Is your medical device idea viable?

What are you going to get?No matter how good your idea is, if people aren’t going to buy it and invest in it, it isn’t going to be a success.

During the course of this ebook, we will take you through the important decisions that will form the basis of your business plan.

The journey won’t be the same for everyone but the steps are going to be similar. Some of the decisions will require more thought than others and your attitude towards risk will

determine your route. It also depends on whether this is your first foray into medical devices or you have been there before. Either way, starting with the basics is never a bad thing.

Once you have completed these tasks, you should have a clearer understanding of whether or not your idea can give rise to a successful medical device.

If your findings are positive, you’ll also have the foundations of a business case to make to investors.

Contents

Part 1: Market Research

Part 2: Business Considerations

Part 3: Engineering Feasibility

Part 4: Manufacturing

Part 5: Funding

Part 1: Market Research

Market research should be the starting point to any business endeavour.

The amount of information and ease of communication nowadays means that you can explore the needs of your potential customers even before you have a solid idea of what your medical device is going to be.

The simplest way to break down market research is in to a series of inputs and outputs. Each of the following activities are inputs. Keep an eye on the outputs because they’re going to come back as inputs later on in the viability assessment process.

#1 Market Research

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Speak to the people that are going to be using your medical device. That might be nurses, specialist clinicians or GP’s. Focus on finding out as much as you can about current clinical practice (this will be very important when it comes to marketing your device later on.)

This may also inform any upcoming changes in clinical practice.

Discussions with potential users

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Discussions with potential purchasersIt is a common misconception among inexperienced market researchers that the person using the device is the only ‘customer’.

While the end user (the consumer) is important, so too is the person responsible for purchasing. Try to identify who makes the final purchasing decision and how they are influenced.

In the US, reimbursement is usually a key factor in market acceptance. Try to find out early whether you are likely to be able to achieve a reimbursement code for your device.

Key Definition:Customer- The person who makesthe purchasing decision

Consumer- The person who uses (consumes) the product or service

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Conducting a preliminary IP search at this early stage serves two functions:1. It tells you whether there is any currentIP around your idea. This feeds into theengineering specification whereby you mayhave to work around existing IP.

2. It gives you an indication of whether youmay be able to protect your idea. Whenapproaching investors, this will be one ofthe ways that they assess how valuable yourbusiness is.

Intellectual Property (IP) Search

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Preliminary regulatory requirementsDuring your market research you should have an idea of the likely regulatory strategy for your device. If you are selling in to the USA, knowing whether your device is likely to need 510(k) clearance or PMA approval will affect your time and costs to get to market.

FDA regulatory pathways:510(k) - A pre-market notification, known as a 510(k), depends on demonstrating equivalence with a device that has already been approved. This is generally a faster process than a PMA.

Pre-market Approval (PMA) – A PMA approval process is used for new or modified devices for which no equivalent FDA-cleared device exists. This is a longer process and usually requires clinical trials to be undertaken.

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Competitor research and analysisJust because other products exists doesn’t mean you should avoid a market; assuming you can provide something of value.

If you want to be successful in your target market, it is not enough just to know who else is there. You also need to know what they are doing and how they are doing it so that you can figure out how to create something better.

Remember that 'better' depends on the needs of the customer and consumer.

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As well as competitors with similar devices to yours, be aware that there may also be new technologies emerging that can diagnose or treat the same thing in a different way. These technologies are probably harder to find as there likely won’t be anything commercially available yet.

Attending academic conferences and university events is a good place to find out what basic research is going on in your area.

Emerging competitive technology investigations

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"You’ve got to understand and choose the customers

you want to serve. Don’t just go after everyone. Define the target market carefully through segmentation and then really

position yourself as different and as superior to that target market. Don’t go into that target market

if you’re not superior"

Some final words of wisdom from marketing thought-leader Philip Kotler:

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Part 2: Business Considerations

"In part one we gave you an overview of the market research tasks you should undertake

as the first step to identifying whether your medical device

idea is viable."

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You now have an idea of:• What your potential end users need and how disruptive your

device might be.

• Who will purchase your device and how they make thatdecision

• What IP already exists and whether you can add value to yourbusiness by protecting your idea

• The likely regulatory pathway for your device

• Who your competitors are, what competing technologies areemerging and how you can offer something better

Make sure you have your results from Part 1 to hand because some of the outputs will be inputs for Part 2.

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One primary measurement of the risk level of pursuing your idea is whether realization of your idea requires skills outside of those that you have internally.

This could be skills such as particular engineering or scientific disciplines or business functions such as manufacturing, logistics and marketing.

Once you understand the skills and assets required to realize your idea you can make decisions on whether you might need to hire and/or outsource and assess the investment required to do so.

1. What are yourcore skills?

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Using an Ansoff Matrix, such as the one on the next page, is an easy way to identify the risk level of your growth plan.

The risk level of the idea will depend on which of the four quadrants within the matrix the business strategy for the new idea represents. The quadrants relevant to your new idea will be those on the right hand side as these relate to new products.

Product development is the less risky of the two strategies as this involves bringing a new product to your existing market.

Diversification on the other hand is approaching a new market with a new product and is therefore more risky.

If you are a start-up or spinout company and you don’t have an existing range you can still use the matrix. Just take ‘existing market’ to mean a current competitive market and ‘new market’ to mean a need that hasn’t been met by other products yet.

This should be informed by the output of your competitor and user research from part 1.

2. Are you aiming at newor existing markets?

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Markets

Products

Ansoff Matrix

3. How will theTechnology beexploited?STOP! Before reading this section, remind yourself of the results of your IP search from part 1.

There are a number of options when it comes to exploiting your new medical device idea and the route that you take will shape your overall product strategy and business plan.

Some of the most common strategies are:

• Start a new business

• Develop and license the technology

• Develop and sell the technology

Often companies will eventually carry out more than one or all of the above as their business progresses. You might not know how things are going to turn out in the long-term but setting out your short to mid-term aim is paramount.

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Strengths Weaknesses

Opportunities Threats

Send in the S.W.O.T teamWhile it may seem a little old school, a SWOT analysis is a neat way of bringing all of the internal business and external market research considerations together in one place:

Part 3: Engineering Feasibility

"Parts 1 and 2 focused on the

Business, now we move on to the Engineering"

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Go back and complete parts 1 and 2 before you read part 3.Parts 1 and 2 led to creating your SWOT analysis. This is made up of the results of your market research and business analysis and will give you a clear picture of the internal and external environment around your medical device idea. In parts 3 and 4 we now get in to the nuts and bolts and start to think about engineering and manufacturing your device.

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While you are unlikely to have explored the Engineering elements of your medical device idea in too much detail at this stage, there are still good reasons to start thinking about your design:

• Investors will need some level of assurancethat it is possible for your idea to be madein to a working product.

• The level of engineering difficulty willhelp to inform the level of investmentrequired and ballpark timescales forcommercialization.

• The engineering feasibility is a fundamentalpart of the business plan and strategy

Here are 5 questions you should ask yourself to assess early Engineering Feasibility

#3 Engineering Feasibility

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1. Does your devicerequire completelynew technology?If your idea builds on existing, proven technology, the development process may be simpler than that of a completely customized, never-before-seen device or one that pushes existing technology beyond where it is normally used.

If there is existing technology, look back over your IP search in part 1 as you may need to design around other patents.

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2. What regulatoryrequirements doesyour device needto meet? Having already assessed the regulatory requirements in part 1 you can begin to delve deeper into the specifics around your device in relation to the development process.

Regulatory standards such as ISO 13485 set out clear guidelines as to the processes that a medical device development lifecycle must include in order for the end result to be compliant.

A good starting point is to know what class of device your idea would be. Each class has different requirements for documentation, verification and validation. 20

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Remember the rules are different in different countries.

3. Who is going todesign and developyour device? Look back over your core skills from the business considerations in part 2. Do you have all of the necessary skills in-house or do you need to outsource part of the development?

If you are going to outsource it is worth beginning some initial discussions with potential design and development partners.

This will allow you to draw on their experience and might also provide some new insights that you hadn’t thought of.

Note: You probably won’t get much input without paying the design company but keep in mind that their involvement adds credibility to your business plan, especially where investors are concerned.

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4. What are themajor engineeringrisk areas? Addressing and mitigating engineering risk is both a regulatory requirement and good business sense.

You need to set an acceptable level of risk within the development program and then decide how you (or your outsourcing partner) is expected to de-risk to achieve this level.

Two common examples of de-risking are:

1. Developing proof ofprinciples to prove certainelements of the system.

2. Building developmentprototypes to further allow youto develop the technology (e.g.if it involves chemistry) before adevice is developed.

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5. How will youmanage the project?

Whether you outsource all or part of the development of your device or do it all in-house, your project is going to have to be managed.

If you are a start-up you will almost certainly use contractors for some elements of the device design and development.

Make sure you set out the responsibilities of all parties involved and be clear from the start as to how you will know if someone isn’t meeting your needs.

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The 5 questions above will feed into a requirements document that will allow like-for-like comparison if you are outsourcing or will provide a way to properly brief internal engineers so that they can scope the project.

If you go ahead with your idea the specification becomes part of the Design History File too.

Create a requirements specification

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Consider carefully EVERY feature of the device and ask yourself:

1Does the user need it?

2Does it add value?

3Could you wait until Version

2 to add it?

Part 4: Manufacturing

"There is a big difference between something that can be designed and prototyped and

something that can be manufactured in volume

at the right cost."

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Where are we now?We have now assessed the market, your business and have an appreciation of the initial engineering considerations. The next thing you are going to need to think about is how your device is going to be manufactured.

We’re going to stick with the format of the last 3 parts in the ebook and give you another set of questions to stimulate your thinking around manufacturing your medical device.

As always, it will help you to read over your answers from the previous parts again- we’ll be referring back to them.

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As with the Engineering considerations in part 3, it pays to think about manufacturing early on.

A basic appreciation of the likely manufacturing requirements for your device adds to the overall view of where you’re trying to head and also helps you to constrain your design team.

#4 Manufacturing

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1. What are yougoing to charge?

Your market price will be affected by the manufacturing and engineering costs.

Returning to market research in part 1, what price are your customers willing to pay for a product like yours? What does the current alternative cost (if there is one)?

Eventually the manufacturing costs (labor, materials etc.) are going to have a considerable impact on the price that you charge.

Of course, you won’t have a detailed cost model yet or perhaps even an idea of the components you will use however your early engineering feasibility work may help you to determine a very rough ($100’s, $1000’s etc.) estimate of an end price. 28

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2. How willyour device be assembled?

With the advent of 3D printing, robotic assembly etc., manufacturing is constantly evolving.

The manufacturing process that is best suited to your device will depend on things like the size, complexity and volume requirements.

For example, if you are considering a device that will sell in high volumes, automation may be preferable over manual assembly.

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A note on Automation.

While Automation is ideal for high volume, low margin products, you must take in to account the level of investment necessary. Speak to automation specialists early on to get an idea of quite how complex the set up might need to be and consider starting with manual assembly and moving to automated manufacturing once volumes are sufficient to cover the costs.

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3. What are theregulatory requirements?

You will notice that regulatory affairs have come up time and time again during this ebook. This is because it permeates everything we do in the Medical Device industry from early concept development to customer service.

In terms of Manufacturing, the class of your device (which you will know from part 3) and the way in which it will be used (part 1) will have associated regulatory requirements for manufacturing.

Is the device used in an operating theatre? If so, it might need to be manufactured in a cleanroom. It is returned to you to be serviced? Then you need a decontamination procedure.

You can find out much of this information by talking to a notified body or a regulatory affairs consultant.

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4. How will you makesure that your device ismanufacturable?

Having the right people on the team will ensure that you create a product that has been engineered for manufacturing. If you don’t get this right early on you risk developing something that works technically but can’t be made in to a commercial product cost-effectively.

Ideally the engineers (in-house or within a product design company) need some experience in your area. Not necessarily on exactly the same product as yours but as close as possible in terms of materials and application.

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5. Domestic orOverseas? There is much debate in the MedTech industry around Offshoring and Onshoring and overseas v.s. domestic manufacturing.

People have different reasons and opinions but your motivation should be based on what is best for your product.

It is too early to make any definite decisions yet but you should at least appreciate that at some point you will need to weigh up your options.

We would recommend speaking to a variety of people within your industry that have been there before (LinkedIn Groups and specific networking events are a good place to start) to find out what worked and what didn’t.

Part 5: Funding

We now move on to Funding, the final piece in the puzzle of determining

if your Medical Device idea is viable.

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ITL VA’s funding top tips A quick Google search will give you a list of funding options available and the relative pros and cons so instead we’re going to draw on the experiences of our clients to give you some tips you can apply straight away in your next investor meeting.

You’ll notice we don’t talk about crowdfunding. Don’t worry, we haven’t forgotten it, it’s just that currently crowdfunding is still finding its feet when it comes to the FDA so it seems a little premature to give any solid advice. Keep an eye on the industry press though; crowdfunding has worked for some MedTech start-ups already.

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Because you are at an early stage we will focus on how to get the initial injection of cash required to get your idea off the ground. This usually involves meetings with Angel investors and others offering seed capital.

#5 Funding

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What do investors want to know?

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A recent article from MedCity News lists the preliminary things Investors will want to know.

• Why is your product necessary?

• Is there a clinical need for your product?

• Are there existing competitive products?

• Who will use your product?

• Who will buy your product?

• How big is the market?

• What are the associated regulatory issues?

• Does the technology work?

Luckily for you, because you have followed parts 1-4 in our ebook you can already answer all of these questions.

Now that you are armed with the information, let’s look at how you can increase your chances of success.

Tip #1 Make them feel comfortable

You should already have a relationship with a design house and a manufacturing company (if you have followed our advice in parts 3 and 4) so you may be able to use their facilities to host investor meetings.

This gives the investor a clear indication that you have done your background research and shows that you have already made progress in terms of commercial arrangements.

Furthermore, the engineers can act as another level of reinforcement around the technology and manufacturing feasibility and can likely field some of the investor’s questions for you.

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Tip #2 Investors aren’t always experts in your technology

While you should have engineers on hand it may be better to put the management team rather than just the techies in front of your investors. The investors need to understand the business vison and get a positive feel for your company on a personal level.

Remember, you’re not just selling your technology; you’re selling your business.

Make sure that you explain your technology at an accessible level. If the investor happens to be more knowledgeable this will come out in their questioning.

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Tip #3 Understand your investors’ appetite for risk

Look back over the investment history of your investors, what have they put money into before? Is medical a new market for them or are they seasoned veterans?

All of this will give you a good indication of what level of risk they will accept and therefore whether you are a good fit for each other.

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Tip #4 Don’t just focus on Angel funding

First and foremost, investors want to make money. Equally, they don’t want to lose money. Giving them answers to all of the questions at the beginning of this article will go most of the way to establishing your business case but that doesn’t mean an angel investor is going be able to or want to offer you all of the money you need.

If you have multiple sources of capital this is likely to be a less risky investment, especially if the other funding is coming from grants.

Tip #5 It doesn’t have to be a one horse race

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You might only be pitching one product for now but that doesn’t mean your technology isn’t applicable anywhere else.

If you can you show a long-term growth strategy to broaden the portfolio of products or applications, this can really resonate with investors because it shows you aren’t only offering one source of (risky) revenue.

Product Development | Product Design

| Manufacture | Aftersales

sales@itlva.com | +1 804-381-0905

www.itlva.com/contact

Contact ITL Virginia Inc.

What’s next?Now that you have finished our series of articles it’s over to you.

Collecting all of the information and answering all of the questions we have given will help you to put together a solid business plan that you can take to investors.

If you have any more questions on any of the articles or need to speak with a design and manufacturing company we would be happy to help.

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