EXECUTIVE INTERVIEW J&J’S NEW APPROACH TO MEDTECH INNOVATION:An Interview with Bruce Rosengard

Stephen Levin, 10

PERSPECTIVE BD/Bard: BUILDING CRITICAL MASS in a Cost-Constrained World

David Cassak & Mary Thompson, 4

ORTHOPEDICS/EXTREMITIES

CARTIVA’S CHALLENGE:Moving the Market with a

First-in-Class Motion-Preserving Toe Implant

Wendy Diller, 30

VENTURE CAPITALSanté Ventures:

INVESTING with a Provider’s Mindset

David Cassak, 20

QUARTERLY M&A/FINANCINGSFirst Quarter Deal-Making Remains Stable, But IPO WINDOW STILL CLOSED Stephen Levin, 36

MEDTECHSTRATEGIST.COM

MAY 12, 2017Vol. 4, No. 7

MARKET TRACK

Published by Innovation In Medtech, llc

See page 36

Medical Device M&A

START-UPS TO WATCH

FLOW FORWARD MEDICAL:

A Game-Changer for Hemodialysis Vascular Access

Mary Stuart, 40

LINEAR HEALTH SCIENCES:

The Worry-Free Future of the IV

Colin Miller, 44

$13

$20

$8$6

$20 $19

$49

$66

$26

$12

$63

$50

$16

$27

$67

$28

$73

$16

$7

$25$22

$29

$12

$22

$34

$7

43

51

4548

62

77

83

91

57

42

59

48 4641

45

58

44

0

10

20

30

40

50

60

70

80

90

100

$0

$10

$20

$30

$40

$50

$60

$70

$80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 '16 Q1 '17

Transaction Value

Number of Deals

(2) (3)(1) (4) (5)

Aggregate Deal Value (US$ in Billions) Number of Deals

(6)

10

(7)

Medical Device M&A Environment

10

Source: SEC filings, company press releases, SDC, Wall Street Publications and FactSet as of March 31, 2017. Note: Only includes U.S. domiciled target deals with announced values greater than $20 million and only includes guaranteed payments (i.e., does not include performance -based earn -outs). (1) Includes approximately $12.4 billion Thermo Electron/Fisher Scientific merger and $11.4 billion Biomet/Buyout consortium (Goldman Sachs/KKR/TPG) acquisition. Break in ba r delineates transaction value excluding the Thermo Electron/Fisher Scientific merger and Biomet/Buyout consortium acquisition. (2) Includes December 16, 2010 Novartis/Alcon acquisition of approximately $40.7 billion. Break in bar delineates transaction val ue excluding the Novartis/Alcon acquisition. (3) Includes April 26, 2011 Johnson & Johnson/ Synthes acquisition of approximately $21.5 billion. Break in bar delineates transaction value excluding the J&J/Synthes acquisition. (4) Includes April 15, 2013 Thermo Fisher/Life Technologies acquisition of approximately $15.4 billion. Break in bar delineates transaction value excluding the Thermo Fisher/Life Technologies acquisition. (5) Includes Becton, Dickinson/CareFusion acquisition of approximately $12.1 billion, Merck KGaA /Sigma-Aldrich acquisition of approximately $17.0 billion, and Zimmer/Biomet acquisition of approximately $13.3 billion. Break in bar delineates transaction value excluding those three deals. (6) Includes Abbott/St. Jude Medical acquisition of approximately $30.2 billion and Abbott/Alere acquisition of approximately $9.1 billion. Break in bar delineates transaction value excluding the Abbott/St. Jude Medical and Abbott/Alere acquisition. (7) Includes Abbott/Alere acquisition of approximately $9.1 billion. Break in bar delineates transaction value excluding the Abbott/Alere acquisition.

THE MEDTECH STRATEGIST © 2017 Innovation In Medtech, LLC. All rights reserved.

44 START-UPS TO WATCH

Dislodgement is one of the primary IV failure modes, occurring with 10-25% of all lines placed.

In the years following the completion of his res-idency, hospitalist Ryan Dennis, MD, the founder of Linear Health Sciences (LHS), took note of a fairly common problem among his numerous patients; their IVs were becoming dislodged in the middle of the night. He would receive calls from nurses who were unable to reestablish access without a PICC line (Peripherally Inserted Central Catheter), which can be unavailable at those late hours, or a much more invasive central line, which would require placement by a doc-tor. Furthermore, even if a dislodgment occurred during the day, gaining peripheral access was par-

ticularly difficult with certain patients, and a cen-tral line would need to be implemented.

One case in particular stands out to Dennis as part of the inspiration for his solution to the prob-lem, the Orchid Safety Release Valve. “I had a patient in the emergency room,” he recalls, “who had a chest tube in for a pneumothorax caused by a collapsed bulla.” Though she was experiencing some pain, she was doing fine that evening, so Dennis went home, only to return the next morn-ing to a distressing report of the night before. The patient had gotten up to use the bathroom when her chest tube caught on her bed railing, pulling out the tube and surrounding sutures. Her lung recollapsed in the process. Before Dennis’ arrival, she had spent hours in excruciating pain because no available personnel could reinsert the tube.

As he listened to her story, Dennis was con-vinced that there must be an alternative with less pain and less trouble. He thought of another device that was easy to reconnect after accidental disconnection—the magnetic charger of his lap-top. It only made sense to him that IVs should be just as hassle-free, ensuring the connection while minimizing the risk of damage to either side of the connection when removed. He decided then and there to develop an out-of-the-box solution for securing medical tubing with these priorities in mind.

Initial brainstorming yielded the idea of a break-away valve analogous to that on a gas pump which releases the hose and stops the flow of gasoline should a car attempt to drive away with the nozzle still inserted. Dennis reached out to Adam Waters, with whom he had developed a friendship stemming from the fact that both their wives worked together as nurses. Waters had previously shown him some industrial projects he had worked on in valve tech-

nology for the oil industry, and making a natural connection, Dennis asked if Waters could design a nonmetallic, miniaturized solution for the dis-lodgment problem he described.

The next step was to commercialize. Dennis turned to his college fraternity brother Daniel Clark, who had been working with some major strategics in infusion disposables and seen several products brought to market, and whose business experience would round out the core team. The founders began working nights to quantify the market and get some initial interest from func-tional users in the form of surveys. Once they had the numbers to work with, Waters, the engineer of the group, took on the task of iterating their original design, which proved both practicable and cost-effective.

LINEAR HEALTH SCIENCES: The Worry-Free Future of the IV

OKLAHOMA CITY,OKLAHOMA

contact

Dr. Ryan Dennis, Founder and CEO

year founded2015

who’s behind itRyan Dennis,MD, a hospitalist and medical director of Carter Healthcare (Oklahoma City, OK), mechanical engineer Adam Waters, co-founder & CTO; Dan Clark co-founder & CMO (who has a background in industrial engineering and global business development)

unmet clinical needAccidental dislodgement of IV catheters is a frequent problem that causes patients pain and racks up unnecessary hospital costs

solutionA release valve that attaches to existing IV administration sets, breaking away harmlessly and automatically sealing from both ends if it senses a sudden force on the line

funding $1.25 million

investors i2E (Innovation to Enterprise)’s Oklahoma Angel Fund and other healthcare professionals

by COLIN MILLER, CONTRIBUTOR

Linear Health Sciences has recently unveiled its flagship product, the Orchid Safety Release Valve, an innovative answer to an issue that impacts the satisfaction and safety of patients and nurses alike, as well as the bottom lines of hospitals across the country.

MAY 12, 2017 | Vol. 4, No. 7

MAY 12, 2017

45START-UPS TO WATCH

Bearing a visual resemblance to a standard needle-less connector, the Orchid Safety Release Valve is applied by nursing staff in the same fashion between the IV administra-tion set and the IV extension set. If the line snags on something, the device breaks away and seals off on both sides, protecting the infu-sion (which could range from cheap saline to precious chemotherapeu-tic agents) from leaks and backflow. It also sends an alert signal to nurs-ing staff once it registers the break in the connection. The responding staff need only replace the Orchid valve by screwing off the broken halves and placing a new valve in between (see Figure 1). Thus, for just two dollars, the cost of the Orchid valve, a peripheral line that might have otherwise cost $30 in time and resources can be salvaged.

In Dennis’ experience, clinicians brought up two points of concern when the Orchid was pitched. First was skepticism of existing IV dis-lodgment data. No definitive study exists on the subject yet, though Dennis ultimately aims to carry one out once LHS secures its place in the market, generating data via the pilots that make up the bulk of their commercial launch process. For now, he and his team have been holding focus groups, using some of the existing data to get a baseline for dislodgment rates and gathering their own from records of dislodgment specifically due to tension kept by daytime nurses at Dennis’ hospital, which reflected the figures encountered in the lit-erature. Current data shows that dislodgment is one of the primary IV failure modes, occurring with 10-25% of all lines placed. With 300,000,000 peripheral lines in the United States, those costs add up. If it’s an expensive IV drug or a cen-tral line being protected, the sav-

ings increase exponentially with the use of the Orchid valve.

The second concern surrounded the integration of the Orchid into administration sets currently on the market. Moving forward, strate-gic partnerships with existing IV set manufacturers would eliminate the problem of Orchid valves being left on the supply shelf simply because they’re a separate, individual compo-nent. “We want this to be on every line, every time,” says Dennis, believ-ing it to be “a standard-of-care-shift-ing” technology. He cites companies like Becton Dickinson, 3M, Baxter, B. Braun Melsungen, Hospira, and Medtronic among those with whom he has interest in exploring partner-ships. Furthermore, though they began with valves for IV tubes which have lure closures on both sides, Dennis’ goal is to apply the platform technology to the chest tubes that originally helped inspire the product as well as portable insulin pumps and other devices for active, ambulatory patients for whom dislodgment pres-ents a risk.

For patients, the Orchid means less pain and a reduced chance of having to resort to more invasive lines. For nurses, it means exposure to fewer sharps and bodily fluids, not to men-

tion workflow efficiencies in terms of not having to spend time plac-ing new IVs. Perhaps the most dra-matic impact of all, however, is that upon hospitals’ bottom lines. Using the base case numbers of a $30 line restart (factoring supplies and labor) and a $2 unit cost for the device, the average 160-bed hospital would be expected to see $240,000 in annual savings. Extrapolation over all US hospitals would translate to nearly $1 billion in nationwide savings. Plus, according to Dr. Dennis, the device could significantly reduce potential for infiltration, phlebitis, and line-associated infections.

The development team is cur-rently undergoing final design, veri-fication and validation in preparation for 510(k) FDA clearance. Because of the FDA’s special framework for infusion disposables, they expect an expedited clearance process and anticipate a release date in the third quarter of 2017. At that point, Den-nis hopes to establish relationships with strategics in order to sell to hospital buying committees. Initially, he says this will mean demonstrat-ing commercial traction by follow-ing a direct sales model with pilot protocols in place to generate data to quantify and prove the savings he projects.

Online print subscriptions, reprints, and web posting and distribution licenses are available.Contact Kristy Kennedy at 480.985.9512 • k.kennedy@medtechinno.com

Figure 1

Orchid Safety Release Valve for IV Infusion Sets

Source: Linear Health Sciences