At a panel during LSI USA ‘24, industry leaders delved into the complexities and rewards of pioneering advancements in medtech innovation. The discussion highlighted the arduous process from ideation to implementation and the critical factors that drive success in the medtech market. Here are some key takeaways from the panel.

The Importance of Flexibility

The ability to adapt and explore new applications can lead to significant breakthroughs in the medtech market. Howard Levin shared Deerfield Catalyst’s experience. The company’s journey began with an unexpected pivot from heart failure to hypertension. Levin recounted the initial focus: "It was a heart failure play to start. We were trying to hyper perfuse the kidney to fake it to believe it should make urine." However, a critical discovery was made during their research: "We found that, lo and behold, there were different reasons to believe that the renal nerves controlled the input to the kidney and blood pressure. So, at this point, we have a deck for hypertension, a deck for heart failure, and a deck for end-stage or chronic renal failure." 

This shift in focus highlights the importance of flexibility and openness to new findings in the development process. 

The Agony of Clinical Trials

Clinical trials are often fraught with challenges, and the path to success is rarely straightforward. Chris Cleary discussed the setbacks Medtronic faced in their renal denervation trials around the time he joined the team: "In between my offer letter date and my starting date is when it didn't meet the endpoint. This obviously caused a big stir, considering in 2011, it was around $800 million upfront. At the time, it was the largest amount paid for pre-revenue companies. The ecstasy aspect was a future thing at that point for Ardian, but it was a lot of trouble for a lot of people." The initial failure to meet clinical endpoints caused major disruptions and necessitated reevaluating their approach.

 Despite the setbacks, Medtronic's commitment to the project remained strong. This resilience and determination are essential qualities for medical device investors and developers navigating the complexities of clinical validation.

Importance of Value Inflection Points

For startups and early-stage companies, reaching value inflection points with substantial clinical evidence is crucial for attracting investment. Levin emphasized the changing landscape of venture capital: "Maybe 10 to 15 years ago, you got a Series A with a couple of pigs and a provisional. Nowadays, you almost have to have 12 months of clinical data and then some number of patients to get the Series A." This underscores the need for solid clinical foundations to secure funding and strategic partnerships.

Levin also highlighted the importance of understanding both the clinical need and the market: "What you're trying to do is to understand the unmet clinical need but also the market." This dual focus helps ensure that medtech innovations are both effective and commercially viable.

Strategic Decision-Making in Acquisitions

Medtronic's approach to acquisitions involves high upfront costs and long-term commitments, reflecting the strategic importance of certain assets in the medtech industry. Cleary explained, "You have to say, is this an existential asset that I've got to have? Right? And if it is, then you pay up, and this is one of the long-term projects you will fund. You’re making a lot of capital allocation division at the high level, trying to figure out which five or seven programs must be funded." The decision-making process involves careful consideration of the potential for long-term growth and market impact. 

Discussing a specific acquisition, Cleary shared, "Our estimate was probably 500 million to do a U.S., a European, and ultimately a China trial." Such significant investments stress the importance of identifying and securing key assets that align with strategic goals.

The Role of “Therapeutic Magic”

In early-stage medtech innovation, demonstrating significant improvements over existing solutions is critical. Levin referred to this as "therapeutic magic," stating, "When you're doing something early on, you have to show something that's so much better than what exists out there. It should be obvious to the most casual observer that this is a great thing."

This concept is vital for attracting interest and funding, as it provides clear evidence of the innovation's potential impact. Identifying technologies with this degree of promise is key to successful investment for medical device investors.

Creative Financing and Risk Sharing

Medtronic has employed innovative financing strategies to manage development costs while maintaining a pipeline of innovative products. Cleary discussed the approach: "Would you pay someone three times their investment to get a product to market and have a lot of revenue versus zero revenue? That was the operating theory that we had to do." This strategy allows companies to stretch resources and accelerate product development.

Cleary further explained the impact of this approach: "These are products that would not have seen the light of day if we hadn't done it." Creative financing and risk-sharing models are essential for advancing ambitious projects in the medtech market, ensuring that promising innovations reach patients and drive industry growth.

Conclusion

The panel discussion illuminated the complex yet rewarding journey of medtech innovation. From the initial ideation and clinical trials to strategic acquisitions and creative financing, each stage presents unique challenges and opportunities. By understanding and navigating these intricacies, medical device investors and developers can drive transformative advancements in the medtech market, ultimately improving patient outcomes and shaping the future of healthcare.

The full recording of the panel can be found in LSI’s resource hub at the link below:

• The Agony and Ecstacy of Doing Big Things in Medtech

To hear more insights like this, join over 1,500 executives at LSI USA ‘25 at the Waldorf Astoria | Monarch Beach Resort in Dana Point, California, from March 17th to 21st, 2025.