Top 5 unique challenges for investors and entrepreneurs in the Life Sciences Arena
Updated: Jan 11, 2021
A few days ago, an international Venture Capital (VC) Fund approached me regarding a medical IT start up company I’m involved in. Of course, the partner who contacted me described the fund’s vast and impressive investment experience and their current portfolio (it is impressive by all accounts). In general, VCs are not my first choice for funding, however, their value for certain industries and as a growth facilitator is undeniable. In addition, when investors approach a start up, the latter is at an advantage, as it indicates their interest, as opposed to their common nonchalance. Hence, I truly wanted to validate this VC as a potential investor. My familiarity with it was superficial, at best, although sufficient to recall its portfolio lacked medical and health related companies. Therefore, I asked the VC partner on the other side of the line about their experience and knowledge in the medical arena. The response astounded me. The partner responded that not only have they never invested in a medical start up company, but they also do not have experts in the field inhouse nor outsourced.
As an entrepreneur I decided, early on, that the best way to find where my passion lies is empirical. My first invention was a medical device, so naturally, my first entrepreneurial steps were taken in the medical industry. I then sought to gain additional entrepreneurial experience in different leading roles and industries, such as biotechnology, aeronautics, clean energy, ecommerce and even construction. My conclusion, surprisingly, was that my initial tendency suited me best, and I returned to the most challenging and complex medical arena. I suppose that one of the reasons was a notion that I would achieve real satisfaction by confronting what, to me, appears to be the most challenging endeavor. Throughout my work as an entrepreneur and advisor in the life sciences arena I enjoyed many successful battles with challenges that are common to life sciences companies, at different developmental stages. These allowed the establishment of methodologies and manners of thought, mostly, applicable solely to the life sciences field.
Going back to the VC, still somewhat surprised, I strongly recommended that they hire an expert to assist them in making validated investment decisions in the medical field. for a number of reasons:
Regulation is a substantial factor to consider in regard to any medical product as it holds substantial effects over required resources and ability to reach the market. Different regulatory paths to approval demand various scales of monitoring, documentation, clinical evidence, risk management, etc. For example, being first to market with a novel solution has well-known business advantages, however, is considered a less preferred path in the medical industry. This is due to: higher uncertainty; paving the way for competition. The ability to relatively quickly receive a regulatory approval for a novel medical solution exists, under certain conditions via a De-Novo application, however, entrepreneurs whom are not-well-versed-in-regulation could easily find themselves in a pre-market approval (PMA) path which is lengthy and expensive.
Business interests and models are essentially different and more complex than most other industries, a few examples: the customer is usually not the payer; the payer is mostly more than one entity; as opposed to common thought, in most regions, the MD is far from calling the shots and clinical care is not the priority; Most inexperienced entrepreneurs think that a cost-effective solution will be widely adopted, as it makes sense in the real world. Who wouldn’t replace an existing solution with a better one?! The medical industry works according to a different set of assumptions and accordingly making a better product holds no guarantees for sales nor reimbursement.
Time to market is on a whole different scale than almost any other arena. Some medical start up companies focus on R&D for over a decade, prior to reaching the marketing stage.
Clinical affairs such as study design, forms, ethical aspects and committees, execution, data analysis are critical and one mistake could bring a company to its knees. Making changes to study protocols or design, in these slow-moving systems, could delay progress for months.
Technological development has its own set of strict and demanding standards which require expertise and oversight in order to reach regulatory submissions, not to mention receiving a regulatory approval. A wrong turn may lead back to the starting point and to painful expenses and long delays. These standards are valuable and exist in order to protect patients and verify the developed solution performs up to par and is “medical-grade”. In a previous medical device start up company I founded, my team and I were developing a noninvasive skin thermometer. Sounds simple enough right?! The short answer is definitely not. The long explanation is that we were trying to accurately measure skin temperature at a scale of 0.01oc. Firstly, temperature measurement at any scale is actually the measurement of temperature change and balance between surface temperature and ambient temperature. If this doesn’t sufficiently complicate the matter, we also had to develop sensors’ arrays and mechanisms to overcome motion artefacts. Different sources generate these noises: changes in the distance between blood vessels and the skin due to body movement and position; minute shifts in sensor’s location which directly affect the sensor’s temperature as well as indirectly due to an existing difference in skin temperature between two different locations, even though nearby. Utilizing the team’s expertise while operating according to required standards i.e. documenting and running tests allowed us to solve these challenges, achieve the required accuracy and generate the required materials for regulatory submissions.
The above-mentioned topics are the main ingredients for the tasty, yet sometimes hard to swallow life sciences soup. Whether you are an entrepreneur or investor, looking at a start up company, at any stage with a medical or health related solution, take the time to consult with an expert. At times, even experienced entrepreneurs and investors might see a clear path to success, through the dense jungle-like environment, even when it is actually blocked by regulatory cliffs, branches of vague interests, quicksand of time, a fog of standards and bureaucracy.
It is a small price to pay, the disillusion of an invention thought to be worthwhile early on, rather than the belated disappointment by you, your investors and employees, realizing it is not.
For the past two years, I have been offering advisory services to start up companies in a formal manner via our firm, Fortail Life Sciences. I have encountered quite a few entrepreneurs, development teams and investors that while offering a truly innovative, sometimes even disruptive invention could not succeed due to failing to ask the necessary questions.
In conclusion, I’ll make you the same suggestion I made to the VC: try and ask the right questions before you give anybody else the right answers.