FountainBlue

Notes from Life Science Entrepreneurs' Forums

FountainBlue's January 25 Life Science Entrepreneurs’ Forum featured an angel panel speaking on Trends for 2010:

Facilitator Conor Moore, Partner, KPMG

Anne DeGheest, Founder and Managing Director, MedStars, Strategic Advisor at PolyRemedy, Inc

Stuart Eckmann, Keiretsu Forum and Life Science Angels

Don Ross, Member, Life Science Angels and Sand Hill Angels

Michael Weickert, President and CEO, S.E.A. Medical Systems, Inc., Member, Life Science Angels, Venture Partner, Kranenburg Fund 

Below are notes from our conversation.

Our panelists started by remarking on both the fact that there were 40% fewer dollars AND 30% fewer deals than in 2009, the lowest level of activity since 1997, however, they remarked that angel investing is still very active with smaller amounts for more deals. But as 10% of the deals have paid 75% of the total returns, many investors, particularly early stage investors who are more likely to get diluted in future rounds, and who might have incurred huge losses, are much more cautious. VCs are actually even more cautious, waiting for angels to vet and fund early stage companies. As one investor put it, ‘there is no money on the sidelines’ - investors are already “all-in”.  There is also unlikely to be additional money as we are all “exit challenged”, with the disappearance of the IPOs. 

Angels today are much more discerning about WHICH deals and HOW MANY deals to invest in (they may be exposed to as many as 400-500 a year, and only invest in 10 or so), they make smaller investments, and they focus on deals with an early exit strategy. 

Angels and all investors and partners are even more hesitant and discerning as there are too many policy and reimbursement unknowns. It is difficult to plan for customer and market needs while there are FDA, reimbursement, and other major policy decisions being made.

With that said, if YOUR company is one of the companies selected by an angel investor, you will receive much more attention, support, advice and introductions. In YOUR company had ALREADY secured funding recently, angels might be more apt to contribute another round of funding, depending on how you are doing meeting milestones. In fact, each panelist remarked that some of the best investment opportunities happen during a downturn!

So what’s an entrepreneur to do? VCs are shying away from early stage investments, and angels are more cautious than ever, although funded companies are more likely to secure more funding. Below is some advice from our angel investors:

·         Secure non-diluting funding such as government grants: it provides both validity for the scientific concept, but also for the persistence, hard work and know-how and connections for its founders – a very good thing.

·         Partner with big pharma companies and academia and hospitals and even the military to build traction for your technology and move your company forward with little resources.

·         Do the market research and find customers who are willing to pay for your solution. Partner with them to define your product and solution. In other words, serve the customer and market, don’t be a technology looking for a market.

·         Recruit great employees willing to work for sweat equity or low salary.

·         The market might be permanently re-set to focus on the markets rather than on the science. Your long-term company strategy, and your career decisions should reflect that fact.

·         Be the type of entrepreneur who can respond quickly to changing market needs, and more stability with policy, reimbursement, etc.

·         Understand clearly how investment dollars can help move your company forward and be able to articulate it to strategic outside investors, including angels.

·         Create a connected, experienced advisory board who can help you focus on meeting milestones and moving your business forward.

·         Manage limited resources well, and prove that you can do a lot with a little. Virtual companies will become more popular.

·         The expectation for 2010 is that investments will be flat to slightly higher, with modest increases until more money appears in the system through exits.

Below are specific challenges and opportunities for life science sub-industries:

Biopharma does not make sense at the angel level because of the amount of the time and investment dollars to an exit, the technical and commercial risk, and the money required to achieve an exit event. In fact, as there are so many more un-knowns than knowns in biopharma, even with its astronomical advancements over the past decade, pharma companies can require 7-8 rounds of financing, increasing the risk of diluting early investors to a “wipe-out”.  This is not good for angel investors, friends and families, as they are more likely to lose a lot of many, or reserve very diluted returns.

Our panelists recommend that biopharma entrepreneurs partner with academia and Big Pharma to find support (money, services).  Suggestions for biopharma entrepreneurs include finding novel mechanisms of action, finding a new more efficient business model to reduce cost and risk, providing cross-disciplinary integration, and encourage more risk adversity even in academia.

Entrepreneurs, intrapreneurs and investors alike recognize that when there is a ‘win’, the return is substantial. The challenge is to see past the science, focus on the product and the market need. Consider cross-disciplinary solutions – e.g. systems biology and develop a better understanding of disease states and complexity. There are still significant unmet medical needs, and huge interest and markets in 3rd world diseases/cures and other global market opportunities, as well as genomics and patient selection. In addition, specialty companies need new products, and there are opportunities in biosimilars and generics. The convergence of biology and biopharma and computers will also prove interesting.

Personalized Medicine solutions provides opportunities to customize solutions so that they are more effective for individuals, while better understanding genomics. In partnering of therapeutics and diagnostics and academia, we may be able to better educate consumers and doctors and insurers and policymakers and others, and encourage early partnering of these stakeholders.

Systemic change is needed to make the economics for personalized medicine work out, for, by definition, each solution should only serve a small segment of a market, and customized solutions must be efficiently produced and distributed. There are additional challenges around reimbursement models and ROI for investors who are looking for large markets to serve. In addition, in the current health care system, doctors get paid when they prescribe general prescriptions when you are sick, not to prevent sickness or to create a custom prescription to better cure you if you get sick.

Medical Devices from products for the aging, to monitoring and drug delivery and other devices sold directly to patients, to wellness products leveraging technology advancements have become more available, more technology-integrated, and more patient-driven. Challenges for the medical device sub-industry include a proposed Medical device tax, reimbursement ambiguity and trends, technology standards, data-over-abundance, and sometimes too much competition in the marketplace. Despite these challenges, many devices are going mainstream, helping more people, and with our global and aging markets, the opportunities are huge.

Software Solutions are favored by angels who are interested see the interface of IT and devices as the lowest risk, fastest exit segment of the life science industry. Factors such as the human genome project and  our ability to understand, study, predict and treat genome-related conductions, the huge market with many needs at the intersection of biology and technology, from healthcare and prescription management to medical device diagnostics to personalized medicine and medical imaging solutions, etc. make this sub-industry an interesting one for entrepreneurs and investors.

One of the challenges of delivering products and services in this sub-industry is the challenge of silos: organizations and groups who are working individually to solve a problem rather than working with peers and cohorts across companies and roles and industries. Indeed, if the large technology companies could work collaboratively with large academic institutions and hospitals and government and patients, we could work together to create a ‘Salesforce.com’ solution managing huge volumes of data, with cloud computing aspects including interconnectivity, large computing power, and work together to find ways to monetize solutions which benefit people.

Medical Imaging Challenges for medical imaging include declining reimbursement, the high cost of new equipment and relative effectiveness of old equipment deter innovation, and even the current administration's HealthCare IT policy, which would distribute dollars to IT taking priority over the adoption of new equipment. Opportunities include interventional cardiology as specific market, smaller, less expensive imaging opportunity in small practices (primary care physicians) vs. hospital and other opportunity supported by forward-thinking companies such as Japan and Germany.

The bottom line is that we should all partner to create an ecosystem ripe for innovation in all life science sub-industries, with the funding, technology advancement, and risk-tolerant culture needed to address the huge market opportunities ahead.

FountainBlue’s November 19 Life Science Entrepreneurs’ Forum was on the topic of Personalized Medicine, Biomarkers, Invitro Diagnostics: The Science Advances, The Business Opportunities, The Cultural Dilemmas and featured:

• Facilitator Linda K. Molnar, LKM Strategic Consulting
• Panelist Doug Dolginow, MD, BOD and Founder CSO/CMO, Veracyte, Inc and Adviser to Personalized Medicine Start-ups
• Panelist Kimberlee Caple, Vice President, Genetic Systems Division, Applied Biosystems, part of Life Technologies Corporation
• Panelist Ted Driscoll, Venture Partner, Claremont Ventures; Active Member, Life Science Angels; Founding Director, Sand Hill Angels
• Panelist Dick Haiduck, Partner to the CEO, Implicit Bioscience and Compugen, advisor to the Queensland Australia government
• Panelist Kendall Wu, Product Manager, Cytogenetics Portfolio, Affymetrix
• Presenting Entrepreneur Richard A. Goozh, Sr. VP, Strategy & Finance, Wave 80 Biosciences; Managing Director, Cambrian Partners
• Presenting Entrepreneur Massimo Bocchi, Chief Technology Officer, MindSeeds Laboratories s.r.l. and Fulbright scholar

Below are notes from our conversation.

Personalized medicine was broadly defined by our panelists, ranging from isolation of genomes for customized therapies and/or magnifying pools of similar customers to create viable markets for therapy monitoring and diagnostics. Personalized medicine goes beyond the patient in that it’s about the whole person through a whole life cycle, from the importance of genome mapping for children to prevention strategies for teens, and early detection and treatments for adults. There is the issue of personalization, or finding the right treatment for the right person at the right time, cost-effectively. There’s a whole separate element of prediction, which studies and tracks risk factors on who would get what disease when, and a third piece on prevention, based on information gained from personalization and prediction.

There are many opportunities in the area of personalized, where patients would get custom recommendations, diagnostics and therapies which would greatly increase the efficacy of treatment programs. With the challenges of aging demographics, the advancements in biometric and technologies in general, and the relative affluence of the patient population in need of therapies, the international market potential is huge, and large pharma companies, small start-ups, academic institutes, insurance companies, government agencies and other stakeholders are looking at the opportunities with great interest.

However, the very nature of personalized medicine brings the challenge of cost-effectively providing customized care quickly. There are so many constituencies involved in getting it right, from the FDA to the physician, from the patient to the reimbursement parties, from manufacturing to pharma to diagnostics, etc. Any one stakeholder not fully engaged and committed to a solution may doom its success.

In addition, with the longer development cycles and larger, more capital-efficient funding needs, coupled with the need to work with government regulatory agencies, investors are shying away from investing in this promising space, perhaps electing for later-stage companies or personalized medicine companies relying more on computational/IT solutions.

The panel offered sage advice for start-ups for will be tackling this market:

·         Identify a 500 million to multi-billion dollar market for the personalized medicine solution.

·         Find the market first, don’t develop a technology and then identify the market.

·         Find ways to develop personalized therapies working with existing healthcare system.

·         Consider reimbursement and regulatory issues when strategizing how you will serve your market.

·         Start-ups today are asked to be more resourceful, coming up with a prototype and defining the market even before they can secure outside funding.

·         Focus on the size of the market and what you can do to serve that market and how you will make money on it.

·         Understand from the insurer’s perspective where there are risk and how YOUR solution can address that risk cost-effectively and efficiently.

·         A coordinated effort between all parties is required to reform the current system, and everyone from patients to doctors to regulators to pharma and investors and particularly insurers must play a role. Understanding the need for reform, and a commitment to working collaboratively on the reform will help ensure its success.

The panel next highlighted some hot areas of interest in personalized medicine:

·         Diagnostics is involved in 80% of all treatments, yet it is only 2% of healthcare cost. It will take a long time to address this discrepancy, working within the system, but resourceful start-ups, working in partnership with insurers, patients, corporations, etc. and play a role in changing this, and opening up the market for personalized diagnostics and therapies.

·         There are tremendous IT and software opportunities for personalized medicine ranging from monitoring and sensoring and diagnostics to genome exploration and disease risk analysis.

·         There are niche opportunities for small personalized devices to diagnosis, monitor, or track.

The panel concluded with the need for all parties to be educated about the opportunities around personalized medicine, so that everyone can work in collaboration to better serves all constituents. Information is just once piece of the education puzzle – all parties need to know how to apply the information, working in collaboration to solve problems and create personalized medicine opportunities.

Resource:

·         The November 18 issue of the Personalized Medicine journal has a special issue on the topic of Delving into Personal Genomics, assembled by Elaine Mardis and Jeantine Lunshof, with some free and intriguing content. In their introduction, they say that "genome-based personalized medicine is no longer a thought experiment and the course of both disease research and medical practice will be substantially altered as a result" and that "the ethical, legal and societal implications of the developments in the genomic sciences cannot be ignored and require ongoing assessment." http://www.genomeweb.com/blog/delving-personal-genomics

FountainBlue’s October 19 Life Science Entrepreneurs’ Forum was on the topic of Software Meets Healthcare Services: Health IT Platforms, Pharmaceutical Tracking, Remote Monitoring and Beyond and featured:

• Facilitator Russell Singleton, President and CEO, Molecular Image
• Panelist Shannon Kelley, Director of Marketing, Intuitive Surgical
• Panelist John Steuart, Claremont Ventures
• Panelist Evgeny Zaytsev, Helix Ventures
• Panelist Steve Douglas, CEO, Data Physics Research
• Presenting Entrepreneur Rohan G.F. Coelho, CEO, Rexanto
• Presenting Entrepreneur Anthony Gioeli, CEO, MedAttune

Below are notes from our conversation.

Software Meets Healthcare Services highlights the convergence of technology and health care, and is a tremendously broad and promising area, which includes:

• Healthcare Infrastructure and IT Platforms,
• Software Diagnostics
• Imaging Solutions from Diagnostics to Prototyping  
• Biomarker and Genomics Businesses
• Remote Monitoring and Management of Patients and Drugs and Relationships
• Software Leveraged for Pharmaceutical Development 
• Medical Device and Diagnostics Solutions with Software Components
• Education and Social Networking Solutions connecting users of medical technologies and
• Many other areas.

Software Meets Healthcare solutions benefit health service professionals, from doctors to nurses, as well as insurers, hospitals, and patients. Other stakeholders include policy-makers who are leading the drive to reduce expenditures, corporations challenged by meeting skyrocketing insurance premiums and demanding patients who are more educated, more proactive than ever before. There are partly so many passionate stakeholders as the opportunity is HUGE – 2.4 trillion dollars, accelerating to 3 trillion dollars in the next decade. In addition, with an established infrastructure and rapid technology advances, coupled with an aging, affluent generation, this industry is positioned to grow exponentially. Indeed, many are claiming that the software meets healthcare area will be the next big technology wave.

Below are some questions which may help you hone in on excellent business opportunities in the software meets healthcare area:

• With the current administration’s emphasis on reducing the cost of healthcare:
• What software solutions will help manage the issuance, monitoring, distribution and review of prescribed medicines?
• What software solutions will help all stakeholders (from care-givers to insurers to payees to patients) better collaborate in delivering quality care for the patient?
• What software solutions can provide training to professionals, and build communities of support following or in combination with training?
• What are the opportunities if there were mandates for electronic medical records? How can historical patient record information be integrated into these comprehensive medical records, and what business opportunity is there in this area?
• With the rapid advancements in technologies:
• How can new processing capabilities assist in the review, design, planning, etc. of new products and services, from medical device to pharma to personalized medicine?
• What technology advancements will facilitate getting patients in and out of hospitals most efficiently and effectively?
• What technology advancements will better support outpatient care, while also ensuring optimal caregiver involvement?
• What technology advancements will help mitigate the expenses around the last-year-of-life, still by far the most costly health care expenditure for the system?
• What opportunities will the push for software standardization and interoperability open up?
• Consider the successes of other countries in their proactive management of healthcare services and what role software plays in these successes.
• With the patient empowerment movement, where patients are more tech-savvy, more demanding:
• What personalized information would patients demand to proactively manage their health and how can software solutions address this need?
• What free-mium and other business models can follow from this growing need?
• What web/mobile/GUI opportunities will arise with the patient demand for easily-accessed and easily-read personalized information?
• Personalized medicine is requiring exponential increases in use of data creating huge needs in bioinformatics. What opportunity opens up because of this?
• With the push-pull balance between collaboration/standards and the need for privacy:
• How can software help all parties have their cake and eat it too?
• What does mobile to mobile technology advances make possible for communication and collaboration between stakeholders?

With the immense opportunities ahead, the panelists also mentioned obstacles to adoption of software meets healthcare solutions. Adoption of software or any new solutions in the healthcare industry has historically taken longer as there are more mandates, procedures and requirements involved in the life science industry overall.

A specific challenge for those working on a software SAAS solution involving the collection and management of patient records, there are so many different standards across hospitals, states, nations, etc. and so much information about each patient that it would be difficult to input all the data into a single, standard format, and get all parties to agree on the process to update that common medical record. But while this would be a challenge, the financial opportunities and benefits would be huge.

Another challenge for those in the medical device industry is the challenge of integration and interoperability with federal and insurer mandates and standards, including EMR, EHR, PHR, and provide outcome data to prove they are effective or providers will not be able to be reimbursed for using them. 

There are several cultural challenges also worth noting. The issue of privacy and having a standard for privacy needs to be resolved to facilitate the mass adoption of patient record solutions acceptable to caregivers, insurers, payees and patients. Another cultural challenge is to get hospitals, insurers, caregivers, policy-makers and patients to work together in alignment to serve the needs of all.

The panel added the following advice to entrepreneurs:

• Build traction in product development, in partnerships, in revenues, in team, etc. with minimal funding.
• Build partnerships deep and early.
• Understand the idiosyncrasies of the industry – software professionals may not be used to the pace or culture of hospital and medical professionals, for example, but fitting in and being accepted by these people are a requirement for building a company serving them.
• Go after markets which the CVSs, Walmarts, Oracles, IBMs, Intels, etc. out there would think were too small.
• Focus on the customers you are serving and their pain points, and continue to efficiency and effectively serve that customer and market.
• Healthcare issues are huge. You don’t need to solve the whole problem. A piece of it would be huge. You don’t have to solve it overnight either.

The panel concluded by applauding the successes and investments of Kaiser Permanente, an insurer and a provider who has invested 10 billion dollars in IT and software solutions. Kaiser’s investment will be providing an infrastructure which would better support patients, better communicate between physicians and insurers, and better coordinate between all stakeholders. What lessons can we learn from this proactive investment, and how will it better position Kaiser to serve its members, who stay an average of 17 years with them?

FountainBlue’s September 21 Life Science Entrepreneurs’ Forum was on the topic of Medical Device Advances: From Implantables to Surgical Tools, From Diagnostics to Therapeutics and was generously hosted and sponsored by LifeScan. Please join me in thanking our sponsors at LifeScan and our dynamic panels who so generously shared their thoughts and advice on the state of the medical device industry.

• Facilitator Geetha Rao, Springborne Life Sciences
• Panelist Joseph Heanue PhD, President, Triple Ring Technologies
• Panelist Frank Ingle, Senior Research Fellow, Electrophysiology Division, Boston Scientific
• Panelist Sharbel Noujaim, VP of Product Engineering, LifeScan
• Presenting Evelyn Hu, Chief Marketing Officer and Director of Product Development, iShoe
• Presenting Tom Moore, President and CEO, Silicon Valley Medical Instruments
• Presenting Michael Weickert, President and CEO at SEA Medical Systems, Inc

Below are notes from our conversation. 

Trends of the Medical Device Industry

Today’s business and economic challenges in the medical device industry range from a skittish investor community with new, much higher milestone requirements for portfolio companies, to a conservative corporate investments and partnerships spurred by increasing demands from corporate shareholders, to international pressure to efficiently deliver products and services, to changing policies for regulatory and reimbursement standards and requirements.

Resourceful and resilient entrepreneurs can still succeed despite and even because of these challenges. To do so, entrepreneurs must:

• Creatively leverage the available funding options (from grants to friends and family etc.), talent pool (senior people are available as staff or consultants really cheap right now), and development/services discounts and deferred compensation options for consultants and staff, available because of the challenging business climate.
• Produce milestone-based results as you leverage these resources.
• Closely manage cash flow; do more with less.
• Focus on market needs now and in the near future, as we slowly recover from these challenges.
• Temporarily (or permanently) downgrade vision so that you can quickly generate early products and results. It can bring in revenues, get feedback from early customers for future products and solutions, while also making you a more viable investment and strategic partner. It would also be a smaller risk if the product doesn’t build traction in the market, and provide valuable feedback on who will buy what for what cost.
• Focus on clinical outcomes and pristine data that proves that outcome.
• Build relationships with everyone – from staff to partners to investors to consultants. Know who will come through for you under what circumstances and work collaboratively to build your business and support them in building theirs.
• With the virtual disappearance of IPOs as exits, interesting strategic partners in the device space might include Boston Scientific, LifeScan, as well as Medtronic, St. Jude’s, Siemens and Philips and even new players in the space including GE and Toshiba.
• With that said, be trustworthy, and work with those who are worthy of your trust.

The panel continued on with a discussion on hot new medical device trends. There are opportunities with imaging technology for a whole range of products and solutions, particularly with the aging population. There are also immense opportunities with combining technology solutions in the device world and beyond. For example, combining imaging with instruments, or software with instruments, or imaging with monitoring might be interesting.

With the aging population and the pervasiveness of cell phone/mobile technologies, other opportunities might include a range of solutions in the device diagnostics, from cardiological to biomarkers. Neuro-modulation diagnostics and diabetes diagnostic devices might also prove interesting.

There was a final word of advice to the Obama administration on how to best support innovation and entrepreneurship in the medical device industry:

• The challenge grants are great, but the majority of the grants went to academic institutions who might not have the skills, connections or ability to bring research projects to market.
• Involving experienced medical device professionals in the decision process for grants might ensure that the most promising companies and technologies will get the financial support necessary to bring products to market and produce jobs.
• Establishing a policy to encourage R&D expenditure, like the .40/$1.00 reimbursement currently in Canada, might help entrepreneurs traverse that first chasm – creatively developing a prototype/proof of concept without the benefit of angel/venture/corporate/customer funding.
• Balance FDA requirements for safety with having such stringent requirements that it’s too daunting an undertaking for entrepreneurs to develop and sell to the US markets, which would make other international markets more attractive.

Any way you look at it, forging progress in innovation and entrepreneurship takes a partnership of entrepreneurs, intrapreneurs, investors and government stakeholders, to serve the real needs of a growing customer market worldwide. Perhaps this is more true during unstable economic times.

• Facilitator Peter Berger II, CEO, Alitora
• Panelist Ian Irwin, Director of Drug Discovery, Parkinson’s Institute
• Panelist Michael O’Donnell, Partner, Wilson Sonsini
• Panelist Ted Spack, Managing Director, Fast Forward LLC
• Panelist Craig Taylor, Co-Founder and General Partner, Alloy Ventures
• Presenting Entrepreneur: Yadon Arad, Tiara Pharmaceuticals
• Presenting Entrepreneur: Julia O’Connor, CEO, Accelalox Inc.
• Presenting Entrepreneur: David Zarling, CEO, Colby Pharmaceuticals

• Start relationship-building early; Keep building relationships with partners and customers.
• Project-manage effectively as a team to drive deliverables and ensure smooth transition between groups, phases, organizations, countries.
• Manage your resources tightly to make a good impression.
• Keep making the case that safety needs to be balanced with efficacy, and encouraging forward momentum.
• Manage risks. Raise safety concerns in a timely manner.
• Move your concept and organization as far as you can with as few resources as possible. Make a convincing case that additional partnership and support would build measurable and specific traction toward pre-defined milestones.
• Be flexible and creative in securing funding, utilize all sources of funding to move forward with early development, including private foundation, angel investment, SBIR/STTR. Government and foundation grants might be good resource during early development phases, They require forming solid partnerships, AND can be time-consuming AND they can’t provide the kind of investment dollars necessary to grow the company beyond early development, but are still worth investigating.
• Accept where your sphere of influence is with your partners in corporate, government, investment, etc. and leverage where you will have the best payoff, while also growing your influence.
• Leverage outsourcing where practical, but manage the outsourcing projects closely.
• Enlist the support of entrepreneurial industry experts with complementary skills.

• ·    India and China will play an increasingly important role in accelerating drug development, not only as CRO/CMO service providers, but also drive for technology innovation and represent great market. As such, there will be more opportunities and larger markets as countries such as India and China become active in this space.
• ·    Changes to reimbursement policies will make it more practical for existing and new solutions to go to market.
• ·    There are many early-stage concepts which could not navigate all the hurdles of the development process, yet the thousands and millions of dollars already expended has produced science and technologies, even prototypes and studies which may be cost-effectively leveraged into new solutions, if the hurdles can be overcome.
• ·    Advancements in personalized medicine will not only provide custom solutions for patients, but it may also explain why some drugs did not pass regulations. These drugs might then be brought to market, targeting a more specific, more responsive patient population.
• ·    In general, with the advancements in technologies, there is more likely to be knowledge-driven understanding about what went wrong with drugs that could not complete the approval process and how to bring them to market cost-effectively.
• ·    There are opportunities in diagnostic tools, in genomics, imaging, informatics and other scientific areas which could lead to new drugs.

FountainBlue’s June 15 Life Science Entrepreneurs’ Forum was on the topic of Life Science Leaders: From Strategy to Execution and featured:

• Facilitator Dick Haiduck, Partner to the CEO, Haiduck Consulting
• Panelist Rich Ferrari, Partner, De Novo Ventures
• Panelist Stevan Jovanovich, PhD., CEO, Microchip Biotech
• Panelist Yvonne Linney, VP, Strategy, Marketing and Business Development, Life Sciences Solutions Unit, Agilent
• Panelist Glen Sato, Partner, Cooley Godward Kronish, LLP
• Panelist Charles Versaggi, CEO, OsteoCorp

Below are notes from the conversation.

The panel agreed that an organization’s strategy must focus on the needs of the customer and be more market driven than technology driven. In other words, from its inception, and throughout a company’s life span, the focus should be on understanding and delivering the clinical value of the solution on the specific target market that they are serving, thereby focusing on delivering the company’s unfair advantage. This necessitates an alignment between the goals of the management team, the organization, and all its staff and partners to plan for, communicate and execute on delivering that value, and remaining fluid on HOW the organization will continue to serve its customers. Therefore, there must be utter clarity on who the target customers are, what value is provided through which project, and how the experienced team will execute to milestones based on this clarity of vision, communicated well.

The current economic conditions amplify the importance of both thinking and acting strategically. With resources so tight, it is even more important to ensure that the strategy is customer focused, targeting a specific unmet need and that execution is measurable and milestone driven, with the necessary adjustments in both strategy and execution along the way. There is an overwhelming emphasis on doing more with less, stretching precious dollars to meet milestones, and focusing on providing the core value to customers, making every decision, every action, count.

During these challenging times, when considering a company’s strategy, think about which elements of strategy you’re considering – from business to financial to clinical to positioning – as well as the timing for the strategy and how it is integrated with other strategies. Successful entrepreneurs ensure an alignment between overall company goals and implementing strategies to achieve those goals, even if it means changing the overall corporate objectives along the way. The most experienced entrepreneurs see strategy as a process, not a destination, and are adept at proactively managing the direction of the company, erring on the side of action/decisiveness, and hiring a management team with a similar mindset.

Based on questions from the audience on how to best focus on select projects when resources on tight, the panel recommended that entrepreneurs periodically evaluate individual projects to ensure that they are delivering anticipated value, both in terms of meeting the needs of customers and in financial returns, using the anticipated amount of financial and staff resources. The panel even went so far as to encourage a culture where everyone is rewarded both for originating projects, AND for disproving projects, so that resources may be allocated to other more promising projects. Making these types of business decisions objectively based on fact, rather than on popularity, emotions and opinions, will help organizations develop a more resilient, practical strategy that meets the needs of its customers.

In conclusion, the panel noted that start-ups are prized for their innovation and their nimbleness, and in these economic conditions, the stakes are higher, and so are the opportunities for those proven entrepreneurs who can survive the storm, executing on milestones for a vibrant, flexible strategy that serves customers well and brings rich financial returns.

FountainBlue’s May 18 Life Science Entrepreneurs’ Forum was on the topic of How Regulatory and Reimbursement Changes Impact Today's Life Science Businesses and featured:

• Facilitator Joyce Chiarenza, Chiarenza Consulting, L.L.C., Certified Clinical Compliance Professional, and Instructor, UCSC Extension
• Panelist Walt Cecka, Senior Director, Program Management, Triple Ring Technologies
• Panelist Krishna Ghosh, VP of Quality and Compliance, Arbor Vita Corporation
• Panelist Jacques Ginestet, Director, Sustaining Engineering, LifeScan
• Panelist Chris Panarties, Sr. Director, Reimbursement, Health Economics and Pricing, NeurogesX
• Panelist Susan Rowinski, Sue Rowinski Group LLC, Reimbursement & Marketing Consulting

Below are notes from the conversation:

Reforms in the regulatory and reimbursement landscapes are driven by several major drivers. First, policy changes led by the new administration, with an emphasis on measurable differences and outcomes, is impacting life science companies, providers, payers and patients alike. In addition, cost pressures from payers – both the 50 million Medicare and Medicaid customers, as well as private insurers – are impacting how they are interacting with providers and patients. And lastly, demographics of patients are changing as an affluent, techno-philic, educated baby boomer population ages.

These confluence of factors are forcing life science companies to 1) closely monitor policies around regulations, with new FDA standards to be reinforced as early as next March, 2) evaluate and revise business, market, and development strategies based on changing reimbursement policies of buyers and 3) more broadly consider their market, perhaps targeting individuals more. 

Reforms in the reimbursement process are designed to foster collaboration from all the providers, and facilitate more efficient payment distribution to the patient. One specific change is payers migrating to a single lump sum payment, rather than billing hospitals and physicians and post-care facilities separately. This change is forcing physicians and hospitals to be in closer alignment between them, as physicians must take expense into account when prescribing treatments, as their personal reimbursement will be directly impacted by these decisions.

Another change in reimbursement is to offer a single lump sum for standard procedures such as orthopedic, cardiac, delivery, prenatal care, etc., with a global payment for a specific, pre-defined set of issues. The overall reimbursement dollars may be a bit higher, and it forces everyone working on a procedure, from all the physicians involved to the hospital to the pharmacy to the post-procedure care and skilled nursing services, to collaborate and coordinate payment formulas.

The panel had the following advice for life science companies around the reimbursement and regulation area:

• Have a really good product, not just a me-too or nice to have, but something game changing that people need.
• Integrate the regulatory and reimbursement strategy with the marketing, development and business plan for the company.
• More stringent regulatory standards, ICD9 in US, will impact existing and new products and payers will start questioning procedures which had previously been automatically approved. How will that impact your business and your partners?
• Segmenting the patient market will help make payers and policy-makers better understand how to most effectively and efficiently treat patients. What are the implications for your business?
• To be considered a viable M&A acquisition target have a real/clear solution, have a clear reimbursement strategy, and get the product into the market. If a life science corporation decides to purchase your company, they will then leverage their marketing power and distribution channels for an existing, viable product.
• Have a small footprint for your company – operate leanly so that you can have beter returns, be a better investment opportunity, and a better acquisition target.

Resources:

• 5/18/09 - Will Comparative Effectiveness in the U.S. Be Like NICE? http://www.pharmacychoice.com/News/article.cfm?Article_ID=400040
• HHS Names Federal Coordinating Council for Comparative Effectiveness Research, Recovery Act Allocates $1.1 Billion for Comparative Effectiveness Research http://www.hhs.gov/news/press/2009pres/03/20090319a.html

FountainBlue’s April 20 Life Science Entrepreneurs’ Forum was on the topic of Physician's Panel: Serving Patients, Keeping Advised on Trends, Reimbursement Challenges and featured:

• Facilitator Myriam Curet, MD, Stanford University, Chief Medical Advisor, Intuitive Surgical
• Panelist Shahram S. Gholami, M.D., Urological Surgeon
• Panelist Gary Heit, PhD, MD, former Assistant Professor, Director of Functional Neurosurgery, Dept of Neurosurgery, Kaiser Redwood City
• Panelist Frank Lai, MD, Department of Urology, El Camino Hospital
• Panelist Michael Leong, MD, Anesthesiologist
• Panelist James Lilja, PhD, OBGYN

Below are note from the conversation:

One of the greatest challenges physicians face today are around reimbursements policies, which are regulated by insurance companies and at times federal and state policies. In fact, reimbursement changes are severely impacting the decisions how physicians are treating patients. Because the overall amount of procedures has declined, and the procedures approved by insurance companies tend to be more outpatient services, physicians are factoring in economics when advising patients on what’s best for their health. Indeed, with policy makers and insurance companies leaning more toward ‘evidence-based medicine’ for political or economic gain, there is a focus on approving procedures which display measurable results – metrics defined not by doctors or patients, but by policy-makers, administrators and insurance companies. Therefore, important, but difficult-to-measure factors such as quality-of-life and patient satisfaction are not as important as number of prescriptions or procedures per patient and time and cost for conducting procedures.

Entrepreneurs should consider the following opportunities for serving physicians and hospitals:

• Diagnosing medical problems which are difficult to reach and difficult to see like cancer, through advanced medical imaging or drug marker technologies;
• Advancing interventional radiology in outpatient centers which make it easy to treat patients with minimal side effects;
• Biopharma solutions which would limit the toxicity of cancers;
• Devices, biopharma and other solutions targeting an aging population;
• Technology and device solutions which work with robotics to shorter procedures and increase their efficacy.

Our panel of physicians remains positive and optimistic that changes in the health care system can lead to a better balance between the needs of the patient, the art of being a physician, and the science of developing sustainable business models for insurance companies and fostering good will for the administrators and politicians engaged in making a system that works. Below are some keys to shifting that balance to a more patient-centric system:

• Empower the patient to own medical information, which is currently only available in fragments by individual practitioners and not shared across physicians or hospitals.
• Create a standard for medical record keeping which would make it easier for physicians and hospitals to share information about patients, and work together to view the whole patient and develop comprehensive treatment plans based on an understanding of the whole patient.
• Consider allowing patients to pay more for additional services which are by choice, rather than by medical need.
• Encourage doctors to adopt new technologies like robotics, rather than penalize them for adopting new technologies which take less patient time, reducing the reimbursement dollars.

In the end, entrepreneurs should keep thinking about the IT, device, pharma and other solutions and products which would help ensure a better quality of life for patients and how can we help physicians and hospitals to deliver this.

FountainBlue’s March 16 Life Science Entrepreneurs’ Forum was on the topic of Corporate Strategies for Partnering with Entrepreneurs and featured:

•  Facilitator John Bashkin, Triple Ring Technologies

• Panelist Rob Abrams, Operating Partner, Sanderling Ventures, Former Head of Business Development, Boston Scientific
• Panelist Dave Scott, Senior Product Manager, Vision Systems, Intuitive Surgical
• Panelist Niamh Pellegrini, General Manager, LifeScan, a J&J Company

Below are notes from the conversation at the event, and from the prep call prior to the event.

It’s difficult to get ideas off the ground, financings, especially now. As private venture capital is pulling back, corporate partnerships become more important. In a down market, everyone conserves cash, and plans for the future. Experienced executives and entrepreneurs find resourceful ways to continue their R&D, especially during a downturn when there are so many cost-effective resources and opportunities for new products and markets with the return to economic stability.

There are tougher constraints, and it is much more difficult to get ideas adopted early, and given the opportunity a chance to grow. Corporate partners and investors might require that you analyze and refine an idea much more, instead of adopting a concept or technology early, giving it room to grow. You have to get it right from day one. With financial pressures of stockholders, Corporates are more likely to minimize risk and go after the blockbusters that are in their proven areas of expertise and executives are more likely to make the same types of decisions, going with the tried and true.

With that said, some of the best companies have generated in worst of times.

• Investments ARE still made, and co-developments, licensing deals and M&As are taking place for early stage entrepreneurs who see the future, strategic select partners, and navigate the process from r&d to approvals and commercialization.
• The nature of corporate P&Ls are changing, and innovative new business models for tried technologies and solutions are seriously considered.
• The regulatory environment is changing and that is impacting how corporates do R&D and clinical trials, for example. It’s becoming increasingly expensive to do all R&D in-house, so corporates must strategically seek partnership with entrepreneurs to support their R&D efforts.
• VCs and corporate partners alike need to appreciate and understand what’s coming up, and hearing the latest entrepreneurial ideas will help them get a feel for the evolving market and industry.

To increase your chances of success, consider doing the following:

• Understand the business of the strategic partner, what drives a particular procedure – what technology/process would drive patient/customer value? The champions in the company will find them.
• Recruit a strong and vocal advocate/champion as absolutely nothing will get through without one. Recruit a champion with influence across the company and P&L responsibility, one who is willing to make a bet, have enough technical background to understand the solution, yet also understand how it will drive the business. Although product managers, business development folks and line engineers have some influence, the commercial voice with P&L responsibilities will make a decision on whether your project is worth investing in over another project.
• Don’t go in asking for money before the technology and concept have been fleshed out. Ask for advice and input and listen to the needs of the customers.
• Put together mid, moderate and best case scenarios for a solution that serves a real need. Understand and proactively mitigate and manage the risks and communicate how and why you are doing that.
• Consider adopting tried technologies into new areas. For example, what opportunities will advanced medical imaging provide in terms of surgical robotic tools?
• Whether you’re working with investors, advisers or teams, build deep, broad relationships early and continue to build on them. It’s about who you know. The right champion will help you do what you need to grow the organization, from recruiting a team mentors, investors, executives, etc., who have done it before and are willing to help out.
• Create incremental clinical/economic patient value – not just a different spin to the same thing. Find something that takes it to the next level.
• Whether you’re a small start-up or a multi-billion dollar company, take the time and resources to quickly understand the real needs of the patient and how your product and service would serve those needs. Get involved in the communities that you’re trying to serve, get to know the patient.
• Don’t develop your product in a vacuum – understand the market, customers and technology landscape.
• Be persistent and find a way to get around the NOs, if you’re sure that you’re working on the right technology, the right partnership, the right strategy.
• Strategy is a choice. Be flexible and open to other ways your product or service might fit the needs of the strategy partner you’ve selected. With that said, make sure you remain true to the mission of your company, and don’t just adopt someone else’s cause.
• Think creatively about how you can meet the needs of strategics.
• Be realistic about what you’re asking for and your own valuation and potential.
• When negotiating with strategic partners, it’s OK to start conversations with multiple target companies, but be transparent about what you’re doing and make a commitment to work with one of them in the end.

Thoughts on other financing options:

• Securing SBIR grants and other grants which might come with the stimulus package are viewed as a positive. They are difficult to get, and it’s time intensive to go through the grant-writing process. Securing a grant adds credibility for an organization and is a good thing, provided that the focus is on growing the business with the grant dollars, not just going from grant to grant to finance the company.
• Fellowship program for surgeons and hospitals may be helpful, although it doesn’t necessarily lead to new products, but it does build identity and gain traction in new procedures. It is a resource for going into a clinical setting. It can also let companies test out new products in a validated and credible fashion while allowing you to stay close to the clinician and patient.

• Facilitator Steven Cui, Of Counsel, Jones Day
• Panelist Bonnie Anderson, CEO, Veracyte, Inc.
• Panelist Deborah Kilpatrick, Vice President, Market Development, CardioDx, Inc.
• Panelist Geetha Rao, Springborne and Molecular Image
• Panelist Mike Richey, Chief Business Officer, Tethys Bioscience
• Panelist David Rollo, President, Cell Point LLC

• Here’s one way of thinking of molecular medicine. It is comprised of molecular diagnostics – identifying biomarkers for diseases, molecular imaging – targeting location and extent of a disease, molecular therapy – targeting treatment for the diseased cells/areas. Investing in personalized medicine will help providers better diagnose, identify and treat patients more effectively and with less expense.
• Personalized medicine helps people understand their genome and what they are pre-disposed to, based on genetics or environment. Knowing this information will help patients, providers and payers alike better understand, diagnose and treat health challenges, even in the early stages.
• Personalized medicine has the potential to positively impact the regulatory, clinical trials, reimbursement and other challenges which have historically been barriers to delivering medication to patients.
• Some claim that some current medical solutions only treat as little as 20% of the affected population. Personalized medicine has the ability to identify a wider range of solutions for a larger percentage of the affected population. This would impact payers, physicians, providers, patients and investors alike, creating a tremendous business opportunity while also better serving everyone.

• This economic downturn makes it challenging for the funding of even the most promising technologies. Be conservative about cash management, keep developing a business worthy of funding (people, products, market, risk management), build relationships with key stakeholders, and manage your fundraising needs to fit the times.
• If stakeholders move from a philosophy of treating the symptoms to understanding pre-dispositions to disease and providing targeted treatments early on, it may increase the effectiveness of the treatment while lowering the risks and the costs.
• We must prove through clinical trials that personalized medicine can safely and effectively live up to that potential of providing customized medical solutions to patients while still supporting solid business practices and satisfying all stakeholders.
• We must enlist the support of providers and educate them on developing use cases and advocating for the adoption of personalized medical options.
• We must work with the FDA to create new standards for clinical trial approval which are more appropriate for personalized medicine solutions. Current standards are more effective for pharma and device solutions, so while we’re advocating for a new standard, we must find a way to work within the current standards.
• There are political and societal barriers we must overcome in order to develop critical mass for the adoption of personalized medicine. This takes time and must be done through passionate education and advocacy from engaged stakeholders.
• Later, we must empower patients to take charge of their own health.

FountainBlue’s January 26 Life Science Entrepreneurs’ Forum featured a Life Science Angel Investor's Panel speaking on Trends for 2009:

Facilitator: Rahul Pathak, Partner, Jones Day

Angel Panelists:

• Stuart Eckmann, Keiretsu Forum and Life Science Angels (Bio and Device Committees)
• Elaine Heron, Life Science Angels and LabCyte
• Anne DeGheest, MedStars
• Don Ross, Life Science Angels and Sand Hill Angel

• Mitchell Mutz, CSO, Amplyx Pharmaceuticals

• Michelle Stecklein Call, CEO, Lypro BioScience

Below are notes from the conversation which also includes notes from our preparatory conference calls.

Life Science Trends for 2009

• Pharmaceutical solutions for Medicare and insurance companies will be more stable than consumer deals right now, especially if they add functionality to an existing drug.
• Application of life science technologies to energy fields.
• Consider where there will be a shortages, where there will be a large market, how demographics will impact the market size and need, etc.,  

Advice for Life Science Entrepreneurs Seeking Funding:

• Position yourself for successful partnerships and fundings.
• Before you seek outside funding, consider strategic partnering and securing government grants to better position yourself for angel and VC funding.
• No matter where you are getting the funding, identify measurable objectives and timelines and deliver on them, which will better position you for additional funding.
• Investors are facing down-rounds, and ailing portfolio companies. They are investing more in existing portfolio companies for longer, plus they are trying to help struggling portfolio companies. Because of this, they are less likely to consider new deals, so time your fundraising for when the economy recovers, hopefully in six months or a year or so.
• Speak more about the business – your market, your revenue model, your experienced team – than the technology. Many founders are so enamored with the technology that they focus too much on explaining that, and many investors may not understand enough about the technology to understand why it is unique. But most investors WOULD understand markets and business models.
• Investors are in the business of risk management. Understand the risks which are inherent in the business you’re running and have a plan on how to mitigate those risks.
• With that said, investors by nature are risk tolerant, and they know that investing in early stage companies, particularly in tough markets, will lead to the highest earnings, assuming the company is successful.
• Practice your pitch, drawing feedback from experienced entrepreneurs, investors, and others.
• Strategically plan your business based on evolving market needs.
• Identify a large market with a must-have (pain) rather than a nice-to-have solution.
• Have a strong, defensible IP.
• Offer a unique for a large market and prove that it can be delivered cost-effectively to paying customers.
• Build a strong team with experienced technical and business professionals who are the best people for the stage of the company. This will vary as the company grows.
• The team must be receptive to feedback, and the chemistry between team members, and between the team and the investors must be good.
• The team must be passionate, and have the stomach to put up with the uncertainties and stresses and changes that are inherent with early stage start-ups.
• The team must be willing and able to execute and perform on incomplete information, another element of being in a start-up whose goal is to be early to market.
• The leadership team must be willing and able to step down or step up based on the growth needs of the company.
• The team leaders must communicate with transparency and integrity.
• Team leaders must let go of the idea of control.
• The team must enjoy working with each other, and find a way to have fun, despite the challenges!
• Always consider if your current team, technology, market options would be attractive to other investors.
• Know your exit strategy – who will pay for your company by when if you achieve what?
• Identify funding organizations (angels, VCs) which have historically funded something similar to what your company is offering. Then identify who is a leader within that organization and research how to get introduced to these leaders so that you can strategically introduce your organization to them.
• Tightly manage cash flow.
• With the difficult economic climate, it is more important than ever to manage your cash and deliver on commitments.
• Build strategic alliances with larger organizations, angels, research organizations, and other key stakeholders.
• Mentor capital is more effective in some ways than dollars.
• Partner with corporations who may help fund R&D, understand market, build relationships and channels.
• Partner with academic institutions, where technologies might be developed and need to be taken ‘out of the labs, and into the market’.
• Partner with government agencies who may be able to give equity-free grant dollars.
• Remember that it is easier to ask for money from people you have already made money for!

• Ideas for funding product development and navigating government regulations:
  • SBIR, small business innovation research grants, up to 100K for phase 1, more for phase 2 http://www.sbirworld.com
    • Must have less than 500 people in the company to qualify
    • Principle investigator must be an employee
    • Non-diluted funding, but government owns the research and may ask you to share the results
    • This would impact likelihood of getting institutional funding
• Drug vs. Biologic approval process
  • Drugs: approvals focused on clinical effects rather than the process
  • Biologics: Pay attention to the process/the process may be the product - vaccines, blood products, etc.,
• Advice for navigating government regulations
  • Find out who will be evaluating your product/process and build a relationship with them first.
  • Agree on protocols and end points up front, the earlier the better
  • Stick to what you agreed to do. Communicate your progress.
  • Label your product and process with care. The regulatory officials will evaluate your product or process based on the labels you agree on.
  • When looking for an approval for a medical device, consider the class of the device and work with standards organizations (ISO, IEC) standards.
  • Show proof that your product has less risk than currently accepted products.
  • For combination devices, consider the best category of fit. Try to categorize it as a medical device if appropriate.
  • Plan during and following the approval process. Document before, during and after the process.

• Reasons for outsourcing:
  • Cost reduction
  • Specialized Expertise
  • Avoid delays
  • Insufficient infrastructure or resources to do something internally
  • Maintain focus on core functions
• Outsourcing Examples
  • Back-office functions such as HR and IT
  • Employee leasing
  • IP-related contract R&D
  • Regulatory
  • Legal
  • Other
• Advantages
  • Access to specialized, highly-trained work force
  • Lower costs
  • Avoid or defer investments in infrastructure and personnel
  • Maintain focus on core functionality
• Disadvantages
  • Unfamiliar legal regime, particularly when working with other countries
  • IP enforcement, particularly when working with other countries
  • Language and cultural barriers
  • Time zone challenges
  • Expense of travel and communication
  • Additional project management resources

• Be strategic about your outsourcing needs. Understand first why you need to outsource, what will be outsourced, how outsourcing fits into the overall company plans, etc.,
• Create a detailed and specific project plan based on your identified needs
  • Define service provider obligations, milestones and deliverables based on your needs
  • Insist in quality results, don't just choose the most cost-effective option
  • Proactively manage the outside vendor - Garbage In Is Garbage Out (If you don't proactively manage the process, you cannot expect great results)
  • Specify client responsibilities
  • Identify fees and terms
  • Define ownership and rights issues with new, pre-existing, IP
  • Identify processes and mechanisms to manage problems and scope changes
  • Understand legal implications about independent contractor vs. employee
• Do you due diligence in evaluating providers. Have a thorough process for evaluation. Find someone you would enjoy working with, is thorough, detail-oriented and flexible.
• Relationships matter. Develop relationships with vendors and make sure chemistry is there, and track record is solid.
• Manage your risk with employment law, IP law, etc., by planning ahead, seeking legal counsel
• Have a thorough plan and manage it tightly, but also be flexible. Choose vendors who have the same mindset. (When doing early stage R&D for example, your initial plan may not work, but the process may need to another opportunity or option which would work better than the initial plan.)
• Experienced consultants help you identify issues to focus on and proactively communicate with you, collaborate with you. They are also entrepreneurial and proactive.
• Working with universities may be difficult when time is of the essence.

• Read the Nearsoft article in the Red Herring on Outsourcing in Local Time.
• Dr. Dobb's Portal, August 2, SCRUM Meets CMMi: Agility and discipline combined

• Facilitator Sharon Lewis, President, Strategic Impact, Inc.
• Panelist – Ruth Cavagnaro, CEO, ChorusWare (Astia Portfolio Company)
• Panelist – Chisato Ishii, Investment Partner, JAIC America, Inc.
• Panelist – Ken Macrae, PhD, MD, EVP and Serial CEO
• Panelist – John Reed, Global Operations, Agilent Technologies
• Panelist - Fred Seddiqui, CEO, Avantis Medical Systems, Inc.

Below are notes from the discussion.

Defining value propositions:

• Exchange (generally cash) for something that will help company produce something better, cheaper, faster
• Jack Welch definition: 'Your competitive advantage' - Don't start a company without understanding that.
• Delivery of product or service achieving measurable results based on predefined customer needs and expectations.
• Understand the customer pain and what specifically a product/service can to do to measurably address that pain.

Advice for creating a value proposition for life science entrepreneurs:

• Start with a problem
  • Articulate the problem from the customer's perspective
  • Quantify the problem and what the product/service can do to address that problem in measurable ways (time and results) for whose benefit
• Understand your market size and customer profile, the people who have the problem
  • Evolve your value proposition based on evolving customer and market needs.
• Have a management team with the passion and experience to lead the company.
  • Management team must be passionate about solving the problem, and the experience to understand the pain customers are experiencing.
  • Management team must know the players in that market and industry, and have the types of relationships which would lead to key customers and partners.
• Communicate your value proposition based on the interest of your stakeholders: customers, investors, staff, channel, etc.,
  • Example: It might make sense to first demonstrate life science products first to doctors, as they would recommend it to their patients.
  • Example: When communicating to internal staff, you might speak about operational issues such as quality, availability, margins and cash flow, which may not be of interest to other stakeholders.
• Creating a value proposition is an ongoing task
  • You should have an idea of your customer need, market size/competitive advantage, but you should also refine it as you get more information and as the market changes.
  • Proactively engage in updating your value proposition with your various stakeholders.
  • When communicating your value to internal staff members, it might make sense to talk about the Mission (overall goal, why company exists), Objectives (what group/company is trying to do), Strategy (how group/company will do it) and Tactics (what your/your group's contribution will be) - acronym of MOST.
  • Put careful thought into the words used to describe your company's value as it can be easily misunderstood/misinterpreted.
  • Value propositions evolve as company and markets change.
• When contemplating the value-add your company provides to its target customers, focus first on profitability (how will your product/service help make that company money), then cost-savings (how will your product/service save that company money) and lastly the big picture (why is it good for that company in the short or long term).
• Protect Your IP
  • Investigate licensing/IP ownership and partnership options prior to making a commitment
  • Conduct due diligence before engaging in a deal, and make the diligence process proportional to the size of the deal.
    

    ---

•  Facilitator Roy Fiebiger, Sanford Rose and Associates
• Panelist Brent Contstantz, Skeletal Kinetics LLC
• Panelist Charlie Wen, Current founder and CTO, Tensegrity, former CEO of OrthoClear, Karegiver, former director of engineering and Align Technology
• Panelist Tony Zhang, PhD President, CEO and Chairman Formurex

• Make sure there's a cultural fit with funders
• Understand the expectations of your funders
• Understand the role of the funders - how much do they want to influence the overall company direction? The day-to-day management?
• Consider other funding choices, such as angels or government grants

• Be clear, thorough and transparent about your communications
• No surprises!
• Raise issues before meetings
• Work with your corporate counsel to manage board, as necessary

• Consider applying for a provisional patent initially
• Work with a good attorney. Sometimes they can do it for equity, even if they can't investing in a few hours of attorney time will strengthen the position of your provisional patent

• Know your role and abilities and that of your team, and work with people who can complement what your team has to offer
• Understand how the funder/others will support the organization - is it just money? will they provide connections? credibility? link to organization/academic institution? subject matter expertise?

• Train them if necessary
• Get respected member of their community to publicly endorse your product
• Show the value proposition of your solution, particularly if it's scalable
• Make solution easy to learn/adapt to
• Enlist patients to request your product/service
  
  

  ---

• Facilitator Roy Fiebiger, Sanford Rose and Associates
• Panelist Andrew Farquharson, InCube Ventures
• Panelist Nina Kjellson, Partner, InterWest Partners
• Panelist John Maroney, General Partner, Delphi Ventures
• Panelist Kevin Wasserstein, Versant Ventures

• Ask yourself if your team fits the organization's opportunity - does everyone have the experience to lead, and to lead for what stage/size of the company? does everyone have the skills and connections to help the organization to succeed? Is the chemistry good between the entrepreneurs and the investors? etc.,

• Focus on the strategic objectives for your organization and make measurable progress on agreed milestones. This is important whether you're getting funding, between rounds, or never planning to receive funding.
• Understand why progress is not being made - is it related to the team? the resources? the market?
• With that understanding, take action to address the problem.
• Avoid the 'lingering failures' or 'walking dead' - companies that are limping along without making progress, showing promise but not delivering. It's important to keep moving forward in specific areas, and to understand up front when to 'pull the plug'.
• Conduct hypothesis-driven experiments which can help drive decisions. Conducting them early and cost-effectively will also help organization to make strategic decisions.

• Articulate the market size, your specific niche, your strategy for addressing that niche, the competitive landscape, etc.,
• Know how you are differentiating yourself and communicate that clearly.
• Consider the immediate likely objections of potential investors and be prepared to address those objections prior to meeting with investors.
• Consider market adoption trends and health care provider practices when you write your executive summary.
• Be flexible about your organization, its goals, its revenue models, etc., It's rare that an early-stage company's business plan endures for the long term.
• Don't have 'founder-itis' - know your skills and your contributions and be willing to hire the right partners and team to address the needs of the organization. Put the organization in front of your own personal needs if necessary.
• Physicians may be good partners in that they may be able to validate a market need.
• Some companies come out of 'near-death' experiences stronger and better for it, and can build credibility based on learnings from those experiences.

• Research which investors are funding in your space. Call the portfolio companies and ask them about their experiences with the funders.
• Identify and make connections with investors who are funding in your market niche and find someone who can make an introduction to them, rather than submitting a business plan without an introduction.
• When you have a conversation with a VC, be likeable and personable and listen thoughtfully rather than spending the whole time selling.
• Don't get discouraged with 'nos'. If you get a rejection from a VC, take the opportunity to ask for feedback and even recommendations and introductions to other VCs who might be more appropriate funders for your opportunity.
• Remember that relationships with investors are two-way relationships. Make sure that the investor fits your expectations on how the monies will be invested (how much for R&D, single product investment? team investment? etc.,)
• Don't be afraid to ask the touch questions.
  

• Facilitator Brian Boyer, Attorney, Perkins Coie LLP
• Panelist Jeff Fairman, founder and senior research director, Juvaris
• Panelist Tom Gutshall, Founder and Former CEO, Current Chairman of Cepheid
• Panelist David Light, Business Builders

Below is a summary of advice on R&D Funding Opportunities for Life Science Companies, also available at http://fountainblue.pbwiki.com/R-D-FundingOpportunities.

• Start with a life science business idea which is interesting to a specific target audience, something you, as a founder are passionate about.
• Create a team to build the organization and strategically identify the best R&D funders, those who would think that you're idea is a good one, in a huge market. Sell the funders on the business idea and on the team.
• Once you are funded, make sure you execute on your business plan, while also staying flexible, based on changing market needs/technology requirements. This will not only help ensure the success of your company, but also to ensure R&D funding for your next venture.
• When you are planning your funding, make sure that others on your team are aware of the level of work and commitment needed to ensure success. Investors will respect your personal financial and personal commitment to your cause.

• Networking with the right people can help get the right doors open for your R&D efforts.
• Continue speaking passionately to all your contacts about your current funding needs and a door may unexpectedly opened for you.
• Be prepared - plan for such an occurrence to happen, so know what you're looking for, what you will do with it, who will do the work, over what time frame with support of which partners.
• Be proactive and speak to program officers of foundations and other funding sources. Ask them for suggestions and feedback. Develop a relationship with them, and they may help you give you the advantage tailoring a grant request specifically to your organization.
• Consider building relationships with VCs for support in filling out your team.

• They may be more likely to partner with you, assuming that another party will fund the more risky R&D efforts.
• They might think that the funding will make it more difficult to influence the direction of your company.
• In some cases, they might be threatened by the grant agreement, if IP and ownership issues are raised for instance.
• Plan your funding strategy, integrating a variety of sources - from corporate investors to foundations and venture firms.

• Facilitator Geetha Rao
• Panelist Brian Boyer, Perkins Coie LLP
• Panelist John Cornwell, Sand Hill Angels, and Life Science Angels
• Panelist Ken Martin, Onset Ventures
• Panelist David Miller Founder, InnoSpine
• Panelist Don Ross, Life Science Angels

• Ensure that there is a big market opportunity, more than 500 million, and have a clear understanding of the market, the competition, your unique value.
• Focus on developing a fully integrated business plan, explaining the business and describing the team, as well as the product/technology. (Many entrepreneurs are so enamored of the technology, they don't explain the business opportunity when many funders look for the business and team information as much as the technology/IP.)
• Build relationships with angels, VCs and other funders as they will be your advocate for funding, and also can coach you, make introductions for you.
• Build relationships with others who could introduce you to funders - like start-up lawyers.
• Network with people who can make the connections for you.
• The angel funding process is similar to the VC funding process, only the due diligence is not as vigorous. The due diligence helps to address the risks investors may face with an investment. Minimizing those risks prior to seeking funding will increase the likelihood of a funding event.
• Adopt the perspective of the funder - does it make sense to fund your company, and if so, why? What is the strength, potential, market opportunity for the company?
• Select a funder you are willing to work closely with as it will be a very close relationship, and not always easy.
• The founder must be prepared to give up leadership of the company as it approaches a later, more advance stage, which may require a different skill set.
• Consider the exit early, as it forces strategic thinking and execution.

• An organization is forced to be more focused. The funded company will be held accountable to more people, who may not be as receptive to their ideas.
• There may be more operational formality, particularly if there are regulatory requirements.
• Funders may now have board members who are more likely to 'hold your feet to the fire'. 
• Management team may change.
• Patent strategies may be more proactive.

Because of the government and other regulatory standards for life science products and services, whether they are pharmaceutical, bio-devices, bio-nano, etc., because of the experience, education and other personal characteristics of the entrepreneurs and executives within the industry, and other factors, the pace, culture, mind-set and expectations for decision-makers in the life science industry are much different than those in the high-tech sector.

However, with the convergence of bio, nano and information technologies, many high-tech corporations are branching into more life science solutions and investing in R&D efforts in the life science space. In addition, many larger life science and high tech are adopting an 'R&D-outsourced model', which helps them partner with VCs and early stage companies in support of their corporate R&D efforts. This month's meeting will feature speakers from both the high-tech and life science industries to investigate corporate R&D strategies and their implications for today's life science entrepreneurs.

• Agilent Technologies

  Proteomics  Agriculture Nucleic Acid Analysis Genomics Pharmaceuticals - Disease Discovery - Drug Discovery - Drug Development - Drug Manufacturing/QA/QC

   
• Applied Biosystems
• Genetic Analysis
• Genomics
• Proteomics
• Cell Biology
• Drug Discovery
• Drug Development
• Testing and Identification
• Information Management
• Ambion RNA Resources
• Experimental Workflows  
•  Genentech
• Strategic Alliances

• They help cover the 'funding gap' between pre-clinical and later stage companies.
• They partner with both entrepreneurs and VCs.
• They invite innovative, entrepreneurial ideas which fit the strategic vision for their organization.
• They offer many opportunities for partnership.

• From a corporation's perspective, research and development can be created organically (in house), through acquisitions, or through partnerships/collaborations. Decide whether to position your company for an acquisition or partnership/collaboration and plan accordingly.
• If you're working on a partnership, consider all types of partnership opportunities (from in-licensing to joint ventures to M&A and equity investments) and be clear what you want from the partnership and clearly communicate that.
• Understand how your company fits the overall corporate strategy and communicate that.
• Larger companies generally realize that it's easier to be innovative in smaller companies with fewer enforced processes and systems. Even if a M&A event occurs, larger companies try to preserve that entrepreneurial culture where possible as it is in their best interest.
• Corporations focus more on the best strategic investment rather than on price. (Strategy first, economics after.)
• It takes time to finalize partnership agreements so plan accordingly. (It may take an average of 9 months to close a licensing agreement for example, as there is much diligence involved.)

• With the aging of the baby boomers, what opportunities will arise and how can entrepreneurs and corporations partner to address the needs of this huge market?
  

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The Monday, November 20 Life Science Entrepreneurs' Forum was on the theme of "Building an A+ Life Science Team".

As life science entrepreneurs, we know the value of an experienced, results-oriented management team, but what can entrepreneurs do to attract the best and the brightest in early stage companies, when cash is tight? How can we retain, inspire and motivate your executive team and staff to work start-up hours and continually go the extra mile? How do you know what type of executive is best for which stage of your company, and how do you retain the right people at the right company stage, while maintaining relationships?

The facilitator is Roy Fiebiger, Managing Partner of Sanford Rose Associates-Silicon Valley, a Life Science Executive search firm. Prior to starting his executive search practice, Roy had served as a CEO and senior executive in several venture-backed medical device companies. Roy brings a unique combination of corporate experience, entrepreneurial wherewithal, vision, and dedication to address soft people issues and other business challenges. He has worked with many early and middle stage companies with their executive hiring process, and is eager to share his knowledge and advice on leadership, management and people issues with life science entrepreneurs. Roy has also assembled a panel to address the questions about and others from the VC, CEO, recruiter and legal perspectives.

- Tom Afzal, CEO of SpinalKinetics, who will share the life science CEO perspective

- Andrew Farquharson, currently with InCube and formerly with The Halo Fund, who will share the life science VC perspective

- Mike Hall, Partner Life Sciences Practice, Latham & Watkins, who will share the legal perspective

Below is a Summary of Notes and Advice for your reference, drawn on the wisdom of our facilitators and each of you as participants.

An effective management team is an essential ingredient for success

• It is necessary both to have the visionary with the innovative ideas and the executive with the experience, connections and resourcefulness to execute and consitently deliver results.
• There are different management needs for different stages of development
• For early stage, resource-constrained start-ups, the founders must passionate communicate the start-up concept and get the right early founders to become engaged and grow the company. (A corollary to that is that if the right people aren't signing up for the company, perhaps the concept is not as exciting as the founder thinks!)
• 'Convenient Hires' - hiring friends, neighbors, family, may be detrimental to the long-term (and short-term) needs for the company, and may in the end strain these relationships, particularly when one party is laid off.

Planning on attracting and retaining an A+ management team will help ensure that it happens

• Know what type of leadership area you need in what area by when, and create a strategic, milestone-related plan to get the right executives in place at the optimal time
• Setting the goals, communicating the vision, attracting and retaining the right talent are all crucial requirements for putting the right management team in place
• Creating and maintaining a positive, motivating and supportive culture will encourage your top talent to stay with the organization. It's not necessarily expensive to do that, and it's very worthwhile.
• In order to hire the right people, you must be thorough and invest the time in the interview and screening process, including conducting behavioral interviews and doing full background checks.

Be careful with the current trend of hiring consultants rather than a full time staff.

• There are a handful of requirements necessary to be considered an independent consultant rather than a staff member.
• If most people in the organization is a consultant:
• You must still have a 'buck-stops-here' decision maker to make pivotal decisions for the organization.
• The business may not be as scalable.
• It may not be as fundable by investors.

When you must lay off people on the team:

• Be direct regarding your concerns and try to come up with a mutually agreeable arrangement to part company gracefully.
• Document your communication - the measures taken to resolve any performance issues in case there is a legal dispute around wrongful termination.
• It is more awkward for investors to part company with the senior executives for portfolio companies, but it can be done with respectful and direct communications, based on measurable, milestone-related performance/progress.

Our facilitators for our first Life Science Entrepreneurs' Forum on September 18, 2006 were Michael Shuster from Fenwick & West and Melinda Richter from SJ Biocenter. Below are some comments and advice from Michael and Melinda and others in attendance at the event.

Advice on Bringing a Product to Market

Get Market Clarity: Know Your Target Market

• Make sure you understand which slice of the market you'd like to target, who your competitors are targeting, what your edge is over those competitors, how you will attack that market, etc.,
• Make sure you understand your target customer - it may not be the person you initially thought it would be

Be flexible

• If your target market, customer, team, product, etc., changes, respond accordingly
• When working with angels, VCs, etc., be flexible about your control of the company and the product and trust in their experience and wisdom, but use good judgement in selecting a funder who is compatible with your business and professional style. (Rarely do companies succeed with the entrepreneur's original product idea.)

Run a quality organization

• IP, product, team, market, etc., are all important for the success of an organization.
• Get quality legal and business advice (for example from Fenwick & West) to protect your IP and business interests. They can also offer introductions to the right investors.
• Have your own vision and line up your partners who are in support of that vision. (This can help align supporters and investors.)

When seeking funding:

• Consider all the funding options: High net-worth individuals, angels, angel funds, dedicated funds, foundations, banks, institutions. VCs are also an option, but they can be 'expensive and painful' money. (Contact Geetha or Michael whose organizations can help with this.)
• When seeking funding, do not stop focusing on building the business. The funding itself is not the exit path.

When bringing a life science product to market:

• Don't change the doctor's actions
• Don't require changes in how reimbursements are processed.