Medsider: Learn from Medtech and Healthtech Founders and CEOs - Two Important Customers — FDA and CMS: Interview with Procyrion CEO Dr. Eric Fain

Episode Date: April 24, 2024

In this episode of Medsider Radio, we had an insightful discussion with Dr. Eric Fain, CEO and President of Procyrion — a startup developing an advanced percutaneous mechanical circulatory support device for patients with chronic heart failure.  Eric began his career at Ventritex, a startup focused on implantable defibrillators. Over the next 30 years, and through the company’s acquisition by St. Jude Medical, he has held a number of leadership roles overseeing global sales, marketing, R&D, and clinical, eventually becoming the Group President via St. Jude’s exit to Abbott. In this interview, Eric shares his expertise in managing startup finances, attracting investors through strategic planning, drawing up clear clinical roadmaps, and engaging with payers to catalyze commercialization. Before we dive into the discussion, I wanted to mention a few things:First, if you’re into learning from medical device and health technology founders and CEOs, and want to know when new interviews are live, head over to Medsider.com and sign up for our free newsletter.Second, if you want to peek behind the curtain of the world's most successful startups, you should consider a Medsider premium membership. You’ll learn the strategies and tactics that founders and CEOs use to build and grow companies like Silk Road Medical, AliveCor, Shockwave Medical, and hundreds more!We recently introduced some fantastic additions exclusively for Medsider premium members, including playbooks, which are curated collections of our top Medsider interviews on key topics like capital fundraising and risk mitigation, and a curated investor database to help you discover your next medical device or health technology investor!In addition to the entire back catalog of Medsider interviews over the past decade, premium members also get a copy of every volume of Medsider Mentors at no additional cost, including the latest Medsider Mentors Volume V. 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 Dr. Eric Fain.

Going back a number of years, FDA approval was really the, you know, 80% of the focus and then reimbursement was 20% of focus. I'd say, you know, maybe not flipped exactly, but the reimbursement piece of this has become more and more important and also more challenging. It truly goes hand in hand. And so you really have two customers. I mean, you have FDA for, and they're looking at effectiveness and safety and building the clinical evidence for them.

And, you know, in particular, you have CMS, which has a different perspective. Welcome to Medsider, where you can learn from the brightest founders and CEOs in medical devices and health technology. Join tens of thousands of ambitious doers as we unpack the insights, tactics, and secrets behind the most successful life science startups in the world. Now, here's your host, Scott Nelson. Hey, everyone, it's Scott. In this episode of MedSider, I sat down with Dr. Eric. Eric Fain, CEO, Preserian. After graduating from medical school, Eric took a year off and discovered his passion for

MedTech. He has since held key roles throughout the space, spanning sales, marketing, and R&D for both startups and major players like St. June Medical and Abbott. Today, as CEO and President Preserian, he's leading the development of an advanced precutaneous mechanical circulatory support device. Here for you the key things that we discussed in this conversation. First, to attract investors, develop a compelling story outlining your company's unique value proposition and path to success. If you want to build relationships with potential capital

investors and strategic partners well in advance of needing immediate funding, start the conversations early. Second, put yourself in the acquires shoes. Evaluate your company from their perspective to identify areas of value and potential concerns. Robust clinical evidence for early stage startups is a must. Also, don't underestimate the importance of a well-developed and documented quality management system. Third, your target market needs to be defined before you can properly develop your regulatory and reimbursement plans. Address coverage challenges early on and engage CMS. Explore partnerships with private payers for both learning and clinical trial opportunities.

All right, before we jump into this episode, I wanted to let you know that the latest edition of MedSider Mentors is now live. We just published Volume 5, which summarizes the key learnings from the most popular Medsider interviews over the last several months with incredible entrepreneurs like Gabriel Jones, CEO of Proprio, Kirsten Carroll, CEO of Can Do Health, Dr. David Alpert, founder of of AliveCorp, Greg Bullington, CEO of Magnolia Medical, and other leaders of some of the hottest startups in our space. Look, it's tough to listen or read every interview that comes out, even the best ones, but there are so many valuable lessons you can pick up from the founders

and CEOs that join our program. So that's why we decided to create MedSider mentors. It's the easiest way for you to learn from the world's best medical device and health technology entrepreneurs in one central place. To check out the latest volume, head over to MedsiderRadio.com forward slash mentors. Premium members get free access to all past and future volumes. If you're not a premium member yet, you should definitely consider signing up. In addition to every volume of Medsider mentors, you'll get full access to the entire library of interviews dating back to 2010.

You'll also be able to see all of our playbooks, which are handpicked collections of the most insightful interviews with the brightest founders and CEOs that join our program. Whether you're looking to master capital fundraising, navigate early stage development, tackle regulatory challenges, understand reimbursement, or position your venture for a meaningful exit, Medsider Playbooks have you covered. And last, considering that fundraising can be one of the most daunting tasks for any startup, we created a meticulous database of investors right at your fingertips.

Explore a wealth of VC funds, private equity firms, angel groups, and more, all eager to invest in medical device and health technology startups. Access to this database is a premium member exclusive, so don't miss out. Learn more about Medsider Mentors and our premium memberships by visiting Medsiderradio.com forward slash mentors. All right. Without further ado, let's jump into the interview. All right.

Dr. Eric Fane, welcome to Medsider Radio. Appreciate you coming on. Thanks for having me, Scott. Yeah, really looking forward to diving into your really accomplished, you know, professional journey and kind of what you're up to at Procerion, especially with some of the most recent news. But with that said, I recorded a short kind of condensed bio at the outset of this particular episode, but I always like to start here. You're an MD by background. You have a really,

really extensive pedigree. So maybe without going too far into the weeds, give us this sort of an elevator-style pitch kind of overview of what you've been, what you've been doing leading up to running Preserion as the CEO. Sure. As you mentioned, I'm an MD by training as an undergrad. I have an applied math background degree. And really, while I was in medical school, I got involved in some of the early days research with implausible the circulators, and my advisor that Roger Winkle got associated and was heading up a medical advisory board for a startup company called VentureTech. And so when I graduated from medical school, originally I had planned to just take a year off, joined the company, helped them do some more of the fundamental research and work on some of the

product specifications and really just kind of fell in love with it and decided to kind of take a detour from my original plans of going into clinical medicine and sticking on the medical device development side, stayed at Venturetakes until we were acquired by St. Judee Medical and ended up having a 20-year career there, ran the Cardiach or the management division, then picked up also the neuromodulation division as well, and then eventually became group president over the full state jute portfolio. And then we were acquired in the beginning of 2017 by Abbott. I went through the integration process there, but then was thinking about what I wanted to do next and really kind of thought about getting back to the startup environment, which I loved. And that led me to

do some due diligence for the potential investor for Preservian and eventually taking the CEO job. Got it. We're recording this in early 24. And it looks like based on your LinkedIn profile, did you join Preserion in kind of mid-2018? Is that sound about right? Yeah. Yeah. Yeah, summer of 2017, 2018. That's right. Got it. So almost, almost six years into the, end of the journey with the company. So really, really interested to kind of learn what you've been building over the past, you know, a handful of years or so. But for those that are familiar with sort of the heart failure space, give us, give us kind of a sense of what aortic is, what it does, what it solves for. And then, you know, maybe how it's different versus other kind of, you know, treatments that are a bit more standard of care.

Yeah. So aortic is a pump technology called Perkestanian mechanical circuit. support class of devices. And one way to think about it is that there's really been a lot of advances in the treatment and management of chronic heart failure patients, but really have not been any advantages for decades in the treatment of patients who have acute decomposated heart failure. So these are patients who are outside the hospital, but then become very sick with heart failure, symptoms primarily are the result of taking on a lot of excess fluid, and that's manifested by having fluid fill up in the lungs, so shortness of breath is a real hallmark of exacerbation,

but also swelling, especially of the lower limbs and feet, and also in more severe cases, also of the belly where you have the buildup in anestitis there as well. So those are the patients to get admitted to the hospital are the hardest to manage and really have very, very poor outcomes. About 25% of these patients who are admitted to the hospital with Acute Accompetitive Heart Trilier are not able to be successfully decongested with standard of care available therapy today, and they stay in the hospital for a long time, but eventually kind of get pushed out and have very, very poor outcomes. About half the patients are either dead or readmitted to the not at all in 90 days to six lunch and time.

So those are the patients that we're really focused on. And again, standard care today primarily is just treatment with high doses of intravenous diuretics plus or minus some other cardiac medications like onotropes. And so when the patients that we're focused on are, again, that 25% about a patients who are not able to be clinically decondescent, a orage device differs from the other, the other real device, it's a percutaneous MCS device on the market in Pella, in that device goes in similarly catheter base through the femoral artery and the groin, but we're positioned in the descending aorta rather than being positioned in the left atrical of the heart. And because

we're positioned in aorta really gives us some advantages in terms of safety. We don't need to worry about things like stroke or other things that can be involved in putting a device into the heart itself. But really what differentiates us are the types of patients that we're looking to treat. So again, we're looking for treat our initial indication. We're looking for treatment of these heart failure patients who have acute to compensated heart failure, unable to be treated with standard of care therapy. And Pellet today is indicated for treating high risk patients during PCI procedures and also frank cardiogenic shock. Got it. Yeah. That's super helpful. And for those,

listening that don't get to the full write-up on Medsider, Presyrian is the website, Preserian.com. So it's spelled p-R-C-Y-R-R-R-I-R-N dot com. C-R-R-R-I-O-N-P-R-N-P-R-N-P-R-R-N-P-R-S Museum. We'll link to it in the full lineup on MedSiter as well as Eric. It's Eric's linked-in Profile, too. So that's a really helpful overview. And, you know, I'm sure there's a lot of folks that are listening

that are, that are, you know, sort of involved in the cardiobiled space that are familiar with some Helen. So thanks for kind of pointing out kind of how the devices differ at a high level anyway. And I know you recently, I think announced enrollment, of your IDE pivotal trial. But Eric, can you kind of give us, before we kind of go deep into some functional areas of the business and your journeys specifically, give us the sense of kind of where the company's at currently.

Yeah, it's been, you know, Percerion's been around for quite a number of years and really most of that time has been really solving the engineering challenges and developing a miniaturized pump that is really durable. It can stay in the body, in the blood pool, and not only perform well in terms of the pump function, but also not seize up with clots and have other issues. And so when I joined the company in 2018, we're still were challenged to really get to a pump the kid, stay in the body, and last and be durable. And so that was a lot of the time that we did.

And we've been able to accomplish that now. I actually have had the pumps in animals up to almost five months running well, which opens the door for some other indications down the road for home ambulatory use. But right now, we're really excited after having completed our pilot study in these acute decomposedated heart failure patients back in the third quarter of 2022, we enrolled our first patients at our pivotal trial called the Drain HF trial in November of last year. And we've been really focused on getting sites activated and going and continuing to enroll patients with the goal of completing enrollment by around the end of the first quarter of. 2045 beginning of the second quarter of 2025, which would set us up then for our PM8 submission to FDA for approval sometime in the late 2025 timeframe. Got it. Very good. Super helpful overview. I think helps generally kind of speaking level set,

everyone listening pursuing on that with respect to its life cycle. So with that said, let's spend in the next maybe 20 or 30 minutes diving into kind of some key functional areas. And I'd like to start out with with fundraising and we'll get to maybe kind of your thoughts around, you know, establishing clinical evidence and kind of building out that, that Glenn-Rag kind of roadmap. But with protective fundraising, you recently completed your Series E fundraise, which, you know, I'm sure probably wasn't, well, raising that amount of capital wasn't for the faint of part. You know, in this market environment, why I guess really fundraising is never, never easy, but especially in this in this kind of market environment, it's especially, you know, challenging.

And so when you think about kind of how you're fundraising, you know, today or most recently versus maybe, you know, a handful of years ago, what are some of the key, key lessons that you've kind of learned along the way and maybe could recommend to other med tech founders and CEOs there in the throw in raising capital? The first thing I'd say sort of talking cheek is timing is everything. So, you know, we're in really, really, as you said, challenging time for raising capital, and especially in the medical device space, and particularly for clinical. stage companies, you know, just a lot of perfect storm sorts of things, you know, high interest

rates and borrowing costs and which, you know, VCs having very long diligence timelines. And then also for the VCs, it's really them having to deploy their own funds to support their own portfolio companies. So having all that together really creates a difficult environment for mid-tech startups and in raising money. And, you know, the general environment also meant that companies that are sort of early stage commercial companies have had low valuation. So you have more competition with there where investors are looking at not the additional risk of running a clinical trial as well. And many activities have been down. So like I said, kind of a perfect storm for right now. But I think in terms of lessons learned, you really can't

control timing. But one of the things that we did and allowed us to kind of survive and whether the storm was that we last raised our Series D back in mid-2019 and raised $30 million. And, you know, from the back, you know, from the get-go, and I think part of that is due to my experience just in a large company environment, just been very, very careful with our cash. Really never knowing what's going to come up for us, the big thing was COVID. We started our pilot study and COVID hit, and that really set us back for a good, you a year, year and a half in terms of making the progress that we wanted to. So really, really have always focused on spending the money where it was critical, you know, saving as much for any

day as we could, extending the cash runway. And, and, you know, that allowed us to really have a cash runway that allowed us to kind of survive. But for the, you know, other lessons learned, I think, you know, you have to get out there and talk to a, you know, a really broad group of potential investors from across the board, whether it's VCs, family offices. And we were also lucky to have a very supportive current investor base that we could leverage as well. But, you know, I think it's really having a very clear story, being able to define what your path is for potential investors, giving a timeline that's realistic. And really for our group investors, it's really being able to bring them along to the details of what separates you from

an innovation standpoint, the size of the patient population, and how you can really make a difference. Yeah, your comments around this idea that, you know, cash is king and it's so, so crucial. And it sounds, you know, reasonably straightforward, right? But it's always such, such a hard balance to strike, right? The kind of this idea of really accelerating and moving, moving quickly, but also that typically comes with a fair amount of cash burn. You know what I mean? And so so that that balance and try to weigh, you know, weigh that against how long it's going to take to maybe, you know, get to, you know, raise another round of capital, you know, really, really difficult. And the other thing that kind of stands out, you know, hearing you describe your experience as raising, raising funds is that

you've got an incredibly accomplished pedigree, a couple of exits under your belt. And it's not, it's not easy, right, raising money. And there's so many other accomplished entrepreneurs that have come out of the program, but mentioned the very same thing. And so, I think it's just helpful, you know, for anyone listening that, you know, raising capital never, never is easy. Even if it's true. Yeah. Yeah, that's true.

And I think it's also, you know, having a plan of, you know, not only you're going to, you're going to raise, you know, some X number of dollars, having a plan of the milestones that you're going to accomplish with that care, laying that out for investors, making sure that you have the positive feedback that if you accomplish those milestones, that should be the long. point to be able to raise a next round of financing. And I think again, it's really focusing to spend on where the team can really add value. We outsource a lot of things like Mani's Acturing that is not our core expertise, but, you know,

we're going to manage expertly, but we're going to focus on hiring, you know, a small lean team, but we're in the places that is really going to be where we're in subject matter experts and could really add the most value to advancing the programs. Yeah. Yeah, it's good to keep in mind. Like, where are your strengths and lean into, lean into those strengths and look at outsourcing properly and other key areas? Let's shift the conversation a little bit to M&A.

And I know you're to do your first startup, Ventrotex, to St. Jude, and then ended up running several business units within St. Jude. And then went through obviously a very large M&A transaction when Abbott acquired St. Jude. And so when you think about your experience is kind of going through, you know, a smaller M&A transaction versus a much larger one. Give us a sense for kind of what that was like. And if you go to the same thing, right, like how are you,

how are you approaching those sort of transactions with strategics? Yeah, it's a great question. I think, yeah, definitely the size, you know, depending upon the stage and size of the company and if you're commercial or not commercial. But, you know, I think for startup companies, some of the things to really think about are sort of, What sort of exits are you looking to do?

I mean, there's, you know, it used to be that outside the MNA area, the IPO markets were hot, and, you know, that was a good vehicle for exit. But the environment also has changed a lot. So I think that for most sort of single product, startup companies today, M&A is probably the most likely outcome. Not to say that you can't build the commercial organization and go on your own, but it's probably less likely today than it was, you know, even five, five, 10 years ago. But I think, you know, as when you're thinking about it, you really need to sort of wear the hat

of the acquirer and think about what's going to be important to them. And so one of the things obviously is going to be how you've built out your clinical evidence, you know, whether it's, it always starts with with the study design and thinking about then the clinical evidence you're going to have at the end, really defining your patient population, defining sort of the, you may have a single priority program, which both startup companies will, but really thinking about what would be next and sort of laying some early groundwork that acquires can see that they could pick up and run with. I think one of the things that I can tell you from experience on both sides of the transactions

that oftentimes is overlooked is having a very strong quality system, and quality program. A lot of startups, that's the area where there is a lot of focus. Having been on the acquirer side a number of times with St.G, it has become a bigger criteria for acquires and how they think about companies because a lot of times you get these small companies, you acquire them, you're really excited about the technology, and then when you get in there and see about really implementing a program

within a bigger company, the quality system, if it's not in good shape, can be a real barrier for really, really, you know, scaling up manufacturing, managing the clinical systems that are needed in place to add around. So I would definitely put some, make sure that you have a strong quality system. And I think today also that acquires, strategics are really digging in and making sure that if they're going to acquire a company, that the quality system really is something that they can leverage. That's a really good point.

It's come up actually. I wouldn't say a lot per se, but there's a few other, you know, experienced founders and CEOs that have brought up something's very similar. And, you know, I'm sure a lot of, a lot of, you know, people are looking, listening to this and thinking, you know, quality, Rob, and it's the bare basics.

But the reality is like as you, as you approach a potential M&A transaction, you're trying to de-risk as much as, you know, everything as much as possible. And if your QMS is a mess, that just represents a very sizable risk, right? It's one more, you know, sort of budget allocation around remediation. That strategic is going to have to consider.

And so, you know, try to, I think the message is probably try to limit the number of risks as possible. And that includes, obviously, the QLAS. 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, Nadine Miarid, CEO of CVRX, and so many others. As a premium member, you'll get to join live interviews with these incredible medical device and health technology entrepreneurs. In addition, you'll get a copy of every volume of Medsider mentors at no additional cost. To learn more, head over to MedsiderRadio.com forward slash premium. Again, that's Medsiderradio.com forward slash premium.