Medsider: Learn from Medtech and Healthtech Founders and CEOs - Bridging the Gap Between Clinical Trials and Commercial Success: Interview With Rob Ball, CEO of Shoulder Innovations

Episode Date: June 19, 2023

In this episode of Medsider Radio, we sat down with Rob Ball CEO of Shoulder Innovations, a leading orthopedic device company recognized for developing one of the most robust and stable glenoid platforms in the industry.Rob, a graduate of Kettering University with a deep-rooted passion for engineering, has dedicated over two decades of his professional life to medical device technologies. Rob has over 30 issued or pending patents and has been instrumental in the growth of several organizations, most notably Tornier, where he drove the company’s revenue from $40 million to an impressive $300 million within a handful of years. In this interview, Rob shares his unique journey from the automotive industry to the realm of orthopedics, emphasizing the importance of balancing technical problem-solving with commercial realities.Before we jump into the conversation, I wanted to mention a few things:If you’re into learning from proven medtech and health tech leaders and want to know when new content and interviews go live, head over to Medsider.com and sign up for our free newsletter. You’ll get access to gated articles, and lots of other interesting healthcare content.Second, if you want even more inside info from proven experts, think about a Medsider premium membership. We talk to experienced life science leaders about the nuts and bolts of running a business and bringing products to market.This is your place for valuable knowledge on specific topics like seed funding, prototyping, insurance reimbursement, and positioning a medtech startup for an exit.In addition to the entire back catalog of Medsider interviews over the past decade, premium members get a copy of every volume of Medsider Mentors at no additional cost. If you’re interested, go to medsider.com/subscribe to learn more.

Win-win has always been my mantra as I entered negotiations with people. Beginning with the end in mind has always been something that I kept top of mind. And probably most important is to first seek to understand before you seek to be understood. 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 Rob Ball, CEO of Shoulder Innovations, a leading orthopedic device company recognized for developing one of the most

robust and stable glenoid platforms in the industry. Rob is over 30 issued or pending patents and has been instrumental in the growth of several organizations, most notably Tournier, where he drove the company's top line revenue from 40 million to an impressive 300 million within a handful of years. Here a few of the key things that we discussed in this conversation. First, engineers naturally excel at spotting technical problems and finding solutions for them. However, entrepreneurs should always try to balance their technical focus with the commercial aspects when developing a new product. Second, clinical trials are crucial, so set them up in a way in which they answer pertinent questions from clinicians while aligning with the key regulatory requirements.

Third, capital efficiency is critical during a startup's early stages. If done the right way, you can both attract further investors and ensure early stage financial partners a good return on their investments. Before we jump into this episode, I wanted to let you know that we just released the latest edition of Medsider Mentors Volume 3, which summarizes the key learnings from the most popular Medsider interviews over the last several months with folks like Jim Persley, CEO of Hinge Health, Carol Burns, CEO of Cajent Vascular, and other leaders of some of the hottest startups of the space. Look, it's tough to listen or read every medsider interview that comes out, even the best ones. But there are so many valuable lessons

you can glean from the founders and CEOs that join our program. So that's why we decided to create Medsider mentors. It's the easiest way for you to learn from the world's best medical device and health technology entrepreneurs in one central place. If you're interested in learning more, head over to MedsiderRadio.com forward slash mentors. Premium members get free access to all past and future volumes. If you're not a premium member yet, you should definitely consider signing up. In addition to every volume of Medsider mentors, you'll get full access to the entire library of interviews dating back to 2010. This includes conversations with experts like Nadine Yared, CEO of CVRX, Renee Ryan, CEO of CalaHealth,

and so many others. Learn more by visiting MedsiderRadio.com forward slash mentors. All right, Rob, welcome to Medsider. Appreciate you coming on. Thank you, Scott. Nice to join you today. Yeah, looking forward to the conversation. And for those listening, they can't see our video.

And so maybe as part of the intro, we'll have you strum a little tune on the guitar here in your back. Then I would embarrass myself. I know. But actually people might lean in and be like, wait, this guy runs, you know, highly successful startup, has a couple exits under his belt and plays the guitar. That's pretty cool. So, no, but joking aside, I recorded kind of a brief bio on your, on your background kind of at the outset of this interview. But I would love to kind of hear it from you first. if you can kind of give us an elevator elevator pitch for your professional background,

heading or, you know, I guess leading up to, you know, taking on the CEO role at shoulder invasions. Yeah, sure. It's somewhat ironic, actually. I grew up in Kalamazoo, Michigan, of all places and found myself in the other business, which, of course, I'm sure most of your listeners know that Stryker being headquartered in Kalamazoo. But never had the opportunity to work for Stryker.

But I, you know, kind of grew up knowing I was going to be an engineer, spent my time at it was General Motors Institute or GMI when I was there at the time. But I have a bachelor's and master's from Kettering University, which is called now. And, you know, have enjoyed an early time in my career in automotive industry. And I worked for an FPX corporation, which used to be out of Southwest Michigan. But I built a large-scale casting and machining facility in all places, Warsaw, Indiana. And as I moved there, I found, came to understand that my, my neighbor that lived Kitty Corner was Dane Miller, who of course I'm sure most will recognize as the founder of Biomet. And many probably don't remember that Dane was a, his alma mater was GMI as well.

So I got to know him a little bit and transparently I came to understand in my interactions with Dane that we calculated in the automotive industry margin differently than the medical. device industry did. We talked about markup as 20% in the medical device industry. We talk about cost of goods as 20%. And I immediately knew that, you know, I needed to make a change. So I begged my way into Dubu that was right around the time that it was acquired by Jane J and J. and found myself as a product development engineer in the extremities group, which at the time was not the most attractive place to be. Of course, hips and knees drove the motives of that business. business, but I didn't know the difference that I made it my own and built a lot of great relationships and learned a ton and find myself in a small startup in Southern California

called Connecticut Cost Medical. And just it really enjoyed taking what I learned at J&J, which is this is what the end looks like on some level from systems and processes, et cetera, and applied some of that to KMI. That ended up being acquired by Integral Life Sciences, which was a great retreat. turn for investors. But Warburg-Pinkas was also interested in the business. So I got to know the MedTech team at Warburg-Pinkus, which had been simultaneously working on the Tournier acquisition. And so as that transpired, they invited me to join the Tournay team. And so I ran R&D at Tournier for about eight years and had clinical and regulatory as well. And we did a lot of neat work.

I think we're, you know, $50, $40, $50 million in revenue when I started. You know, Doug Coors did a great job, helped him to lead that business. I think we were. in the 300s when I left, more or less organic growth. It was a great opportunity and success. And I really enjoyed my time there and met a lot of great folks. I had the opportunity to live in France doing that for about five years. So learned a little bit of French. And I learned a lot about myself, honestly, living in a foreign country, which was really interesting. But came home, so to speak to the States in 2013. And that's when we formed Genesis Innovation Group. And I say we, myself and are two co-founders, Jeff Onderland on running, which we characterize now as just a very

early stage investor in medical device technology. And we invest both financial capital and, you know, talent capital, if you will. And so that's Genesis today. One of those portfolio companies is shoulder innovations, the most mature. And so we raised a series C in 2020 into shoulder innovations. In that time, I decided to transition and take the CEO role at shoulder innovation. And I don't want to say it's been bliss ever since, but we've had a nice run of success here and are making some great progress as a company. So that's my short history. Yeah, that's great. That's great. One quick follow-up question, because I know we're going to do it later, but Genesis, do you, so you don't classify it as an accelerator and an incubator.

It's more just like an early stage investment fund that, as you said, invest both capital and human capital. Yeah, no. I mean, it's an operating, there's a component that's an operating consulting organization and an investment vehicle. So we call Genesis essentially has a product called Cultivate MD, which is an investment vehicle. So there's a number of LPs that have participated in investment through Cultivate MD. But if you look at Genesis, it's Genesis Innovation Group. Think about R&D engineering, regulatory, quality systems, financial operations, governance, those types of functions we can provide to the portfolio. we have a separate subsidiary called Genesis Software Innovations,

which is all software development. You know, we built several platforms from zero lines of code. And then a subset of us also own a business called Revelation Medical Devices in Auburn, Indiana, which is a small scale and, you know, kind of manufacturing metals and plastics manufacturing and prototyping. So those three businesses together are kind of the operation that Genesis operates. That's a little under 100 folks at this point. and, you know, supporting a number of portfolio businesses.

Got it. Okay. That's helpful. Yep. Yep. Let's talk a little bit about shoulder innovations because I'm looking at the website right now, which is shoulder innovations just as it sounds.com for those listening that want to learn a little bit more about the technology and probably what we'll spend most of our time talking

about. Sure. But give us at least a high level take of like what, like, obviously, what your, what devices like you're developing and commercializing, but like how they're different. and maybe, you know, we've into like the, the, or a little bit about the origin story before we, you know, go back in time. Yeah, sure. Yeah.

So at this point, I'll fast forward all the way to the, where we are today is pure play shoulder orthoplasty company. All of our products are regulatory cleared. We characterize that we have products prepared and in market that represent about 85% of what happens in a shoulder arthroplasty operating room. So we don't touch today kind of revision surgery or fracture indications, you know, work on those, but that's not something we operate in today. So that's the status of shoulder innovations. I characterize that what we're really known for, in fact, a surgeon John Levy gave a talk

just a couple of weeks ago at a meeting in Miami called the shoulder 360 meeting and talked about what's called insect glenoids. And his statement, not quite word for, probably almost word for word, which is insect glinoids are synonymous with shoulder innovations. And that's what we're really known for. So two types of shoulder arthroplasies, anatomic and reverse and perhaps It's not the context to go into those details, but as it relates to anatomic shoulder arthroplasty, where you're trying to replace the articulation substantially as it exists biologically, the problem is loosening of the glenoid component or the scapular side component of that joint. And we have developed a product which solves that problem effectively.

So we've proven that in a number of publications showing that, you know, biomechanically, it reduces the leading cause of that losing, which is called rocking horse. And then we have two five and nine year publications that demonstrate 100% survivorship of those devices. So it's a great kind of technology to start with. Of course, anatomic shoulder arthroplasty only represents on a revenue basis about 35 or 40% of the overall shoulder orthoplacy market. So it's a great place to start, but we needed to develop the rest of that, you know, kind of bag, so to speak. So our commercial team could be successful. That insect glenoid was actually invented by a surgeon in Charlottesville, Virginia, named Steve Gunther.

Steve is a mature and very successful orthopedic surgeon shoulder specialist in Virginia and is still very involved in the company and we enjoy a great relationship with Steve. He's been a spectacular inventor and founder. So he and a venture capitalist named Mike DeBrease founded the company in 2009 and did kind of the early development work on that insect glenoid. And then the current management team got involved. Genesis Innovation Group essentially acquired controlling interest to the company in 2015. That's when our team got involved. And we kind of took a technology and turned it into a company. And that's, yeah. Got it. And is that where Genesis typically likes to play is sort of like taking, you know, controlling your majority positions and sort of with maybe an existing platform or technology that is legit, has substance,

and then just kind of really, really scaling it into a into an actual company? Yeah, I'd say, the opportunities that Genesis has taken advantage of have run the full spectrum all the way from companies that already had some revenue all the way from napkin sketches, right? And so, however, the sweet spot for Genesis is to get involved in those very early stages. And it provides intellectual information about the operations of the company when members of the Genesis team can be involved in the operations. And it gives a unique view on, you know, risks. Let's put it that way, right? Got it. Got it. Yep, it makes sense. And if I had to, one thing that I thought was interesting as you kind of were telling that that high-level story about shoulder

innovations is, you know, a company was found in 2009. We're recording this in Q2 of, of 2023, and you recently just raised your series D. And I say that just because, you know, for people that are listening that are kind of new to med tech and like the startup world, what is that? I'm doing public math now, right? But it's like you're almost, yeah, 15 or 15 years. In the making here and you're at your series D. I mean, that gives, hopefully gives folks an idea. Like, these are typically long runs. I mean, like, even with our kind of accelerator, it's a hybrid between an accelerating incubator.

We typically like to get involved with more short-term projects, but at the very least, like most of these startup, you know, I mean, they're five, seven-year stents at least, you know,

if not much, much longer. And so, you know, a lot of times you got to be in it for the long road, you know? Yeah, there's no question.

And particularly orthopedics, and particularly within orthopedics joint replacements. It's a long game. There's no question. And I mean, you can walk out of the operating room with a successful operation that two years later is failing, right? I mean, that's, that's, you know, not atypical in orthopedics. And so it is that long game that you have to have a perspective of. Even in the aspect of collecting clinical data,

typical joint replacement, minimum data collection period or follow-up period, two years, I mean, there's many, for example, cardiac devices where either it worked or it didn't work in the lab, right? And when the patient wakes up, you know whether it was a positive or a negative clinical outcome. an orthopedics, that's not the case at all. And so it is a long game. There's no question. And it sounds like with shoulder innervation specifically, like sort of the company was sort of founded on this differentiated technology of,

you said inset glenoid. Do I have that right? That's right. I mean, this is not my will house. I've never spent really any time in it. But since then, you've sort of expanded out the portfolio to really kind of take share within this

broader shoulder orthoposity space, correct? That's exactly right. Yeah. I mean, we started with what we call a microcommercialization model. So took controlling interest in 2015, we put our first commercially, you know, commercial, you know, kind of glenoid in a patient in mid-2016. And we had regulatory clearance on the insect glenoid and what I characterized as a relatively traditional humoral stem product, which wasn't quite the technology with which our customer base was looking for at the time. And we kind of knew that going into it, but which we found immediately, which was a little bit surprising to us, was many surgeons wanted to use our glenolmation.

with an alternative device. So, for example, our team was very involved in Tournier and the development of the first stemless that was cleared in the United States. And so we had many surgeons and relationships that used our insect glenoid on an off-label basis with a simplicity stemless device from Tournier, which was a first, to my knowledge, in the shoulder arthroplasty space. And for us, it was a little bit of a testament to how attractive that technology was to surgeons. So all that to say, the first thing we needed to do is get a current technology humeral implant, which we then released in 2019. We released additional versions, what we call augmented versions of the insect glenoid for highly erosed glenoids. So lots of bone loss that came in 2020.

And then probably a key pivoting point for us was soon after we raised our Series C, we were able to get regulatory clearance and launch our reverse shoulder arthroplasty. and that was in late 2021. And as I mentioned earlier, anatomic shoulder orthoplasy being about 35, 40% of the market, suddenly bringing reverse, dramatically improved our exposure, even with our current customer base to, you know, TAM, so to speak, right?

And that was a, you know, a game changer for us from a revenue growth standpoint. Got it. And so just from a timeline perspective, your series C was 2020, you said? Yeah, late 2020, yeah. So before that series C, you did have clearances and you were kind of,

of, you know, that's correct. Okay, you were. Okay, got it. Yep, we were. Yeah. Yeah. Okay, perfect. Cool. Well, Rob, maybe for the next 20 minutes or so, we'll kind of go back in time a little bit. And I'd really like to kind of glean some of your experiences around, you know, a couple key functional areas, right? Fundraising being one of them, would like to get your thoughts, especially on kind of like early stage prototyping, alpha and beta builds, etc. Just because, I mean, you've seen so much, especially with your experience at Genesis, too. So maybe we'll riff on these topics for, you know, 15 or 20 minutes and then to kind of wrap up with the rapid fire portion of the interview. But let's start out with the former topic that I mentioned, which is kind of early stage alpha and beta builds, right? Where you're trying to,

you know, most startups don't have a ton of capital at that point. You've got to be really capital efficient. You're trying to iterate quickly, trying to get a gauge of like, you know, what's good enough here? So maybe if you can talk to a little bit about like what mistakes do you often see founders make or maybe flip that and say, you know, what have you found to be most successful in those early stages, you know, trying to be capital efficient, but yet also kind of getting to the next milestone too. Yeah, knowing my own story of the best, it's probably easy for me to talk about the mistakes I make and mistakes I've learned from. You know, I think I'm an engineer and I think about things in relatively engineering, you know, technical sense. And that's probably

a majority of startups in the medical device space are, you know, founded by people with at least technical backgrounds or, you know, commercial technical backgrounds. And, you know, I think that it's very easy to get tied up in how, oh, okay, we learn as engineers to be able to articulate a problem that you're solving, right? And I think we as engineers can be pretty good at that. And I think we are pretty good, you know, creating solutions to the problem. But I think we can get a little too caught up sometimes in that technical aspect of what is the problem and what's the solution to the problem. And for me, I think where I've I've missed it at times in the past have been to fail to recognize that even though I solve the technical problem, it just may not fit from a commercial perspective, right?

And I may not be able to express the solution in ways that people understand. The selling methods or the commercial pathways of getting that product to market just may not fit with norms within the industry. I may be asking my customer to change the way they do business, so to speak. And I think there can be just as much innovation in the commercial side of the business as the technical side. And at least for me, you know, that's the area that's been weakest for me. personally that I've learned a lot in and made a lot of mistakes in, right? And I think that, that, you know, early stage startup entrepreneurs should consider carefully is walk through that money to or order to cash process at the beginning of your startup as opposed to waiting to the

end. Because it's, it's, no matter how good your technology is, if that doesn't work, you just don't have a business. Yeah. Yeah. That's great. That's great thoughts. I mean, if I, if I had a summer up, it's like, don't get too caught up in the weeds, I guess, you know, from a technical perspective early on, and yet miss the bigger picture or more specifically, you know, answering the key kind of commercial questions, right? Who's going to get paid? Who's going to buy this? How is it going to be purchased?

What workflows need to be in place in order to make this purchase happen, et cetera. So we chat about that a lot on the program is like that's something that oftentimes gets missed, right? Early on, you're so focused on in most respects probably is a really cool thing that you're working on, right? It's got like all these maybe additional features or benefits or whatever. and maybe solve some real needs, but, you know, thinking about like the, you know, the regulatory pathway, what that looks like, you know, thinking about the economics and how this is actually

commercialized. Yeah, an example of what I'm talking. We have a Genesis has a business in the MRI space that has developed in an absolutely incredible technology. However, in their early go-to-market, you know, kind of efforts, they found that no matter how good their technology was, what they were asking the customer to do was a look at a second monitor and a second set of data in order to confirm, you know, it's a little above, you know, my understanding, but essentially they're asking the workflow to change. And that completely stopped revenue. It was just, that was a non-starter. And so, you know, there's a need to go back and, all right, let's reformulate the product a little bit. And it didn't change the technology, but that was probably something that was identifiable much earlier

in the development process and would have accelerated the, you know, let's just say value creation for the business and patients. Yeah, that's such a good example. It reminds me of a recent conversation. And by the time this is published, I think this particular interview will have gone live as well. But it was with Wauquas Al-Sadique, I believe is how he pronounced his last name. He's the founder and CEO of biotricity.

And they build remote wearables, basically, for cardiac space. And he mentioned one of the early mistakes was focusing too much on clinician feedback as it pertains to the product and not necessarily on sort of the adjacent stakeholders and their work. flows. Interesting. They just missed out on some things, right? Like, you know, they were, they realized that, yeah, yeah, dogs weren't necessarily even using their product or touching their product. They may have some good thoughts around the data they want to see, but in terms of like how the patient or the consumer interacts with the device, etc. It was largely the nurses and

the text that were. Right. Is the other people that are actually pushing the buttons. Yeah, experience their product, right? Yeah. Yeah. Exactly. Yeah. It's kind of aligns with your feedback. I want to be sensitive to your schedule. But let's talk a little bit maybe about Clint Reg and then kind of jumped it to fundraising too. because I know you just recently wrapped up your series D. So I'd like to get your thoughts just on that topic of general. But let's Clint, Klinreg. You mentioned this earlier, like the orthopedic space.

I mean, these are these are implants that it's not like 30 day follow up is going to lead to either reg, reg, reg clearance or approval or even really commercial adoption for the most part. So when you think about this function in general, right, making sure that your reg and cleanse strategies line up and how you approach that. Something it can be kind of daunting, right, to any early stage founder trying to map out, how do I get this done with a certain amount of capital, et cetera. So do you have any thoughts in general? What do you typically advise early stage founders or CEOs? How do you advise them to approach this in general, you know, heading into kind of their first key kind of reg and clinical milestones?

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. We'll get full access to the entire library of interviews dating back to 2010. This includes conversations with experts like Renee Ryan, CEO of Cala Health, Nadine Miarid, CEO of CBRX, and so many others. As a premium member, you'll get to join live interviews with these incredible medical device and health technology entrepreneurs.

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