Interactive: The faces of med tech

Paul Dailing, Gregg Mrowka and Brianne Hans; story by Paul Dailing

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Now let’s meet members of the Kellogg network working to grow the medical device space.

Medical devices better have problems, Clinical Assistant Professor of Innovation & Entrepreneurship David Schonthal said.

He doesn’t mean the bandages, infant teething rings, pacemakers, scalpels, MRI machines, surgical gowns, stethoscopes, syringes, dialysis machines, toothbrushes and the thousands of other health care materials the FDA puts in the category of “medical device” should have flaws.

He means that if the device wasn’t built to address a specific problem, it has no reason to exist.

“Just because it works in the lab doesn’t mean there’s a need for it in the market,” Schonthal said.

Schonthal tries to combat the “solution hunting for a problem” through health-tech incubator MATTER. Schonthal and Kellogg grads Andrew Cittadine ’98 and Steven Collens ’01 created the incubator/innovation center to help bring the doctors and clinicians who created a device together with the payers, venture capitalists, channel partners and regulatory consultants who can help shape an idea into a viable business.

MATTER is just one of the ways the Kellogg community is helping grow the med tech market.

The doctors

A medical device starts with an idea, often one generated by doctors working in the field.

That’s how a team of Northwestern Memorial Hospital surgeons, including David Mahvi and Dan McCarthy, the latter a 2013 graduate of Kellogg’s MMM program and a fellow at Northwestern’s Center for Device Development, developed a cancer treatment device coming to the market through startup Innoblative.

Innoblative CEO Tyler Wanke ’15, a MMM student and MD candidate, said they're months, if not years, away from seeking FDA approval.

“The biggest surprise was probably how in-depth, arduous and long the regulatory process was,” Wanke said.

That regulatory process doesn’t end once the product is on the market. Intersect ENT’s sinus implants ended up having to go through the Pre-Market Approval, or PMA, path. With this, the FDA’s most stringent and expensive device pathway, any changes in the product or even the manufacturing post-market must go back to the FDA for approval.

“We moved to a new facility just up the road five miles from Palo Alto to Menlo Park and we had to do a full submission to get the FDA to approve the facility,” said CEO Lisa Earnhardt ’96.

Despite the risk, the rewards are there. Intersect ENT went from a 12-person startup to a 200-person company and winner of the American Rhinologic Society’s Cottle Award for Best Clinical Science Research. The Silicon Valley Business Journal recognized them this fall as the fastest growing company in Silicon Valley. Forbes honored them as one of "America's Most Promising Companies."

But not all device ideas are at the Innoblative or Intersect ENT level, Schonthal said. Not all ideas, no matter how technically proficient, are worth pursuing if there’s no call for them in the market.

“Sometimes the most humane thing you can do for a technical founder is stop them from wasting their time,” Schonthal said.

The angels

Even the best idea takes money to become a full-fledged product. A lot of money. That’s where venture capitalists like Marc-Henri Galletti ’97 come in.

Galletti is the co-founder and managing director of venture capital firm Longitude Capital, which specializes in life sciences and has two active funds with over $700 million in commitments.

A “stage-agnostic investment firm,” Longitude will consider investing in medical device startups at any stage. The important part is the company, with Longitude's support and assistance, should be able to hit the next key value-creating milestone, whether that's proof of concept, FDA approval or settling into a post-market niche within three to five years.

“If the company has a challenge getting over those hurdles, then we have to have a very difficult discussion about whether we want to continue with this company,” Galletti said.

Just as angel investors invest in many companies, the companies hunt for multiple funding sources. Innoblative, for example, has won nearly $200,000 in funding through 11 top business plan and case competitions, has taken a new office and lab space through Insight Product Development’s accelerator lab and has even taken to the Internet, raising money through Medstartr, a Kickstarter-like crowdfunding site.

Why so expensive?

On the surface, it seems much cheaper to make a medical device than a drug. Part of that reason is that the FDA requires large-scale Phase 3 clinical trials, which can often put the cost of getting a drug to market past the $1 billion mark.

However, Arun Menawat ’96, CEO of medical imaging company Novadaq, said the true cost of a medical device isn’t necessarily less, just backloaded.

Phase 3 studies, while expensive, definitively show the medical profession how well the drug works. Device testing shows that a treatment is safe, not that it’s more effective than competitors.

“On the device side, once you get the regulatory approval, that gives you license to really start the business,” Menawat said. “You may have the best product, but it still may take two to three years before adoption occurs, because the surgeon is used to using his own device and you’re asking him to make a change.”

Menawat says some device companies invest in multi-center studies of their product after it’s on the market, working with numerous hospitals basically to replicate the testing that would have gone into a Phase 3 trial. Only about 10 percent of companies invest in such studies, he said. He expects that number to rise.

Costs borne in the USA

The United States of America has the most demanding and expensive process for approving medical devices of any nation in the world. And that can be good or bad.

Menawat’s Canada-based company sought approval in the U.S. first, then used the rigorously tested data to get approval in countries with less demanding standards.

“If we’ve done the work in the U.S., effectively we’ve done the work for the rest of the countries,” he said.

Innoblative, however, is considering launching in Europe first, after obtaining a CE mark — the European Union seal of product safety.

“If you can get your device to market in Europe, you do that, you learn, you make some money and you get your product out there helping people sooner,” Wanke said.