Starting a Fundable Medical Device Company Christopher Porter - PowerPoint PPT Presentation

Starting a Fundable Medical Device Company Christopher Porter Medical Genesis

Christopher Porter, PhD n Chemical Engineer/Material Science n 40 yrs in Medical Industry in Product Development and Management n Serial Entrepreneur/Intrapreneur • 6 Successful Startups • 2 Divisions (J & J and Pfizer) • Multiple exits through IPOs and Sale of Company n 30 + Products on Market n 50+ Patents n Early Stage Life Science Company Advice • LIFE SCIENCE WASH, COMOTION, WINGS, W-FUND, LSDF, COULTER • Over 100 companies/year

BACKGROUND

Medical Product’s Characteristics n Highly Regulated n High Value/High Margins n Different Types • Drugs • Biologics • Diagnostics • Devices n Third Party Payers n Medical IT has a different model

STARTING AN ENTERPRISE

EXAMPLE Proxima -A catheter system to treat brain and breast cancer with radiation -Sold to Cytec in 2005

TUMOR

EXTERNAL BEAM RADIATION FROM DIFFERENT DIRECTIONS Resected Tumor Cancerous Margins M Missing the Target Damage to Healthy Tissue

Balloon with Radioactive Fluid Low Level- Localized and Precise Radiation

Gliasite Clinical Data

ADVANTAGES n Less expensive than fractional radiation n Does not need specialized and expensive equipment n Faster Treatment Time n Easier on Patients n Less Healthy Tissue Damage n Arguably more effective treatment n Can be adapted to other cancers

MAMOSITE Radiation following a lumpectomy for Breast Cancer

GOING FORWARD

GENESIS OF A MEDICAL PRODUCT COMPANY VALUE ADDER COMPELLING MILESTONES IDEA UNMET NEED Feasibility CONCEPT Proof of Concept DEVELOPMENT AND CLINICALS FDA Approval COMMERCIALIZATION Sales and Profitability EXIT STRATEGY IPO or Sale of Company

FUNDABLE STAGES OF A MEDICAL COMPANY 0. Initial Concept (IDEA) 1. Fundable Idea (Feasibility) $ Business Plan 2. Proof of Concept EARLY STAGES $ PLANNING 3.Final Development and Regulatory Approval $ LATER STAGES EXECUTION 4. Commercialization 5. Liquidity (Exit Event)

COMMON MISTAKES n Elegant solutions to non-problems • Technology in search of a need of a solution • Invented needs • Funding the lab instead of advancing the company n Product, not an company • Small market • Evolutionary, not Revolutionary • Belongs with an Existing Company n Wasting resources on overly complex products • Features that are not important • Increases cost, complexity and risk • In love with the technology

COMMON MISTAKES n Not doing enough upfront homework • Not addressing critical items • Don’t talk to potential customers • Get far down the path before the mistake is clear n Non-investable management pitching the company • Better to have no CEO rather the wrong one n Trying to raise investor money to soon • Have not fully addressed critical milestones • 10 resurrections to take care of one crucifixion

FUNDING

Staged Approach IDEA HIGH VALUE OF COMPANY Probability of Success FEASABILITY $ OK PROOF OF CONCEPT OK $ $ PRODUCT DEVELOPMENT $ LOW $ OK TIME

Value Increases Discreetly HIGH Value Added RISK Milestones COMPANY VALUE LIQUIDITY RISK $ SIGNIFICANT SALES, POSITIVE CASH FLOW VALUE FDA APPROVAL PROOF OF CONCEPT LOW IDEA TIME

FUND RAISING AND DILUTION STOCK IN COMPANY VALUE RECEIVED FUNDING POINT FOUNDERS IDEA, KNOWHOW, IP (Common) SWEAT-EQUITY INVESTORS $ 1. FEASABILITY (Preferred) $ 2. PROOF OF CONCEPT $ 3. FDA APPROVAL $ 4. COMMERCIALIZATION PUBLIC $ 5. PUBLIC OFFERING

STAGES OF A COMPANY IDEA- ( DEFINE A NEED START AND PRODUCT TO FILL IT ) 0.3-1.0 MM $ 6-18 Mo DEMONSTRATE 0.2-1.0 MM$ PROOF OF CONCEPT 5-10 MM $ 1-3 YR COMPLETE DEVELOPMENT AND 5-15 MM$ OBTAIN REGULATORY APPROVAL 20-40 MM$ 1-3 YR COMMERCIALIZATION 10-20 MM$ 100-200 MM$ LIQUIDITY EVENT END ( IPO OR SELL IT ) PRE-MONEY TIME AND VALUE STAGE $s RAISED

Value and Ownership 120 % Ownership 100 Company Value 80 % or $MM 60 Founders Value 40 20 0 Start 1st 2nd 3rd Liquidity Round

Sources of Funding n NON DILUTIVE • Government Grants • Foundations • Other Grants n EARLY STAGES (DILUTIVE) • Sweat Equity • Self, Friends and Family • Angels • Seed Funds n LATER STAGES • Existing Company (Strategic Investors) • Venture Capital n LIQUIDITY • Public (IPO) • Sell the company

Venture and Angel Investors n Good ones can add a lot of value to the company • Connections and Networking • Know How and Advice • Credibility • Continued source of funding n Their job is to maximize the return for themselves or their funds n Want to structure as strong a company as possible -- even at the expense of the founders n Will try and get control of the company

WHAT INVESTORS ARE LOOKING FOR n A good Return on Investment • Liquidity Event n Sell the Company or Idea n Public Offering • High Returns n Initial value of the venture n Time it takes to get to liquidity n How much total money will go into it by that time n What will be worth at the liquidity event n Is this worth it for investor to work on • Size of the fund • Other Opportunities they have to make an investment

POTENTIAL DEAL KILLERS n Bet People as Much as (more than) Ideas n Evolutionary vs. Revolutionary n Product vs. a Company n Market Potential Too Low n No or Poor Patent Position n Reimbursement is unlikely (Make it and they will come fallacy) n Too high expectation of initial value n Regulatory is too risky n Overly optimistic projections

What I Have Learned n Most excited about the things you know the least about- do your homework n You don’t know what you don’t know - find experienced help n The last person you want to fool is your self – People fall in love with their own ideas and will not listen n Invest in only things that create value

What I Have Learned n Don’t be too valuation sensitive • 100% of nothing is not as valuable of 25% of something • Get good investors n Always raise money before you need it n Raise enough money-It always takes longer and cost more than you think n The largest predictor of success are your expectations