Medsider: Learn from Medtech and Healthtech Founders and CEOs - Collaborating for Clinical Credibility: Interview with Strados Labs CEO Nick Delmonico

Episode Date: December 14, 2023

In this episode of Medsider Radio, we had a fun discussion with Nick Delmonico, CEO of Strados Labs, the company developing a wearable stethoscope to remotely capture lung sounds.  Nick boasts a dynamic background with an MBA from the Fox School of Business at Temple University and a Bachelor's in Accounting from the University of Delaware. His career includes roles at ECG Management Consultants, PwC, and J.P. Morgan, where he honed his skills in healthcare strategy, commercialization and operations, business planning, and project management.In this interview, Nick talks about how Strados validated its technology through others' research and how starting with a clear understanding of the problem, rather than jumping straight to offering solutions, created significant opportunities for his company. He also emphasizes why interpersonal skills and active listening are crucial to success in medtech, and shares strategies for non-dilutive funding as a way to alleviate initial capital constraints while building credibility at the same time.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 Nick Delmonico.

Be open-minded to different opportunities and different ways to commercialize in MedTech, I think. While on some hands, it can be a very rigid feeling, you know, commercial industry, right? As far as you've got to get a regulatory clearance, you've got to get reimbursement, you've got to get clinical. If you continue to have an open mind, you'll be able to find the right pockets to commercialize to develop your technology and to build, you know, value for your enterprise. If there's no way you put it on paper and plan it. 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 Nick Delmonico, co-founder and CEO of Stratos Labs. Nick boasted a dynamic background with an MBA from the Fox School of Business at Temple University and a bachelor's in accounting from the University of Delaware. His career includes roles at ECG management consultants, PWC and JPMorgan, where he honed his skills in healthcare strategy, commercialization, and operations, business planning, and project management. Here are few of the key things that we discussed in this conversation. First, in addressing complex problems, especially in health care, it's crucial to first gain

a deep understanding of the issue. actively engage with various stakeholders such as patients, doctors, and administrators to gather a wide range of insights. Second, explore uncharted paths that align with your business's unique needs and market position. For example, by understanding the research requirements of pharmaceutical companies, Stratos not only validated its own technology through others' research, but also gathered invaluable data and got paid for it along the way. Third, starting with non-diluted funding methods such as grants and competitions

is a smart strategy for medtech beginners. This approach allows you to maintain ownership. and focus on product building versus the distractions that often come with fundraising. Before we jump into this episode, I wanted to let you know that the latest edition of Medsider mentors is now live. Volume 4 summarizes the key learnings from the most popular Medsider interviews over the last several months with folks like Rob Ball, CEO of Shoulder Innovations, Kate Rumroll, CEO of Ablated Solutions, Dr. Christian Ramdo, CEO of Tempe Health, and other leaders of some of the hottest startups in 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 Medsider Radio.com forward slash mentors. Premium members get free access to all past and future volumes. And 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.

You'll also be able to see all of our playbooks, which are handpicked collections of the most insightful interviews with the brightest founders and CEOs. Whether you're looking to master capital fundraising, navigate early stage development, tackle regulatory challenges, understand reimbursement, or position your venture for a meaningful exit, Medsider playbooks have you covered. And last, considering that fundraising can be one of the most daunting tasks for any startup, We created a meticulous database of investors right at your fingertips. Explore a wealth of VC funds, private equity firms, angel groups, and more, all eager to

invest in medical device and health technology startups. Access to this database is a premium member exclusive, so don't miss out. Learn more about MedSider Mentors and our premium memberships by visiting Medsiderradio.com forward slash mentors. Again, that's Medsider Radio.com forward slash mentors. All right, without further ado, let's jump right into the interview. All right, Nick, welcome to Medside Radio. Thanks for having me.

Yeah, looking forward to the conversation and learning a lot more about Stratos as well as, you know, the experiences that you've gleaned along the way, building the company. So with that said, let's start with your professional background first. I recorded a very short bio at the outside of this interview. But I always like to start kind of with an elevator pitch, kind of of what you were doing, you know, leading up to Stratos. So if you can kind of give us a high level overview of that, That'd be great. Yeah, happy to do that. Yeah, my background is really

in thinking about just healthcare finance and strategy. So I have a background as a certified public accountant. I have an MBA in healthcare management. I work for large consulting companies whose clients were hospitals and pharmaceutical and life sciences, just looking at operational problems, financial problems, and trying to help those companies with all of those, a multitude of business-related issues.

And that's really what drove me to be interested in really the life sciences, medical technology, hospital, healthcare space. But I actually had an aspiration at one point of, you know, while I was getting an MBA, you know, doing a hospital administration. That's actually what I thought I would go into. So, you know, didn't exactly think I would end up in medical technology, although I always liked physical products as well. So, yeah, my background is not clinical, not scientific.

for my business background and healthcare was one of the reasons I got interested in the space. Yeah, that's super helpful. And so in terms of stratos and kind of the core platform that you're building, give us a high-level sense of kind of what the technology does and then also kind of where you're out with it in terms of, you know, Clin-Rag, commercialization, etc. And if you can kind of frame up that what does it do, like let's pretend I'm a freshman in high school, right? And I know nothing about your technology. If you can help me understand what it does, that'd be great. Yeah, at its most core level, what our technology does is it helps us capture

when a patient is wheezing or coughing at home or wherever they may be and notify clinical teams of those events so that they can take the right action to get the right care at the right time. So that's the core technology and really part of our value proposition is enable care for patients with pulmonary conditions outside of the four walls of the hospital so that we can get ahead of events before they get really bad before ER visits, before hospitalizations, and end up having better outcomes for patients. And the unique technology that we developed to do that is an acoustic patch that you wear on your chest that listens to your lung sounds, measures your breathing patterns and uses a set of algorithms to detect when those events are occurring and how much

worse they are getting and then notify the care team so they can take action. Yeah, that's super, that's super unique. And give us a sense for kind of where you're at in terms of development, Ray Klinn and commercialization. Yeah, so we have officially received FDA clearance for our device and our platform. So the hardware patch that I described as well as the software system that color, the data from the patch and displays it for clinicians. And so our clearance, which in the U.S. 510K is essentially the clearance of a medical devices safety to be used in the U.S.

It is a prescription product, so prescribed by doctors for patients. Our indication is all adult populations of patients, so we don't have a specific disease state that the technology has to be used in. And really what we are capable of saying today is that the device can accurately detect changes in lung sounds while worn by a patient, both in hospitals and in health systems, as well as in the home. So a doctor can, as you can imagine, can interpret what we are sending them from the patient as something that could be useful to them clinically to know about that patient. So that's our primary initial regulatory clearance in the U.S.

We are manufacturing the product as we speak. We have a manufacturing site here in the U.S. That's our contract manufacturer, and we are in the process of building out a distribution network for the system as well. So we don't yet fully commercialize and distribute the product to hospitals for prescription today. But I'll tell you a little bit about one of the commercial avenues that we have done and have continued to work in since our clearance, which is helping us build our commercial. strategy. So that's where we are at from a regulatory perspective. And then clinically,

you know, as I sort of mentioned, is we're building out our ability to actually distribute this, you know, across different health systems in different states. You have to, you know, get regulatory, or I should say, you know, certifications, right, in order to distribute in certain licenses to be able to distribute in states. But also you have to develop your body of clinical evidence to support the benefit of the product to the patients. And because this is so new, you know, there's never been a device that can capture lung sounds from a patient, you know, in their own home. We have to establish the clinical evidence that doing so can provide better outcomes for patients. And so we're in the midst of developing that clinical plan

and doing those studies. I got it. I think that really helps kind of set the stage for the rest of the conversation. So we're recording this in early Q4 of 2023. I think your clearance, Nick, came in, was it mid-2020? Does that sound about right? that's correct yeah okay okay got it and so you're kind of in the process of not only building out or scaling up from a manufacturing standpoint is probably the better way to say that but you're also in the process of kind of executing against your your clinical roadmap in preparation for for distribution commercialization and distribution over the next several several years i would imagine so for anyone listening that doesn't get to the full write-up on med site or definitely

curious you to check out the website stratoslabs.com S-T-R-A-D-O-S-Labs.com, just as it sounds, Stratoslabs.com. We'll link to it, of course, in the full write-up, but definitely encourage you to check out the technology. Really, really cool. And as Nick said earlier, it's basically a wearable. This is my description, right? But almost like a wearable that allows you to kind of gauge, you know, lung functionality,

for lack of a better description, right? That's obviously my own way of describing this, but it's really cool technology. So, definitely encourage everyone to take a look at it. So with that said, let's use this next, you know, 20, 30 minutes or so, Nick, to go back in time and learn a little bit more about what you've learned since co-founding the company back in, whatever, mid-2018 timeframe. So you're about, you know, five plus years in the making. I'm sure you've learned a lot. And maybe let's start with the design of the actual, the device itself. I'm sure the current kind of iteration looks a lot different, right, than those first pilot

or alpha builds. And so when you think about, you know, what you've learned through, those development life cycles, are there, are there any like key lessons that come to mind? And on a, in a similar vein, if you could coach up any other entrepreneurs that are trying to move through these early development phases with limited capital, you know, what would your, advice be? Yeah. And, you know, to sort of reiterate, and I think you did a great job with the description, it is, it is a wearable.

And the easiest way to think about it is it's a wearable stethoscope, right? So, you know, the key interests, right, was, well, if you can build a stethoscope, that can be warm and you could capture those events, how can that be helpful to, you know, to patients and to doctors to provide better care and more readily accessible care, right? So that was sort of the question that I was conflicted with when I started the idea was, you know, I think there's this interest in collecting this kind of data clinically. Patients seem to be interested in being able to know when they're having these kinds of pulmonary symptoms of weeping and coughing and changes in their breathing pattern. And it appears as though we can build a technology that is now a wearable

thethoscope, something that's now finally lightweight, you know, wireless and can be inconspicuous enough to, you know, a patient to actually wear it. And so as far as going all the way back, you know, it really started as an idea that I had as a patient. I went to a hospital health hackathon event in Philadelphia where I was getting my MBA at the time. And, you know, I, again, I, talked about my background. I knew healthcare was a messy business and there was a need to have better, earlier interventions to reduce hospitalizations and payment models were starting to change, although even five years later they haven't fully changed, but to what's called fee for service, well, from fee for service to fee for value, meaning hospitals would get paid to have

better outcomes for patients versus just to do the procedures on patients. And as you might imagine, if you're a pulmonary patient, now coming to the ER a lot for your exacerbation of symptoms is no longer, you know, frankly, economically beneficial for hospitals and was never beneficial for patients. And so as a patient myself, you know, I knew the problem as a, you know, professional said, yep, there's a big problem. It's a very expensive care. You don't have great ways of monitoring. And I say, well, you know, I know that because I'm an asthma patient. I've been to the hospital for exacerbation of asthma, which is typically airway constriction, where you start weathing and coughing and are unable to breathe.

And I remember being asked by a doctor, when did your symptoms start? When did you start having difficulty breathing? And, you know, I didn't really know how to answer that question. And as I thought more deeply about it, I said, isn't that a bit strange to think that, you know, seeking care and also assessing a patient clinically asks a question like that? where, you know, there's no objective assessment of that. You don't know the time stamping of it. You know nothing.

And yet this is the kind of the standard of care. And so I said, well, if there was a way to objectively monitor those symptoms of weasing and coughing and short of breath with the device, you know, I could share that information with my clinician ahead of time and make sure I'm on the right treatment plan. So that was sort of the whole impetus for, you know, building this company and looking at this technology. And so, you know, what I always recommend to people is really think about the problem you're trying to solve before just starting to build technology. And in fact, what I did was I started with interviewing stakeholders.

I interviewed patients. I interviewed doctors, nurses, technologists, people who worked for payer organizations within the health care ecosystem and administrators and then, you know, said, hey, is this a real problem? do you actually experience it and do you think there's a need for better tools and what might those tools look like? And so, you know, it helped us really understand the problem before trying to build a solution, right? Because we could have built something that was not the right approach to solving that problem. So, you know, that's when I go back, I actually, you know, my most important, you know, memory was starting with the problem and not the solution was really crucial for us.

And it's like so straightforward, right, in retrospect, but it's so easy, right, when you're knee-deep in your solution, in your thing that you're working on to lose side of the fact that you may be developing or designing a solution for a need that either doesn't really make sense or you don't have a full, really full understanding of. Yeah, so really good advice. And to your point, Nick, about kind of that underlying need, right, of not being able to objectively determine determine when this event, this respiratory event, started, stopped, the degree, etc. Like, it really resonates with me because I remember, like, one of our, our oldest daughters actually did have some pretty significant asthma-related issues when she was really young.

I think, you know, basically a newborn almost through, like, maybe when she was two or three years old or something like that, and that's never fun to have, like, some sort of significant asthma event have to take her into the, into the ER. But if you would have had it, if we would have. have been aware of like a technology like this where you can like like objectively quantifiably, you know, gauge her her lung capacity or lung function remotely. I mean, that would have been extremely valuable. So I can, I can see where you're going with. I guess what I'm saying is I can see where you're going with with the the solution here, right? And being able to do all of that,

to measure all of that, you know, quantifiable, you know, in a quantifiable way outside of the, outside of the hospital. Yeah, no, you're exactly right. Yeah. Yeah. Yeah, so kind of kind of moving on, let's move on to talk about regulatory a little bit. And you already mentioned that your clearance came in kind of mid, mid-2020. I believe you've got CE Mark as well. I think that came sometime, maybe a year before then roughly, something like that. So in essence, you've got some nice regulatory wins under your belt at this point in time. You know, looking back at that journey, right, that regulatory journey,

is there anything that you, that has been very helpful to you and your, team over the years or maybe on a flip side, anything that you would do differently, you know, the next, the next go-round. Yeah. And, you know, for folks who are thinking about, you know, medical technology and regulatory, it's really, you know, again, also kind of sounds a bit obvious, but, and I'll try to, you know, tie to an example, but there are several different regulatory paths that you can take as a medical technology.

And I guess the example for us, right, is, you know, we have a wearable device that's intended to help monitor changes in lung cells. But if I wanted to make a really big claim that, for example, we could predict an asthma exacerbation, well, that's going to require a whole different body of clinical evidence so that the regulators can feel comfortable with that claim. Right. And so, you know, I think it's always really important. And this is something that we learned, you know, and obviously continue to evaluate and assess as, as, as, you know, rules change, but I had to think a lot about what's the most important first claim and first step that we need to make from a regulatory perspective. And for us, it was, well, we need to give clinicians, you know, from the feedback we heard, confidence that can a device that's worn on the

chest actually listen to patient lung sound at the same fidelity that they would hear from their own stethoscope, right? That was the big underlying preliminary question that we received. And And so, you know, with that, we said, okay, well, what's the right regulatory task to go down? What claims do we want to make about really what product this is and what we say the product is capable of doing? And how does that help us get to the next commercial step without, you know, obviously talking about having only finite access to capital, especially at the early stages? You know, how can we do all of that in a capital? efficient manner that derricks the solution moving forward for investors. And so, you know, all I'll say is something that we certainly thought a lot about. And, you know, our predicate device, as an example,

is a stethoscope, right? So all of our testing was that while we weren't on the body, our device can capture lung sounds at the same fidelity as a FDA cleared stethoscope. And thus, you know, we can rely on that data set. So, you know, that's just an example of how what you want to achieve clinically marketing-wise, regulatory and reimbursement are all really, they're really intertwined. And I think it's important, too, as an entrepreneur, you want to swing for the fences, let's say, right? And it would be wonderful to be able to do this really big study that's, you know, randomizing controlled and demonstrates clinical outcomes for the product.

But if you haven't even done the basic principles, which is, well, isn't even accurate you know, you got to start there. And that's what we did. And, you know, so now that allows us as a company to say, okay, well, what's the next thing that we want to be able to prove and start marketing about our products? But now we can rely on its accuracy and its safety for patients. Yeah, so it's a really good point. It reminds me of something that Mike Wallace brought up.

He's most recently, he's serial kind of med tech entrepreneur, most recently sold DeVoro to Boston Scientific. and is now, you know, working on a number of different projects, sits on a lot of boards, you know, I think is a part-time investor as well. And he was like, you know, a lot of big mistake that I see a lot of, a lot of med tech entrepreneurs make is they do try to swing for the fences too early, right? Or they try to take too big of a swing at the plate. And I think what he meant by that was, you know, right away, they're trying to tackle a class three PMA device or something like that. When in reality, they should just nail the basics first, right? Get a five, get one, 510K,

maybe with limited indications, but just get one under your belt, just to get some reps in, basically, in essence, right, before you take your, you know, maybe a bigger swing the next time around. And it sounds like, you know, your advice is somewhat similar. 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 Cala Health, Nadine Miarid CEO of CVRX, and so many others. As a premium member, you'll get to

join live interviews with these incredible medical device and health technology entrepreneurs. In addition, you'll get a copy of every volume of Medsider mentors at no additional cost. To learn more, head over to MedsiderRadio.com forward slash premium. Again, that's Medsiderradio.com forward slash premium. You know,