Medsider: Learn from Medtech and Healthtech Founders and CEOs - How to Pull the Right Regulatory Levers: Interview with Linear Health Sciences Founder and President Daniel Clark

Episode Date: October 26, 2022

In this episode of Medsider Radio, we sat down with Dan Clark, President of Linear Health Sciences. Dan Clark started his career in the private sector at Parker Hannifin, a Fortune 200 organization that he calls “the largest company you’ve never heard of.” After experiencing the medtech innovation cycle many times over, he was eager to innovate himself. In 2015, Dan teamed up with Dr. Ryan Dennis to start Linear Health Sciences, a medtech company that created the Orchid, a device designed to mitigate unwanted or accidental IV dislodgement.In this interview, Dan explains when and how Linear raised capital, how it has navigated complex regulatory pathways, and why you need to be your own worst enemy as an innovator.Before we jump into the conversation, I wanted to mention a few things:If you’re into learning from proven medtech and healthtech 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 healthcare 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 sent to their door at no additional cost. If you’re interested, go to medsider.com/subscribe to learn more.Lastly, here's the link to the full interview with Dan if you'd rather read it instead.

As innovators in this space, the best thing and almost also the most hair-losing thing you can do is continue to be your own worst enemy. You need to be asking yourself the hard questions. What have I not done? What have I done wrong? What should I be redoing? What have we done incorrectly? And the core thesis of our company from the very beginning is if there's a question, we're going to do it right. And no matter what, we're going to push harder.

We're going to do more. And we're going to be compliant. Welcome to Medsider Radio, where you can learn from proven medtech and healthcare thought leaders through uncut and unedited interviews. Now, here's your host, Scott Nelson. Hey, everyone, it's Scott. In this Medsider interview, I sat down with Dan Clark, who started his career in the private sector at Parker Hanofen, a Fortune 200 organization, which he calls the largest company you've never heard of. After experiencing the MedTech innovation cycle many times over, he was eager to innovate himself. So in 2015, Dan teamed up with Dr. Ryan Dennis to start linear health sciences, a MedSec Company

that created the Orchid, a device designed to mitigate unwanted or accidental IV dislodgement. Here for the key things that we discussed in this conversation. First, don't skimp on research during early stage development. Soliciting feedback from a broad range of stakeholders before commercialization will set you up for a smoother process when it's time to scale. Two, know your skill sets. Find the right partner and divide and conquer. Dan focused on product development, marketing, and regulatory, which freed his co-founder to tackle

fundraising full-time. Third, for a smoother regulatory pathway, bring the FDA into the conversation as early as possible to foster better understanding. Be your own worst enemy, asking the difficult questions to ensure you've done all you can to be compliant. Okay, so before we jump into the discussion, I wanted to let you know that we just released the first volume of Medsider mentors. A print-based book that summarizes the key learnings from my favorite Medsider interviews over

the past six months. months. Look, I fully realize 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 a way for you to learn from the best thought leaders in our space in one central place. Here's a teaser of what you'll see in this first volume. Gar Hong Kong, founder of Health Quest Capital, teaches you how to successfully pitch your startup. Patricia Ziliak, CEO of Ivinsens, discusses what you really need to know about clinical trials. Jared Bauer, CEO of Ionic Sciences, shares best practices for avoiding

obstacles in your startup journey. That only scratches the surface, so if you're interested in learning more, head over to medsider radio.com forward slash mentors. If you're a premium medsider member, you'll get free digital access and a print version sent straight to your door. 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 Erica Rogers, CEO of Silk Road Medical, Dr. David Albert, founder of Livecore, and so many others. Learn more by visiting MedsiderRadio.com forward slash mentors.

Again, that's Medsider Radio. com forward slash mentors. All right, without further ado, let's get to the interview. All right, Dan, welcome to MedSider Radio. Hey, thanks for having me, Scott. Yeah, really looking forward to this discussion. We had a little nice, nice little chat, kind of free recording. So I think this should be a fun, lively discussion for sure.

But let's start out with a little bit more about your background. If you can kind of give us an elevator pitch and maybe, you know, a few minutes about what you were doing leading up to co-founding linear health. Yeah. Yeah, I certainly can. So I follow kind of a semi-consistent path with a lot of founders. I'm technical by degree and by way of engineering. But I'm not the type of engineer that anybody wanted actually doing any true math.

I'm the guy that was able to look at something, tell you if it worked or not, theorize the concept, amend things, and then hand it off, right? So when I first went into the private sector, I guess, I was working for a big Fortune 200 called Parker Hanifin. And I don't know if you've heard of it. I'd explain it as the biggest company nobody's ever heard of. And the reason is because they generally have bits and pieces and everything. heavy in automotive and oil and gas, seals, gaskets, tubing, those types of things. And they have a small sub-segment that was medical device.

And it was never something that was actually on my radar. But what happened was I went through the training program with them and they said, hey, we need a sales engineer that can speak technically, but at the same time also kind of has the vibe and feel for med tech. I had been exposed to it at this point and said, you know, this sounds like it could be a great fit, you're going to move me to SoCal, I'm in all board. Let's go. And that's where the history started. And I started experiencing what the MedTech innovation cycle started to look like. Now, we weren't the end manufacturer or the end developer. What we did is we included bits and

pieces. We created components or subassemblies for the Medtronics, the COVIDians, the carefusions of the world. So it was an interesting perspective because it It was predominantly out of baseline manufacturing, what's capable. And throughout my tenure at Parker, that experience kind of expanded, whether it was territory management or specific product line management. I actually, towards the end of my tenure there, ended up managing strategic relationships internationally, actually for the Medtronic-CoVIDian relationship was how I ended my tenure there, where I was responsible for entering and exiting strategic business, finding more value-based

approaches to things, especially when it came to manufacturing for these companies and help streamline not only their profitability, but ours as well in the same game. Towards the end of that time frame, I was starting to get antsy. And the reason is because at that point, I was still pretty young, pretty brash. And a lot of the senior leadership at the company wasn't, I weren't exactly fans of my methodologies because their approach to things where, hey, we've been successful forever. This is how we've always done it. This is how we're going to continue to do it, which I know to a lot of the other innovators on this have said or I'm sure feel is that's nails on a chalkboard, right? I can't stand the idea of not having a new innovative way to do things

or a different perspective. And so there was some tension in that respect. And so I started looking at other opportunities knowing that I at some point I wanted to do something myself, but I didn't know what and I didn't know how because, hey, I'm not a physician. I'm not a clinician. But I fell into a market that I love. So I started just kind of keeping tabs on things, stretching my arms out with friends and family, but really a passive approach to things. And what this kind of stems into is kind of how linear it came to be is a friend of mine from Purdue said, hey, I'm out in Oklahoma City. I'm working. A friend of mine's a physician or a hospitalist here. And he's got an idea for something. I think it's right up your alleyway.

We were hoping we could at least gut check this forward through you. I said, yeah, let's shoot it across. It was an interesting, interesting element because at that point, I was young and I was ignorant. And I thought, you know, what I like to do, my kind of thesis on life still to this day is I like seeing cool people do cool stuff and if I can help you along the way I'm going to do so. And so they ran the idea, the initial concept of what has now become the organ safety release belt by me. And I said the theory of this works. Here's your pathway, right? 10,000 square or 10,000 feet up. Let's take a look at what this is going to look like and how we're going to get from A to B. Here are your black holes. Here's what's missing. White my hands of it.

good luck. So I got a call about two. And this was like 2015, 2016 timeframe? Yeah, this was 2015. Yeah, we've been after this a while. Yeah, just for everyone else listening, if you, if this is going to late to this game a little bit, we're recording this in kind of the back half of, we'll call it the back half of 2022. So, you know, about seven years, right, posts you seeing this idea coming across your, your table's on this piece. And we're finally into commercialization. So, yeah, nice and efficient time use there, right? No, no, no. I mean, we're joking around, but like, so many net tech projects, they kind of start that way, right?

Like, I'm involved with one that I co-founded, and we started working on it probably around that same time frame, right? But didn't, you know, you know, people I was working with at the time, they were doing, you know, other projects and, you know, the timing just didn't work out. But we picked it back up, raised the seed around, and the team that's working on the project now at Crossfires. moving amazingly fast. And yeah, so, no, I get it.

I get it. These MEPAC projects and kind of have, you know, kind of have some interesting stories for sure. So, no, they do.

And especially when, you know, once you take it away from part time, this is a really cool project to, to, okay, I'm bootstrapping to, okay,

well, we actually have to go raise capital. You know, these are, these are major inflection points in terms of growth for the company in and of itself. And these, you know,

for us, and it sounds like the same idea. And for many others, it takes time to get there. We didn't raise our first round of capital for two years. Yep, yep. And that's so, I'm glad we're even talking, because it wasn't kind of on the list of questions, so to speak, right?

But like, that's such an important point because there's a lot of people that listen to this program that are like you and the, whether they're engineers, non-engineers, physicians, whatever, but they've got some great idea, right? But it's always, it never turned into something because it's always like a side project, right? Right. And there's, and these, you know, anything in life sciences, especially med tech, you're, I mean, you can only work on it so much on the side for, you know, at time, but they all need capital, a fair amount of capital. Unless you've got, you know, a couple hundred, maybe a couple million

and like throw at something, you know, it's never going to see lift off, right, until you go raise, you know, raise a small round of financing. So anyway, I'm sorry to interrupt, go ahead. No, no, not at all. You brought up a great point. It's actually one of those things that we had to learn. We thought at the very beginning that we could bootstrap it. And that's, you know, that's based off of a lack of knowledge of ever having done this before, right? But we work within a market that is in an absolute necessity. And the question is, when do you pull that trigger, right? Where are you going to do that in your own timeline?

And that can be tricky to a certain extent because not only do folks understand that you need money in this arena, but they also want to see proof of concept, they want to understand market. You have to have your eyes dot and your teeth crossed to even cross that bridge. And that takes time too. Yep. So really interesting stuff. Yeah. No, no doubt. So, so you, so it sounds like you were, you know, you're working on this for time period, but eventually to your point, needed needed to raise some money, needed it needed to become like a real thing, right?

And so talk to us, you mentioned that, that Orchid is the kind of the main device, right? It sounds like you are in commercialization. So give us a high level. And before we, I guess we go, we go back in time, right, and revisit some of these things that you work through. Give us a sense for kind of what, what, it is and like, like, where's the company at right now? I mean, are you, are you like full on commercialization, limited market release? Like, what does that look like? Yeah, good question. So, so first and foremost, yes, we are full-scale commercial. We are having a structured approach to it, but anybody that is interested can certainly go get in any physicians or hospitals

to take a step back and kind of explain the product in and of itself. The Orchid Safety Release valve is designed to mitigate unwanted or accidental IV dislodic. The theory of the device itself is extremely simple. It goes between an IV extension set and an administration set. And on tension, it separates and seals the system on both sides, creating a sterile barrier. Once that happens, your IV pump sends you an occlusion alarm. You know something is wrong. To return back to treatment, you simply have to replace the separated valve halves,

dispose of them and put a new, will prepackaged one on, and return right back to treatment. Now, it's important to understand what the status quo is or the current standard of care, why this is important, is the current standard of care is if an IV gets dislodged, well, then everything, the IV, the tubing, whatever you're infusing, the bag of treatment, all of that is disposed of. So it's pretty waste intensive. Now, we evaluate things based off of simple concepts like saline, but imagine you're doing something more critical, whether it's chemo or TPN. The dollar value that is associated with the waste goes exponentially up. You're introducing new needles, more traumatic experience for your patients, you're looking at redundant

activities for your clinicians. We're aiming to mitigate all of that by replacing a simple valve set in comparison. So where we're at right now is we are commercializing. We are on body. It is early stage still. We've only been in market for a couple months, but so far the subjective feedback has been overwhelmingly positive. And I think a lot of the reason for that is is education. The arena of medical tubing dislodgement is not necessarily an arena that is actually tracked. In fact, it's not considered a reportable event. When we don't have a reportable event required, well, you start losing traceability as to how big of an issue something actually is. While we aim to change that in the long term, what we're seeing and what we're educating on

is more transparency to what IV dislodgment actually looks like. And when you start looking at it for a peripheral IV, the most basic of IVs, the easiest access, you're looking at reported percentages anywhere between around 9.5 to 24%. Now, you go up chain when you're looking at like a central line, that number is exponentially lower, but the criticality of IV recite retention there is exponentially higher. Beyond that, going into alternative applications, we start seeing medical tubing dislodgement as a whole as a rather large issue, and it's been fundamentally just accepted a status quo when it doesn't have to be. And quite honestly, it shouldn't be. Got it. So that's kind of the background of where we're at, where we're going. But right now,

we're excited because it's the early stage commercialization and the education, the most difficult, but also the most exciting component of this. Got it. That's really interesting because and just so I understand, basically what you're saying is it happens a lot, right, more than people even expect. And you mentioned earlier the cost around that. I didn't realize that. Like, you take an expensive drug that's being infused through an IV. And that's just like my, if I'm, if I'm, if I'm being infused right now, you know, via purple IV, it gets dislodged. That just goes, that's like standard of care just to toss that.

Wow. No kidding. That's it. Now, now you could take it one step further. And if somebody is receiving chemotherapy and they receive treatment, the standard of care if you lose an IV is they throw away everything. But the problem is, chemo is a very critical application. right? They cannot mess up how much you've had. So what they do, instead of looking at it,

estimating how much fell on the floor and hoping they figured out how much you received, they say, we don't know how much you got. Best of luck next time. We'll see you next round. Right. Which is fundamentally impactful for these highly intensive treatments that folks are receiving. So taking a very basic approach to how we can impact patients, this is why we came up with this device to have a fundamental impact on the more than 90% of folks that get IVs when they're in a hospital, whether it's saline or TPN or chemo. Got it. Got it.

That makes sense. And super helpful. So if you're listening while you're driving or, you know, doing some lawn work, you know, during the fall or whatever, you want to learn more about the device. Head on it over to linear sciences.com. There's a, there's a lot of helpful information on their website. Linear sciences.com is the place to learn a little bit more. So Dan, now that we've got it kind of, we've sort of level set on kind of where,

where you guys are at, let's go, let's go back in time and talk a little bit more about kind of what, what this device initially looked like. You mentioned kind of you were, you know, this idea came across your table or your, your desk, so to speak, you know, virtually. And it looked like it had legs, right? But I'm sure there was probably a lot of key lessons that you learned developing some of the early alpha and beta concepts. So talk to us a little bit more about that.

And really maybe frame that up within your experiences, even at Parker Hanifan, because I'm sure you probably saw a lot of mistakes that companies make in these kind of early formative years. So maybe let's start there. Yeah. It's a great question. So first and foremost, when it first came across my desk, it actually wasn't vascular access. The idea was born and bred out of my business partner, Dr. Ryan Dennis, where he had a patient who dislodged her chest tube. through a myriad of issues, that chest tube was not replaced for about six hours. Now, when that happens, what's essentially occurring is you're suffocating.

That lung is filling fluid. It's not draining. So his approach to this was there has to be a better way to address this and get a warning system and manage the tubing application, not lose our site. And when it came across the desk, the first thing we looked at was exactly this. we said, hey, the idea is, it's got legs. How do we impact the most lives right off the bat? Well, inherently, with more than 90% of all patients receiving IVs,

it would, of course, be vascular access. And that's how this originally really started gaining steam, looking at the market, understanding the impacts of treatment, and where we need to go. Now, I think one of the most critical aspects that needs to be addressed early on when you're going through alpha-beta and doing some of this product iteration is really getting feedback from the from industry i've heard this said before and i think these are the folks that you tend to find uh you see finding more and more

success is the more that you involve them in the process not just not just key opinion leaders not just hey we're doing a roundtable but day in and day out having them feedback provide guidance uh use cases applications physical handling elements uh visual aesthetics i'll give you an example, our device is purple for a reason. You can see it against a white bedside. And that was directed feedback. It sounds so simple and so basic, but it has such a fundamental impact on the day-to-day use cases of these nurses. So getting them to weigh in, I think, is one of the most important components to it. And more specifically, on our side of things, what we needed to understand is our market. What could the market bear when we're looking at the business case? Price points,

you know, these are disposable devices. We need to understand the market that we're playing in. And we also need to make it repeatable. So manufactureability. And this is where the Parker-Hannafins side of things kind of came into play, conceptually understanding what was repeatable, what's not, what's scalable, right? So we don't want molds that are making one to two components each time. We need to scale this thing exponentially.

So that was a building block that we put into place at the forefront of the company. to make sure we could repeat this, scale it effectively, and that we weren't pigeonholing ourselves with too tight of tolerances, too restrictive of geometry, and that we could scale this not only with the individual product, but across a platform of products for all of medical tubing. Got it. I use the example of like enteral feeding. That's a great one.

All we have to do is swap out the connectors, and we actually have the functional capabilities to address it. Yeah. Those are really great points. And I think most people that are listening this, right, they're, the first kind of point that you made around getting VOC, right, voice to customer research,

whether it's from physicians, nurses, tax, whatever, is crucial for any device, especially if it's pretty innovative or it's different, right? It's not, it's not like a Me Too type of product like, like something else, right? But you're doing something fundamentally different with Orchid, even though it's relatively straightforward. It is fundamentally different.

But those points that you made around like being, you know, pivoting to profile IV. as an example, understanding that, look, if like the typical path for a MedTech startup, like the market just simply, it simply needs to be big enough, right? You could be solving, you could be solving a really like critical need. But I mean, unfortunately, like that's the world we live in in MetTech. Like the market has to be big enough because, you know, all of these projects are going to require, like we discussed earlier, all of them are going typically require, you know, a fair amount of capital, right? Maybe in some cases very significant capital.

And if the market's not big enough, you just not, there's not going to be a path forward, right? This is just kind of the cold hard reality. But you also brought up like a really interesting point around looking at the device and understanding like how does this look back at scale from a manufacturing standpoint, which I think is like most kind of entrepreneurs that I interact with via this podcast and MedSiter, they don't, they haven't even thought through that at all. They're so focused on this interesting idea that they have, right, that solves what appears to be a pretty clear need, but haven't even.

remotely thought about the manufacturing and scalability of that. So super interesting that you brought that up because it's crucial, it's crucial, especially for a device like yours, right? Yeah, absolutely. And it's certainly appreciated. You know, this is, it's a construct of my history and my perspective of understanding materials and manufacturing. Again, not being the one that would be doing the finite element analysis or the mathematics behind it, but understanding that this was a core building block of what it needed to be. And I think, I think that is a crucial step that is becoming more transparent to innovators, especially in the med device space, as it continues to evolve. That's, it's something that needs to be taken more into account.

And I think, I think people are seeing it. Right, right. And maybe the, maybe the key take-home lesson on this particular point is if you, if you're working, if you're listening to this and working on, you know, a pretty, pretty interesting idea, and maybe the market is big enough, you need to think about, like, what does this, what does this look like when you hit, you know, when you hit, commercialization, right? Is this something that you can truly scale up? Or is it designed so uniquely that like no one's going to want to take it on? It's going to be like an absolute nightmare, right, to build out a line or even to transfer a line, et cetera. So like those are really, really important questions. Obviously, you need to have something to work with in order to like, you know, go there.

You know, there needs to be, you know, something legitimate that you're working on. But nonetheless, it's super smart to be thinking about that stuff, you know, early on, you know, in the process. Yeah, I think it's safe to say that everybody's initial couple form factors, whether it's alpha or beta, have nothing to do with that. It's how do we make this thing work, right? Right, right. And you cross those bridges and you start to iterate down with the knowledge that you need to get to that point. Yeah. And at least as long as you can have a pathway, I think that's, that's one of the key takeaways there. Yeah. Yeah, no doubt. Let's use that and kind of transition to the topic of regulatory, right? And I know, you know, we're recording this before you're doing this

panel with Mark Deval and his firm. But we were chatting about this in kind of the pre-interview. When I heard about this panel that you were doing and it caught my attention. And so I reached out. And then I started doing some background research on you, on linear. And I was like, wait, like this device seems really straightforward. You know what I mean? It's not like a heart valve. Like how like how complicated a regulatory path is this. But it sounds like it has been. So maybe if you can, you know, I'll kind of pass the baton to you, right? And like you kind of tell us a little bit more about sort of the what you've been through and really maybe with a focus on kind of, you know, key lessons learn for anyone else that's listening that that maybe thinks

the reg path is very straightforward, but, you know, they may be in for a bit of a rude awakening. Yeah. We've had an interesting path. So first of all, I'd like to talk it from a macro perspective on our timeline. We've been around since 2015, 2016. You look at our bootstrapping timeline. That's about two years of it. How much you're really getting done there outside of concepts, right? And then we had our development period. And then we ended up, I'll put the term nicely collaborating with the FDA for getting close to three years in terms of the regulatory pathway, where we received multiple NSEs, multiple back and forth conversations.

We attempted presubs that got us nowhere. So if you look at the overall time frame, the product development, it actually didn't take that long. It's the regulatory headache that we took on, kind of put us in a different. atmosphere. And theoretically, you're right. I mean, I don't know anybody that hasn't said, you know, the function of this device is not, not outside the box of thinking. I mean, it's like, if you've ever seen somebody drive away from a gas station and the valve closes and the terminal's still up and the hoses with the car, right? When they drive away with that hose in their car, it's the same

thing. The concept exists. So what we ultimately came down to is about getting close to a three-year pathway where we finally succeeded after a formal appeal. But in the mix of all that, the conversation that we had was relatively convoluted. And I think what we ultimately distilled it down to was that the risk profile that the review group associated with this type of device was not indicative of users or the market as a whole. So what we were doing is we were building for clinicians, building for nurses, using the regulatory compliance structure that's in place, validating it, attempting to go through third party or they agreed that we should have been substantially equivalent. But then the feedback that we were receiving was inconsistent with that. And it got to the point where I was on a rather high-level call with the agency.

And my stress bubbled up to the top. And my exact words were, this type of regulatory environment is what is killing innovation in this space. if you're not willing to nudge a little bit in a 510K or de novo pathway, how these things are built, how they're implied, then we're not going to see innovation in our industry. You're going to see the status quo, and it's going to be a bunch of Me Too products. And that raises a lot of heartburn for me as a whole.

But in more specifics to the Orchid Safety Release Belt, what we had to do is we had to go back and run enhanced testing, really got put through the ring around things. that no normal device I don't think actually would have been. Extended microbial ingress testing that, I mean, the world thought leaders who I had on the phone because of the point I didn't think of themselves. They said, this is insane, right? So there are some explicit examples related to that microbial ingress product function.

Their expectation was that we removed people from treatment instead of saving treatment, which again, from an industry perspective is the fundamental opposite. The status quo removes people from treatment. We're trying to save it. Right. Right. So it's these types of things, these narratives. And I think some of the key takeaways are early, early conversations with the agency.

I say all these things with the understanding that I need to put out there that they're trying to do the right thing. They're trying to bring out safe products, things that don't negatively impact or adversely impact folks. I understand that. So early conversations and education are key. The earlier that you can bring them in, they can better understand. stand things, the better chance you have of streamlining your regulatory pathway, more explicit

outcomes or reports or data that's necessary from them. We didn't have that luxury. We couldn't go sit in a room because when we started a whole this, we all hit the COVID lockdown. So the opportunity to go sit in a room where you can flesh things out rather simply was lost. And you're restricted to a Zoom call where you had 45 minutes and the second that 45 minutes was up, the screen would go black. So what can you really get done? And that was some of the impacts. Hey there, it's Scott, and thanks for listening in so far.

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