Medsider: Learn from Medtech and Healthtech Founders and CEOs - Low Drama, High Performance, Big Results: Interview with PhotoniCare CEO Cary Vance

Episode Date: December 11, 2024

In this episode of Medsider Radio, we sat down with Cary Vance, CEO of PhotoniCare. The company's FDA-cleared OtoSight™ Middle Ear Scope is a clinical diagnostic tool that offers a non-invasive and comprehensive assessment of middle ear fluid. Cary is a proven medtech leader with over two decades of experience across large strategics like GE Healthcare and Covidien, and nearly 11 years as CEO of six different startups, including Titan Medical and Hansen Medical where he drove commercialization, fundraising, and M&A opportunities. He's been the Chairman, President, and CEO of PhotoniCare since May 2023.In this interview, Cary shares why clinical evidence, workflow efficiency, and financial viability are the three pillars of medtech success and how he prepares for launches and M&As from day one.Before we dive into the discussion, I wanted to mention a few things:First, if you’re into learning from medical device and health technology founders and CEOs, and want to know when new interviews are live, head over to Medsider.com and sign up for our free newsletter.Second, if you want to peek behind the curtain of the world's most successful startups, you should consider a Medsider premium membership. You’ll learn the strategies and tactics that founders and CEOs use to build and grow companies like Silk Road Medical, AliveCor, Shockwave Medical, and hundreds more!We recently introduced some fantastic additions exclusively for Medsider premium members, including playbooks, which are curated collections of our top Medsider interviews on key topics like capital fundraising and risk mitigation, and 3 packages that will help you make use of our database of 750+ lifescience investors more efficiently for your fundraise and help you discover your next medical device or health technology investor!In addition to the entire back catalog of Medsider interviews over the past decade, premium members also get a copy of every volume of Medsider Mentors at no additional cost, including the latest Medsider Mentors Volume VI. If you’re interested, go to medsider.com/subscribe to learn more.Lastly, if you'd rather read than listen, here's a link to the full interview with Cary Vance. 

And if you're going to introduce a new technology, anything new, even if it's better, anything new, they are resistant to that to some degree. If it takes more time, it's difficult to learn, difficult to use. And again, you have to think ahead. So if you're developing something now that fits in the current workflow, let's say, in a hospital. But two years from now, five years from now, that same procedure is going to be done in an outpatient setting or in the hole. You have to be shooting for that target, not for the current target. Welcome to MedSider, where you can learn from the brightest founders and CEOs in medical devices and health technology. Join tens of thousands of ambitious doers as we unpack the insights, tactics, and secrets behind the most successful life science startups in the world.

Now, here's your host, Scott Nelson. Hey, everyone, it's Scott. In this episode of MedSider, I set out with Carrie Van, CEO of Photonacare. Carrie is a proven med tech leader with over two decades of experience across large strategics like GE Healthcare. in COVIDian and nearly 11 years as CEO of six different startups, including Titan Medical, and Hanson Medical, where he drove commercialization, fundraising, and M&A opportunities. Here for you the key things that we discussed in this conversation. First, make sure you're solving real problems with a strong foundation, demonstrating clinical evidence, workflow, efficiency, and financial viability. Showcase clear data-driven benefits for patients and providers,

ensure your solution integrates seamlessly into clinical workflows, and prove its financial value to stakeholders to drive wide adoption of your device. Second, begin by aligning your product development with regulatory, reimbursement, and commercial pathways from day one. Recognize your own limitations and bring in experienced team members to ensure your product is easy to sell and adopt. Then, when you launch, do it intentionally. Start slow to build adoption and prove value before accelerating.

Third, the preparation for a successful MNA starts long before the exit and requires clear alignment with potential acquires. First, determine if you're the right person to lead the company through an acquisition, and bring in expertise it needed. Evaluate your business rigorously, ensuring its de-risk with a solid market opportunity and a strong value proposition. And start engaging with strategic early, not just to showcase your company, but to understand their needs and internal dynamics.

All right, quick note before we jump in. If you're a Medsider listener, I'm guessing you're pretty serious about leveling up your game, right? Well, if that's you, we just made Medsider Premium better than ever with a recent site relaunch, and I think you're going to love what we've added. Here's the scoop. With Medsider Playbooks, you've got thematic collections of hard-won insights from some of the brightest founders and CEOs in our space, covering topics like fundraising, risk

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to every single interview dating back to 2010. That's over 200 episodes packed with expert insights from proven founders and CEOs. So if you're ready to dive into all of this, check it out at Medsider.com forward slash subscribe. All right, let's jump into the episode. All right, Kerry, welcome to Medsider Radio. Appreciate you coming on. You'll be with you, Scott. I know you're busy not only running a company, but also sounds like raising some capital. So I could definitely appreciate that and grateful for the time and recording this interview.

Looking forward to what should be a pretty pretty fun conversation. But I recorded a very short bio at the outset of this episode. But let's start there. You've got a pretty robust amount of experience within the broader med tech space with both large strategies and a bunch of startups as well. Without going too far into the weeds on any certain role per se, give us a sort of an elevator pitch or highlight a little overview of your career leading up to taking on the CEO role at Photonic Air. Sure.

Like you mentioned, I spent about 20 years at large companies. So I was at GE Healthcare Covidian Intelflex. And so I had a number of different roles of those companies. Learned a lot. I worked with a lot of good people, a lot of different types of products. Capital equipment, disposable equipment, really great experiences over the years. And then about 11 years ago, early 20, early 20 was contacted for my first. CEO role. Over the last 11 years have been running small companies, about six of them,

and got a couple exits in there, but all different types, commercial, pre-commercial, surgical robotics, diagnostics, pain management. So a lot of good experiences there as well. And I think both of those inform each other, I think having worked for the large strategies, I think I understand leading small companies, what those strategies look for, when they look to make acquisitions or develop partnerships with small companies. And I think having spent time at those large companies with great processes and great talent, I think I understand how to bring some of that, at least, to these small companies. That's a good overview.

Not only have you taken a lot of swings, right, at various startups, have been a lot of swings in different sort of categories, right? So any preferences at all, like for certain therapeutic arenas? I don't. I'm at least to why I came to Photonic here. but really just trying to solve problems. At this point in your career, you really look for spaces where there's a massive problem and a technological solution that your company can bring.

And so I don't really care. I think maybe early in my career you wanted something, or I wanted something exciting that I could talk about right now. I just want to solve problems wherever I am. Yeah, that's a good point. Especially in a space like MedTac, you need to be solving big problems, right? because they typically require a fair amount of capital and a fair amount of time to get to an eventual product that solves that need. So on that note, tell us a little bit about Onesite, right?

That's your core product at Photonic Gear. Give us a sense for what it is and what is that major problem that you're aiming to solve for. Sure. It's a different space for me to middle ear health, right? And significantly and specifically diagnosing with Titus Media, which is ear infections, right? It's a space where E&Ts have sophisticated equipment that they use for diagnosing and treating that disease. But frontline care, pediatricians, family office, urgent care, where you might take yourself or a child in for diagnosis or ear pain, they don't have the tools that they need. And so that's the problem.

It's a massive market, 180 million ear exams a year in the U.S. alone. But it also has a massive problem associated with, and that is the physicians or clinicians get it wrong half the time, which is completely unacceptable in med tech or in healthcare these days. But the reason why they get it wrong at least half the time is because they don't have the tools that they need. Got it. And I didn't realize it was that one, that wasn't a problem, but more so the failure rate upon diagnosis is that high. So like how are, I've got a lot of kids, and fortunately don't have to take them. I haven't had to take them two. often to hurt for ear infection. So like how do most, whether it's a pediatrician or semi-energy care, like how is it, how's it typically diagnosed? Yeah, it's, again, I have a lot of kids and even a lot of grandkids at this point. And it's a little scary when you think about it. And I would tell you 99%

of the people in this country, at least, do not even know this is a problem. The fact is, your infection occurs in the middle ear. That's where the fluid is. That's where the infection is. But when you go into the physician, they're looking at the eardrum. So they're flashing a light. They use a notoscope that's been used for 200 years. It's basically a penlight and a magnifying glass. They look in the air. And five out of six kids, by the time they're three have an ear infection.

So these are a lot of little kids. 80% of the patients that this is used on are small children. So they have smaller canals. They're usually not comfortable. They're wiggling around. but even if you can get a decent look at that smaller canal. And the eardrum is not where the problem is. They might try to figure out based on whether it's red or not,

what they're seeing or not seeing whether there's an infection. And the fact is that that's not where the problem is. And they get a wrong half the time because of it. And there's a lot of pressure from parrots to do something. And so the default quite often is, I don't like to look at that earlets prescribe some antibiotics. And the problem is, kids are taking antibiotics when they don't need to. Kids, if they've got four-air infections, or at least have been diagnosed for four-year

infections in a year, they're being referred to an E&T for potential tube placement. If two of those four were not actual infections, then that's unnecessary. The tube placement is unnecessary. A lot of discomfort, a lot of cost, a lot of drama unnecessarily. And just like any other part of healthcare, you think about going in if you have a toothache or you tweak your knee at the gym, they're not looking at the surface of the skin. They're taking an x-ray. They're taking an MRI. Then they show you the MRI or the x-ray. They say, this is the problem.

This is what we should do about it. That's not what happens here. You have a pediatrician that looks in the ear and then turns to the parent and says, I don't like to look at that ear. Let's prescribe some antibiotics. And that's just not the way it should be done. Got it. A lot of downstream ramifications. I hadn't realized that that otoscope has been around that long. It's still predominantly being used. They digitize it, but let's just put a dozen whistles on something that isn't looking in the right spot. Yeah. Got it. And I'm on your website now. It's phatona.com.com.

It's F-H-O-T-O-N-I dot care. P-H-O-T-O-N-I-Care. If you listen to this and you don't get a chance to get to the full right up on MedSider, you can definitely go check out the website to learn. a little bit more about this technology. It's pretty cool. With that said, we're recording this in 2nd, 24. So it looks like you've been at the helm for, gosh, a little over a year and a half, almost two years now, something like that, or approaching two years. Give us a sense for where the company's at in terms of stage. Yeah, so we've begun to commercialize. So what's key with our company is reimbursement, right? So when I looked at the company itself, and anytime I looked, and this was about a year and a half ago, I was looking at joining the company and also investing in the company. And I look at the typical things. Addressable market size, the problem

you're trying to solve, whether or not you have FDA clearance, manufacturability of the product once it's been developed, IP protection, quality system, clinical data, which we have a ton of it, peer-reviewed published data, commercial patient use. We have about 25,000 patients that have been examined with the technology, how easy it is to use, how much, uh, what the COGS are on the system and then what the investor base is. So I looked at all those things. And right now we've begun to commercialize over the last year. We have two category three CPP codes that allow our customers to get paid,

albeit a bit inconsistently because those are temporary T codes, right? Some private payers pay, some do not, some pay, and then you can file an appeal and you get paid a little bit more. and so we're working through that on our way to the Kedaroo 1 CPT code submission mid-year next year. Got it. Wow. Yeah, that's a big boulder to push uphill.

That's so crucial, kind of that nailing that reimbursement pathway. So that's a super helpful overview. I want to spend the next maybe 20 to 30 ministers are covering some cross-functional kind of topics that, you know, a lot of founders, CEOs that listen to this program, investors, other folks who matter will go through or have to tackle in a, typically in a startup, but even in a large, like mid to larger scale company as well. First one on the docket is similar to what you just mentioned.

Like when you're not only an advisor to a lot of startups, right, you're running a startup yourself and sounds like you invested in a fair number. You just listed off like several criteria that you often look for, right? Reimbursement, regulatory, what's the regulatory pathway, clinical data, on the device, etc., margins effectively, et cetera. So when you think about all of the ideas that kind of come across your desk or that you're pitched, that you've looked at yourself or have been pitched, are there, What do you think are the most crucial things that any founder with a good idea

that's looking to maybe build a company around? Like they really need to get right before they go start asking for money. Or even they, you know, let alone spend time working on the thing that they've got in their heads. You know, I think there's three key areas. One is clinical, long as word flow, one is financial. So you have to not only understand technology, understand the space, understand the disease states and the body. you have to also understand how clinics or how offices or how hospitals work. And you have to also understand how they make money, how they spend money, right?

So all of those things, you need to understand those very deeply. And so you need to address all three of them. And let's start with clinical. Everybody can say this is better. They can say it's faster, whatever it might be that helps the patient. but there needs to be clear, data-driven benefit. And if you look out there in the market, there's a lot of IP,

there's a lot of big companies that are in the space. There's a lot of new companies trying to get in the space, so you have to understand who's doing what. And you have to be realistic and think, listen, if I have to get through FDA clearance, I might even need to get a reimbursement pathway. I might be five years out from commercializing. And so when I'm developing something clinically, I need to think out to 2030, not in the current state, because the current state will have passed you by and other people will have innovated it as well.

So clinically, you need to make sure it's demonstrable. You need to make sure that it's data driven and that you have a clear benefit to the patient and to the provider. Second, workflow. Clinicians are people too. they never have enough time. They never have enough patience. Some of them don't want to say are lazy, but they're just like everybody else. And so they're adverse to change.

And if you're going to introduce a new technology, anything new, even if it's better, anything new, they are resistant to that to some degree. If it takes more time, if it's difficult to learn, difficult to use. And again, you have to think ahead. So if you're developing something now that fits in the current work, let's say in a hospital. But two years from now, five years from now, that same procedure is going to be done

in an outpatient setting or in the whole. You have to be, you have to be shooting for that target, not for the current target. So that's workflow. And then last and most importantly, it really is, and like it or not, it is the most important piece,

is the financial piece. Back when I started in sales, if a physician wanted something, they got it. And if it was better for the patient or the physician just really like using it, you could get it into that hospital. Anymore, it has to demonstrate significant cost savings or found revenue for them. And I have tried to introduce technologies and I've said, this is way better for the patient. It's going to cost you more money. But in the long run, or holistically at the hospital, you're going to save money because you're going to have reduced

store time or you're going to have a reduced length of stay or reduced complications. So you're essentially speaking to one department, but telling them they have to pay more because another department is going to save money. That works, but it's often quite difficult. So you really need to help the hospital or the entity speak to itself, but also it has to be really clear. Or as you said, you go out to the garage and you start tinkering around and you start trying to develop something. If you haven't already figured out how much this is going to cost, how much they might have to pay for, and whether or not it's cost beneficial or financially beneficial to that physician, that hospital, that clinic, then you should probably just go back inside because that's really the environment we're in,

and it's only going more that way in the years to come. Yeah, no, you laid out three really good, three really good. So the areas of focus, if you will, we could probably spend the next 20 minutes, just discussing these in more detail. But like you're this overarching kind of theme of you need to be. I hate to, it sounds cliche, but like literally skating to where the puck is going. So crucial across all three of those, three of those areas that you mentioned. But just to touch on the two latter ones, workflow and the economics of this idea that you may have in your head, that never sees it amaze me. Like even the most influential thoughtleaguers like in the space, you think, oh, of course they have more pull at their hospital or their ASC, wherever they're practicing.

But the reality is, like, they don't really. But, I mean, at the end of the day, there's multiple stakeholders that are very influential in a decision on whether or not a technology brought in. And if the economics aren't there, you've got such a low likelihood and ever seeing that product being adopted. That's just like the cold, hard truth of operating in today's healthcare environment. Oh, that's true. And also, I will say that those key opinion leaders, they're a small subset of the market.

And so you may be able to get in. They may have that influence even today. and be able to give it into their hospital, let's say. But if you're trying to get broad adoption, and that's why it's important as you have advisory boards or people giving a counsel, this has to work everywhere, community hospital offices, clinics,

wherever it's being used. It has to work across the board or you're really just going to be limited as to your addressable market. Yeah, that's such a good point, such a good follow point. But also on the workflow topic as well, like even the most is for chatting about KOLs, right?

It looks very skilled positions. You'd actually maybe think, oh, of course they're going to want the next bell or whistle on this product or this thing. And the reality is like most often not. They just want something that's more simple to use. It's easy. Like, they don't have to think about it. And that's such a good point because it's often maybe the most underappreciated aspect

of early stage development is actually thinking about what worse the friction at when it comes to using this product, right? The commercial friction. And if there is, probably time to go back to the drawing board. It's just like anything that you buy too. If it's cumbersome or if it takes more time, you just don't want to do it. And time is money. There is, you've been to the physician and you have to wait 40 minutes.

That's because they're overbooking and they've got a lot to do. And so when I was in surgical robotics, we would talk about how much quicker it could be in difficult cases. But when it took them longer to set it up than it did to do the procedure, it was a big problem. And I'll say too in the case of Photonicare in Otisai, you would think everybody would just adopt this because it's for the children. Right. And you would think that. But in actuality, you can't make the workflow work, which we're doing. And if you can't make the financial piece work, which we're doing, you're really going to be limited in terms of adopt it.

Yeah. No, now, those are all three of those aren't really like just really good areas to focus on it. Because it's so easy to get caught up in an idea, right? It may actually be, it may hit the first one that you mentioned, which is clinical. It could be actually like deliver on some really clinically meaningful aspects or points. But if you can't get the other two, it's just the reality is like that it's never going to, it's never going to help really people. Maybe a few potentially, but it's never really going to reach broad adoption. There's a lot of technologies that have never made to market because the last two of those weren't addressed.

Yeah, 100%. Let's shift and talk a little bit about fundraising. I think you raised just recently, I believe, fairly recently anyway. Earlier this year, you raised it looks like a round of capital for Photonacare. You've obviously raised a fair amount of fundraising in the past for your other startups too. When you think about your journey fundraising and maybe frame it up with how are you approaching it now, maybe versus five, 10 years ago, how would you coach up another founder or CEO that's really never done this before?

I think the first thing is to think ahead. And a lot of times you're just trying to think about how to get to the next six spots through the year. you have to really think one, two, three funding rounds ahead, if you can achieve, and cheat milestones that you will achieve that you can basically sell yourself on during those different time frames. There's a lot over the years where I've taken over companies that have gone public, and they've gone public primarily because they had to. They had to get those funds, and that's not a very good reason. There's not a lot of intentionality around why they do things

they do things a bit out of desperation. You don't want to have to do that. So you want to think had strategize and get some counsel from people that are in that space that I understand because a lot of times founders or even CEOs they can believe their own height and they can feel really good about it. They could think everybody should be investing in this and everybody doesn't want to. And so it's good to get some perspective ahead of time. What types of milestones would we need to hit so that you would feel comfortable investing or that people would be comfortable investing. Ultimately, it's just like it sales, everything it's sales. Ultimately, when you sell yourself or you sell a company, you sell a product, you want the investor or the customer to feel two things.

One is comfortable and the second is excited. And so that comfort piece comes from derisking the company. All those things that I mention, that at Photonicare, we've checked those boxes. We have one big box to check yet and that's enhanced reimbursement. But to me, you have to do you risk to put yourself in their shoes. Are they comfortable? Would you be comfortable, excited by what you're looking at? And then you just need to build a network. You need to talk to everyone. As for referrals, even if they're saying no to this round, it's amazing. Some people have very defined. They'll invest at this point at this size, they'll lead or they won't lead or they'll follow. So they're very particular quite often. So it's not a good time for them now, but maybe later.

but they know somebody that would. So ask for those things so that you build up dozens and dozens of investor networks. And that's the key. Sometimes it's just a numbers game, but it's putting your company in order from a derisking standpoint in understanding the things that would get them excited about investing. Yeah. Even at your website now, again,

which is phatonna dot care, phatonicare, but it's the dot care aspect of that part of that in the URL. But you've got like an invest, like a simple form, right, for anyone that's interested in investing. I see so many startups that don't even include something simple as that, right? As you start to generate more awareness and more buzz about the company, that's just an easy way to allow people to, in essence, raise their hand in a virtual environment and say, yeah, I'm interested in following your journeys. I highly encourage everyone

that's listening. If you don't have something simple like that of your website and you're raising capital, just do it sooner rather than later. But those two things that you mentioned here, comfort and then excitement, I think that's a really great way to sum it up, especially the excitement part, because I, I, think getting folks comfortable with the company, like entrance into the game, but also leaving them with making them feel excitement. Investing is very much an emotional part of investing. And so if your pitch is dry or boring or like the area is not exciting, you're just, it's going to be, it's going to be harder to get people to wire hair toe spuns.

And so I think that's really important. Hey there, it's Scott. And thanks for listening in so far. The rest of this conversation is only available via our private. 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

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