It’s always 20%

Meetings with the Ventures group went well – but there are always a few curves thrown in among the fast balls.

Our US medtech startup was founded by four partners (a finely tuned ensemble consisting of an engineer, a financier, a salesperson, and a physician) in mid-2011 to develop a new surgical monitoring device.  Design and development work was done in the Netherlands, clinical trials in Seattle and Chicago.  We played by the rules and informed Mayo, where the physician worked, about our activities.  As per university policy, we assigned all patents that he helped to invent back to them.  And, after taking a royalty, they licensed them back to us.

‘All above-board, amicable, and straightforward for 12 months.

This meeting was a routine update – we’d planned to show them the prototype, relate our experiences at the conference, and lay out the commercialization plan for the coming months.  however, the meeting opened by saying that there was a paperwork issue that needed to be  resolved.  It developed that Mayo policy requires that when a physician is a shareholder in a startup, then shares must be given to Mayo. 

That’s certainly a new twist: their follow-up put teeth to it:

Gentlemen,

My homework at this end indicates that in cases where Mayo does not initiate the start-up, we end up with a 10% stake that can’t be diluted until $5M is raised. I believe this is consistent with what I had mentioned on Thursday (I didn’t have a number, but I assured you it would be a minority share). Let me know how you want to convey this transfer. I look forward to working with you.

The  meeting made clear that Ventures further planned to be an active partner for their shares.  They had a CEO waiting in the wings (who would need 20% share), they know VCs who might be interested (for a 20% stake),  would we like to meet a distributor who could sell the product (for 20% commission)?

My business profs told me there would be days like this…

We do need to find out the basis for their assertion, of course, then see whether there is any tangible reciprocity accompanying their bear hug.  Introductions and advice are cheap.  I’ve bounced this off of a few friends in the industry, whose advice ranges from 'Be disinclined to acquiesce’ to ‘It is gnarly’.  The truth is that some accommodation is likely inevitable, we’ll end up negotiating the take and holding our governance.

I really wish that life lessons weren’t always so expensive.

Along Highway 52, MN

The ASA show closed out successfully and it’s time to hit the skies again, this time northwest to Minneapolis.   The occasion is a meeting with Mayo Clinic Ventures, an hour’s drive away in Rochester.  It’s noticeably more wintery in the upper Midwest: a cold wind and low clouds sweep across the prairie and the trees are already bare.

I turn south onto Highway 52, into gently rolling farmland dotted with red barns amidst fields of golden stubble.  Cell phone reception fades with every dip in the landscape, the car rocks with every passing truck (and there are a lot of them).

So, I shove office thoughts aside, turn cruise control on, and just watch the scenery drift past.

Hampton MN:  The Black Stallion Saloon flashes by, an R.I.P Hampton sign posted in front.  I try not to take it personally: the eponymous town must be going through hard times.  Greg’s Meats are next – a shame that I can’t stop and take a smoked sausage back, but customs would never allow it.

Canyon Falls: The speed limit dips from 65 to 55 for a quarter mile around Canyon Falls:  speed trap. Some things never change (although the coppery dollar coins are new to me).  The white clapboard Class Act lies just beyond, the explanation “Gentlemen’s Club” painted over the entrance.  Weirdly, outdoor picnic tables crowd the front of the building: ‘can’t imagine there’s wisdom in sitting in front of a strip club fronting a major highway for any length of time. 

Zumbrota:   The landscape is somewhat recognizably Dutch=-rural, but the barns don’t sprawl, and the fields are dry-rimmed Still, I can almost imagine I’m still on the A2.   The other night in Washington, I absently thought, Oh there’s an American when overhearing a familiar accent in a restaurant.  That’s a sure sign of an expat mind at work.

Pine Island:   Take America Back appears, bold red, white, and blue lettering, then another, and another.  They are  punctuated by variants urging drivers to Pass Voter ID Laws, to Pray to End Abortion, and, above all, to Vote Republican.  Wake Up, Don’t Be Foolish,  Vote Right.  Their country is being lost: farmers, a rural way of life, a familiar social order are under threat.

I remember Minnesota as a traditionally tolerant, Scandinavian-immigrant sort of place.   We used to joke that Corporate staffers in Minneapolis suffered from “Minnesota Nice”, making it impossible to challenge one another directly.

It’s ironic and a bit sad to see the anger flow past.  The issues aren’t real, but real perceptions are being fed.  The campaigns are feeding a storm of incivility, precipitating into white drifts of bitter signs along Highway 52.

Rochester: Mayo Clinic, 4 miles.  The traffic thickens as the road arcs around a high-rise core.  Signage normalizes to commercial standards rather than political hyperbole; familiar brands replace the eccentric and unique. 

One hour until our presentation, I start running through my narrative.  Speak to your audience, is always  the advice.  But which part of Highway 52 is waiting?

The value of clinical trials

What is supposed to be an objective scientific process designed to assess whether product work, whether they are better than products already on the market and whether their side effects are a price worth paying for any benefits they might convey s routinely being corrupted.  Companies bury clinical trials which show bad results and publish only those that show a benefit.  Trials are often run on small numbers of unrepresentative patients, and the statistical analyses are massaged to give as rosy a picture as possible. Entire clinical trials are run not as trials at all, but as under-the-counter advertising campaigns. That is a scandal.

Economist, reviewing Ben Goldacre’s new book.

This was my jumping-point for a talk on Clinical Trials Strategy that I gave to an industry audience at Medtec Ireland this week.

My first point was a straightforward solution: Clinical trials must inform and conform.  To inform, trials must be designed to answer a significant question honestly, with the possibility of a negative result.  To conform, trials must be executed using hypothesis-driven scientific methods, following rules to assure patient safety and privacy.

My second point was strategic: Recognize that clinical trial results serve many other audiences.  Publication in peer reviewed literature is obvious.  But regulators, payers, professional clinical associations, industry risk / usability standards,  and investors also have particular needs for information and evidence.  If the planning process doesn’t take account of them, then trials may need to be repeated.  As our Business Development director reminds me, 10% more investment broadening a trial's data collection strategy returns 30x savings later when the right information is available as needed.

I’m in Washington DC now for the Anesthesiology Society of America meeting. We’re presenting five abstracts (here’s one) describing the results of clinical studies that demonstrate safety and baseline characteristics of a new surgical monitoring device in normal subjects. 

The first two day’s experiences has really driven home both points.

These are High Science presentations: hypothesis-driven, rigorous methodology, direct comparison to the  commercial gold standard, formal registration, peer-reviewed publication.  These studies establish facts and promote open discussion, first through formal presentation and then through hours of informal walk-by discussions with clinicians. Our next set of results, accepted for December, will move to clinical experiences describing efficacy and usability.

But more broadly, the presentations also connected with multiple audiences.  We brought a prototype of the monitoring device that illustrated the likely instantiation of the idea.  Doctor who understood the need and the evidence could comment directly on the product.   They told friends; friends talked but it on the trade floor.  Industry rep’s dropped through to inquire and to  fret.  We were featured in n article in the ASA Daily News (p.3).

We hoped for a few hours of comment by our medical advisory group.  We got very full 12-hour days of intense discussion by a diverse audience of people from academics, clinical practice, and industry.  The prototype got a month of shakeout in days.

To be honest, the momentum built so fast that I got a bit worried.  Was it being oversold?  Could we meet expectations for performance and delivery time?  Was awareness building too quickly among competitors?  Were we losing control of the process?

There’s no question of the value that connecting with customers through clinical trials  has brought to the process of developing the product and the business.   Context, credibility, awareness, and access have all accelerated; optimism and enthusiasm have infused the founding team.  It’s driving late night discussions over nibbled tapas and glowing tablets about planning and funding.  It’s exciting.

Are we losing sight of the simple maxims that I advocated in Ireland just days before?  I think it’s really fortunate that I presented on these issues immediately before the conference: so far I think we’re wholly on the side of the angels and headed in directions that will both inform and conform. 

In directions that should, ultimately, benefit patients and the business.