Two Important Customers — FDA and CMS

Key Learnings From Eric’s Experience

• To attract investors, develop a compelling story outlining your company's unique value proposition and path to success. If you want to build relationships with potential capital investors and strategic partners well in advance of needing immediate funding, start the conversation early. Focus spending on critical areas while you outsource non-core functions to conserve resources and extend your runway. 

• Put yourself in the acquirer’s shoes. Evaluate your company from their perspective to identify areas of value and potential concerns. Robust clinical evidence for early-stage startups is a must. Also, don’t underestimate the importance of a well-developed and documented quality management system, as the lack of it can be a real barrier to your venture’s ability to scale in the future.

• Your target market needs to be defined before you can properly develop your regulatory and reimbursement plans. Address coverage challenges early on and engage CMS. Explore partnerships with private payers for both learning and clinical trial opportunities.

Dr. Eric Fain has a background in applied math and medicine. An innovator at heart, during medical school, he worked on early implantable defibrillator research with his advisor Dr. Roger Winkle, a cardiovascular disease and electrophysiology specialist. After graduating in 1987, Eric took a one-year hiatus from medicine and joined Ventritex, a device startup specializing in implantable defibrillators, to help with fundamental research. 

Although he planned to return to clinical medicine after a year, Eric became enamored with medical devices and decided to stay in the space. After 10 years at Ventritex  and 20 years in various leadership roles at large strategics, he decided to rejoin the startup world as the CEO of Procyrion. 

Founded in 2005, Procyrion has been focused on overcoming engineering challenges to develop its flagship product, Aortix — a percutaneous mechanical circulatory support (pMCS) device designed to treat heart failure patients admitted to the hospital who are unable to be successfully treated with medication alone and make up about 25% of heart failure admissions. These patients experience severe symptoms and complications like shortness of breath and swelling of the lower limbs and feet due to excess fluid accumulation. The standard of care today primarily relies on high doses of intravenous diuretics and cardiac medications. 

Because of its placement in the descending aorta, Aortix reduces the risk of strokes and other complications that are associated with devices placed directly in the heart. After its placement, Aortix facilitates blood flow from the aortic arch to the lower aorta, decreasing the heart's workload. This helps improve cardiac efficiency while boosting renal function by directly increasing blood flow to the kidneys, which increases urine output and results in decongesting these diuretic-resistant patients. 

Procyrion was able to enroll its first patients in a pivotal trial called DRAIN-HF Trial in November 2023, a critical step in demonstrating Aortix’s efficacy in decongesting patients, enhancing their survival chances, and reducing hospital readmissions. Today, the team is focused on activating new trial sites and accelerating patient enrollment with the mission of completing enrollment in the trial in the second quarter of 2025, with the goal of ultimately obtaining a PMA from FDA.

Capital Saved is Capital Earned

Fundraising in medtech is undeniably challenging, especially with the changing landscape over the last decade. VCs are already stretching their resources to support existing portfolio companies and tend to avoid taking on external risks. That leaves early-stage startups in a tough spot, surrounded by intense competition and lower valuations. 

Timing is everything," Eric says, tongue in cheek, “But I think, in terms of lessons learned, you really can't control timing.” That’s why his advice is to be prepared. He emphasizes the importance of strategic fund management, a clear roadmap, and a compelling and realistic story to tell. This builds a solid foundation and attracts strong investors. 

Procyrion raised $30 million in their Series D in mid-2019. COVID hit right after the team started the pilot study, which set them back at least a year. Despite the setbacks during the pandemic, Procyrion’s prudent cash management allowed them to weather the storm. “We’ve always focused on spending money where it’s most critical, saving as much as possible for a rainy day, and extending our cash runway,” Eric explains. 

Currently, Procyrion has a very supportive investor base. As someone who has been on the other side of the funding and acquisition table, Eric suggests engaging a wide range of investors, whether it's VCs or family offices. Then, you have to connect the dots for them. “Highlight what sets your company apart in terms of innovation, the size of the patient population you serve, and show them how you can really make a difference,” he shares. 

You also need to define your path openly and have a realistic timeline that doesn’t only include the amount of money you’ll raise but also the milestones you are planning to hit with the capital. When you achieve your key targets, make sure to make your successes known. They are your launching pad for future fundraising. 

Eric’s straightforward approach involves resource allocation as well. He suggests strategic outsourcing of non-core functions to conserve capital and lean on your company’s strengths. For Procyrion, this meant outsourcing manufacturing to concentrate on management, clinical study development and execution, and program development.

Prepping for an Exit

Eric has extensive experience with M&As, including an exit with St. Jude and a very big one with Abbott. When approaching an acquisition, Eric advises, “You really need to wear the hat of the acquirer and think about what's going to be important to them.” 

Think ahead about the groundwork you’re laying and how it can be valuable for potential acquirers. It depends on the size and the stage of the company, and whether it’s commercial or not commercial. These are the criteria that can help you define what type of exit you are looking for. For startups, Eric notes, the focus often lies on clinical evidence and a robust quality system. 

He also stresses the importance of taking a step back to reflect on the claims you intend to make about your device once it's approved. This should happen early so you can build appropriate data collection strategies into your protocol. Since these claims will be crucial for marketing and driving adoption, it's important to collect data during clinical trials that can directly support them. 

Eric’s overarching advice is: Think ahead of your marketing strategy; design your pivotal trial in a way that allows for the collection of data that might extend beyond the primary effectiveness endpoint, covering aspects that will resonate with your target audience and thus aid in marketing and adoption. In his words, “You have to stay within the guardrails of the data you have to support the claims that you'd like to make to market the device and drive adoption.” 

There’s also the often-overlooked significance of a well-developed quality system. “From my experience, it has become a bigger criteria for acquirers and how they evaluate companies,” he notes. A mature quality system is crucial in terms of having robust product performance and the ability to scale manufacturing post-acquisition, thus, it really reduces the risks associated with integrating a smaller company into a larger one. 

In essence, when you approach a potential M&A transaction, you need to de-risk every aspect of the business as much as possible. This includes solid clinical evidence, a well-maintained quality system management (QMS), as well as meticulous documentation that will stand up to examination by a potential acquirer. 

Beyond FDA: Clinical Studies and Payers

In navigating regulatory pathways, Eric stresses the importance of building a proactive relationship with FDA. “You have to really approach it as a partnership. You have your strategy. You're not going to lay all your cards on the table, at least not in the beginning, but you want to be upfront.” 

For example, completing verification and validation (V&V) work before consulting with FDA is a common mistake. You need to ensure alignment on parameters like study design and desired clinical evidence – especially if you’re after a PMA – before you get too far. By fostering open communication and aligning expectations, you’re streamlining the eventual submission process. 

Eric also underscores the increasing need to address reimbursement challenges from the outset. “In the past, FDA approval was 80% of the focus, and reimbursement was 20%. I'd say, maybe not flipped exactly, but those priorities are closer to equal today.” Currently, the aspect of who’s going to pay for it is becoming increasingly important and complex. That’s why it's essential to consider not just the FDA but also CMS for Medicare and Medicaid coverage. 

In Procyrion's case, it was essential to gain coverage for the Medicare patient population in particular, as their target patient population – people over 65 – is primarily covered by the intended indications. 

You should also consider private payers, especially if your device targets patient groups outside the Medicare age bracket. Additionally, there are entities in the healthcare ecosystem who are both payers and providers. The overlapping roles of payers and providers offers a unique perspective on value, safety, and outcomes, and considering them as potential trial sites can be a powerful and strategic move.