Medsider: Learn from Medtech and Healthtech Founders and CEOs - Balancing Innovation with Practical Outsourcing: Interview with Spark Biomedical CEO Daniel Powell

Episode Date: January 8, 2024

In this episode of Medsider Radio, we had a fascinating discussion with Daniel Powel, CEO of Spark Biomedical, the company behind Sparrow Ascent, a drug-free wearable device to combat opioid withdrawal symptoms. It is also advancing neurostimulation technology to address Neonatal Opioid Withdrawal Syndrome. Daniel found his true passion in medical devices, specifically neurostimulation, in 2006 and has since launched multiple products in the space for companies like St. Jude Medical, LivaNova, and Getinge. He co-founded Spark Biomedical in 2018, which now has two FDA-cleared devices to treat opioid addiction.In this interview, Daniel shares key insights from his journey: the importance of testing ideas and creating a MVP, diversifying funding sources, and how to make informed regulatory decisions.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 recently launched Medsider Mentors Volume IV. 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 Daniel Powell.

The one thing I can guarantee every entrepreneur listening to this is everything will take longer and everything will cost more than you plan. Just operate on that as a truism. 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 Daniel Powell, CEO of Spark Biomedical. Daniel found his true passion in medical devices, specifically neurostimulation in 2006, and has since launched multiple products in the space for companies like St. Jude Medical, Leavenova, and Cottinga. Daniel co-founded Spark in 2018, and he's since been serving as the CEO. Spark has developed the FDA- cleared sparrow assent, a novel wearable device for treating opioid addiction, and is also advancing neurostimulation technology to address neonatal opioid withdrawal syndrome. Here are few of the key things that we discussed in this interview.

First, let go of your ego and rigorously test whether you have product market fit. Focus on creating a minimum viable product and explore efficient ways to outsource design and development. In the earliest stages, keep your team lean and mean by relying on a few trusted consultants. Second, there are many ways to fund a venture and relying on only one of them is a risky strategy. diversify your plan with grants, venture capital, family offices, and angel investors, and make sure to approach each potential partner with a tailored plan. Third, navigating FDA involves jumping through numerous hoops, some of which you can avoid if you know how to.

Do thorough research, enlist top-notch consultants, and be ready to guide the regulatory reviewers whenever needed. Okay, so before we jump into this episode, if you're listening to this show, I'm going to make the assumption that you're a dedicated pro looking to learn from the best in the business. If that's the case, which I think it probably is, I've got some excited. exciting news related to our premium memberships. First, let's talk a little bit about Medsider Playbooks, your ticket to going from zero to 100

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All right, without further ado, let's jump back into the interview. All right, Daniel, welcome to Medsiter Radio. Appreciate you coming on. Thank you very much. I appreciate it, too. Yeah, it should be a fun conversation. I know you've done a few of these podcasts in the past. So I think the conversation should not only be educational, but hopefully there's a little

bit of entertainment along the way as well. I will try to entertain a little bit. So with that said, I recorded your brief bio at the outset of this episode. But let's start there without going line by line, I guess, with your resume in hand. Give us sort of your elevator pitch for your professional background leading up to co-founding the Spark Biomedical and leading the company as CEO. Yeah, I took what someone once called the off-road path to get where I am. but actually I'm a business major from Texas A&M, accounting of all things, and went into IT consulting as my first career, worked for a KPMG,

and then I got this wild idea to start an internet game cafe. And this must have been 2000. And so I started an internet game cafe, which was a phenomenal way to lose a lot of money. I found out that retail is horrible. and ends up an electrical engineer from St. Jude Medical's Neuromodulation Division would come into my store every day during lunch and play World Warcraft. He ended up investing in the stores, which wasn't the best investment in the world, but ended up helping me get a job at St. Jude when it was kind of apparent. I needed to go back to work and I couldn't earn enough money shelling one hour game passes to the internet cafe. So I ended up at St. Jude Medical in the software department.

I had a strong technical background, even though through my IT consulting. And man, I just fell in love with medical devices. And not just medical devices. It was like it's the career I've been looking for. And I just fell in love with this idea of neurostimulation. Like the body runs on chemical and electricity. And we're putting electricity into the nervous system to affect a disease state outcome or an Oregon state.

And it just all clicked. And I just, that's 20 years ago. I did spinal cord stem, deep brain stimulation as a product manager, upstream product manager, like figuring out what was the unmet need in the product space. And then working with engineering to deliver it. Went on to do Vegas nerve stem at Leavenova, led global marketing there before kind of going, trying a couple different things, trying a DBS startup and then meeting my founding partners, Navit and Alejandro where this crazy idea that we're going to stimulate the Vegas nerve

through the ear was pioneered. Got it. The internet game cafe turned, you know, neuromodulation med tech entrepreneur. I think you might be the first person I've ever had on the show that spent time, you know, trying to try to build what sounds like an internet gaming franchise. But no, that's an awesome background. I always, you can only, it's funny, I can't remember exactly the conversation I had recently where we got into this topic.

In fact, I think it might have been where I was on another podcast where it's always, I can always tell like the people that are, our inherent entrepreneurs, there's always like little trends or signs, you know, earlier on in their career where they were like just taking swings, right, attempting to do things that are maybe outside the, outside the norm. Yeah, what was funny is the failure of the game stores crushed me, man. I was, I just felt like such a failure. And my wife would always say, like, Martha Stewart failed like seven bankrupt companies

before you know, this is just part of your journey and it didn't help. I was like, I'm just going to be an employee and take my paycheck. I'm not risking everything again. And it was funny, 20 years later, I learned a deep knowledge of an industry processes. So when it came to starting the company this time, I learned management skills. You know, there was, I had a very different skill base to tackle it this time. Yeah. Yeah.

Yeah, lots of kind of years or years of experience under the belt, right? So you can probably approach it a little bit differently this time. But let's talk a little bit about the Sparrow Ascent platform. If you can kind of give us a high-level overview of the technology and what you're trying to solve, you mentioned kind of, you mentioned it just a few minutes ago with you, you know, when you were introduced to your co-founders. But give us, you know, pretend I'm in, you know, I'm a ninth grader, you know, in high school. And I'm trying to, you know, learn a little bit more about what you're building there.

And then if there's a particular interesting aspect to the origin story, you know, that would be fun to learn about as well. Yeah, we have a unique approach. So what we're doing is we're applying electricity to two specific cranial nerves simultaneously. The trigeminal nerve, which is more known for mediating pain, driving endorphine release. And then the vagus nerve, which is known for mediating your fight or flight, your autonomic. nervous system. And so what ends up as Navid, our chief science officer, pioneered Vegas nerve stem for stroke recovery. That was his background, came out of UT Dallas, is the foundation of the implantable Vegas nerve stimulator company, Microtransponder now, was built on his PhD work.

Alejandro was a trigeminal nerve expert, and his product, he designed a system that, that is now Neurosigma, which is a forehead stimulator for ADHD. So these two scientists got, and he's a neuroengineer, so these two scientists got to talking and put this idea of, what happens when we stimulate these two very complementary nerves together simultaneously? So that began what we call transcutaneous, auricular nerve stimulation or tans. And that is the fundamental basis.

So we have a little device. We access this through the ear. Right above your ear canal, there's a little ridge. That is the Simba Concha. That's where we're grabbing the vagus nerve. And then right in front of your ears, a little divot. You probably have rubbed it when you're stressed out because that's going to modulate your trigeminal. And so the device itself is battery powered.

It stimulates at different frequencies and pulse widths and amplitude. Those two different nerves, like two different languages of electricity. So one's at a high frequency, one's at a low. and currently we are FDA cleared and on market to alleviate opioid withdrawal. So the clinical effect of our first product is you can take somebody in the fetal position in opioid withdrawal is like the worst flu you've ever had combined with a hyper state of fighter flight. Like you literally believe you're going to die, which makes willpower to get through it a very

difficult thing because it's your lizard brain saying you're going to die, man. And you need to do something about this, which is use more drugs. And so clinically what this looks like is we can put this on somebody in the fetal position that are having just a really bad day. And within 30 to 60 minutes, they could be on this podcast. It is profound and highly effective effects. So we're bringing them out of fighter flight. We're elite.

We're driving endorphin production, which is alleviating those aches and chills and that misery. So it's pretty exciting. So that's our first gen on market. We're developing a baby version of it for babies born physically dependent on opioids. So I'd say of all things I talk about today, that's what I'm absolutely most proud of, clinical sites here in Dallas at Parkland Hospital and MUSC and UT San Antonio now. Well, yeah, that's always like the most kind of rewarding aspect of being involved in med tech, right? It's like, it's extremely difficult to kind of build a startup in this ecosystem, but the fact that you're, you know, you're truly making a difference quite compelling.

With that said, I'm looking at the device on your website, which is sparkbiomedical.com for everyone listening if you don't get a chance to get to the full write-up on medside or it's sparkbiomedical.com. You can take a look a little bit about the device. But one quick follow-up question, Daniel, are you stimulating those two nerves? It looks almost like their patches that like that are or not. Like how are you actually, I see the little wear, like the actual kind of device itself, but how are you actually doing that? It's hydrogels. So it's high or electricity through a hydro gel and that delivers it.

The hydrogels really good because it's comfortable. It covers a bigger surface area so you don't get, you know, pin corrects, but it evenly distributes the current. Got it, got it. And so it just sticks on like a Band-Aid. Okay. Yeah. And they're daily disposable.

So I want, you know, for most auricular vagus nerve, type of applications, you wouldn't stimulate all day long. You normally are stimulating and you know, for 30 minutes or 20 minutes or five minutes or something. Almost all the applications are like that. With withdrawal, you're really constantly battling that fight or flight and all. So we don't know the perfect dosing of it yet, but people wear the system all day long, take it off, go to sleep, get up the next morning. They're not feeling too bad, throw the system back on. Got it. That was going to be. My next follow-up question is like, well, how long, how long do you wear it? But you answer it for me. So,

We're recording this in Q4 of 23. And based on your LinkedIn profile, it looks like you've been at it for a little over five years or so, something like that. Last month was our five, yeah, five year anniversary this month. Okay, got it. Cool.

That's awesome. And you mentioned it already. You've got the flagship system that's FDA clear. Are you actively commercializing that then? Yes, we are. You are. Okay. And then you've got this additional platform that's intended to treat,

you said like babies neonatal? Yes. So we had our first generation system and this is the second generation just approved. Okay. Same indication. We really needed the second generation approved to the first one. The cables were fiddly. You know, it's your first gen system.

You learn a lot of lessons. We didn't feel comfortable sending that to somebody's home. And I'll get to the expansion, but just to kind of explain. So we've been kind of on hold to get this. system through FDA and now it's launched with a telehealth offering as well as broken mortar detox because what we found out is 99% of people don't want to go to rehab. They do desire to get of opioids, but they don't, you know, they have a dog, you have a family, you have kids, you have a life, you have a job. Not everybody can just take a 21 day vacation,

not vacation, but, you know, just unplug for 21 or 28 days. So the platform, that really the only change for the neonates is shrinking the earpiece down to fit a tiny baby ear. So that's really the only adjustment. But all the parameters are adjusted. So we're in about nine or ten other clinical trials and which we can adjust the parameters to try to affect the body differently by using the same interface. So we've been very successful at grants and DOD contracts. So we have a lot of irons.

Sometimes my investors get a little worried because they're like, you focused because you have like nine things going on. But, you know, we've, we've been awarded about $17.5 million in non-duglut of funding to date in the five years. Naveed and his team are grant writing machines. So that really has funded our research. Probably most cool about it is we're doing a giant brain imaging study where we're going to show exactly the brain structures we're affecting and modulating. That's great. Yeah, I want to circle back around to to what you've been able to accomplish on the grant reigning side, because that's really, really impressive.

A couple million dollars in nine-day leave of grants is impressive, but 17 plus million is a whole other level. So with that said, I think that sort of sets the stage for maybe, you know, rewining the clock a little bit, right, and kind of running through or discussing some key functions of any MedTech startup or any key functions that any tech startup needs to navigate, right, to go from, you know, zero to one and beyond. And so with that said, let's talk a little bit about early stage development.

And you mentioned Gen 1, right, of the Sparrow scent was likely different. And even probably going further back, your alpha and your beta versions of Gen 1 probably were that much different than where we have PTSD from the alpha version that was in clinical trials. It was so bad. So bad. It requires you to wear your own product, right, continuously. No. Yeah, exactly. But yeah, this is this is probably one of the more difficult.

things, right? For any startup, you've got likely limited dollars that you're working with. You need to kind of make reasonably, you know, quick progress very, very efficiently. So like when you think about what you've learned, not just even like at the various strategics that you've been with, but maybe even more so at SPAR, you know, are you doing or did you do anything differently with like the second gen device when it comes to development or just any key tips or tricks, not tricks per se, but any like, I guess, words of wisdom to other, you know, medtech founders and entrepreneurs that are kind of in the same boat, right? They're in this alpha beta journey or beta alpha journey and wanting to, you know, wanting to move quickly with

limited dollars. Yeah, we did face this, you know, I'd say the first four to five months, you know, we were actually just trying to kill the idea, you know, but the doors just kept opening and everything just kept working. So we, we, you know, in each step of the way, what we're trying to do is reduce risk and not spend money. we don't have to. So put a lot of pride away. Like, hey, I got to, I got to own all the manufacturing and, you know, I got to own, now you know, I don't, I don't need a warehouse. I don't need any, you know, think of all that infrastructure. We just don't worry about. We outsourced all of R&D, but we had a strong CTO. I mean, Alejandro, you know, is a very tenured neuroengineer who could lead

it. I was like, I don't want to have big staff of people burning money. You know, we'll outsource, find a great partner and outsource it. So, you know, we did a very finite clinical test, proof of concept. And, you know, with this not being an unplantable product, but being a wearable, boy, boy, that makes life easier, you know. So that was kind of some of the thought process around this. So, you know, quick hits, quick wins. This also helped us raise money.

What I was looking for each step of the way is checking all the boxes to say, yes, proceed to the next level, the next level of valuation, to the next level of money. And what I didn't want to do is run out of money and not have accomplished a major set of milestones where you're like, yes, you're graduating to the next grade. And I like what you mentioned out of the gate, right, which is you almost tried to kill the ideas, right? It's almost like the ideas were sort of default dead.

And then if they, if they, you know, had life, you know, maybe, maybe you decided to pursue, pursue them with more rigor. But I kind of like that approach. And, you know, the second thing you mentioned that, often comes up on the show is just being as as founders all of us need or CEOs, all of us need to be mindful of like cash in the bank, right? But how does that get me to the next, you know, clear milestones so I can go, you know, raise, raise more capital.

And that framework of thinking is so, so crucial, right? Especially in their, I mean, it's important at every phase of the company, right? But you need to be, you know, very, very mindful of, you know, ensuring that you have a good story to tell around how you're going to, I don't really use the money. and how are you going to execute against those goals that you have in mind and be able to demonstrate that clear progress along the way? Absolutely. Oh, I remember the other thing I was going to talk about.

See me riffing, Daniel, like it sparks good thoughts, right? Yeah, yeah. The other interesting thing we did was we, again, it goes back to risk reduction is we had a Bluetooth connection to the device that they were like, oh, it's, you know, HIPAA and all the cybersecurity. security and we looked at that and we're like, we're not collecting any patient device on the first one. This thing's going to be dumb. Then it was like, oh, don't we want a feedback loop and record that?

Yeah, but then the FDA is going to ask us for all this. Like, get Gen 1, get your MVP done. And, you know, don't, all those things would have put massive risk on the project on the FDA clearance. And it was like, those aren't necessary. Those can be step two. The other thing I want to address, because you mentioned cash flow, you know, we did. we did have a major, you know, we ran into a major roadblock running out of money. And it was, you know, my worst nightmare.

And, you know, we had just had several big investments fall through. And I've been very successful at raising money and just sort of got complacent. And I remember it was like a Monday. And I remember sitting there and I was like, I am going to panic today and give my self-permission to panic today. And then tomorrow I'm going to work the problem. And, you know, we just stopped and like, okay, what do we need to do? and we just, you know, I got on the phone, started calling. We had a convertible note.

We just opened it back up and started putting money back into it versus a new round. And I don't want to ever go through that again. That just is such a miserable place. And we were doing good and it still snuck up on us. Yeah, yeah. I know I remember Gabriel Jones, he's one of the co-founders and CEOs of Proprio. He mentioned on the pod recently that he recommends all like the founders and CEOs and his network that if you're if you're staring down a nine to 12 months of runway, you know,

until you raise that next round of capital, he's like, you know, don't just don't start three months away, right, from when you're going to run out. I mean, you've got nearly, you know, 50% even double, you know, that time period that, you know, that you think is required to raise that next round of capital in order to, in order to give you enough time to actually effectively close it. But the one thing I can guarantee every entrepreneur listening to this is everything will take longer and everything will cost more than you plant, period. Just operate on that as a truism.

Right, right. There's no doubt. You know, and to your point earlier about getting to MVP, right, it's a mistake that's so easy to kind of fall or a trap that's so easy to fall into, right, where you want to build in that next, that next interesting feature or the next cool thing. and being able to balance that against, you know, feedback that you're getting from advisors, right? Oftentimes end users that are like,

you really need to do this or you really need to do that. You have to be able to like have the fortitude to balance that sort of feedback, which is typically great feedback, but you need to balance it against kind of what you need to do, like to get to the next step and that, you know, the various risks that are going to come along with incorporating a lot of those features early on. So I think that's just really, really kind of important feedback, I think, for any founders or CEOs that are working on their,

their first devices that's like get get something out right that you can use to get to the next the next stage so so so so so crucial um let's talk a little bit about let's touch on um touch on just kind of uh you know ray clen in general you mentioned you've got like nine plus different studies going on something like that that's ridiculous yeah you've been able obviously to effectively you know navigate you know the regulatory landscape which i know you mentioned it's a it's a it's not and implantable, but these sort of like novel kind of technologies, especially if they're, they're wearable in this sense, don't come without their challenges when it comes to reg. So when you, when you just think about like your journey over the past five years with

Spark, Biomedical, what are the, what are some of the key things that I guess you've learned kind of building out, you know, both of those kind of functions, clinical and reg, because they obviously interrelates so, so heavily. Yeah. So, you know, it's probably not a good, it's probably not wise to come and say bad stuff about the FDA on a podcast. So I've been warned many times. But they're going to be frustrating to deal with. You're going to, they are inconsistent. There are personalities involved.

There is the guidance that they're supposed to be following that they don't many times. And they're just people, right? And they're not bad. They're not good. They're just people. There are people in a giant bureaucratic world. we're saying no is always the better answer than saying yes, in my experience. Like you have very few people who are trying to get you to the finish line.

You more have people in the environment that are going, well, I see something wrong and you need to prove beyond a shadow of a doubt. That's not a risk. So what I have found was the regulatory process, we've underestimated it several times. This last time our product was delayed over nine months, getting on market because of biocompatibility on a set of biocompatibility test that we passed. We passed them.

And I won't go into the details. But it just wasn't right. But that became the bar we needed to hit, you know, meat. And I told my team, you know, this isn't fair. And I'm mad. And now that's the bar. And that's just how we have to perform. So I've noticed, you know, I talked to.

other people in the wearable space and they're like, well, we don't have to do biocompatibility testing. It's just off the shelf hydrogels. And I'm like, no, you do. Like, so I would assume a, even though it's wearable, where we've been bit is we're like, it's wearable. It's a class two. It's not a class three. It can't be near the rigor.

And it feels like we've had to push a class three over the, the finish line both times. So I guess all that's just, you know, you can't be learning on the job. regulatory. You need good consultants. You need, you know, you need people tenured in the field who know it and it's still going to, it's still can potentially be kind of challenging. And so the key to it's your pre-submission meetings. And that's plural for a reason because, you know, you're not going to get everything you need in your first one. So those are free other than the cost of consultants and everything. You go, you sit in front of the FDA, you explain to them what you're trying to accomplish. You have your series of questions. You want to say, like, are we in agreement?

This is a class two device. Are we in agreement? This is my 510K predicate or not. And then, and so they have 90 days to respond and they will take all 90 days every single time. We've had two approvals come within four hours of the clock. So they're on a fixed clock, but they can pause the clock and play with the clock. We've had both of our approvals come within four hours of that clock being up at the full 90 days plus, you know, all the pauses. They're like, I bet this is going to get through in 72 days. We had a whole bet. Everybody was betting on over and unders on it. And it was like, the one person who's the negative sour plus was like, it'll take all 90 days. It's not fantasy football. It's like fantasy, fantasy regulatory. Fantasy FDA.

Yeah, yeah, yeah, exactly. fantasy football. Hey there, it's Scott, and thanks for listening in so far. The rest of this conversation is only available via our private podcast for MedSider Premium members. If you're not a premium member yet, you should definitely consider signing up. You'll get full access to the entire library of interviews dating back to 2010. This includes conversations with experts like Renee Ryan, CEO of Calah Health, Nadine Mared,

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