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Healthcare: big opportunities for small companies

Innovative start-ups can make a major impact in healthcare if they develop a technology that solves a real-world problem. For engineers, academics and surgeons bringing products to market, sound advice from experienced experts can help clear the financial, intellectual property and regulatory hurdles that lie ahead. Gary Finnegan* asked experts and inventors for their top tips.

Fifteen years ago, while working at the University of Oslo, StålePetterLyngstadaas, found a problem in need of a solution. Patients with broken bones sometimes undergo surgery to have replacement bone transplanted from their hip or shin. The operation helps the broken bone to repair.

The trouble is that the procedure is complex and can come with risks. Many of the older patients who endure the surgery find it burdensome. And, as Europe’s ageing population is expected to mean many more fractured and broken bones, there are concerns that the costs are beginning to mount.

Prof Lyngstadaas wanted to find another way. Working with a diverse team of scientists and industry experts, he co-founded a company that aimed to develop biomaterials – substances engineered to interact with the body. One of their goals was to invent a simpler and cheaper way to accelerate bone healing. What followed was a text-book case of a nimble university spin-off company balancing the urgent need for external funds with their mission to push the boundaries of biomedical science.

“We received some public funding to develop the ideas we had and patented a number of novel technologies,” recalls Prof Lyngstadaas, CEO of Corticalis. “By selling some of the bioactive surfaces we had come up with we had money to invest in new inventions.”

Advice nr 1: consider commercial needs from the early stages

The company’s founders had good links with industry and were able to pitch their next ideas to investors and funding agencies. Finance is an essential piece of the puzzle for biomedical start-ups but so too is finding partners and tapping into valuable sources of advice from experienced advisors. “You need to convince people that your technology is industrially viable,” he says. “One of the things we have done right is to consider commercial needs from the early stages.”

Through Eureka’s Eurostars programme, Corticalis and its partners in the University of Oslo, Numat Biomedical and the University of the Balearic Islands, have brought their ‘NewBone’ technology to the point whether it is ready for clinical testing.

From bench to bedside

Now, the company finds itself at a crossroads. “We are reaching the stage where we want to go into clinical testing,” says Prof Lyngstadaas. “The question is whether we partner with a bigger player or do it on our own with the support of investors – or maybe even a combination of the two.”

While the regulatory burden grows as companies get closer to market, medical technology is a field where small and medium-sized enterprises (SMEs) can develop and launch products without necessarily selling to a big-name partner. The journey to market is much faster and less expensive than in the pharmaceutical sector – particularly for technologies that are not implanted into the body.

Advice nr 2: Establishing yourself in the market always takes longer than you think

“Medical devices are easier and faster to get to market,” saysProf Lyngstadaas, “but I would still advise people that it always takes much longer than you think to establish yourself in the market.”

Firms developing e-Health solutions or diagnostic tests can access Europe’s single market by securing CE-marking. In contrast, a university spin-off that identifies a molecule with potential to become a new cancer drug would find it almost impossible to conduct the large and lengthy clinical trials required to secure marketing authorisation.

This explains why the pharma sector is dominated by large multinational companies while medtech is populated by smaller companies – sometimes started by an engineer, an academic or a surgeon who spots a niche.

“The medtech sector is, in many ways, a model European industry,” says Serge Bernasconi, Chief Executive of MedTech Europe, the trade association for diagnostics and devices. “Around 95 per cent of Europe’s 25,000 medtech companies are SMEs. They develop smart new technologies that help us live longer, healthier, independent lives.”

Think ‘product’

Despite these encouraging statistics, making it to market can be a daunting task, particularly when company founders have limited business experience. Dolf van Loon, a member of the Independent Evaluation Panel (IEP) for the Eurostars programme,says healthcare start-ups need to “stop thinking technology and start thinking product”. Defining the product, who might use it, what is already on the market and what value you bring to users are essential to moving beyond the ideas stage.

He says engineers or tech companies who are new to healthcare can break into the market but they need to consider the environment in which their technology will be used. The product may need to perform in a sterile environment, interact with existing operating room technology, have very high levels of reliability and, ideally, require minimal staff training time.

advice nr 3: stop thinking technology, think about the business model

“Knowledge of the field is essential,” says Prof van Loon. “An investor would look at the group of people involved in the company and ask whether they are suited to developing products for this market, and whether they have the skills”. Liaising with regulatory authorities early is also advisable, he adds, as this can help to make connections with safety and technical experts familiar with the field.

Funding agencies are another valuable source of technical advice and market intelligence. “Eurostars gives smaller companies a chance to collaborate across borders and brings them outside their own small circle,” says Prof van Loon. “They also get expert feedback and advice. The Swiss national funding agency goes one further and provides an interactive system where companies can engage with experts and send revised funding applications.”

This sentiment is echoed by Dr Kjell Stenberg, a member of the Eurostars IEP with experience working at pharma companies, large and small. “Start-ups need guidance from people with business experience,” he says. “It can be helpful to submit an application to Eurostars and, even if you do not win funding, the specific feedback you get can be valuable if you take it to heart and use it constructively.”

In addition to his own business experience, Dr Stenberg has worked with venture capital firms supporting clinical development of new drugs and diagnostic technologies. His advice to SMEs in healthcare is to retain objectivity – a tall order for founders passionate about their labour of love.

advice nr 4: take feedback aboard

“I’ve seen a lot of wishful thinking from scientists and inventors,” he says. “There can be wonderful excitement about data from cellular models but investors need to see a plan for long-term development and answers to other key questions: Is the product going to be too expensive? Could there be stability issues when manufacturing it? Are there competitors?”

Rather than dreaming of hitting the jackpot with a game-changing new technology, smart scientists pick the brains of seasoned healthcare entrepreneurs who have known failure as well as success. Of all the early stage projects emerging from universities and small laboratories, only between 1% and 5% will hit the big time while the rest fizzle out.

Success factors

Filling a niche, finding partners, securing patient protection, taking expert advice – Professor Emanuela Keller has been applying these tips for more than two decades, and her entrepreneurial career is far from finished. As an active clinician, Prof Keller began doing research in the 1990s when spotted spot demand for new technologies in the clinic.

In collaboration with the Technical University in Zurich, she developed prototypes for devices to be used in intensive care units, patented her ideas and worked with industry partners to get the technology into clinics. Her company NeMo Devices was founded in 2007 and secured Eurostars support in 2009. “Scientific prototypes and intellectual property protection are prerequisites for founding a spin-off company, and so is working with industry,” Prof Keller says. “With the Eurostars project we were able to move forward with industrialisation.”

advice nr 5: protect your intellectual property

Her tips for academics with big ideas is to protect their intellectual property before they publish or share it at conferences. “Academics don’t always think about IP but it is very important,” she says. “The other tips I would give colleagues is to identify a clear demand for a product, build strategic partnerships and think about the business model – where will the revenue streams come from, is this idea scalable and how long will it take.”

In addition to coaching and support from national and European funding bodies, Prof Keller undertook a two-month business course in the US to learn about business development. Her latest innovation uses sensor technology to help save the lives of people at risk of brain injury or stroke and, by working with key opinion leaders in the field, the company hopes to record its first sales in the next two years. Once they build a solid customer base, they will consider selling to a larger company that could take the technology global.

But that’s the end of a chapter rather than the end of the story. “I already have the next idea,” Prof Keller says. “It’s in the area of software and data management – a hugely interesting area right now. It’s very exciting.”

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This article is also published in EUREKA's printed magazine - healthcare issue

*Gary Finnegan has a degree in physiology from Trinity College Dublin, and an MSc in science communications from Dublin City University. Working as a health and science writer for 15 years in Dublin, Brussels and Beijing, he has written for national newspapers, specialist medical publications and online media. Gary was a national winner at the EU Health Prize for Journalists in 2009, 2010 and 2011, and won Irish Medical Media Awards in 2007 and 2013.

Raising the productivity and competitiveness of European businesses through technology. Boosting national economies on the international market, and strengthening the basis for sustainable prosperity and employment.