Many start-up medical device and diagnostic companies offer some of the most promising technologies in the industry. As a result, most large medical device companies have created significant business development and venture funding units to tap into this innovation. However, some promising technologies will never see the light of day – not due to the validity of technology, but because of significant commercial missteps.
Here are three common mistakes on the road to commercialization and how to navigate them successfully:
#1 – Focusing on FDA clearance as the major commercialization milestone.
Many senior executives and management boards set bonus incentives around achieving 510k clearance, but if your technology is truly going to change a clinical practice, this mindset can be shortsighted and has the potential to destroy your commercial success.
If you are launching a game-changing technology, FDA clearance is only one piece of the greater puzzle. Often times, clinical studies get launched with little to no input from the commercial team. This input, however, is important to address the true customer needs. Questions like “what marketing claim(s) do I need to be able to make in order to gain adoption?” Reaching consensus around the answer to this question will be critical to clinical success.
Another important question you must answer is, “what information will the customer require to confidently change their treatment protocol to one which includes my product?” Nine times out of ten, this necessitates the collection of additional clinical data and if you haven’t thought this through, you have just added 2-3 years to your commercial inflection point. This was a tough lesson I learned while working at a start-up launching diagnostic imaging technology. While the technology was amazing, in the rush to commercialization, they didn’t collect enough data to enable clinicians to make confident decisions regarding the potential need for amputation. Needless to say, this created a commercial crisis within the organization. As a result, the sales team was eliminated in order to finance clinical data collection. It was a major loss in time to market, wasted opex and lost revenue.
Mistake number one can often lead to #2 – Misjudging your cash runway.
You can never have enough runway. I repeat, you can never have enough runway. As everyone knows, it is a difficult capital-raising environment, so close monitoring of your cash burn is critical. The needs of a start-up can be so dynamic; it is important to be able to pivot and course correct with minimal hiring and firing. Hire only what you need to reach your next milestone and seek to close the resource gap by using freelancers and knowledgeable, pragmatic consultants before adding permanent headcount. An underutilized resource is a drain on capital and ultimately a reduction in runway. Another pitfall associated with misjudging your runway is the loss of leverage. When an investor knows your running low on cash, your company value drops precipitously, so raise the money well before you need it.
And finally, #3 – Blindly ramping up the sales force for an aggressive commercial launch.
Field sales executives are one of the most effective promotional channels in the medical device industry, but they are one channel and by far the most expensive one. With the recent implementation of the Sunshine Act and increased adoption of programs like Vendormate, access to clinicians is more restricted than ever. This shifting market dynamic requires a need for commercial executives to rethink their field sales and marketing strategy. New, more cost-effective marketing approaches are available to either complement a smaller field sales organization or obviate their need altogether. Initiatives such as telesales, e-detailing, messaging development, social media and lead nurturing programs are becoming more scientific than ever. Consider ramping your sales force in a more measured way. Start with a few targeted geographies and supplement that with online and direct marketing approaches to drive a more cost effective commercial launch strategy. One recent start-up is having great success using this method, with just three territory managers complemented by telesales and e-detailing programs they were able to generate results at a fraction of the cost of a similar company in their stage of development.
Start-up companies offer the most exciting technology in the industry; applying innovation to their commercial strategy is one more way to help ensure this great technology makes its way to the patient in need.