How to Prepare Your Medical Device Company for Acquisition
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The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series How to Prepare Your Medical Device Company for Acquisition Process Overview February 17, 2009 The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series What Animates Your Career? • Chance, Choice, Change and Challenge* • 5 “at-bats” • Combination of base hits, strike-outs and homeruns – – – – Change = demographics Chance = personalities, priorities and interests Choice = personal goals and ambition Challenge = how to bring it all together • How best to maximize your opportunity? *Jonas Salk, Man Unfolding, 1972 The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Why this Series? • Entrepreneurship is about making an impact • An acquisition might be your career highlight • Leveraging Orange County’s natural strengths – – – – – – Total estimated employment: 29,000 Total estimated wages and salaries paid: $2.2 billion Average wage: Nearly $76,800 Percentage of total California biomedical workforce: 11% Statewide ranking: Third The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Medical Devices M&A 2006 150 Deals 2007 191 Deals (+27%) $57.9B $53.3B (+8.6%) Aggregate 2007 M&A = 90x Aggregate 2007 IPOs Source: Levin Associates Healthcare M&A Information Service, January 2008 The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Your Game Plan for Success February 17, 2009 How to Prepare Your Medical Device Company for Acquisition: an Overview February 24, 2009 Envisioning Milestones and Achieving Them March 3, 2009 The Art of Valuation March 10, 2009 What Makes a Great Investor Pitch April 8, 2009* Secrets to Presenting a Winning Investment Pitch May 5, 2009 Midcourse Corrections May 12, 2009 Executing the Exit The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Our Speakers Tonight • Ray Cohen, CEO, Symphony Medical & Fjord Ventures • Greg Ruehle, CEO of Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Ray Cohen Slideshow The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Flaming enthusiasm, backed up by horse sense and persistence, is the quality that most frequently makes for success. – Dale Carnegie Reasonable men adapt to the world around them; unreasonable men make the world adapt to them. The world is changed by unreasonable men. – Edwin Louis Cole The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series How to Prepare Your Medical Device Company for Acquisition • • • • • • • Is it really a well understood business methodology? The secret is………positioning for sale requires the same basic effort and elements Financial Buyers vs Strategic Buyers Strategic buyers acquire either (i) fully baked businesses that are accretive or (ii) technology that fits with their product portfolio What is most important to strategic buyers? – “proof” Revenue is not a necessary element You and your people are probably redundant The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Elements of a Successful Medtech Start-Up Company • • • A highly motivated, effective and dynamic leader(s) that understands the concept of “enrollment” Novel concept or technology Experienced advisors from specific field of endeavor – Physicians, Researchers, Executives with start up experience, Regulatory expertise • Large under-served market and detailed market research & analysis – How big is the market? what is indication for use? competition? Incremental product improvements create products not companies - there is a distinction btwn a “technology platform” and a “Product” • Intellectual property protection – • • • Initial landscape analysis, filing provisional patents, enablement of invention A well conceived FDA regulatory strategy - 510(k)?, PMA?, Clinical Studies? Pre-clinical safety & efficacy data (bench data if device) A concise and easy to understand PowerPoint presentation – No one reads business plans!, 5 yr projections are useless The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Investment Capital • • • Yes, you need it. Capital is the life blood of early stage and growth companies Rule – Things always take longer and cost more than you think Sources of Investment Capital – – – – Friends & Family, high net worth individuals Incubators - The new concept for start ups Professional “Angel” investors Venture Capital • • • The dilution dilemma – • Not all VCs are created equal How do you get an introduction? They don’t teach you in B-School is how 100% can turn into 1% Preferred Shares, Common Shares, Stock Options The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Growth Phase - Positioning the Company • • • • • • • • • Enroll the right people Be lean, fast and capital efficient Good science is critical – don’t take shortcuts Focus on establishing proof that the product works Focus on filing patents Understand how and by whom similar products are sold to end users Most early stage companies only prove that adoption is hard and devalue opportunity. Hence, what are you alternatives? • Consider an early sale of the Company!!!! • Consider a strategic partner to take product to market • Consider distributors (US vs Intl) • Consider direct sales to a limited market or geography If you plan on taking product to market, Revenue is the key value creator. Profit is not The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Critical Exit Elements Size of market must be clear Marketing survey of likely end users Proof of safety and efficacy Third party validation by key opinion leaders Intellectual property is protected • issued patents are much more valuable than pending patents. If you have to buy someone’s issued patent that’s better than dancing around it Bill of materials must be well understood Gross margin of product will drive the exit price The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Greg Ruehle Slideshow The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Orange Coast Medical Ventures Overview Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Orange Coast Medical Ventures Overview Entrepreneurial Skills Workshop Series – OCMV was the first incubator to be facilitated by OCBIN*, a public benefit initiative of the University of California at Irvine. – OCMV was established to commercialize the inventions of the faculty and researchers of UCI's Medical School and the Southern California Medical Community. Orange Coast Medical Ventures * Orange County Business Incubation Network www.ocbin.org The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Board of Advisors CEO – Orange Coast Medical Ventures – Greg Ruehle – Paul DeRidder, M.D. Tech Coast Angels – Shiv Grewal Partner - Stradling, Yocca, Carlson & Rauth – Jim Armstrong Managing Director, Clearstone Venture Partners – Steve Wilson Finance – James Hill, M.D. J.D. Partner – McDermott Will & Emery LLP – Doug Bennett Oversight Committee Chair Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Media Coverage • Getting Ready to Launch The Orange County Register May 10, 2007 • The New Device Incubators Start-Up Magazine June, 2007 • Incubator Innovators The Frank Peters Show Oct. 1, 2007 Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series About UC Irvine and UCI Medical Center Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series UC Irvine Facts & Figures • U.S. News and World Report: 13th Best Public University in U.S. • 4 Nobel Laureates • $3.6 Billion Annual Economic Impact on OC • 27,000 Students • 1,900 Faculty • 8,800 Staff • Founded in 1965 Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series UCI Invention Productivity $12,000,000 200 180 $10,000,000 160 140 $8,000,000 120 100 $6,000,000 80 $4,000,000 60 40 $2,000,000 20 0 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 19 95 $0 Income Orange Coast Medical Ventures Invention Disclosures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series The OCMV Ecosystem Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series The OCMV Ecosystem Investors Corporate Partners Economic Development Orange Coast Medical Ventures U.C. Irvine OCMV Mentors Portfolio Company Service Providers The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Corporate Partner Program • Participate in OCMV ecosystem – Benefits from relationships with all constituencies – Interact with UCI faculty & researchers Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Preferred Provider Program • Preferred provider to portfolio companies • Limited # of preferred providers per category • Participate in OCMV ecosystem – Gain leads from other OCMV participants Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Mentor Program • Consists of Experienced Executives – – – – Investors Service Providers Corporate Partners Individuals • Pro Bono Guidance During Incubation • Potential for Employment or Contracts Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Paths to Commercialization Independent Entrepreneur Other OCMV Incubation Management Entrepreneur Entrepreneur with Mentoring Recruited/ Entrepreneur Funding Entrepreneur Introductions Provided Provided by Incubator Providers Entrepreneur Introductions Provided Preferred Providers Business Plan Entrepreneur Plan Review Process Co-developed with Incubator No Yes Yes Dilution Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Investing In OCMV Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Investment Overview • OCMV is a Limited Partnership – Invests in UCI and community inventions • Investors Own shares in OCMV’s LP – Fund life: 3 years • Share price: $125K – Variable discount for founding partners • Participation in OCMV ecosystem Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Investment Allocation and Return Series A, B… Investment Investors Seed Capital OCMV L.P. Returns Returns License and Contract Fees Government Agencies Salary Returns Salary Grants U.C. Irvine Inventors Inventors Share of License Fees Corporate Partners Orange Coast Medical Ventures Portfolio Companies Normal Flow Optional Flow The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Two Portfolio Models Virtual Company No payroll Possible equity for contractors Traditional Company 2-3 paid staff May be directed research grant No office/lab needs May need offices/lab space IT equipment & hosting IT equipment and hosting Primary expense is T&E T&E Transactional legal expenses Transactional legal expenses Marketing expenses Marketing expenses Budget up to $10K/quarter Budget up to $75K/quarter Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Vetting Process • Admission Criteria – – – – – • Intellectual property Market size and growth rate Scalability of company and technology Sustainability Key individuals - experience and skills Evaluation Process – – – – Committee member becomes sponsor Sponsor works with company to create pitch Pitch delivered to full committee Committee accepts, rejects or defers Orange Coast Medical Ventures The Les Kilpatrick Students to Start-ups Entrepreneurial Skills Workshop Series Greg Ruehle, CEO c/o Office of Technology Alliances 380 University Tower University of California, Irvine Irvine, CA. 92697-7700 Office: 949-824-7295 Cell: 949-212-1983 Fax: 949-824-2899 E-mail: G355@aol.com Orange Coast Medical Ventures
