Secrets of selling medical devices

Ben Nelms /National Post

CEO of Verisante Technology Inc, Thomas Braun.

Link to full story at The Financial Post 

Mary Teresa Bitti  Aug 23, 2011 – 8:10 AM ET
 

Thomas Braun, CEO of Vancouver-based Verisante Technology, Inc., is one step closer to bringing the Verisante Aura, a non-invasive early skin cancer detection device developed by Canada’s leading dermatologists and cancer specialists, to market. The company, which has an exclusive licensing agreement with the BC Cancer Agency to manufacture the device, has recently received ISO certification and is awaiting Health Canada approval in order to start marketing the medical device this year. Since Health Canada’s requirements for medical devices are in alignment with those of Australia and Europe, the plan is to hit all three markets in short order. Mr. Braun explained to Mary Teresa Bitti what it takes to commercialize a new medical technology.
Q What are the potential impacts of the technology?


A In Canada, there is a one in six chance of getting skin cancer in your lifetime, but most of those people are over age 65 because it is the result of a lifetime of sun exposure. At the same time we have rapidly escalating health care costs and we are facing a shortage of dermatologists and general practitioners. So we need devices that can be used by technicians or physicians’ assistants to leverage the doctor’s time. This device reduces the amount of time it takes to diagnose skin cancer and it also reduces the biopsy ratio. Right now based on dermatologists just examining patients with their eyes, they have a biopsy ratio of 30 to one. Our device reduces that ratio to 6: 1 with nearly 100% sensitivity. When you catch a melanoma early, you pay $5,000 for treatment, which typically involves surgery to remove it and results in a 99% survival rate. If it progresses to Stage 4 and metastasis the cost for treatment is $110,000 with survival rates dropping to 15%.
Q What led you to launch Verisante Technology? How did you connect with the BC Cancer Agency?
A The concept of being able to image cancer like an ultrasound or a CAT scan images other diseases was so intriguing I thought it was a huge winner and technologically feasible. So I launched Verisante Technology in 2006. We worked on this for three years, had seven patents and went public. We had always wanted to work with the BC Cancer Agency but they were very advanced into a clinical trial and at that time they didn’t need an industrial partner. It was only after they had completed a six-year clinical trial and scanned 1,000 lesions that they felt they had sufficient evidence the technology worked and it would be a commercial success that they started looking for a partner. We were the only skin cancer imaging company in Canada and one of the few in the world and we happened to be local. We had just completed an IPO that raised $1.5-million at a difficult time. They liked the idea of being able to license the technology to a public company so that there is transparency.
Q Is this kind of partnership the way of the future for medical innovations?
A Big companies have the resources to develop their own technologies. Smaller companies don’t. This technology had been in development by the BC Cancer Agency and UBC for more than 10 years and was supported by the BC Cancer Foundation, the Canadian Cancer Society and Canadian Institutes for Health Research. A lot of time and money had already been spent. They have the infrastructure. I don’t know if you could raise money from investors and say to them we have a 10-year time horizon.
Q What are the steps to take a medical technology to market?
A It starts with a unique proprietary platform technology that addresses an unmet need and that you can build a multi-million-dollar business on with multiple shots on goal. In this case, there is also an endoscopic version, which has already proven to work for early detection of lung cancer. The device has to save lives and money because ultimately you have to convince doctors, hospital administrators, insurance companies – all of the decision makers – that there is a strong economic case to adopt the technology. You also have to have a strong value proposition and competitive advantage that will attract funding. Once you have the money, you can hire the engineering people you need, the sales and marketing people, the regulatory affairs people and start to move the project along. Not only do you have to build this thing, run clinical trials and get it ready for manufacturing, in Canada you also have to get ISO certification. Then you have to do safety testing. You have to show your device won’t affect other medical devices in a hospital or doctor’s office and that it itself won’t be affected by electromagnetic radiation emitted by computers and other devices around it. Once the safety testing is done, you can apply for Health Canada approval. Canada’s system is very much in alignment with Europe and Australia, so once you tick all those boxes you can seek regulatory approval in each of those countries.
Q Why do you think you have been so successful in attracting funding?
A In 2011, we raised more than $7-million. The reason we have that high level of investor interest is because people see the value proposition. From the outset, we created a strategic pathway for regulatory approval that dovetails with a marketing pathway that will lead to early revenue. A lot of companies are focused on the U.S., the world’s largest market, but it’s also the hardest to get into. The guidance we got from the FDA was to go to the U.S. after we had approval in Canada, Europe and Australia because then they will view us in a much more favourable light.
Q Where do you go from here?
A The plan is to get everything done in order to have approval here in Canada, Australia and Europe by the end of the year. Once safety testing is done – and it should be in August – we will then apply for approval with Health Canada and initiate the process to get into Europe. You need approval before you can start marketing it. Otherwise you have to have a warning sign that says this product is not approved and potential buyers won’t be interested. It will take time to ramp up production and deliver. We are looking at early next year for delivery and closing sales. We’ll be attending a dermatology conference in Lisbon in October and Medica, the world’s largest medical device tradeshow, in Dusseldorf in November. We’ll look at distributors in Europe to start introducing the device to people. Australia will also be a huge market. It has the most cases of skin cancer in the world. Two-thirds of the population gets skin cancer at some point in life and there are some one million doctor visits per year to get screened for skin cancer. As a result, there are chains of walk-in skin cancer screening offices. We will be busy selling into all of these markets.