Medsider: Learn from Medtech and Healthtech Founders and CEOs - Finding Opportunities When Curveballs Come Your Way: Interview with Cytovale CEO Ajay Shah

Episode Date: September 26, 2024

In this episode of Medsider Radio, we sat down with Ajay Shah, co-founder and CEO of Cytovale. The company is helping solve the sepsis problem with IntelliSep, a simple, cost-effective, and quick sepsis test.  Ajay is a serial entrepreneur and engineer with expertise in cell-based diagnostic technologies. Before Cytovale, Ajay co-founded two other life sciences startups, one of which was acquired in 2012. In 2023, Ajay raised a Series C financing round of over $80 million and brought Cytovale’s sepsis test to market. In this interview, Ajay shares why CEOs should immerse themselves in the problem they’re hoping to tackle, how he nurtures relationships with investors over time, and his opinions on making the transition to entrepreneurship from a non-commercial career path. 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 VI. 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 Ajay Shah.

As I think about the last 10 years of SIDIDABEL, I really think of it as probably four or five, two-year chapters. And in each of those chapters, what's been important has been thinking about what is the key milestone I'm trying to move through in this chapter, but then also starting to build that network of people who can give me insight on the upcoming chapter. 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 A.J. Shaw, a serial entrepreneur and engineer with expertise in cell-based diagnostic technologies.

Before his latest venture, Citobale, A.J. co-founded two other life sciences startups, one of which was acquired in 2012. In 2023, AJA raised a Series C financing round of over $80 million and brought Scytovail's sepsis tests to market. Here are a few of the key things that we discussed in this conversation. First, a METEC CEO's first priority is to deeply understand the clinical problem their technology solves. Dive into the physician's perspective, patient needs, and how your product improves overall care. Emmerse yourself where your technology will most commonly be used and get insights from those

on the front lines early on. Second, don't accept capital from whoever offers it simply. because you're desperate for money. Find investors you can build a company with and make an intentional effort to nurture relationships with them. When you do so, they may eventually contribute to your adventure in many different ways, like serving as board members or key advisors. Third, capitalize on every opportunity that arises, especially the unexpected ones. Stay agile as an organization to make the most of these moments, cultivate a network of trusted advisors, and harness your technical skills to sift through their advice, identifying and focusing on the core themes that emerge.

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 6, which summarizes the key learnings from the most popular interviews over the last several months with incredible entrepreneurs like Dan Rose, former CEO of Limfloe, Dr. Stephen Michelson, founder of Ferrapulse, and current CEO of Field Medical, 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 pick up from the founders and CEOs that join 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. To check out the latest volume, head over to MedsiderRadio.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 thematically handpicked collections of the most insightful interviews covering topics like capital fundraising, early stage development, regulatory challenges, reimbursement, M&A, and much more. And last, considering that fundraising could be one of the

most daunting tasks for any startup, we curated a database of over 700 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. All right. Without further ado, let's jump right into the interview. All right, AJ, welcome to Medsider. Appreciate you coming on in the program. Thanks for having me. All right, let's start. Let's start at the top. You've been with Sidovel for over a decade now. So if you can, maybe summarize or give us a kind of a very brief overview

or elevator pitch on your professional background leading up to co-founding the company. Yeah, so I come from a technical background. I'm a, my medical engineer by training and went to grad school at the Harvard, MIT, Health Sciences and and Technology Program. But really, my orientation towards this field began as being the son of a critical care physician and spending my life in and around the world of medicine and now married to a physician as well. And so I have learned just enough to be dangerous and talk shop with them all. But I think what's been formative for me at a professional level is seeing where technology can really intersect and make a difference in the lives of patients as well as providers and hospitals.

Awesome. And give us a high level overview of Intellesep, right, which is your hero product there at Sinovel, kind of the idea for the technology come about or like, why did you choose to work on this, right, 10 plus years ago around this kind of this, the sepsis category? Absolutely. The early detection of sepsis, when you can make the biggest impact, in the disease process has been a challenge that goes back eons in health care. And the reality is that sepsis is the number one cause of death for inpatients and the costliest condition in U.S. hospitals. And so it's a huge, compelling, unmet need. Clinicians today have objective diagnostic tool to quickly identify the other key medical emergencies, such as stemmy and stroke, but lack a clear

objective tool to identify who's at high risk for sepsis and who's experiencing that medical emergency as they first walk through the threshold of an emergency department. And the reality is that nearly 90% of sepsis patients do walk through the front door of EDs in the United States. And so what we're focused on with Intellisep is really bringing to market a first of its kind technology that enables in just a few minutes the ability for physicians to look across their entire emergency department and see who actually is experiencing life-threatening medical emergency, much like an EKG does for a heart attack or a rapid CT does for stroke. Got it's still wild. I think most people that are listening are going to be somewhat familiar

with sepsis, right, or at least heard about it, maybe they have a high level understanding of it. Still wild, that it's still such a significant cause of death. At this point in time, it's cool to hear that there's, it'll be fun to learn a little bit more about your story, have been really cool to hear about entrepreneurs working on such a significant problem. With that said, AJ, give us a little bit of sense before we go back in time and learn a little bit more about the history of Siderbell. Give us a sense for where the company's at currently. For sure. Today, Sidervel is really in a significant growth phase. We have several commercial customers that are either contracted or just coming live really as we speak.

We had one announcement last week about a new clinical facility and several more in the pipeline as we look out between now and the end of the year, that'll come live. At our flagship launch customer, Our Lady of the Lake Regional Medical Center in Baton, Louisiana, they've been using Intellisept for just about a year now. And following implementation in their emergency department, they saw some pretty immediate return on investment. The ROI they saw in terms of cost savings and approved care outcomes were transformative for them.

And that really led them to expand across their entire health system with Intelisap, To give you a couple of the highlights there, they saw a decrease in the cost of care for patients tested with Intellesep by over $1,400 per patient tested, a decrease in mortality. Their risk adjusted mortality index dropped by over 30 percent, and they've been able to see an absolute mortality decrease as well as an impact on length of stay. So some pretty compelling clinical outcomes, really shaping patient's care journeys and improving their outcomes as well as meaningful and financial outcomes for the health system. Got it. Cool. Yeah, you're definitely an exciting point with the company after a decade ago

founding it now in a full-out commercial launch modes. With that said, for everyone listening, we'll link to it in the full write-up on Medsider, but sidowale.com is the website, cytovailc-c-com. Cydow-V-A-L-E dot com, where you can learn a little bit more about the company, Intelisep, which is their hero product, as well as the rest of the folks on I use team. With that said, let's use that maybe 20, 30 minutes or so. Going back in time and learning a little bit more about the hurdles to crop from a cross-functional perspective that you've overcome, right, building building side of L thus far. And first one, I think is especially currently considering you're pretty extensive engineering background, right? You touched on this,

but I think you were being a little bit humble. He's got a PhD and mechanical engineering. So you quite experienced in this particular topic. And so when you think about the very early versions of Inteliseth, right, maybe in years one, two, and three is you're moving through various iterations of the product, where there's some key lessons learned thinking back at that period of time. And maybe another way to frame this up is if you're talking to a small group of younger mechanical engineers that want to work on a startup, what are a couple pieces of advice that you offer up to help them quickly iterate with likely pretty limited capital in those early phases? Yeah. What really comes to mind is ensuring that you take the time to genuinely understand the

clinical challenge you're addressing. Right. And really taking the time to dig in and appreciate where the physicians coming from, what matters to the patients, and ultimately, how does your technology change their care journey? And by doing that, I think it'll really help folks refine up front what matters most. That's what we did at Cidavail. And so to add some color to that, we recognize early on that sepsis really is a condition

that presents in the emergency department, and that's where, like I said, a moment ago, nearly 90% of patients first show up. And so even though a fair amount of the thought leadership in the substance space may come from fields such as critical care or infectious disease or the like, we focused our core product development around meeting that emergency department need, because that's where we saw it to be most acute. And then related to that, we did all of our core development work with patient samples coming straight out of the ED. And so rather than work on contrived samples or theoretical approaches and pure, cleaner patient populations, we recognize that if we're building a solution for the emergency department, we need to develop it there. Yeah, I'm really glad you

touched on kind of that workflow issue, which you brought up first. So crucial, because it's easy, If you're looking at them, not easy. I think a lot of people would tend to gravitate towards wanting to go straight to thought leaders or KOLs in the sepsis arena, right? That may be an entirely different specialty and not the front line of where these devices are used. I'm glad you mentioned that. So crucial to really understand what happens in reality inside a normal hospital in terms of testing for sepsis. I think that's right. And look, all these stakeholders play key roles.

I think what's been important to us is to engage with the full spectrum of specialties. No doubt. Yeah, so many. What are the unique things about MedTech is there's so many different stakeholders, right? Not within just the clinical setting, right? But then you've got payers, you've got various insurance companies, CMS, regulatory stakeholders, et cetera. And list goes on and on. And so thinking about those key players, right, as early as possible is so important.

Let's talk a little bit about on that topic of regulatory. and clinical. Sidavel, you guys, you received your 5K clearance, I believe, based on our research in early 23, and have published a fair amount of data over the years. Thinking about your kind of your Klenraig journey at Sidervel, what do you think are some of the top things, I guess, either that you've learned or that you would recommend other CEOs or founders be thinking about as they begin to build out their own clinical and regulatory roadbass? Yeah.

I think I would really encourage folks to start by understanding the core science that they're trying to improve, right, and then build in the clinical strategy and then the regulatory strategy on top of that. I think that, you know, in our engagement with FDA, we found them to be incredibly thoughtful about the fundamental science. And by engaging with them early, by going through several pre-submission cycles and the like, what we found, was we were able to really align with them on the right, on the right study design, on what would be the appropriate claims to make based on that study design and land on an unintended use that we were really happy with. How critical was that?

What was engaging those really, and I would imagine, fairly frequent engagements with FDA? I think at least in our story, they were crucial, right? Sepsis is still a complex field and host response technologies like ours are very much an emerging set of technologies. And so there isn't clear-cut established guidance to follow. And so that's where having those pre-submission interactions with the agency was crucial to help shape the strategy. Got it. And so if I guess that maybe one of the take-on messages is if I'm a MedTech entrepreneur and I'm debating that question of whether or not

to do a pre-sum as an example, or maybe just to go and submit for a 5K,000 K, do you is generally speaking, would you recommend engaging with FDA through the QSIP process? I definitely would. We got some helpful feedback and we got some feedback that we, you know, not only shed a light on the regulatory process, but helped us sharpen our overall strategy around the clinical studies and the approach to validating the claims that we wanted to make about the product. It never sees it to amaze me some of those learnings that you take away from relatively straightforward engagements. Don't get me wrong. is typically those Q-Sept meetings are a lot of work, a lot of preparation.

But you go to those sometimes thinking, I don't really expect to learn much. This is more of a check-the-box sort of initiative. And maybe for those that are debating this topic or having this question internally, your venture, usually there are some key learnings that you pick up on that oftentimes are unexpected. With that said, let's talk a little bit about fundraising. You raised a pretty significant series C. Our notes say roughly $80 plus million last year, which is a really large round of financing. but you've been at it for a decade now.

So I have a lot of experience not just raising significant rounds like your Series C, but from C to Series A and B as well. So when you think about your experience fundraising for Side Adel, are there a few kind of key insights that have surfaced over the years that you've picked up on and maybe you can offer up some advice for other founder CEOs that are in the throes of raising capital for their startups? Look, I'm not certainly not the first person probably today to say the financing environment is rough right now.

And it was certainly rough last year as well. I think the interesting and perhaps slightly contrarian advice I would give to folks is it matters now more than ever to ensure that you find partners who are well aligned with your approach to building a business. Right. And so while certainly you may need to reach far and wide to at least have first conversations with people, what I found in my experience and I think continues to be true is when, you find like-minded partners on the venture side who really understand why you're building this business, what you find exciting about it, and who are excited about the vision that you're building towards, that then can become the bedrock for a strong relationship that

enables a collaborative diligence process and a collaborative approach to advancing towards securing the financing and then building the business, right? And one of the silver linings of a long financing cycle is that you really get to know these investors as people and such that once you close, and some of them may jump on your board, some of them may be key advisors and investors, nothing changed from the day before the money was wired till the day after other than having the capital in the bank, right? You have established that relationship and communication and trust. That's one of the more difficult things because I think a lot of people listening to this

and there's a lot of earlier stage companies that consume Medsiter content. It's very, it's easy to fall into this sort of desperation. You mentioned, Rated Capital is never easy, especially in this sort of, especially in METACI, especially in this sort of macroeconomic environment, but it's easy to just take money from whoever you can get it from in essence, right? And I don't want to say this is completely definitive feedback per se, but if you take money from the wrong investors, it will almost undoubtedly lead to a lot of challenges down the road. So I'm glad you mentioned that. I think it's hard to really get your head around that when you're just trying to straight by maybe in your seed or Series A rounds of financing, but it's really crucial to ensure that there's alignment with your key investors.

are going to be really important for not only the health of the company, but also future rounds of fundraising. 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 Kala Health, Nadine Maread, CEO of CVRX,

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