Were you there? Really were you at Chicago Innovation Showcase, there were so many attendees that I was not able to make it around and see everyone. Needless to say, the event was a huge success and it is always great to see the community come out to support the new technology ventures in the Chicago ecosystem. At last count, the registration rates were over 200, and if you were in attendance I hope you were one of the lucky ones who had a seat.
The program started off with Ray Briscuso promoting the AdvaMed conference that is going to be in Chicago on October 6-8th at the McCormick Center. If you have not registered I would recommend this conference, it has the right balance of attendees making networking extremely efficient, and the programming is spot on, talking about relevant issues and provide sound advice for building companies, increasing business and marketshare. Also Hillary Clinton will be keynoting and you won’t have to stand in a mile long line to get into the plenary lunch.
AdvaMed CEO’s Unplugged: Deal Structures in Med Tech
The programming started off with a panel discussion led by Tony Davis, Managing Partner of Linden Capital Partners. Tony was joined by Patrick Balthrop, President & CEO of Luminex Corporation, Justin Klein of New Enterprise Associates and Francisco Rausa from AbbVie.
This session addressed deal structures in medtech from the perspective of large companies and investors. Tony Davis guided the discussion through a few topics of Market Trends, Inversions and Managing Risks.
Patrick Balthrop started off the conversation on this topic by focusing not he beliefs and methods he uses when building his company. It is important for them to make products that produce results and reduce costs. It is also important to keep in mind what the cost would be if a innovative product wasn’t created. Take for instance a heart stent, it costs what it costs, but look at what it used to cost when we didn’t have them. Surgery was more expensive. Innovation ultimately can reduce costs and it is important to keep in mind what those cost savings could be when looking at a new innovative product.
Justin Klein focused more on financing markets for vc backed companies. He is seeing an increase in the number of investments in the bio industry. Broadly in the financial markets, public investors are looking for new investment and the increase in IPO’s helps the vc investment companies, because they are able to leverage those liquidity events to raise additional capital from their investors. He is also starting to see signs of the biophrama boom working its way to the Health IT and Medtech industries.
Todd Davis said that reimbursement in some sectors is getting really hard and regulatory scrutiny is increases. Additionally devices are harder for them to deal with the risk, that ecosystem has gone away. They are looking for devices that have a drug link impact on the patient. The needed impact on health outcomes just does not seem to be there for devices in general.
Next the conversations moved on to inversions it has been a hot topic in the community and in press. Just today Walgreens announced that they will not go through with their inversion plans, and as you will see in this discussion, it had a negative impact on their stock price. Patrick Ballthrop had the best response on this issue.
Patrick Balthrop: I understand the principle, but the practical citizen is worried about the political reaction. I feel like they are fixing the wrong problem. I think that some of the proposals that have been made are not very serious, when you are talking about punishing companies instead of addressing the underlying issues. We need to focus on the corporate tax rate, and then the problem with inversions will be a moot point. It is a direct result of the ecosystem. US corporate taxes put revenue growth and R&D spend under pressure by our share holders. Price per share becomes very important to us. Any responsible management team needs to at least consider it.
The last subject discussed was on managing risks.
Justin Klein: We have shied away from pre ice stage. Management team is always something we look at, if there are going to be hurdles coming down the pipeline, we want to make sure that they have the right people in place to deal with the problem. Building strong partnerships with other investors is also very important to reduce risk. We make sure everyone is in line with each others terms, and that they are very clear. It is also important to have in place a process to deal with conflicts.
Tony Davis: IP is one area where we will be spending more time because there seems to be increasing risk in IP ownership.
Francisco Rausa: I tend to look at highly disruptive but also extremely early companies, it is too hard to look at these companies. We tend to really take a balance look at this risk and how disruptive the technology can be. I am coming at this from a slightly different position as typical investors.
Patrick Balthrop: Every deal is its own animal. We look at people first, and products & IP, facilities and capabilities. We look for deals that are complimentary, not transformative.
Audience Question: New Therapeutic pathways and programs at FDA.
Justin Klein: I wold like to think that PMA and the new regulatory pathways and initiatives would improve deal opportunities. I am not convinced that the programs that the FDA has put in place for specific therapeutic areas really doesn’t accept enough risk to move the therapies to market faster.
Patrick Balthrop: The underlying bureaucracy at the FDA is really what drives the organization. They people are all very competent and capable, but what they are actually able to do is based on that bureaucracy. their ability to respond to emerging trends have been well intentioned but they can’t act as fast as they would like to see happen.
Propel Business Plan Competition:
Next up on the agenda was the PROPEL business plan competition. Congratulations to PixelEXX Systems, for winning this year’s competition. Here are the company overviews.
Innoblative Designs Inc. a medical device company dedicated to innovating the treatment of early-stage breast cancer. Developed by a team of surgeons and graduate students at Northwestern University, our disposable radiofrequency ablation probe allows surgeons to intra-operatively destroy residual cancer that may remain after the removal of a breast tumor (lumpectomy) using safe radiofrequency-generated heat, thus reducing or eliminating the need for reoperations as well as dangerous, lengthy, expensive ionizing radiation therapy.
DeNovX LLC: DeNovX is a life sciences company providing platform products and services that accelerate pharmaceutical development and make drug manufacturing more efficient. Over 90% of active pharmaceutical ingredients are crystalline, and our platform technologies overcome the challenges of controlling the size, shape, and structure of these solids. DeNovX has a portfolio of five issued and two pending patents, and a growth engine that includes specialty products, services, and licensing revenues to generate high margin revenue streams.
Orpheden Therapeutics is commercializing a second-generation dendritic cell therapy platform based on granulysin. We have designed an award-winning business plan that is lean, taking advantage of existing infrastructure at Northwestern University and the National Institutes of Health to prove the platform in the “orphan” disease, ovarian cancer. Minimized risk, a dynamic revenue model, and an expert management team allows us to quickly yield high returns for investors.
PixelEXX is creating the imaging systems poised to overcome the performance barriers of size, image quality, and flexibility that currently bedevil endoscopy. The proprietary PixelEXX technology delivers image sensors much smaller than is possible using other technologies, creating crisper, higher-resolution images in highly compact packages: an acknowledged need in the medical device community. Endoscopy is a dynamic and growing market in which image system advances are enabling adoption of minimally invasive diagnostic and surgical procedures.
Sintact Medical Systems, LLC is a medical device company that develops non-resorbable films which separate adjacent organs from adhering to each other after surgery. Internal scar formation, commonly referred to as surgical adhesions, cause adjacent tissue and organs to adhere to one another due to surgical trauma. Sintact films acts as an adhesion barrier separating these surfaces to significantly reduce the likelihood of adhesion formation and associated post-operative complications.
The Chicago Innovation Showcase ended with 15 – 5 minute presentations by new technology ventures from the Universities, coordinated by the Chicago Innovation Mentors. Although there are a few notable companies like ProofX I am not going to go in depth on these companies.