchangeably, our microscopic citizens really populate our entire body, including the skin. That’s the target for Farmington, Connecticut-based Azitra.

Azitra announced on Wednesday that it had closed a $2.9 million Series A venture round led by Bios Partners. With earlier seed funding, including from Peter Thiel’s Breakout Labs program, the startup has raised $3.75 million to date.

Rather than brewing a complex bacterial concoction, Azitra has identified one key bacteria strain for its lead candidate, AZT-01, to be applied as a cream to affected skin. In its cross-hairs for treatment are eczema, rare genetic skin diseases, and more everyday cosmetic applications such as dry skin.

In an email forwarded by a company representative, Azitra Cofounder and CSO Travis Whitfill said the microbial treatment isn’t just a band-aid — it could address an underlying cause.

“Studies have repeatedly shown that these patients have an imbalanced microbiome, and in the case of eczema, they often have an overgrowth of Staph aureus. There is also evidence that our strain of bacteria can kill some strains of Staph aureus, which is one of the reasons we chose it as a chassis,” Whitfill said.

Applied topically, the good bacteria can colonize the area and begin correcting the dysbiosis.

Photo: spawns, Getty Images

Intermountain Healthcare Innovation Fund gives some more love to Redox

Redox Engine, the Madison, Wisconsin health IT startup that’s helping healthcare facilities overcome interoperability challenges has received $1 million in follow-on investment from Intermountain Healthcare Innovation Fund, according to a company release. The funding is part of Redox’s Series B round.

Redox will work with Intermountain in the Salt Lake City-based health system’s push to adopt digital health solutions that fit into their electronic health record. The company will also support applications Intermountain has developed, such as the Rehab Outcomes Management System, as part of Redox’s API platform.

Healthbox has previously run an accelerator for healthcare startups called Healthbox Studio but with the management change last year, Healthbox repositioned itself as a venture capital investment manager with an innovation platform that functions as a consultant to and collaborator with healthcare partners.

Healthbox has managed Intermountain Healthcare’s Innovation Fund since the fund’s launch in 2015. The fund is intended to source, evaluate, and invest in companies that align with Intermountain’s mission. So far the fund has made a handful of investments in healthcare startups, in addition to Redox:

Zebra Medical Vision, an Israel-based health IT business, developed a clinical decision support teaching computers to read and diagnose medical images through machine learning. Last year, Zebra closed a Series B round as it launched a consumer-facing product called Profound. The service allows individuals to upload their medical imaging scans such as computerized tomography scans and mammograms to Zebra Medical Vision’s online service, and receive an automated analysis of key clinical conditions.

Syapse is a precision medicine software meets clinical decision support startup. It seeks to improve care coordination for hospitals by extracting clinical, genomic and other molecular data from medical records, labs and pharmacies and integrating that data to offer more detailed patient profiles. By doing this, the company wants to guide doctors to find the right diagnostic test and therapeutic approach. The Intermountain fund took part in its Series C round.

The fund also invested in Utah-based genomics software developer Tute Genomics, which was later acquired by PierianDx. PierianDx seeks to enable personalized medicine for clinical labs.

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Oncora Medical and MD Anderson embark on personalized radiation oncology study

 

Philadelphia-based clinical decision support startup Oncora Medical is collaborating with University of Texas MD Anderson Cancer Center in Houston in a study to help radiation oncologists develop personalized treatment plans with the goal of improving outcomes, according to a news release. The Phase 1 study will focus on data from 2,000 breast cancer patients and last three to nine months.

Oncora’s Precision Radiation Oncology Platform will analyze data from MD Anderson’s electronic medical record system, tumor registry, radiation therapy planning system, and Brocade — a Web-based clinical documentation tool for medical records developed by MD Anderson Associate Professor of Radiation Oncology, Dr. Benjamin Smith.

Oncora will be tasked with creating interoperability between its Precision Radiation Oncology Platform and Brocade to explore the potential value of a combined product, the release said.

“Through this alliance, we hope to improve workflows and processes for radiation oncologists and simultaneously give radiation oncologists access to better information to support real-time, precision medical decision making,” Smith said in the release.

Although most people think of precision medicine as targeted therapy, Lindsay noted that the company defines precision medicine as the “right treatment for the right patient at the right time” and wants to expand the conventionally accepted definition beyond drugs and diagnostics.

The study was a year in the making and will be Oncora’s biggest endeavor to date, Lindsay said.

“Our software needs to access data across multiple software systems at a center that treats nearly 10,000 patients per year. That is part of the reason why we spent so long planning for the partnership. We want everything to go smoothly and we want to deliver MD Anderson a seamlessly integrated product.”

The study will also assess physician utilization and quality of the company’s predictive modeling efforts. But the ultimate criteria for success will be the deployment of a “functioning product” at MD Anderson, noted Lindsay.

The second phase of the of the collaboration with MD Anderson will expand the study to all cancer types treated with radiation.

One of the challenges in healthcare is de-siloing data, particularly for clinical decision support. When it comes to cancer treatment, radiation oncology data risks being siloed in different hospital software systems, which makes it tough to collect and analyze. Oncora Medical views its approach as a way to make predictive analytics and precision radiation oncology succeed.

Photo: Jirsak, Getty Images