A quick scan of course offerings and lecture titles at medical meetings shows that bioentrepreneurship is a growing phenomenon in the United States. With the expansion of technological capabilities, physicians and other researchers have come up with new products to meet unmet needs in medicine, be it drugs or devices. Bioentrepreneurship for otolaryngologists typically involves developing a new device to improve otolaryngologic surgery. ENT Today spoke with several bioentrepreneurs about the road to success.
Explore This IssueFebruary 2009
Bioentrepreneurship involves taking technology from the mind of a researcher and bringing it to the marketplace. Typically the two pathways for doing this are patenting and proving a concept and licensing it with a larger company or using the new technology as the basis for a start-up company that may grow into a larger company or may be acquired in the future by a larger company, explained Donald A. Gonzales, MD. Dr. Gonzales, a bioentrepreneur, is founder and Chief Medical Officer of ENTrigue Surgical in San Antonio, TX. The company currently has one commercialized articulating sinus instrument, a stapler for septoplasty awaiting approval, and ongoing clinical trials for a middle turbinate medializer.
Becoming a Bioentrepreneur
Bioentrepreneurship may come about in any number of ways, but generally it involves identifying a product for an unmet need and considering whether it will benefit all the major stakeholders: patients, physicians, site of care, and payors, explained Thomas V. Ressemann, another bioentrepreneur, who is President and Chief Executive Officer of Entellus Medical, the company he co-founded with an otolaryngologist. Entellus’ first product is the FinESS Sinus Treatment System, an innovative, less invasive treatment for chronic sinusitis and acute sinusitis.
Mr. Ressemann gave a broad overview of how to go about bringing a product or service to the marketplace. Once an appropriate product or service is identified, a functional organization or business model is created and decisions are made about the associated people, resources, and time needed to bring the business model to the stakeholders, he continued. Intellectual property should be established. Once capital has been raised through appropriate sources and resources are in place, the product or service is developed, tested, and approved by regulatory bodies for marketing.
Identifying a clear regulatory path, clinical study path, and reimbursement path is critical, Mr. Ressemann said. It is also important to research whether the product can be delivered through existing distribution channels, he added.
Key Ingredients for Success
Experts interviewed for this article agreed that the first requirement is an idea for a product that meets the needs of the major stakeholders and is differentiated from other products on the marketplace. An equally important ingredient is involving the right people-including a good corporate attorney-in the fledgling organization. The idea must solve a real problem, and you must be persistent through all the roadblocks you will encounter, Dr. Gonzales said.
-Donald A. Gonzales, MD
The people involved should be knowledgeable about medicine and business, have integrity, and be reasonable. Physicians rarely become CEOs, and it is important to have an experienced business manager and a shared management vision, said Anthony J. Natale, MD, a venture capitalist at Prism Venture Management in Venice, CA.
The market should be attractive for reimbursement, Dr. Natale continued. For example, a surgical device for a procedure that is performed about 100 times a year won’t make money, but a device for sleep apnea is widely applicable, he said. Know the reimbursement environment surrounding your site of care, current care options, and the need for the care option being considered, Mr. Ressemann added.
Intellectual property should be protected, agreed both Dr. Natale and Mr. Ressemann.
Set important milestones such as proof of concept, first in human experience, clinical data, regulatory approval, and sales. Know what it takes to get to each milestone and make sure the funds you raise can get you these important milestones with a six-month reserve of funds. When raising funds for one milestone, always keep your next fund-raising in mind, said Mr. Ressemann.
Francis Parnell, MD, agreed with these points. Dr. Parnell, an otolaryngologist who is President and CEO of Parnell Pharmaceuticals in San Rafael, CA, said, The degree of success depends on finding a niche, funding, and regulatory approval.
Sources of Funding
Potential sources of funding include one’s own money and seed money from friends and family, angels (wealthy individuals looking for an investment), and venture capital, Dr. Gonzales said. Angels generally invest anywhere from a few hundred thousand dollars to a million dollars. Venture capital involves investments ranging from a few million to tens of millions of dollars.
There are no hard and fast rules for funding, according to Dr. Natale, the venture capitalist. It is not always a straight progression from your own seed money, to angels, to venture capital. Some angels might provide more financing than a few hundred thousand dollars, while venture capital may be involved at any point along the spectrum, he noted.
Dos and Don’ts
To be successful at bioentrepreneurship, perhaps the first rule is to be prepared. Do your homework. Understand what you are getting involved in, how the business world works, and how start-ups get off the ground. Know the basics. You would be surprised at how many physicians come up with a good idea and try to bring it to market without understanding the basics, Dr. Natale commented.
Do understand how to present your ideas and the limitations of your product. Do recognize when you need to involve other professionals, and know what qualities are desirable in a business partner. Do be disciplined about hiring the right group of people to make the enterprise a success, Dr. Natale continued.
Do be paranoid enough to protect yourself and your intellectual property, but don’t be too paranoid to block your own way-for example, by not sharing your ideas with a venture capitalist, Dr. Gonzales suggested.
The don’ts are equally important. Don’t be greedy. Be willing to cede control and shares of the company and bring other people on who are aligned on the same pathway, Dr. Gonzales said. Don’t be married to a technology or an invention if it becomes clear that it is not a good idea.
Never assume anything. Get your facts and data from multiple sources. Don’t underestimate the risks to your plan and how to mitigate these risks before you start. And don’t take funds before your business model is complete, Mr. Ressemann cautioned.
Some of the don’ts suggested by interviewees are the obverse of the do’s. For example, Don’t get involved with the wrong people, Dr. Natale said. He also emphasized not being greedy. If you want too big a piece of the pie, you can lose sight of the fact that the size of the pie in the beginning is different from the size you hope it will be at the end. Remember, 50 percent of nothing is nothing. Grow the pie and get the right people, he advised.
Don’t think starting a company is easy, Dr. Parnell cautioned. Don’t talk about your inventions and ideas to your colleagues, and do not trust outsiders. He also pointed out that drugs and devices are heavily regulated, and dealing with the FDA can be an impediment. Big Pharma sets the rules. For example, drug user fees are prohibitive for smaller companies.
Bioentrepreneurship in the Current Economic Climate
Interviewees agreed that an MBA is not mandatory for success, but that business acumen-however you obtain it-is key. An MBA gives an entrepreneur a tool, but it is not a replacement for good business judgment and competence, Mr. Ressemann stated.
An MBA is not a prerequisite, but it won’t hurt. There is no formal path to being an entrepreneur. You need to be able to learn on the job, be hungry, be motivated, and communicate to deal in a business environment, Dr. Natale said.
You don’t need an MBA, but you do need to involve people who understand business as you grow your company, Dr. Gonzales said.
Opinions differed on the effect of the current economy vis à vis bioentrepreneurship. Dr. Natale believes the current economic conditions are not relevant. Medical start-ups will rise and fall based on FDA approval and whether physicians want to use the product. The medical sector is always less affected than other sectors, he said.
The medical sector is insulated, Dr. Gonzales agreed. Now is just as good a time as any in the medical device industry. Our exits [whether a device is licensed or the company is sold to another company] rarely go through IPOs. Large companies always need new products to boost their revenue, he added.
Mr. Ressemann had a slightly different opinion. The current economic times are unprecedented. Early-stage investments are getting tough, and the terms are going to be more demanding than they were just six months ago, he said.
Resources are now available to guide would-be bioentrepreneurs. Dr. Gonzales suggests the Medical Device and Diagnostic Industry (MD&DI) Web site as a starting point for research on comparable companies with medical devices. This portal always has important information. For example, I hired the co-author of an article on ‘Negotiating With Giants’ as my corporate attorney. I found that article on the MD&DI Web site, he said.
Finally, the recently founded Society of Physician Entrepreneurs (SOPE) is an important initiative with the express goal of helping bioentrepreneurs bring their ideas to the marketplace (see sidebar on page 21).
©2009 The Triological Society