Medsider: Learn from Medtech and Healthtech Founders and CEOs - A Roadmap for Proving Clinical Efficacy and Economic Value: Interview with Mainstay Medical CEO Jason Hannon

Episode Date: May 31, 2024

In this episode of Medsider Radio, we sat down with Jason Hannon, President and CEO of Mainstay Medical, where he and his team are commercializing ReActiv8, an implantable neurostimulation system for intractable mechanical chronic low back pain. Jason holds a J.D. from Stanford University Law School and a B.A. from the University of California, Berkeley. After 12 years at NuVasive, where as COO, he led the company to incredible revenue milestones, he transitioned to his current role at Mainstay. In this interview, Jason shares his experiences on iterative product development, considerations for clinical trial design, the importance of patient education, and why reimbursement is paramount.Before we dive into the discussion, I wanted to mention a few things:First, if you’re into learning from medical device and health technology founders and CEOs, and want to know when new interviews are live, head over to Medsider.com and sign up for our free newsletter.Second, if you want to peek behind the curtain of the world's most successful startups, you should consider a Medsider premium membership. You’ll learn the strategies and tactics that founders and CEOs use to build and grow companies like Silk Road Medical, AliveCor, Shockwave Medical, and hundreds more!We recently introduced some fantastic additions exclusively for Medsider premium members, including playbooks, which are curated collections of our top Medsider interviews on key topics like capital fundraising and risk mitigation, and a curated investor database to help you discover your next medical device or health technology investor!In addition to the entire back catalog of Medsider interviews over the past decade, premium members also get a copy of every volume of Medsider Mentors at no additional cost, including the latest Medsider Mentors Volume V. If you’re interested, go to medsider.com/subscribe to learn more.Lastly, if you'd rather read than listen, here's a link to the full interview with Jason Hannon.

There's only really two things you do in my mind when you try and optimize and write the protocol for that big study early on. One, you're trying to prove that you know not just that the therapy works, but you know in whom it works. And so patient selection shouldn't just be written to optimize the study. It's to be written so that in the real world you can actually pick these patients. It's a lot easier in a clinical study when you have the attention of an entire university to pick these patients. The second thing though is reimbursement. Welcome to Medsider, where you can learn from the brightest founders and CEOs in medical devices and health technology. Join tens of thousands of ambitious doers as we unpack the insights, tactics, and secrets behind the most successful life science startups in the world.

Now, here's your host, Scott Nelson. Hey, everyone, it's Scott. In this episode of MedSider, I sat down with Jason Hannan, who holds a JD from Stanford University Law School and a BA from the University of California, Berkeley. after 12 years at Newvasive as CEO where he led the company to incredible revenue milestones. Jason transitioned to his current role as the president and CEO of Mainstay Medical, where he and his team are commercializing reactivate

an implantable neurostimulation system. Here for you the key things that we discussed in this conversation. First, validate your therapy's core concept before investing heavily in device design, especially when introducing a disruptive treatment. You can create a prototype using off-the-shelf products for early testing. This allows you to focus on understanding

the therapy's mechanism of action and potential benefits. Second, don't focus solely on demonstrating that your therapy works, but pay close attention to data points like lowering readmission rates and reducing the need for additional procedures. Introducing a novel therapy with no precedence is incredibly challenging. You have to prove both clinical efficacy and economic benefit, which is vital and securing reimbursement and adoption.

Third, gain your investor's trust with a detailed financial plan and by consistently achieving your goals. Build credibility and prove that you can deliver on your promises in order to best position your company for a future financing event. All right, before we jump into this episode, I wanted to let you know that the latest edition of MedSider Mentors is now live. We just published Volume 5, which summarizes the key learnings from the most popular Medsider interviews

over the last several months with incredible entrepreneurs like Gabriel Jones, CEO of Proprio, Kirsten Carroll, CEO of Can Do Health, Dr. David Alpert, founder of AliveCorp, Greg Bullington, CEO of Magnolia Medical, and other leaders of some of the hottest startups in our space. Look, it's tough to listen, read every interview that comes out, even the best ones. But there are so many valuable lessons

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by visiting MedsiderRadio.com forward slash mentors. All right, without further ado, let's jump into the interview. All right, Jason, welcome to Medsider Radio. you coming on. Thanks, Scott. Thanks for having me. Joining us from sunny San Diego. I'm sure it's a beautiful weather down there in Southern California. We're obviously recording this on video. Listeners are listening on audio, but they would appreciate your background. It's great. The weather in San Diego right now exactly what you would expect it to be. Yeah, I'm in, we recently, you know, fairly recently moved to Reno Taha area, but spent

about six years previously in South Orange County. So I love that part of it. Love that part of the country. Yeah, for sure. So I recorded a brief kind of intro on your bio at the outset of this interview. But let's start here. I'd love to kind of really kind of cover maybe in an elevator style pitch, kind of your background leading up to taking on the CEO role at Mainstay. So I have probably a unique background for what I do. Went to law school originally, practiced law for a while, and ended up in medical devices in the heyday of venture capital working in California. California and ended up working with a company called Nouveasive at the time. They'll take the company public, help them raise money privately before that, went to work there for about 13 years and did literally every job as we were growing that company. I joined at about, oh, 10 or 15 million in sales and was there through a billion in sales. And literally from legal, business development, strategy, HR, clinical, regulatory, ultimately,

product development, international. I think I found out at 40 that I was actually a salesperson. I just didn't know it until then. Ended as president and COO. And then I just, I love the early stage, the disruptive early stage, much more than what it would look like on paper and on my resume. And I left and decided to do something smaller. And mainstay called that they were looking for a CEO, I did probably four months of due diligence. And I couldn't figure out why the therapy wouldn't work. it's so unique and such a disruptive approach, ultimately took it on. And here I am.

Yeah, and that was back in 2017, correct? Is that, oh, no, it's correct? Okay, got it. So we're recording this in kind of Q-1, what's, yeah, end of Q-1 of 24. So you've been at the helm for, what, seven years or so, call it. And I'm looking at the mainstay site right now. It's M-Staymedical.com, just as it sounds, M-A-I-N-S-T-A-Y-M-M-A-M-C-E-M-C-L-E-M-C-W.

But in case you don't get to that write-up, that's the website we're talking about and the company that Jason's leading right now. But give us a sense for kind of what the therapy is, sort of, where does it sit within sort of the general kind of patient workflow, so to speak? And then we'll kind of maybe dive in a little bit deeper and learn more about kind of what you're building the journey kind of so far over the past seven years, et cetera. Yeah, great. So the way to think about reactivate our therapy is back pain comes generally in two forms. You either have neuropathic pain, damage nerve, compressed nerve. You'd feel it radiating down your legs, sometimes all the way to your feet, where you have mechanical pain. Mechanical pain you've experienced locally. Literally cuts, bruises, swelling, broken bones, those are all mechanical forms of pain. Most back pain in the world is mechanical in origin. You feel it in your back and your back and your buttocks and your hips, but most therapies have been developed over the years for neuropathic pain

to try and solve that. Surgery is generally for neuropathic pain. A spinal cord stimulator palliates neuropathic pain. This is genuinely the first approach at long-term treatment of a cause of mechanical pain. So there's two unique things here. It treats mechanical, not neuropathic pain, and it focuses on a cause. It's not a palliative treatment. And that is what, that's what differentiates the thing. therapy from everything else out there. And I'll leave it at that for now. But it's, it's a truly disruptive approach when you're trying to identify the patient because these patients generally don't get surgery today. Almost all of our patients at one point or another have been on opioids for management of long-term pain. Got it. Got it. And this is a, it's an implantable device with

with lead. So it kind of looks a little bit more maybe like a traditional kind of neurostimulator, but works, sounds like it works kind of fundamentally different. Yeah, we often get confused with traditional neurostimulators, which try and confuse your body's ability to recognize pain signals. And if they work for you, they work while they're in and while they're on. This looks like a normal stimulator. It's just the mechanism of action is completely mechanical. We stimulate a nerve in order for the nerve to activate a muscle that your brain has stopped driving on its own.

And it was formed. And that muscle, it's called the multifitous muscle. It's the main stabilizer of your low back. And so in patients with mechanical back pain, quite often the reason is, if the muscle's not firing to stabilize the segments of your low back, all the movements of your back, the joints in your back are unconstrained and therefore painful. And we're trying to rehabilitate that muscle so it works again. Okay, got it. That's super helpful. And again, mainsaymedical.com is the website.

You can learn a little bit more about the technology by hopping on the site. It's tons of information there and really helpful overview. for those of us like myself that aren't as familiar with kind of this sort of neuromodulation neurostimulator space. So with that said, give us a, you're actively commercializing this technology. Give us a sense for kind of where the company's at, maybe now and where it's headed over the next, you know, six to 12 months or so. Sure.

So we're commercial with the device in the U.S., Australia, Germany, and the UK. We went through the full pre-market approval, so the most rigorous clinical trial you can be required. to run in the U.S. And we're about two years in here commercializing in the U.S. The big focus for us is on gaining insurance approvals in the U.S. And if you introduce a new therapy that copycats in existing therapy, you have instant access to reimbursement in the U.S.

But if you do something new, novel, it's a long process. That's what we're in the middle of now, running additional clinical studies while also selling the device commercially and trying to expand it. So we're in those four countries. We'll stay in those four countries now. I'd say the next 12 months, we believe we'll deliver all the clinical data and the economic proof that this therapy ultimately saves money, not only saves heartache for patients

and physical issues and opioid addiction, but also saves the money system. And we can demonstrate that. We think we'll have everything assembled here this year to compel every insurance company in the U.S. to provide this to all their policyholders. Yeah, wow. Yeah, a lot happening, right, over the next. over the next year or so. But yeah, yeah, you touched on it. Maybe if we had time, we'll dig into this topic a little bit more detail. But reimbursement, right? Probably, you know, might be the

single biggest hurdle, right, to not do a truly novel technologies, you know, even more so than, than, you know, try to navigate the regulatory, regulatory hurdles. So I'm glad you mentioned that. It's something that, you know, if you're in the early stages of a novel therapy that does not have a very clear reimbursement pathway, definitely something you want to start considering earlier or sooner rather than later. So that's a super helpful overview. I'd like to maybe spend the next 20 to 30 minutes or so kind of really going back in time, learning about the past seven years, you know, building mainstay.

And, you know, if you can kind of weave in maybe even previous experiences, right? I mean, you sounds like you basically did everything under the sun, right? At New Basive during that, during that sort of that rocket ship, if you will. So feel free to kind of weave in some of your some anecdotes there. But let's start first with kind of product development. I'm sure Reactivate looked a little bit different probably than even when you first joined a CEO versus what you're commercializing now. So when you think about that experience of kind of going from alpha to beta into clinical units, et cetera, I mean, are there a couple things that really stand

out in terms of what entrepreneurs really need to focus on getting through those iteration cycles on probably a fairly lean budget in most cases? Yeah, I mean, the early days of this therapy, It was a concept. Our founder, Danny Sacks, was reading physiatry literature and seeing the correlation between, you can see on an MRI, every one of our patients has on an MRI, fat has grown into the multipitous muscle. And so it no longer looks like a dark red, it's red because it's full of blood, healthy muscle. It's all white, going to dribble through it because it's fat that is settled in because the muscle's not working. So he asked the simple question, if the central nervous system, if the central nervous system,

isn't driving this muscle. And the muscle is the most important thing for stability in your low back. Can we override it? Can we figure out which nerve feeds that muscle and just stimulate it? Can we force the muscle to work? And if we do, will the brain eventually catch up and start to drive it again? It was a very basic question. And we tried it from a product development perspective early on with an off-the-shelf spot

of port stimulator that we reprogram to do what our therapy needs to do. And boy, you think about, A, I'm glad that the company did use an off-the-shelf device because otherwise you spend eight years trying to develop one and you don't understand the therapy works yet. And if you want to know anything about this company or the therapy, we are therapy first, not technology first, not size or features, therapy first. The patient, what they're going through, how we can fix it, maniacally. And then we built technology to serve it.

So we found out two things from that early, that early, feasibility. One, these patients were doing a lot better, three, six, nine months later. So it seemed like the therapy was working and lots of little technical issues. The most obvious example was the electrical leads we placed eventually started migrating and moving. We get patients back to function in an incredible way. The more you function, the more you move, the more you move, the more things don't stay in place. And so one of the early on fixes was to custom build leads that would anchor in place and stay in place. And so those were iterative processes for us,

but it's what every startup goes through is that you have to decide. Do you care first about the technology and then you look for the patient or do you know the patient inside now and then you build the technology to fit? Got it. I love the fact that you called up the use of off-the-shelf components, right? Because that's come up on a number of occasions from other entrepreneurs, right, that have shared kind of their early, early stories. And I think in retrospective, it makes a ton of sense.

But it's so easy to just go strike right to building, right? We're just going to build this next new thing, end up running through a ton of cash, only at the end of the day to kind of, you know, end up with maybe a technology that either doesn't work entirely or like has major, major issues. So really, I mean, really, really, really kind of smart play. And I can't underscore enough. And I've seen this firsthand, even with Fastway, which is the company, running is the sooner you can get into into animals or into a cadaver lab or into patients

ideally there's always these learnings like these unexpected learnings that you you think maybe you solve for on bench or think you've got really good ideas and then you see it like in practice or like in you know in in a in a real patient as an example it's like ah you know we didn't account for that right so again kind of speaks to to to the idea of kind of getting into those environments as soon as really as soon as possible so we've been trying to figure out the last few years we want to prove objectively exactly what changes in the body when we apply this therapy. And this is an involuntary muscle, right? So once your brain shuts it off, right?

All it does is fire to stabilize your spine. Once your brain shuts it off, it doesn't start driving that muscle again naturally until the pain goes away, right? The pain is the inhibitor of this. So the question then is if your muscle has turned largely to fat, after we apply the stimulation over a period of time, does the fat go away? Does the muscle get bigger? Like, what's happening? We know patients feel better, but what's actually happening? And our first answer to that question was just what you said, which is we went straight to the world leader in studying

this muscle in Australia, and he ran an animal study for us. We'd literally randomized the animals, right? Gave them half got the therapy, half didn't, and we were ultimately able to see exactly now what's going on in the muscle. But otherwise, it's just, it's theory forever. And you've got to get your hands on it. Yeah, yeah, no doubt. And I'm that big, you know, proponent of really, you know, obviously trying to optimize for, you know, regulatory clearance or getting into market as soon as possible. But the reality is like some of these exercises, right, like the animal lab that you just mentioned, the cadaver animal lab that you just mentioned, et cetera, even if they're not maybe necessarily required, oftentimes can yield, you know, so much more fruit. And actually may be

enable you to move faster by preventing, you know, a lot of, a lot of, you know, hurdles that you may be creating yourself, you know, for the future. I agree. The more disruptive your therapy is to existing practice, the more you're going to need to be able to demonstrate how it works and, frankly, why it works, these are the ways you do that. I mean, if it's a slightly better mousetrap than the next thing, then maybe you don't need to spend all that money on early labs.

It's just really who's the patient maybe you're optimizing for, but this is the patient who shouldn't be getting surgery already. Now we have an option. We have to demonstrate how it works. Got it. Kind of on a similar topic, I guess that sort of segues into this topic of, I guess, regulatory clinical. And you just mentioned the large PMA trial that you completed.

I think what a couple years ago it sounds like maybe. Huge trial, huge undertaking. I'm sure there's obviously clinical work leading even up to that pivotal trial. For other founders and CEOs, maybe that don't have the breadth of experience that you have, coming out of all of those roles at Newbysiv and then even even kind of leading the charge at Mainstay. Are there a couple of things that kind of really stand out that you think like every founder, CEO needs to be kind of aware of as they begin to kind of sort through, you know, either the regulatory landscape or clinical hurdles that are seemingly large, right?

And as they kind of begin that roadmaping process. The one thing I will say is, and you actually brought this up earlier in our talk, you should always do this. it can never be perfect, but there's only really two things you do in my mind when you try and optimize and write the protocol for that big study early on. One, you're trying to prove that you know, not just that the therapy works, but you know in whom it works. And so patient selection shouldn't just be written to optimize the study. It's to be written so that in the real world, you can actually pick these patients. It's a lot easier in a clinical study when you have the

attention of an entire university to pick these patients. The second thing, though, is reimbursement. Ultimately, if you have a truly novel therapy, you're going to have to demonstrate the people that works, and those people are the people who pay for the surgeons. Writing the study in a way that foresees ultimate reimbursement as the issue is critical because you can't go back and rerun that study. And you have to anticipate what it is a payer. And in our country, in the U.S., it's 300 different payers who all have an individual say on these things. What are the questions they're going to ask and the way to figure this out is go and panel a committee of medical directors and ask them before you run their study. What do you care about something

like this? Can we put that into our protocol? Yeah. So that was going to me my follow-up question is how coming kind of out of the brief discussion we had around reimbursement? Like how did you, how are you thinking about that, right, as you kind of designed the pivotal trial, but you sort of answered my question. And it reminds me of, and I shared this story a couple times previously on the program. I had Nick Anderson, who's kind of a health care economics. He's a nerd. And I think he'd actually like that I call him that. But he's a wealth of knowledge. And he said, you know, one of the, one of the mistakes that he often sees starts to make is they're not doing what you just mentioned is going directly to the payer and saying, hey, if I put down a dossier of this novel

therapy, what are you, what would stand out to you? What would be meaningful to you in order to sort of put your stamp of approval that, yes, we're going to cover and reimburse this. And he goes, most just don't, right? They sort of make assumptions. They don't treat it like a, like you would treat VOC with physicians as an example, right? And it sounds like you've sort of effectively been able to do that, right, in sort of designing that pivotal trial with the goal of this data has got to obviously showcase performance and safety, but also it's got to showcase some beneficial economics, right, to the payers and patients too. It's absolutely right. And we continue that after the study.

We, our first senior level higher before FDA approval was our head of reimbursement who would help to start build this. And we, four different panels of medical directors, we consulted, we knew we'd have to run another big study to prove the economics and the efficacy. So we designed that. We designed that study purely based on medical director input. And no one, no medical director is going to give you a pre-agreement. You know, if you give me this data, I'll write a coverage policy. But if you talk to enough of them, you get a sense of where, you know, where the goalposts are going to be. And this is a market.

We don't, we all like to complain about the insurers. And they're the, you know, they're the enemy of patient access so often in this country. But the reality is, this is a market system for us. And in a market system, just like you said, voice of customer, you better figure out what your customer wants. So you can give it to them. And that's what the insurance companies are in this country. I guess as a follow-up, when you think about kind of the work leading up to sort of tell a convincing story to the payers, obviously the clinical work that you've done is going to tell a lot. But is there anything that stands out, I guess, navigating that process, right? Once you have sort of the clinical data and begin to sort of engage, you know, in a more in-depth way with a lot of these payers, is there anything else that, like, is, you know, especially worked for you or, you know, things that you would coach up? other CEOs that are kind of going through the same process?

So we're right in the process now where we're starting to deliver clinical data that is unmatched. And so for the first time, we're getting high-level engagement from payers where, okay, it's no longer a clinical question. Like, does the therapy work? We can demonstrate the therapy works. And then it becomes, well, how much data do you have? And the few questions that have been key, some of which I would say we're smarter to think about in advance and some of which we're scrambling to be able to answer now. Great that you can show

this in a clinical study. Does it also happen in the real world? We have real world data showing that, you know, when you turn this therapy loose, will physicians really be able to get the same kind of results? Because a payer is only so impressed by a clinical study if they're concerned about, and this is back pain, right? Who doesn't have back pain? So what's going to happen to this therapy? Can you prove that? And can you prove economics beyond anecdotes? And I would say the best way we're finding to do that. We just completed one of these studies is to turn over the economic analysis

to someone independent because we're the most biased people in the world to an insurance company. And they're right. Of course we're biased. But can you get someone else to run an analysis that shows your therapy

is either break-even or a net gain to the system? Those are probably the two biggest areas. Got it, got it. So real-world data combined with maybe third-party economic analysis, kind of our two other things that other CEOs

founders need to be thinking about as they kind of navigate the coverage and reimbursement landscape. Yeah, this is this super interesting topic. And I again, kind of piggybacking up of what we discussed earlier than that. This is a hurdle, especially again with novel technology like you're developing at Mainstay. It's so, so critical, right, to be thinking about this, again, as early as possible. Because if you can effectively do it, which it sounds like you guys are, it's a major win for everyone, right? Physicians, patients, et cetera. It's not easy, not for the, not for the faint of heart. It's definitely not for the faint of heart.

This is not a, it's not a short journey. And when your, when your therapy is not, you know, a niche patient where there's very few of them and a payer knows how easily it is to identify them and choose them. No, it's, it's a slog at times. Because everyone has their own questions. And it just, don't get into this thinking it's going to happen quickly. You have to compel everybody. Yeah, yeah.

You're not going to be able to run like a three month sprint and have. all the payers on board. Let's shift the topic a little bit and discuss fundraising, right, which is critical, almost any startup in the kind of the MetTech and broader life science space, but especially again with when you're developing like really innovative technologies and therapies, every company is going to require a fairly significant amount of capital. You closed a recent financing round. I can't remember. I don't have the add the date, but it was I think north of 100 million,

if my notes are correct. And then that kind of piggybacked off of a previous round that you raised in 2021. So needless to say, you've got a lot of experience, not just at mainstay, raising capital, but also previously at new base. So as you think about all of the lessons you've learned over time, this too is probably one of the hardest challenges, right, for any, any founder or CEO, is to convince people to kind of get on board and ride the train as you're steering it in a direction that you think is the best, what are kind of some of the key lessons or key takeaways, I guess, from all of your financing or fundraising experience? Hey there, it's Scott, and thanks for listening in so far.

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