Medical innovation has become a significant focus for venture capital investment in the last ten years. A growing, ageing population combined with the opportunity to develop global solutions is driving a spike in innovation that helps people better manage their wellbeing or enables them to get well sooner.
Traditional pharmaceutical innovation is now being supplemented with developments in medical technology. The medical device industry is predicted to be worth more than $8.5 billion by 2025 but ensuring the industry’s success will be underpinned by investment from venture capital firms and other investment vehicles.
A company well established within the world of technology private equity investment is Juno Capital. One of its partners and co-founder, Edward Rudd, outlines his experience of investing in medical technology (MedTech) companies, the advantages of platform technologies for an investor and the importance of data analytics in driving positive outcomes in healthcare.
Established in 2011, Juno Capital is an innovative asset management company that provides wealthy individuals and families with attractive and engaging investment opportunities offering a variety of risk profiles. One of the company’s primary objectives is to introduce private investors to early-stage technology companies, helping them decide whether to participate in investment rounds in these companies and offering the opportunity to build diverse and engaging portfolio of investments.
One of Juno’s most important criteria for investment is that companies have already established themselves within a specific market through their technology, product or service, but need additional capital to accelerate growth and build on their achievements. One such company was Sky Medical Technology, which has taken a technology called “On Pulse” and turned it into a wearable medical device that addresses medical issues.
Ed Rudd was first introduced to Sky Medical Technology when he was a partner at his previous investment company, Longbow Capital LLP, a specialist healthcare investment firm where he was responsible for sourcing and researching new opportunities.
“I led the deal for Longbow to invest in Sky Medical Technology during 2009,” he comments. When he and fellow founding partner Julian Hickman left Longbow to set up Juno Capital, he decided to remain in company with Sky Medical Technology. “It was one of the companies that I was keen to continue to have a relationship with,” adds Ed. “And now, I believe that we have invested more in Sky since we’ve left Longbow than we did when we were there.”
One of the first challenges for Sky was to take an established and proven technology and make it into a product. The result – the geko™ device – is a wearable medical gadget that helps address multiple medical disorders. The device, applied at the knee, works by sending electrical pulses to the lower leg that increase blood circulation. It is an easily understood, yet proprietary, mechanism of action, well protected by a family of patents, that can be applied to separate therapy areas – meaning each therapy area simply needs study data and positive economic data to be embedded into clinical practice.
Ed was attracted to the ingenuity of the product. “It was a simple product. I have previously invested in medical heart pumps and these are incredibly complex devices. I liked the idea that, with the geko™ device, you’re leveraging the body’s own healing mechanisms. You’re basically giving the body the means to heal itself.”
A platform technology
From the outset Ed believed the geko™ device had the potential to be “a platform technology, rather than just a simple single-application technology”. The device could be applied to complications related to swelling after surgery, the closure of hard-to-heal wounds and the prevention of life-threatening blood clots. The range of applications was a significant driver for Juno to invest. “It clearly worked. The evidence and the data, even in the early days, wasn’t ambiguous. And it seemed a straightforward path to regulation and from there to get the product to market.” This provided potential new avenues for use and resulted in an increased investment from Juno. As Ed says, “our interest in the company has expanded as the opportunity offered by the geko™ device has grown.”
Applications for the geko™ device were relevant to a hospital environment where patients were immobile – such as those in intensive care or recovering from an operation – and were therefore at higher risk of blood clots, or in need of post-operative or trauma-based oedema management. The device could also be applied to wound healing in the community for patients either supported by medical staff or administering their own healthcare.
For Juno, the benefits of platform technologies are significant. “It offers a portfolio approach. If you find it difficult to get traction with one application, you’ve got a lot of other opportunities to grow the potential uses for the device. For an investor that means there are multiple potential future investor or acquirers of the technology or the company.”
Juno Capital has also invested in Destiny Pharma, a company with similar opportunities. Ed describes the company as “a drug-development business that has developed a portfolio of anti-infectives”. These drugs work against MRSA but offer multiple other uses.
“Our lead product is for “nasal decolonisation”. If you go to hospital for an operation and you catch a bacterial infection, there’s a very high probability you’ve caught the infection from yourself as many people carry staphylococcus aureus in their nostrils and the trauma of an operation and its impact on the body’s immune system can lead to an infection. If you can remove the bacteria before people go into theatre, it’s less likely patients will get an infection. Fewer infections means shorter stays and quicker recovery, which all reduce costs and improve efficiency within a healthcare system.”
Ed is honest enough to admit the challenge associated with platform technology – that of keeping sharp focus when faced with multiple opportunities. “You need to focus on gathering evidence to ensure regulatory approval in one area before moving onto the next, rather than focussing on all clinical applications at once. Sky Medical had done a good job of prioritising the different applications methodically and with evidence and this helped prioritise the opportunities. Ultimately, offering companies the opportunity to licence the technology for one of the applications. Critical is establishing credibility and building a solid evidence base – both from a clinical and economic perspective.”
MedTech – an investment for more rewarding returns
Ed is keen to point out the longer term nature of MedTech investments. A typical technology investor might view success over a five year period. Investment in MedTech can take longer. “If you can navigate the regulatory and clinical hurdles required, assuming you have the right type of products and a solid market, commercialisation and licensing in MedTech can actually be less risky. You can choose to find a clinical partner or commercialise yourself.” With traditional technology, “commercialising is easily overlooked as a risk. Executing on a good commercialisation strategy in a very competitive market can be hard. Platform-based medical devices offer an investor a fairly unique opportunity”.
Ed believes that the founder and CEO of Sky Medical Technology, Bernard Ross, and his team, have taken a perceptive approach to shifting the risk-reward profile. “The team recognised that the company needed to spend money proving the device delivers positive medical outcomes – the geko™ device has received regulatory approval in the UK and US. This means the opportunity is less risky for licensees. Licensees only have to address commercial risk not regulatory risk.”
“If you have the right kind of clinical and economic data, it’s almost impossible for hospitals and clinics not to take your product seriously. It becomes too much of a risk not to use it.”
MedTech – data driving better medical outcomes
Ed believes MedTech devices have an important role to play in the future of healthcare. “There’s a new revolution in healthcare technology and it’s being driven by data,” he comments. “MedTech devices can incorporate data collection to help ensure a continuous improvement in outcomes. “Imagine a connected version of the geko™ device. It could provide feedback on whether the device is switched on, positioned correctly and the impact it is having on blood flow. This could help provide a community nurse, for example, with data on which patients were using the device correctly, enabling them to focus on those that need help. This could mean time can be spent where it’s most needed, rather than seeing patients that do not need support. This data could also provide insight to patients, helping them to a speedier road to recovery, as well as offering an overview to health systems as to the most efficient and effective MedTech devices for specific ailments.”
As innovation provides more ingenious solutions to medical issues, so the demands on healthcare systems grow. Ed believes that MedTech innovation can help bridge the gap between the growing healthcare demands of an ageing population and the limited budgets available for medical treatments. “MedTech innovation – particularly platform technology that addresses multiple medical issues – has the potential to provide highly cost-effective ways to deliver improved clinical outcomes. This is great news for patients and investors and one of the reasons why we are excited by the opportunities offered by this industry.”