Medical Device Link.

Originally Published MX March/April 2006

EDITORIAL ADVISORY BOARD

Newly appointed members of the MX editorial advisory board offer guidance on achieving strategic and financial success in the medtech industry.

In the realm of medical technologies, growing a business often requires a lot more than just a good product idea and a ready marketplace. With resources stretched thin, company leaders are often pressed to develop detailed business plans that project their market potential as well as their regulatory and reimbursement strategies, management team growth, marketing plan, and more.

In turn, such detailed business planning makes it possible for emerging medtech companies to attract the attention of the financial community—including investors ranging from angels to large commercial banks. Such investors are increasingly specialized in the area of medical technology, and they can be a hard group to impress.

In both of these areas, getting expert advice is as important for MX as it is for the magazine's readers. In this issue, MX is pleased to present the newly appointed members of the advisory councils for two areas of critical importance to medtech executives: business planning and finance.

Business Planning

Hamade

Sami Hamade is vice president of the Compass Group, the corporate venture capital and business development arm of Guidant Corp. (Indianapolis). In addition, Hamade recently assumed leadership of a combined West Coast business development unit.

Previous to this position, Hamade held founding roles in the launch and development of significant businesses for Guidant, including coronary stents, carotid, and peripheral systems. Prior to joining Guidant, he held positions of increasing responsibility in engineering and technical sales management, fields in which he was a recognized inventor and business manager. Hamade is the recipient of publication awards and the prestigious Kettering award for innovation.

Hamade has been active in the medical device sector for the past 13 years. He started with Advanced Cardiovascular Systems, where he assumed positions in international marketing and distributor management. He currently sits on several early-stage company boards and advises a Midwest venture fund.

Hamade holds a bachelor's degree in engineering from the American University of Beirut, a master's degree in engineering from the University of Michigan, and an MBA from Stanford University.

Nicholson

James E. Nicholson is founder and managing partner of OrthoPlex LLC. He has an extensive track record in the medical device industry as the founder of several medical device start-up companies, including Mitek Surgical Products, Innovasive Devices, and Cortek Inc.

OrthoPlex is Nicholson's seventh venture. He led both Mitek and Innovasive through successful initial public offerings (IPOs), and both companies were subsequently acquired by Johnson & Johnson's Ethicon division.

When considering whether to set up a company as an acquisition target or remain an independent enterprise, Nicholson says there are clear scale and breadth advantages to larger medical companies. "In high-growth and less-mature segments of medtech, a company may branch out from a few good products to become a platform company, but their value creation first depends on the viability of a key product or system," he says. "Companies should keep their options open to maximize exit value, though it can be difficult to balance product versus business infrastructure spending."

Nicholson is the inventor behind 38 patents. While some emerging medtech companies struggle to get beyond the earliest phases of technology development, Nicholson says there are steps they can take to advance their products. "Companies have to be sure to review their finished designs with doctors in the potential customer set," he says. "They should be sure to talk to thought leaders, but also some less-experienced clinicians who might have even greater demands for ease of use."

Nicholson holds BS and MS degrees in aeronautics and astronautics from the Massachusetts Institute of Technology.

Seeman

Jerrold S. Seeman is president and chief executive officer of Luxcore Ltd. (New York City), the U.S. Department of Justice— registered communication agency that is the official representative of the Luxembourg Board of Economic Development. An attorney and senior corporate public relations and public affairs counselor, he advises senior management and government officials, and executes positioning strategies.

Seeman says the nature of the medtech industry requires a dynamic model of business planning. "Because of the critical, often life-or-death implications of medtech products, and because the medtech industry exists in a stringently regulated, but shifting environment, medtech executives, by necessity, must factor in extreme product standards and absolute regulatory compliance at the earliest stages of business planning—and be prepared to accommodate changing costs and requirements," he says.

Medtech companies can benefit by implementing a multidimensional business-evaluation model, Seeman says. "Medtech companies also have a need for powerful analytics," he says. "They should be able, within reason, to factor in the cost repercussions of a new piece of regulation aimed at the testing or certification of a present or contemplated product.

A graduate of Georgetown University Law Center, Seeman pursued graduate and undergraduate studies in psychology at New York University.

Viscogliosi

Anthony G. Viscogliosi is the founder, chief executive officer, and chairman of the board of managers for Small Bone Innovations LLC (SBI; New York City).

Viscogliosi says the key to success in raising capital is establishing reasonable, prudent, conservative milestones that are achievable in a proper business model. "Adequately financing one's company is the most important job of the CEO, and every CEO wants the current round of financing to be the last, but the best-laid plans never work out exactly as you would like," he says. "When you raise each round of capital, it is also crucial that you raise buffer capital—breathing room—to ensure you are prepared for the next bump in the road. My personal rule of thumb has always been to raise up to 12 months additional, or at least 30% more capital than you plan to consume."

Viscogliosi has more than 20 years of experience as a founder, CEO, and leading research analyst. Prior to cofounding Viscogliosi Bros. LLC (New York City) in 1999, he was employed for 11 years with several regional brokerage and investment banking firms as an institutional sell-side equity analyst.

According to Viscogliosi, opportunities for emerging medtech companies are greater than ever before. "To capitalize on these opportunities and achieve success, it is critically important to be narrowly focused and specific," he says. "Entrepreneurs must be visionary in their approach and find a problem that either no one has focused on solving or that is being treated in a disorganized and highly fragmented way."

Viscogliosi holds a BS in economics from the University of Michigan and is a lieutenant commander in the United States Navy Reserve.

Finance

Cohen

Richard S. Cohen is president of the Walden Group Inc. (Tarrytown, NY), a strategic investment-banking firm specializing in the healthcare industry. He has provided strategic, operating, financial, legal, and tax expertise in more than 70 mergers, acquisitions, and other healthcare transactions.

Over the coming 12 months, Cohen expects the medtech market will continue to experience a high level of acquisition activity. "Continued consolidation can be expected in the cardiovascular, orthopedics, and minimally invasive surgery markets as the baby boomer generation's hearts and joints start to deteriorate," he says. "Boston Scientific's aggressive bidding for Guidant and its purchase of multiple niche players—including TriVascular Inc., Rubicon Medical, Biophan Technologies, Advanced Stent Technologies Inc., and CryoVascular Systems—reflect the drive to offer more cardiovascular treatments through common call points and sales channels."

Cohen is a firm believer in investment banker specialization within the medtech realm. "Deals are now more fitted, and synergies need to be proven, not just in one meeting, but throughout the marathon stretch of time that a large device company applies to an acquisition," Cohen says. "Credibility is vital, and that requires industry and clinical knowledge and experience."

Cohen has a BA from Cornell University, as well as a JD from the New York University School of Law, where he was an editor of the law review. He also attended the Leonard M. Stern Graduate School of Business at New York University.

Dotzler

Frederick J. Dotzler is a managing director of venture capital partnership De Novo Ventures (Menlo Park, CA), which he cofounded in 2000 with three partners. The company currently has $350 million under management.

According to him, funding for start-up medical device companies has never been as abundant as it is in the current marketplace. "There are more sources of funding than I've ever seen, and it's available for all stages," he says. "Many venture capital firms have raised significant amounts during the past three years. The banks that service early-stage companies are flush with capital. Venture debt has become a robust and popular source of capital for companies that want to avoid significant dilution."

Before founding De Novo, Dotzler was a general partner at Medicus Venture Partners, a venture capital firm he founded in 1989. In partnership with the Hillman Co., Medicus invested in a wide variety of early-stage medical technology and biotechnology companies in the western United States.

Dotzler, who penned the article "Starting Up Right" in the November/December 2005 issue of MX, gives the following advice to entrepreneurs who are facing the key financial considerations involved in starting a medtech firm. "Create a realistic budget, carefully select the venture capital firms you plan to pitch, and don't spend money on noncritical-path items," he says.

Dotzler received a BS in industrial engineering from Iowa State University, an MBA from the University of Chicago, and an advanced degree in economics from the University of Louvain, Belgium.

Enstrom

Lars Enstrom is director of the healthcare investment banking group at Houlihan Lokey Howard & Zukin (New York City), where he manages the firm's life sciences business. With more than 12 years' experience in healthcare investment banking, Enstrom has completed more than $3 billion in merger and acquisition, public and private equity financing, senior debt financing, and restructuring transactions, in sectors including medical devices, biotechnology, pharmaceuticals, healthcare services, healthcare technology, and real estate investment trusts (REITs).

Prior to joining Houlihan Lokey, Enstrom was an executive director in the healthcare group at CIBC World Markets. Previously, he covered the long-term care and REIT sectors as part of the healthcare group at NatWest Markets.

Enstrom's professional experience also includes positions in real estate development and acquisitions. He began his investment-banking career with the First Boston Corp. as an analyst on the mortgage-trading desk. He received a BA from Brown University and an MBA from Harvard Business School.

Howard

Michael T. Howard is chief financial officer and senior vice president for corporate services at Medrad Inc. USA (Indianola, PA).

Howard says growth in privately owned companies remains viable. "There is money available from angels and government and regional sources to get going," he says. "How far you get without ‘big public financing' is probably more a matter of the company's business model, its new-product research challenge, and how extensive its required distribution network will be. Large needs in either development or distribution may require the cash best available through public markets or venture capital firms that will be interested in an IPO or sale within a relatively short time frame."

Although public companies face the added pressure of complying with the requirements of the Sarbanes-Oxley Act, Howard says that private companies must still demonstrate a level of financial control. "Trust and credibility with investors and creditors are assets for companies at any stage and size," he says. "However, private equity investors will expect that level of control processes and tasks that can show a minimum cost-benefit."

Howard received a BA in economics from Yale University and holds an MBA with honors from the University of North Carolina at Chapel Hill.

May

Allan W. May is a cofounder of Life Science Angels (LSA; Menlo Park, CA), the largest angel organization on the West Coast focused solely on early-stage medical device and life sciences start-ups.

Most recently, May was chairman and CEO of Vascular Architects (San Jose), a venture-backed company focused on commercializing a less-invasive surgical procedure and bare-metal and drug-eluting stents for treating peripheral vascular disease. Between 2000 and 2003, he was a member of the board of directors and chairman of the investment screening committee of Tenex Medical Investors (Burlingame CA), the first angel group on the West Coast focused exclusively on the life sciences. May is an investor in more than 30 medical device and biotech companies.

May has been a founder, board member, or CEO of a number of early-stage companies in the life sciences arena. He was named Biotech Angel of the Year in 2001 by the International Association of Angels, and was one of the coprogram directors for the Cardiac BioInterventions course held in San Francisco in 2002. The course focused on emerging technologies and clinical development in cardiovascular diagnostics and therapy from the biotech-genomics point of view. He lectures frequently on trends and developments affecting biotech and life sciences investing.

Zickfeld

Roger Zickfeld is a healthcare investment banker at B. Riley & Co. (Los Angeles) and a former medical device executive at Karl Storz Endoscopy (Culver City, CA). He has more than 20 years of financing, operating, and corporate strategy experience.

Zickfeld says that in the current financial market, many emerging medtech companies find it tough to gain broad-reach product distribution or to maximize their sales potential. "This is due to the market control enjoyed by the large incumbent players who are on contract with major group purchasing organizations," he says. "The financial markets will support emerging companies to a point, but investors recognize that many smaller medtech companies are better positioned for growth as parts of larger, more-effective sales and marketing organizations."

From 1987 to 2000, Zickfeld gained extensive life sciences experience as a top executive with Karl Storz Endoscopy, a global medical devices firm, where he had broad managerial and profit-and-loss responsibility.

According to Zickfeld, venture capital investors, much like investment firms, are indeed specialized. "This is a function of the need to fully understand the technologies and market potential of portfolio companies from an expert perspective," he says. "There are many MDs and PhDs serving as general and venture partners at venture capital firms today. This specialization should serve to reduce risk for investors at the end of the day." Zickfeld graduated magna cum laude from the University of Southern California and earned an MBA at the University of California, Los Angeles.

MX looks forward to the contributions of these editorial advisers and will continue to announce members of additional councils throughout 2006. In the May/June issue, MX will present its advisory board members in the areas of market intelligence and technology development. To nominate medtech industry experts in these or other fields, contact MX editor-in-chief Steve Halasey at 310/445-4274 or via e-mail at steve.halasey@cancom.com.

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