For VC firms, FDA regulations at front of discussion topics

By Larry Haimovitch

Medical Device Daily Contributing Writer

June 22, 2011

SAN FRANCISCO — The 19th annual Medical Device Conference, sponsored by the influential law firm of Wilson Sonsini Goodrich & Rosati (WSG&R; Palo Alto, California) was held here this week at a new venue, the historic Palace Hotel in downtown San Francisco.

This meeting, the "granddaddy" of venture capital (VC) oriented gatherings, draws from a variety of groups, including VCs, medical device entrepreneurs, patent attorneys, accounting firms and other service providers to the medical device industry. As usual, attendance was robust, with more than 600 attendees.

The conference organizer, Casey McGlynn, who is a partner and a member of the board of directors of WSG&R, kicked off the conference, saying that "we are here today to discuss the key issues impacting the VC industry and what has changed in the past year."

To no-one's surprise, the regulatory delays at the FDA (or as one attendee called FDA – the "F" word) were front and center in myriad panels and breakout sessions. The sentiments ranged from utter resignation ("it is what it is") to a more hopeful assessment of the situation from some of the panelists at a session titled "Are FDA Policies Affecting U.S. Competitiveness."

This slot was moderated by Mark Leahey, president/CEO of the Medical Device Manufacturers' Association (MDMA; Washington), whose website banner fittingly reads "Innovation Today." Joining Leahey were Mark Deem, chief technical officer of The Foundry (Menlo Park, California), David Gollaher, president/CEO of the California Healthcare Institute (CHI; La Jolla, California) and John Makower, MD, CEO and founder of Exploramed (Mountain View, California).

Gollaher's organization prepares a report each year called the California Biomedical Industry. In its 2011 report, the CHI noted, "for the first time since 1993, when the California Healthcare Institute began tracking jobs data, statewide biomedical employment has fallen." The report went on to say that " . . . the California life sciences innovation machine has stalled." Parenthetically, California is home to the biggest concentration of biomedical companies (more than 2,200) in the U.S., with direct and indirect employment accounting for nearly 14% of the state's total workforce.

CHI cited the "most obvious obstacle," of capital availability as the biggest issue facing the biomedical industry. Gollaher also noted that the FDA is a major contributor, saying "uncertainty and unpredictability at the FDA have reached serious proportions . . .with consequences for U.S. competitiveness and patient care."

Statistics compiled by CHI show a 43% increase in approval time for a 510(k) application in 2010 versus the average duration for the 2003 to 2007 period. Worse yet, the PMA approval time has leaped 75% in the comparable two periods.

"The story with drugs and biologics is equally dismal," said Gollaher.

Dean and Makower struck a more positive note, discussing the progress that has been made as a result of their vigorous three year-old campaign to educate members of Congress and their staffs that the FDA's restrictive policies are having a significant impact on employment in the U.S. Dean put it very succinctly, saying that "our big opportunity (to impact FDA) is through the issue of job creation. This is particularly relevant as our country strives to reduce a very high national unemployment rate."

Gollaher concurred, stating that "we must focus on job creation . . . if we make this an issue of the FDA versus the medical device industry, we will not be very effective or successful."

All the panelists agreed that the FDA is focused solely on the direct patient risks of a device or drug and not at all on the broader issue of the impact on jobs and the economy.

Dean indicated that with their lobbying and educational efforts over the past three years, progress is slowly being made in Washington. However, he stressed that Congress needs to hear more "stories" (that is lifesaving or quality of life benefits of devices or drugs) that positively impact individual patient's lives. He indicated that all stakeholders need to get involved now in some way because it is "put up or shut up time."

Several different policies and suggested initiatives were presented, including the aforementioned re-focusing on the job creation issue, better tracking of applications along the same lines as the patent office has recently implemented, incentivizing reviewers to speed up their file evaluations (one panelist called this "skin in the game") and to allow individuals who have worked in the health care industry to work at the FDA (this is currently disallowed).

Moderator Mark Leahey of the MDMA closed the session saying that the "secret sauce' that will reverse this situation is to align the interests of all the stakeholders—patients, physicians, investors, healthcare providers and the companies—and make a concerted effort to educate and publicize to legislators and the public.

The result of the FDA approval slowdown has accelerated the efforts of many companies to develop and commercialize their products in overseas markets. Thus, it was certainly no surprise that there were several sessions on this topic.

A panel titled "European Commercialization Issues" featured several experienced speakers fluent on the topic. Each participant stressed the need to think strategically and carefully before moving forward in Europe.

For example, Ferolyn Powell, divisional VP and GM, structural heart at Abbott Vascular (Santa Clara, California) asked "what is your real goal in beginning commercial operations in Europe?" Powell was the CEO of privately-owned, venture-backed Evalve when it was acquired by Abbott Laboratories (Abbott Park, Illinois) in November 2009 for $320 million, plus potential future milestone payments (Medical Device Daily, Nov. 3, 2009).

She led Evalve's effort to launch the first commercially available treatment option approved in Europe for non-surgical mitral valve repair for patients suffering from the effects of mitral regurgitation. The MitraClip system is not yet approved in the U.S. but could be in the next several months, following the release of solid data from the EVEREST II (Endovascular Valve Edge-to-Edge Repair Study) trial in April.

Powell further elaborated on her initial query, "why are you entering Europe . . . is it intended to drive adoption of your product, create interest to sell the company or to boost the clinical credibility of your product."

Another panelist, Mika Nishimura, founder and managing partner of the consulting company BLG Group (Belmont, California) echoed "know your goals" before European commercialization.

She posed questions like "how big is the European market now versus the U.S., what is the regulatory gap between the two areas and how will this strategy affect your fund raising and potential exit?"

2011 Wilson Sonsini Conference

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