Medsider: Learn from Medtech and Healthtech Founders and CEOs - Key Mistakes to Avoid in Early-Stage Medical Device Development: Interview with Bob Paulson, CEO of VentureMed

Episode Date: April 26, 2021

In this episode of Medsider Radio, we’re catching up with Bob Paulson, the CEO of VentureMed, a peripheral vascular medtech startup. Bob has over two decades of medical device executive experience, as the CEO of NxThera and Restore Medical, and in leadership roles at Endocardial Solutions, Advanced Bionics, and Medtronic. Bob’s excited multiple medtech startups, and today, he’s going to share his vast expertise, including capital fundraising tips, keys to early-stage medical device product development, and best practices when it comes to clinical evidence and insurance reimbursement. But first, here’s a bit more on Bob’s background:In addition to being CEO of VentureMed, he serves as a Director for Veran Medical Technologies and Spineology. Before he got started in medtech, he worked for General Mills, got an MBA from St. Thomas, and went to law school at Vanderbilt. Bob got involved with medical devices at Medtronic in the early 90s and later was CEO of NxThera, which commercialized benign prostate hyperplasia therapies before it was acquired by Boston Scientific. Bob is one of the most knowledgeable executives in the field, and I’m excited to get his take on the business landscape in today’s rapidly-changing healthcare environment.  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 exclusive Ask Me Anything interviews and masterclasses with some of the world’s most successful medtech founders and executives. Since making the premium memberships available, I’ve been pleasantly surprised at how many people have signed up. If you’re interested, go to medsider.com/subscribe to learn more.Lastly, here's the link to the full interview with Bob Paulson if you'd rather read it instead.

Yeah, so I think they're probably, in my mind, in my experience at least, there's three kind of primary mistakes. The first one is not beginning with the end game in mind. In other words, what do the outcomes need to look like and how are each of the functional pathways, which are really inextribly intertwined, how are you going to have to progress along those pathways to get there? So, you know, when you start with product development, is this a research product with little development, or so little R or Big R little D or is this, are you developing the next better stent for PTA? So there's not a lot of research, but it's all development, right? And whether you have to then develop science to demonstrate the viability,

followed by the safety and efficacy, or whether it's just simply really optimizing a development, that affects the respective kind of development risks and timelines on the development side, but also on the regulatory side. 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. In this episode of Medsider Radio, we're catching up with Bob Halston, the CEO of VentureMed, a peripheral vascular med tech startup. Bob has over two decades of medical device executive experience as the CEO of Nexthera and Restore Medical and in leadership roles at endocardial solutions, advanced bionics, and Medtronic. Bob's exited multiple MedTech startups and today he's going to share his vast experience

including capital fundraising tips, keys to early stage medical device product development and best practices when it comes to clinical evidence and insurance reimbursement. But first, here's a bit more on Bob's background. In addition to being CEO of VentureMed, he serves as director for Varen Medical Technologies and Spinology. Before he got started in MedTech, he worked for General Mills, got an MBA from St. Thomas and went to law school at Vanderbilt. Bob got involved with medical devices at Medtronic in the early 90s and later was CEO of Nextera, which commercialized benign prostate hyperplasia therapies before it was acquired by Boston Scientific.

Bob is one of the most knowledgeable executives in the field, and I'm excited to get his take on the business landscape in today's rapidly changing health care environment. Okay, so before we jump into the conversation, I want to mention a few things. First, if you spend any time in the med tech or health tech space, you probably understand how difficult it may be to hire the right physician. partners. Whether you need help with voice of customer research, advice around clinical study design, or something more straightforward like content review. Whatever the task, instead of spending weeks searching for physicians or paying thousands just to meet one, I highly recommend you check out FlipMD. It's a physician hiring marketplace where you can seek the expertise of thousands of physicians in one simple platform. FlipMD features 2,000 plus physicians in every specialty

and their marketplace is growing every day. When you post your project and set a rate, physicians then compete for the job with bids and then you make the choice on who you want to hire. To get started, it's really simple. Just register your account, post your project, check out the bids that come in and then hire a physician. No finder's fees, no obligation, and no risk. It's super easy. Even better for the Medsider community, FlipMD is offering to waive their normal transaction fee for the first 60 days.

So just head over to MedsiderRadio.com forward slash FlipMD for all the details. Again, that's MedsiderRadio.com forward slash FlipMD. Okay, second, if you're into learning from proven MedTech leaders and want to know when the 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. If you want even more inside info from MedTech experts, think about a MedSider premium membership. We talked 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 exclusive Ask Me Anything interviews and masterclasses with some of the world's most successful MedTech founders and executives. Since making the premium memberships available, I've been pleasantly surprised at how many people have signed up. So if you're interested, go to medsider.com to learn more. All right, without further ado, let's get to the interview. All right, Bob, welcome to the program. Appreciate you coming on. Thanks, Scott. It's pleasure to be here. All right. Just like most of these interviews, let's start with your personal background. And if you can, just maybe provide an elevator pitch. And maybe we'll spend a little bit of time talking about, you know, the fact that you didn't start

your days in MedTech, but, you know, walk us through at least at a high level, kind of your career leading up to this point. Yeah. So the first 50, years of my career were really a combination of, I went to work for General Mills at a college and then got an MBA, but really missed, I never lost your to go to law school. So went back to law school, practiced for several years at a firm here in Minneapolis where it was my first exposure to med tech. We had a lot of med tech clients back then. But I missed being on the business side after several years and ended up getting back, recruited back to General Mills, where I went through a series of legal and then corporate development and then had a chance to join a company

after we acquired it and be a marketing director for a couple three years before I saw the light and had the chance to go over and join Medtronic back in the mid-90s during the early growth period. So that was really my first exposure to MedTech and I fell in love with medical device while at Medtronic. We were doing a lot of cool things back then. and had the chance to do a lot of equity investments and M&A work. And then we did a series of acquisitions back in the late 90s. And I led the Sophomodanic acquisition, which was a spinal technologies deal, and led the integration and then became BP general manager of the surgical navigation business,

which came with the acquisition. And so that was my first opportunity from an operating side to really run a standalone medical device business and fell in love with that operating role. And so following Metronic, it became a trend to begin to join progressively smaller and earlier stage companies, had the chance to run the coconut implant business and advanced bionics, and then joined Jim Bullock and into Cardio Solutions, which was intercardiac mapping and navigation system that was a public company at the time. So we accelerated the growth with a series of new products and sold the company.

to St. Jude in 2005. After that, I joined Restore Medical as the CEO, which we treated snoring and sleep apnea with an implant. Took it public in 2006 on NASDAQ and then we ended up selling that company to

Metronic in 2008. And that then gave me the opportunity to join Nick Sterra in 2009, which was really the earliest, it was really right at the beginning. It was bench top data. We had Series A funding. The technology, used vapor or steam, kind of wet thermal energy to ablate tissue to treat benign

prostateic hyperplasia in a really simple office-based procedure. So it was really the entire gamut from taking that bench top data, developing an entirely new product, not something like something else on the market, something was brand new and didn't exist before. So took it through the entire preclinic oil process, the regulatory process, an IDE, randomized control trial. and then once we got FDA clearance, the reimbursement and commercially grew the company, it was a 10-year overnight success.

And Boston acquired the company in 2018. And as part of that transaction, we spun off prostate cancer into a separate company, now known as Francis Medical and, you know, Mike Kuyak, who's the CEO there. So that was a good outcome for both the investors and for Boston, because the prostate cancer application is a huge opportunity, and it's fun to see Mike grow in that company. So as I was, I had an integration, a post-acquisition integration assignment with Boston. And I was at the end of that gig when I was contacted by Alex Schmitz and Jay Schmelter of Endeavor Vision and Rivervest, who I both, whom I'd known for years, really liked them both.

And they had this opportunity called VentureMed, which had a very intriguing, simple, product to go into the large and growing peripheral market to meet a big unmet need for really preparing the vessel with minimal complications prior to delivering the definitive therapy. So we took a look at it and I was intrigued and decided to join the company. And after we identify kind of the priorities of what we needed to do, we relocated the company from Toledo where it was founded, where the founder was located and practiced his entire career. We located to Minneapolis in the third quarter, 2019, built a team, redesigned the device, and have now launched the second generation of the product, or raised it around a capital,

to conduct a series of post-market studies, prospective post-market studies to correlate the retrospective data we have in more than 700 patients, and as well as developing new products for new indications in the purple space and bringing that to market. Got it. And that's a super helpful background. And we're going to spend most of our kind of our conversation around kind of what you're doing at VentureMed and sort of the lessons that you've learned along throughout your career and how those those are kind of how those are weaving, you know, into a lot of your decisions at VentureMed. But one question kind of as I, you know, studied your background in more detail is that, you know, post your time at Metronic, you know, just like most entrepreneurs do, you kind of went from, you know, startup to startup to startup. But then spent a fair amount of time at, at, you know, post your time at, you know, Next Thera. Was there anything that like, you know, was there something there to like cause you to stay, you know, almost, you know, a decade, I think, or maybe more than a decade at next era, you know, versus kind of moving on to the next thing. That I find that intriguing. Well, I mean, the bottom line was we built a team and we had a, we had a vision of what this could become in terms

of the difference it could make in patients' lives and, and frankly, in giving physicians a very effective tool to treat BPH. And so it took, I mean, that's how much time it took. We raised our B round in the 2009, 2010 time when it was really tough to get capital, right? So you had to be lean and mean and capital efficient. And then based on a lot of factors, we learned that we were going to have to do a randomized control trial, even though that it was a 510K, that was going to be essentially be held to a PMA standard, a large part because a lot of the devices that preceded us in the space had not been, it turned out not to be clinically effective. So it just, it took that much time to get through the trial, get through one-year follow-up, get regulatory clearance,

build a, build a commercial team, and begin to see the adoption, utilization that caught the attention of Boston. Got it. Got it. Okay, cool. Let's talk a little bit more about VentureMed, and then we'll kind of go back in time a bit. But with respect to VentureMed, I know you just, I think received, I think it was like maybe towards the latter half of last year, you received a new indication for the flex vessel prep system. You mentioned the company was initially formed in Toledo. Can you tell us a little bit more about how the idea for this device came to be?

Yeah, so Dr. John Piggott is a vascular surgeon. He's the founder and he's our chief medical officer today. So he had practiced for 37 years at the Jobst Institute in Toledo. was very experienced endovascular procedures to treat pad, purple arterial disease, and had done thousands and thousands of atherecting procedures, as well as participated in multiple atherectomy clinical studies. And one of the things John recognized as he did all these procedures is there were significant challenges, both to kind of traditional high-pressure percutaneous balloon angioplasty,

but there was also a lot of challenges to atherectomy. It was a steep learning curve for new physicians. The technology by design ends up having high rates of dissection and perforation and challenging anatomy with an inherent risk of embolization. And those dissections or those injuries often lead to bail out stenting. And over the course of time where initially as coronary interventions moved into the peripheral and stenting in the coronary's is very successful, A biology of the peripheral vascular is different. So now you have stents in vessels that are surrounded by muscle and bone, and they're twisting and torquing. And so there's a high rate of fracture and collapse of stents in the peripheral, which lead to then restonosis or reclosure.

So John had this idea. He said, what am I really doing with atherectomy? And what do we need to do to kind of improve that vessel compliance and minimize the, trauma to the vessel, the barotrauma. And so he created this ingenious device that was very simple, straightforward. It creates a series of controlled depth, circumferential micro incisions along the entire length of any type of lesion, any type of plaque morphology, and in a pullback procedure. So everything today pushes forward. You're pushing forward in torturous anatomy as opposed to starting at the distal end of the lesion and then doing a pullback and allowing the

device to basically follow the morphology of the vessel, like a ski and a ski slope where you can follow the topography. And then we've been able to demonstrate these micro incisions also create pathways, which really facilitate the diffusion of drug therapies from either a drug-coated balloon or drug-alluding stent into the vessel wall, which is, if there's any barrier between the wall of a drug-coated balloon and the wall of a vessel, the drug can't diffuse, can't make contact and can't diffuse. So the idea was just really a really simple, safe, effective, easy-to-learn approach to modify the plaque. And as we did over the summer, so during COVID, while we were finishing the redesign of the second-generation device and the elective procedures

were on hold as a result of COVID, we were able to take advantage of the opportunity and do a series of instant restinosis pharmacotinetic studies to really evaluate the effectiveness of flex in instant restinosis issues because once you put a stent in really difficult if that restinosis, there's not a lot of options left. And we're able to get an FDI. The indication you mentioned was we added an expanded indication to treat instant restinosis from FDA in the fall of last year. So not only do we believe that this reducing the complication rate, improving best of compliance, reducing complications will lead to less restinosis. we also believe less and reduce the need for stenting in the first place, but 30 to 40% of

of procedures in the in the SFA that are stented end up re-denosing within two years. So now we have a device that with an indication that we can also give the physician a tool to help treat that condition. Got it, got it. And I'll raise kind of two follow-up kind of scenarios. And maybe you can speak to both of them to help folks kind of get their minds wrapped around this device. But let's take a, like, a native vessel that does not have a stent in it.

Are most physicians using this, like, in conjunction with a threctomy? Or are they using as a standalone therapy before, you know, placing a stent? What is that protocol to pick you? Yeah. So the standard, if there are two standard, so if you start with an occluded vessel, you have to open it up. And if you open it up with a high pressure PTA balloon, you are basically trying to compress the plaque.

You're stretching the vessel to dissect it. The issue is most plaque is asymmetrical, right? And the balloons, when they expand, expand concentrically. So the only way to overcome the resistance at one end of an asymmetric lesion versus the other is you have to continue to expand or over expand, increase the inflation pressures, the balloon. And when you do that, you then are creating uncontrolled dissection. So you're creating dissections and tears, if you will, in the vessel wall. And if it gets into the adventitia, the outer layer of a vessel wall,

that starts that inflammatory response cascade then that leads to restinosis. So a huge percentage of the stenting that occurs occurs because you've created dissections and you need to repair that dissection before you leave the vessel. So the whole idea behind creating these circumferential microincisions along the entire length of the occlusion is it improves vessel compliance, which means that you can then go in with whatever you have for your definitive therapy, whether that's PTA alone or whether it's a drug-coded balloon or whether you say I need a stent, but I want to leave some, I want a drug alluding stent to also leave the anti-inflammatory drug at that spot. you are improving vessel compliance, reducing barotrauma, and in cases where you don't need an atherectomy, so it's not necessarily a Rutherford-6 or a highly occluded vessel where it's rock-hard and you need to remove the plaque, but those kind of lesions that are greater than 10 centimeters, the long, diffuse morphology lesions that have to be soft plaque in some places and spots of

calcification and the others, that doesn't really. lend itself usually to atherectomy alone, or it ends up being a very long, complicated procedures. So the idea is in these long diffuse lesions that are 80% of what doctors see in real life, a very simple, easy-to-use way of modifying the plaque or preparing the vessel ahead of the definitive therapy, whether that's PTA, or whether it's a drug-eluding therapy of one sort or the other. So atherectomy is not the therapy. Atherectomy is plaque modification vessel prep ahead of whatever the definitive therapy is.

Got it. Okay. That's super helpful. Thanks for that explanation. And one other quick follow-up question on the product, just because I spent a fair amount of my career in the peripheral vascular space. So it's just naturally intriguing to me. You're in essence pulling this device back then to create those. Right.

You have a retry a pullback. Yep. Okay. Got it. Got it. Okay. Cool. Super interesting.

So on that note, let's talk a little bit about. like, you know, alpha, beta versions of a device, right? And maybe think back to your time, not just with VentureMed, but like throughout, you know, your career at these various startups, you know, for other entrepreneurs that are in this, in the same type of phase, right, whether they're, you know, creating their first prototypes and kind of that alpha under that alpha umbrella, or maybe they're on to their second or third, you know, beta versions. What do you think is the biggest mistake that most folks make at this stage of the life

cycle of the company or product? Yeah. So I think they're probably, in my mind. in my experience, at least there's three kind of primary mistakes. The first one is not beginning with the end game in mind. In other words, what do the outcomes need to look like and how are each of the functional pathways, which are really inextrably intertwined, how are you going to have to progress along those pathways to get there? So, you know, when you start with product development, is this a research product with little development, or so at little R or big R little D or

or is this, are you developing the next better stent or PTAs? So there's not a lot of research, but it's all development, right? And whether you have to then develop science to demonstrate the viability, followed by the safety and efficacy, or whether it's just simply really optimizing a development, that affects the respective kind of development risks and timelines on the development side, but also on the regulatory side. And then within that endgame in mind,

whatever you're doing, it's so important to get physician user input early as you understand what are the key user requirements that you're trying to develop towards. And that means that you need to have both engineers and physicians with a clinical perspective, making sure you really understand those user requirements and you're baking them into the design of the device that then is going to be used in your clinical study. And you have to, during that clinical study, because once you get FDA clearance, it's based on that data and that design. And you have to walk that fine line between saying, gosh, this product could even be better if we did X, Y, and Z versus this is going to get us the data that we need to get regulatory approval. And it's going to meet not only our commercial and clinical adoption objectives, but it's also going to meet whatever your reimbursement pathway and objectives are.

So really understanding that kind of integrated reimbursement strategy from the beginning, because if doctors don't get paid for it, they're not going to use it. So you have to start from kind of where you think it's going to be and work your way back. And based on kind of starting with that end game in mind, that really defines in many respects the team that you need to put together. What are the skill sets, experiences you need in each of your functional teams, whether they're employees or whether a consultant advice, So you have to build based on the risks and opportunities in your development timeline and then really anticipate the fact that in all likelihood your team is going to evolve as you move through each phase of the company. So people who are really good in one phase may not be as effective in another or may not even like it in the other. Best example is probably engineering where early on, especially where you're developing something brand new that's never been done. before, you need engineers who are McGivers, right? They can figure out how to make one of anything

with parts from the Napa Auto Parts Store and prove a concept. But then as you move through that development pathway, that has to evolve into working collaboratively with regulatory quality so that you know that you're developing a design history file that's going to meet your regulatory requirements. And, you know, sometimes engineers are really good at the QA stuff and sometimes they're not, and you probably need both. So really making sure that you're fleshing out your team and you're evolving your team, once you get into the clinical phase, and that involves a whole different level of talent experience you need in the company.

And then the commercial phase, once you're moving to that, now you're starting to burn a lot of cash. So again, making sure you know what your commercial objectives are and you're building your team around that. So that's a second point. I guess the third point is perfection is the enemy of good enough. And it's, especially when you're developing a new product, you really have to balance your resources and timelines to achieve the milestones that are going to be your value inflection points for either raising your next round of capital or if there is, if there are other liquidity event opportunities that are, whether that be an acquisition or accessing the public markets, knowing kind of when you have to cut and run because you've got to demonstrate the next thing in order to hit your value. inflection point. And, you know, if you have a really good engineering team, they're always going to say,

gosh, we could make this even better, right? You know here's, this is good, but this could even be better. But sometimes you have to start with what you have and then you build in the future improvements and feedback based on. So you've got a, you've got kind of a parking lot of things, improvements you know you want to make the device. Let's get out and get some real life experience, early commercial experience and get that feedback and see which of those things in the parking lot aren't that important or they are important or are important or are there additional things you need to build in so you can then step into that second generation product in a very deliberate way. Yeah, that's great stuff.

So if I had to summarize, you know, starting with number one is the big mistake being not beginning with the end game in mind, right? And not building kind of the rest of the team. and really the rest of the project schedule, right, for a particular device, you know, with that end of mind. And then, you know, building, you know, the next point I think you covered was building your team based around, you know, what you perceive as the in-game, right,

and making sure your team is aligned. And then lastly, yeah, what the feel sets and experiences are, you need in your team to be able to hit that end, right? Yep, totally. And I completely appreciate kind of your example around engineering, right? Like when you're first concepting, you need those, McGivers, right? Those kind of like, you know, the Steve Wozniaks, if you will, right? The people that can come up with some really cool ideas. But maybe, I would say,

oftentimes, that's not the same person that's going to drive the rest of that project forward. Right. So, yeah, it's a great, great comment. And I love, and maybe I loved your last one the most, right? Is perfection is the enemy of good enough, especially when you're trying, you know, trying to balance, you know, resources and timelines, as you mentioned. So that's, that's good stuff. On that note, I think one of the when we initially were trying to schedule this interview, you mentioned that you were in the process of raising around for venture med. So on that note, you've got a ton of experience in this arena. And since we're talking about kind of like early stages of a company right now, before we transition to kind of your feedback on reg and building out a clinical strategy, let's talk a little bit more about fundraising. So what is your, if you had to kind of narrow down like maybe one to two pieces of advice for raising capital, whether it's at early stages or maybe kind of in those mid stages, series B, here you see, like what are your recommendations and your suggestions for other entrepreneurs that are in the same boat?

So the first, I guess the first piece of advice is make sure that you've really honed your value proposition. And the value proposition is reflected in the market opportunity, the unmet need, and that the pathway of getting there, both in terms of milestones and their. therefore the resources and timelines are reasonable and achievable. The second piece is it's always about the people. It's about the team that you build. And, you know, if an investor has an opportunity to invest in the greatest idea ever

with a mediocre or less leadership team versus a kind of middle-of-the-road idea, but an absolute crackerjack leadership team. More often not, they're going to invest in the, you're going to bet on the people. So putting that team together, again, that can really help you achieve that value proposition. And then the third thing is as you're, as you're, I mean, it's hard.

Raising money is always hard. It's equally, if not more challenging today. in medical device just because the money has so much money has moved into other investment opportunities. So it's a buyer's market. And you need to really understand the investment thesis of the funds that you're talking to. How does this fit into what's important to them? Where are they in their current fund? What are they looking for? What's what are the real, what are the outcomes that they expect to see. And then, last but not least, is making sure that the syndicate, if you're bringing in new

investors, are going to work well with your current investors. And that collectively, in an idea world, you've got the money around the table to not just do this round of capital, but it provides you with access to or at least a strong base towards the next round of capital that you have to raise to hit that next set of, value inflection points. So those four things, everybody that you're talking to, it needs to be a good fit for them, but it also needs to be a good fit.

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,

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