On this episode of Med Tech Gurus, we sat down with Jay Michael Brown with Number Three Investments and CEO of Rock West Medical Devices about some of the market realities and strategies that can affect the success of medical device develop.
Mr. Brown has a degree in Marketing and Business Administration from Western Kentucky with further study at Columbia University and training in Human Resources at Princeton University. With over 40 years of experience in the medical device space, including time spent in the OR, Critical Care, Emergency, Pulmonary, and Vascular Access Markets with various products, he has been a part of or driven eight successful exits to some of the largest Fortune 500 companies in healthcare.
How Companies with Great Potential Miss the Mark
A lot of companies with great potential fall short. This is exceptionally true of technology based companies who must not only develop great products that function with exceptional efficacy, but also meet needs dictated by the market.
Mike told us he’d been a part of many projects, both in their infant stage and into clinicals, that had great potential because of the quality of their product, but ultimately fell short due to market conditions or non-engineering problems.
Once such product was a Pulmonary Monitoring device meant to measure airwave breathing through chest measurements. Despite being “one of the best” products he’d be associated with, they were unable to sufficiently drive the market and came up short. This particular shortcoming was a function of money more than anything else - as it’s extremely expensive to inform the market.
The product far exceeded the expectations. However, the key was physician education - not only on how to use a product, but in the understanding of the need for the product through the niche it fills. Mike admits that he and others didn’t do as much diligence as they could have. Understanding the market is key.
Although they did eventually sell the business for the amount of cash invested, a testament to the business acumen of those involved with the project, the product had great potential to improve patient healthcare, which would have set it up to be an exceptionally lucrative venture. The tech had the makings of a smart ventilator that other companies are adapting to their technologies. Good tech comes back around.
How Companies Can Hit Home Runs
Missteps in the market won’t always be as palatable. Pleasing the venture capitalist by recapturing investments is always better than landing in the red, but it falls far short of the goals for start up investments.
You can get engineers that are extremely bright and know what they want to do, but it takes more than just being able to create a good device. The early diligence of understanding the market is key and can be the downfall for some really great products. The marketplace doesn’t accept every invention out there.
If you have a product that fills a need, you better make sure you’re not only able to teach people how to use it, but also help them understand more profoundly the need for it if you want to sell them the product. They have a wonderful product, but the market need isn’t understood by the market. Educating the market on its needs is what is expensive.
One of the biggest successes Mike had seen was around an IV catheter. The industry had been using needles to administer IV’s. It was easy to see the patient discomfort and cost associated with such necessary equipment, so different companies were trying out plastic catheters. It was a product whose market needed a massive amount of selling. The need was obvious, so the product was greatly successful.
In this case a fantastic product met an exceptional need in the market. Even after many, many iterations the original company is still going strong today. By being able to be sensitive to the market needs - both obvious and what can be informed - your great tech can begin to slid into gaps that can, in turn, profoundly affect the medical field and prove very beneficial for investment.
Advice for Medical Entrepreneurs
“They need to understand the market need,” Mike reiterates. “You can’t say this often enough to someone who has an idea.” There is an uncommon link between good technology and the need it’s meant to meet. Moreover, relationships and communication with physicians and other professionals in the field who make use of this tech, are necessary to inform the market. The sooner your group is aware of this, the more quickly they can research and make plans to adapt to current and projected market patterns.
The second part that’s become is the regulatory pathway. It’s a real problem; you need to understand and know it because it can be a major portion of your cost, especially with all the clinicals.
A startup most likely should never try to take a product all the way to market. This sounds crazy at first, but if you have something that has a real market need, the big three or five companies in the industry don’t do development extremely well and are willing to acquire technology to grow their businesses.
Know your exit candidates. Know who’s playing in the space you’re playing in. Are you the kind of player that can play in this size of a game? Is there a niche you can fill? You can start this conversation post-regulatory. As soon as you’ve finished your clinic work and prove that the product is viable in the marketplace, you can start the exit process. Having a million in sales goes a long way towards proving marketplace need.
This post is based on an interview with Michael Brown from Rockwest Medical Devices. To hear this episode, and many more like it, you can subscribe to MedTech Gurus.
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