Medsider: Learn from Medtech and Healthtech Founders and CEOs - How Recruiting Top Players Sets the Stage for Medtech Success: Interview with Joe Rafferty, CEO of Vesteck

Episode Date: June 26, 2023

In this episode of Medsider Radio, we sat down with Joe Rafferty CEO of Vesteck, a developer of medical devices intended to treat patients diagnosed with aortic aneurysms.Joe is a seasoned executive with a wealth of experience designing, building, and commercializing medical devices. In this conversation, Joe shares his storied journey in the medtech space, from his broad experiences within the cardiovascular arena to his current role leading Vesteck. Joe offers valuable insights on building a high-functioning in-house team, raising capital, and tips for ensuring your commercial launches are successful.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.

If it was easy anybody could do it, that's why you're here. So, you know, get on with it. It's hard. It's not for the faint of heart, and it's not for the people that quit easily. It does separate those that have that stickability, that persistence and tenacity from those that don't. 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, taxed. 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 MedSider interview, I sat down with Joe Raffrey, CEO of Vestech, an early stage device company developing solutions for aortic aneurysms. Joe is a seasoned executive with a wealth of experience designing, building, and commercializing medical devices. He brings a comprehensive understanding of the challenges and opportunities in the field with his deep interventional med tech background. Here for the key things that we discussed in this conversation.

First, recruit the right people and find ways to keep them on board. Compared to working with contractors developing in-house capabilities for critical functions like R&D, gives you greater control and saves you from unanticipated delays. Second, proficiency in interpersonal communication is indispensable. Don't hesitate to seek guidance as mentors can be especially helpful during the early stages of your startup. Also, make sure you understand what investors are looking for in order to increase your chances of raising capital.

Third, for a successful commercial launch, single out top performers within your team, conduct a thorough market analysis and implement effective positioning strategies. Hiring exceptional talent and executing a well-defined plan will set your company up for revenue growth. 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 Nadim Yared, CEO of CVRX,

Renee Ryan, CEO of Cala Health, and so many others. Learn more by visiting medsiderradio.com forward slash mentors. All right, Joe, welcome to Medside Radio. How are you, Scott? It's a pleasure to be here and thank you. I'm humbled that you would even suggest that I could bring some value to your listeners. So thank you for the invitation and I'll do my best to be interesting and informative. Well, I think there's no question that you'll bring some value.

I mean, you've got a long-storied professional career with a ton of learnings and wisdom kind of under your belt. So I think it'll be a fun conversation. We were chatting in the pre-interview before the discussion, how long it's been to actually connect it live. You know, it's been quite some time, but it's fun to regroup and have these conversations. And hopefully they'll be, you know, part fun, part educational for everyone listening. But with that said, if you don't mind, give us like a, you know, a two-minute elevator pitch on your professional background kind of leading up to, you know, your current role as CEO of Aztec. Yeah, I like to say, I'm the luckiest man God ever created, the luckiest Irishman got ever created. And usually when folks meet my wife, they confirm that, yes, he is.

In my professional career, I was very fortunate to kind of listen to the marketplace. And whether it was J&J, the mechanical products division at J&J, CR Bard, getting into some of the membrane oxygenators and open heart surgery, ACS guidance with angioplasty and coronary stents, I was very fortunate to be. on the cutting edge of global strategics that were getting into major markets. And the fields were fallow. And you either knew how to build a business and grow a business or you didn't. And so literally every day it was about moving the needle. And if you could move the needle, obviously it was very reinforcing.

And if you couldn't move the needle, obviously it was right there in front of it. And so it was a great learning relative to how to build a business. but also retrospectively, if something wasn't working, how to fix it. Because if you knew how to build it, you could kind of go back and look at the drawing board and understand where it was falling down and maybe retool it, if you will. That basis, that grounding of great business practices was kind of a springboard for me to move into the startup world. You know, the old confidence thing, maybe overconfidence thing,

if you think you're any good, you know, yeah, you're making a lot of money for Jane J and guidance and so on. So, you know, get into the startup world and, you know, prove it. Yeah. So true that your comment just like maybe over over confidence. I mean, that really resonates with me because it's like you're doing well earlier, maybe the first half of your professional career in large strategic. And you're like, I'm going to take a swing here. And you think, you think maybe, you know, you're definitely going to like hit a double here. Maybe maybe in a triple perhaps a home run. It's like you get into the startup game and it's like, oof, yeah, this isn't, this isn't for the faint of, fainting heart, you know.

So, uh, really, really good, really good point. And, and for those listening that don't get a chance to, um, or that do get a chance, I should say to get to the, uh, the full interview summary for this particular discussion. We'll link to Joe's, uh, LinkedIn profile on Medsider, but you can kind of check out, like all of the various positions and roles that he's had and teams that he's led throughout his career. It's kind of one of those things, Joe, when I look at your background, it's like when I remember early, earlier in my, in my career when I was kind of just getting started, it was like, I looked at someone like you and you're like, wow, that guy has been, has done a lot,

you know, in his career. It's like, wow, these are, these are probably some amazing, amazing stories along the way. But let's focus in and a little bit on Vestech and then we'll kind of go back in time. But you've been at it with Vest Tech since it looks like around mid-2019, early to mid-2019. Give us a sense for kind of what, what you're doing with your technology now, what it does. And then maybe, maybe a sense for the kind of the origin story or how this even came came to be. A colleague of mine, a good friend brought this technology to me. I had finished with a project and rang up a close friend who was an entrepreneur and an engineer. And he introduced me to a couple of physicians, Johnny Doga and Terry Richard. I Doga is a general surgeon from the time when

general surgeons were the king of the hill and Richard, Dr. Richard is a CT surgeon from Paris. And they brought to me a technology and kind of the summary of the technology is physics is a cruel mistress. And if you cross her, be sorry. When they, as surgeons, looked at the early endovascular grafting space, they said, well, of course this won't work, because the physics of an aneurysm are such that you put radial force on already disease tissue and it's going to continue to dilate and give way. So what they did was they created a catheter that has these nitanol sutures already laid flat. For those of us that were in the peripheral vascular, cardiovascular space,

when they make those nitinol stents, they take a hypotube, and they laser cut the hypotube in the shape that they want it. So we do that with our sutures. We've got nightinol sutures that are preformed in a circle. We preload them in a catheter, and we can deliver them securing the endovascular graft to the aorta, either at the initial implant or when the patients come back. And there are about a million patients around the world that had these graphs in place. And unfortunately, they're failing at

quite an alarming rate. So when Dr. Udogan, Dr. Richard brought this technology to me, as you know, I've been in the space forever. I called one of my best friends, Dr. Ramaya, Vanky Ramaya from Arizona Heart. I asked him to be candid. That's the way Vanky is. And I said, tell me. me about the problem, tell me about this concept, and is it a solution? And he said it's a bit of a challenging secret. I was going to say dirty little secret, but these endovascular graphs are moving, they're leaking, and they're causing quite a problem. And Benke's comment to me was, if your device does what they say it will do, you have a wonderful solution, a very simple solution to a problem that's global.

And so Vinky doesn't mince words. If it was not good, he would share his thoughts with me. And what he did was he said, you need to get involved in this. And in fact, Vinkie is on our advisory board, scientific advisory board. And maybe as a testimony to how important the project is, Dr. Sean Lydon is the chairman of the Department of Vascular Surgery. at Cleveland Clinic. He's our chief medical officer. Dan Claire is down at Vanderbilt now. Dan is the chairman of the Department of Basketas Surgery at Vanderbilt. Dan was at Cleveland Clinic. Dan's on our

advisory board. Andrew Holden down in New Zealand, Ramon Verro. We've got kind of the who's who involved relative to communicating the real gravitas, the challenge that is that patients are experiencing in the market today. You know, they get these graphs and they have to be monitored. They have to get a CT scan every year to make sure the graphs haven't moved or leaked. So it's kind of like, you know, living with a cancer type thing where you thought you were healed, you thought you got fixed, but you really didn't. That that graph without endo anchors, endosutures, is what we call ours.

Without endosutures, it can move and leak and, you know, you're back in the hospital with the really complex repair that the majority of the time ends up being an open surgical procedure, you know, years down the road. Nobody's ever healthier years down the road, not usually anyway. So does that answer your question? It does. It does. And for those listening that haven't spent time in the kind of the cardiovascular peripheral vascular space. So if I'm a patient, I have an aortic aneurism, sort of like a distension in your aorta, this one example would be I have, I get a stint graph place, right? So it's a graph that kind of almost seals up that aneurysm. And but the problem is, as you mentioned, Joe, is that these often, they begin to leak. They can, they can move, et cetera.

And so there's not a lot of great solutions to, to solve for that. Best Tech, you allow a physician to, through an endovascular approach, as my understanding, deliver a catheter and almost secure that graft in place to prevent it from, from moving, leaking, et cetera. Is that kind of, you got it? You nailed it right on the head. And the key is, we're literally creating a hybrid procedure. In the open surgical repair, they're literally attaching the graft to the aorta. We're bringing the aorta to the graft,

and we want to create those adhesions so that the aorta's not going anywhere and the graft's not going anywhere. As you say, that blood is excluded from flowing into the aneurysm. Got it. And it's depressurized. Cool. This is my pitch, my interview, you know, pitch for joining the team.

No, joking aside, So give us a sense for kind of where you guys are at in terms of, you know, development, regulatory commercialization. When the technology was brought to me, the intellectual property had a number of years left on it. And my awareness, they're listening to Global Strategics was, you know, they'd love a clean sheet of paper and 20 years of runway on any product that they would buy. Additionally, Kent Stalker, who was a key person at ACS Guideon with their stents, their carotids, their peripherals.

Kent Stalker is our COO and VP of R&D down there in that Temecula, Carlsbad area. And Ted Wolfman and I worked together at, not only at ACS Guidance, but up at Pathway Medical, Ted was one of the founders and inventors of Pathway, in addition to rotoblater. So Ted's down there. I gave Ted and Kent the technology and said, look, we need to arguably reinvent this.

We can wrap IP around it. for the next 20 years. And so what they did was they took a fantastic idea and they made it even better, much more elegant. And frankly, we've got, we'll have eight or 10 or 12 different patents on this technology so that a potential M&A partner now has a clean runway for 20 years. And what they were able to do is really strip down and make physicians have told us that device and the delivery system is elegantly simple so that from a manufacturing standpoint, it's very low cost. And from a, I'll call it repeatability or consistency of performance, it's a very high consistency type of a manufacturing process. So we got the best of both worlds. We've got patents. We've got a design for

manufacture and a design for a low cost manufacturer. And frankly, all of that was done, begin with the end in mind. Here's what we need team and let's go, let's go do it. And boy, did they really succeeded quite nicely. I think you mentioned Carlsbad, Temecula in Southern California. You know, guidance was, I think they still have a facility in Temecula, but it's like, it's one of those hotspots that's sort of underappreciated, you know, in terms of engineering talent, you know, because obviously a great, great place to live in terms of the climate,

you know, and, you know, it's just a lot of legacy, you know, experience there. Yeah. So yeah, come one of those underappreciated engineering and med tech engineering

hotspots for sure. Yeah, you're a thousand percent correct. And frankly, we got a lot of pushback about not using a contract R&D or a contract manufacturer. But my comment was exactly

what you just said when you've got people like Ted Wolfman and Kent Stocker who have done the startups before, but also can go right back into their R&D lab and implementing.

exactly the suggestions that our physician founders and SAB members have suggested. It's really cut our development time and our IP, you know, wrap around, cut all that, the expenses and the timeline, cut it way, way back. Yeah. I haven't all that inside. Got it. And then so just real quick, are you guys, you're inhuman, I think, right? I believe, are you actively commercializing it or just focused on clinical trials right now? Yeah, we're communicating. We've done four presubmission meetings with FDA. Dorothy Abel is one of our FDA consultants, and her mantra has been from the beginning communicate early and often with FDA so you don't run into those costly surprises. So FDA has essentially given us a lot of very positive feedback on every aspect of what we're

doing. We're doing first in human experiences for investors and also to validate the device before we roll into our 100 patient 12-month follow-up IDE. So we'll do a 510K, aptis or Helifix is our predicate device. The FDA has confirmed that. We'll do 100, 105 patients and do a 12-month follow-up. We'll probably consent them for five years because we want to track from a marketing standpoint. We want to know how long-term the device succeeds, but from an

D.A standpoint, it's 12 months. So yeah, right now we've done five inhumans. We'll probably do another five more. And part of that messaging is to de-risk for investors that, you know, this device works and it works consistently. And physicians, it's not just a device that only the elite can use, that it really is a device that's very simple and very straightforward that Joe Sixpack and the community hospital can use and use very safely. Got it. Got it. Super,

super helpful. And those first in human patients are OUS? Are they, yeah. Yeah, we've done two in Riga Latvia. Dr. Denise Crevens is a rock star.

He's been involved in lots of studies that you know. He was involved in NellX. Somebody told me he was the top enroller in limb flow and projects like that. And so he's very prominent OUS. You know, you get to the Vieth meeting and everybody knows them. We've also been up in Canada, Dr. Bao Bui, who was involved in the very early metronic graft clearance studies. You know, he's been around forever, was involved in Aptus. Dr. Bui's done three cases.

And let's see, Sean Leiden went up to Canada. Venki went up to Canada. Dai Yamanucci went over to Latvia with us. dies now, the professor of the Department of Vascular Surgery at, excuse me, the chairman of the vascular surgery at Fujita Hospital there in Japan. So, yeah, we've got five done. Next week, we're actually headed over, back over to Riga to do three more, and we're actually getting ready to head down to Australia.

We've got a wholly owned subsidiary in Australia, Vestek, Australia. we'll take advantage of some tax credits. We'll take advantage of a great clinical environment down there and great operators. And we'll do some additional cases down there. Okay. Cool. Awesome. That sounds like a lot of fun. And listening to you kind of describe everyone that's involved, right, in the company, the clinical work, et cetera. I think that just speaks volumes around the importance of just maintaining connections in the space, right?

And for someone like you, that's in the cardiovascular, the peripheral vascular space, it's clear that you've done that because you've been able to pull in such an impressive group of KOLs. And it just, it really speaks volumes and really shouldn't be, shouldn't be underappreciated how important that is. But with that said, if you know, if it's cool with you, let's maybe spend the next 20 minutes or so kind of going back in time and learning a little bit more about like the very early days of Vestak.

And then I'd like to answer your questions, just kind of general advice questions about different, you know, kind of functions or areas of a startup. but let's maybe first talk about prototypes. You mentioned, you kind of told the story around how you had this technology. It was, you know, whether you want to kind of consider your alpha build, but it needed to be reworked. And so when you think about with all of your experiences in startups and you think about even just, you know, the last several years with Vestec, how do you think met tech entrepreneur should be thinking about those early stage, you know, iterations from alpha to beta, et cetera, you know, especially, you know, under the guise of, you know, you're trying to be really capital. at that point too. So we'd love to just get your, get your thoughts on how to how to best do that. Any words of wisdom for other founders and CEOs listening to this?

Yeah. We had some really significant conversations with investors about doing this work that you're talking about in-house versus farming it out to contract manufacturers. And what I will endorse wholeheartedly when you've got the right teammates, Kent Stalker and Ted Wolfman and their team, they brought along to just rock star engineers. Here's John Whitfield and Kenneth Stalker. Apples don't fall from orange trees. Kenneth is also a rock star. So when you've got people like that,

you don't need to wait for a contract manufacturer or a contract R&D person to fit you back into the queue and try to develop the ideas that you've brought to them. Because part of that whole working with a contract R&D and contract manufacturer is that it is a sinusoidal way if they're working with you now, but as soon as you walk out the door, they've got, they have to book those hours with the next, you know, the next vendor, if you will, you know, the next company.

And so it's a lot of, as they say in the UK fits and starts, you know, stops and starts. And so we were able to mitigate all that because everybody's in house. And literally, I can be in Carlsbad in the morning and have a conversation, you know, with Ted or Kenneth. And by noontime, there are two or three prototypes on the table. table talking, you know, we're talking through which is the best way to go. The other is when you've got that capability and physicians give you that feedback, you know, one of the highest levels of respect you can pay to a clinician, a physician advisor, is to do what they asked you to do and get

that back to them quickly. And so for our engineers to be able to iterate and take that advice and get it back for an approval or an opinion is really, really valuable. And so I've been involved the other way where you're working with contract manufacturers and I will say this is absolutely a faster, more cost effective. And frankly, the output is much higher way to go with R&D and project evolution. Right. Good. There's a really good points. And I think, you know, if you're listening to this discussion and considering or vet it in the process of vetting, you know, a full CDMO or a contract manufacturer, I think you just, as you mentioned, Joe, it's important just to go into that, that relationship eyes wide open. Because to your point, it is often ebdblow. They may be working on, they may have a team that prioritizes your project this week, but then next week it's five others, you know, and you got to ask yourself, how do I keep my project high priority for them? You know, how do I, how do I get them to focus on it, get their mindset to focus on? It's a really, it's a really, it's a

It's a really key challenge, and obviously it sounds like you've been able to solve for that in a little bit of a different way. And I think, you know, just to plug switchback medical, which is one of the CDMOs that we work with at FastWave, they have a unique model where, and I think they do this with almost every project. I'm not entirely sure, but I'm pretty sure that's the case is when you work with them, they have a team that's solely dedicated to your project. They're not balancing, you know, three, four, five others. It's really just an extension of your team and probably rooted in what exactly you're talking about, right? is they've seen, they've gone with the other model and seen just how challenging that can be and how

slow and kind of onerous it can be when, when, you know, you've got a highly talented group of engineers, but they're just distracted and, you know, working on too many projects. So I think it's a, really, really valid point. Yeah. Well, it makes sense, frankly, when the thing that these contract manufacturers have to sell is an hourly wage. You know, they've got engineers. And if they're not, if they're not working on your project and generating revenue for the business, and they've got to be working on something else to generate revenue for the business, that's the commodity they have to sell is an hourly wage. Right.

So anyway, that's what we decided to do early on, and that's how we got our prototyping done rather quickly. And frankly, when we did the prototyping and the design, that's where all of those patents came from, you know. So the fact that our team developed the device and can write all the IP around what they developed is, you know, it goes hand and glove. Yeah. Yeah, no doubt. No doubt.

Let's transition to another topic, which is, you know, equally important, if not more, which is fundraising, right? And as the, as you know, as the CEO of a startup, other than maybe building the team and connecting the right people, you know, keeping money in the bank is maybe the most important or right. up there, you know, with the key responsibilities as a startup, you know, founder or CEO. So let's discuss this a little bit. Like, it's have this belief that raising capital, especially during the early stages, C, Series A, is probably some of the most difficult challenging capital to raise. I mean, once maybe you're into Series B, series C, not that it gets dramatically easier, but, you know, you're de-risk, you're more de-risk at that point, right?

You've got, you know, a syndicate, ideally, of investors at that point that are, that are going to, you know, continue to support the company. if you're executing in the right way. But those early stages are tough. So what have you, I guess, what have you learned maybe at either at Vestek or just in previous experiences about like what it really takes to get, you know, some of those early stage rounds closed? 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 2000. This includes conversations with experts like Renee Ryan, CEO of Cala Health, Nadine Miarid CEO of CVRX, and so many others.

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