NOVEMBER 16, 2016 Vol. 3, No. 16 Published by Innovation In Medtech, LLC PERSPECTIVE Innovation Overload in RADIATION ONCOLOGY Transcatheter Mitral Valves: REFLEXION: RENAL DENERVATION REDUX? Using Biology to Guide Stephen Levin, 6 Radiation Therapy David Cassak, 8 RefleXion’s Financing: Turning Skeptics into Believers, 19 BLOOD COLLECTION Seventh Sense and the Rise of CONSUMER-FACING MEDTECH FINANCING DIAGNOSTICS ELECTION Wendy Diller, 24 UNCERTAINTY Stalls Q3 M&A and IPOs The Long Road to Less Invasive Stephen Levin,32 Blood Collection, 30 START-UPS TO WATCH G-THERAPEUTICS: A Neurostimulator MARKET TRACK Helps Patients Recover See page 32 from Spinal Cord Injury Medical Device M&A, 2000-2016 YTD Mary Stuart, 36 Aggregate Deal Value Number of Deals (US$ in Billions) $70 100 $66 $67 Transaction Value $65 $63 Number of Deals 90 83 $60 91 LUMA THERAPEUTICS: 77 80 $49 $50 $50 70 A Home-Based Therapy 62 59 58 57 60 $40 Quickly Puts Psoriasis 48 48 46 45 50 43 44 43 42 $29 41 $30 $28 $25 $26 $26 37 40 into Remission 34 $25 $22 $27 $22 $26 $20 $19 $20 30 $16 Mary Stuart, 40 $13 $14 $12 $12 20 $10 $6 $6 10 $0 0 2000 2001 2002 2003 2004 2005 2006(1) 2007 2008 2009 2010(2) 2011 (3) 2012 2013(4) 2014 (5) 2015 2015 2016(6) YTD YTD Source: SEC filings, company press releases, SDC, Wall Street Publications and FactSet as of September 30, 2016. MEDTECHSTRATEGIST.COM 8 RADIATION ONCOLOGY RefleXion: Using Biology to Guide RADIATION THERAPY KEY POINTS n Medtech investors usually shy away by from capital equipment plays because DAVID CASSAK the technology is expensive, the development timelines are long, and selling into a cost-conscious hospital environment today is risky, particularly given the need to unseat an installed All successful fund-raising represents an affirmation of sorts. But base. But RefleXion has been able to for Hayward, CA-based RefleXion Medical, the company’s recent an- raise two rounds of financing, featuring nouncement of a $52 million Series B, led by a sophisticated family- several blue chip investors. office (KCK) and with the participation of Johnson & Johnson Develop- ment Corporation (JJDC), represented a special kind of affirmation. n RefleXion’s novel approach to cancer Just four years ago, RefleXion was running on fumes, having gone therapy: combining positron emission through some early seed capital and grant funding, as the company tomography (PET) technology with founders began a search for Series A investors. Worse, early conver- radiotherapy, turning the former into a sations with venture capitalists were decidedly unpromising. Having therapeutic rather than diagnostic tool, been turned down by virtually every VC contacted, RefleXion seemed to enable real-time, biology-guided to be the quintessentially un-fundable medtech start-up. The com- radiotherapy. pany checked virtually every box on a VC’s “do not invest” list: capital equipment, complex technology, potentially long development times n Key to RefleXion’s opportunity is and lengthy and difficult sales cycles, to name just a few undesirable a shift in strategy from single tumor attributes. therapy to the ability to treat metastatic cancer, a difficult target for conventional On the other side of the ledger, however, were some equally com- radiotherapy because of the diffuse pelling positives: a strong management team, backed by an impres- nature of the disease. sive roster of advisors, and, perhaps most compelling of all, RefleX- ion’s promise to revolutionize the treatment of metastatic cancer by incorporating a well-established technology, positron-emission to- n The interest in RefleXion shown by mography (PET), with a novel approach to zapping tumors. In the end, investors like Pfizer and Johnson & while it hasn’t always been easy, RefleXion has been able to attract Johnson reflects both a wider context some blue-chip investors, including JJDC, KCK, Pfizer Inc., Sofinnova for the company’s prospects and a path- Partners, and Venrock. In the process, this once least-likely of bets way, potentially, to partnerships in the has become one of the hottest technology companies in the medical future, particularly with Big Pharma. device industry. THE MEDTECH STRATEGIST © 2016 Innovation In Medtech, LLC. All rights reserved. RADIATION ONCOLOGY 9 Using Signals from Tumors Technically outside his research area, Mazin worked on the idea for another year or so. During this time he was accept- RefleXion’s founders, Sam Mazin and Akshay Nanduri, met ed into the Stanford Ignite program offered by the business in high school in their native Toronto. After high school, each school to help train scientists on business fundamentals. As went his own way, Mazin to the University of Waterloo, where the concept began to become real, Pelc introduced him to he got a degree in computer engineering before moving on the Kaufmann Foundation, a Kansas City-based organization in 2002 to Stanford University to pursue a degree in electrical that helps entrepreneurs launch companies through educa- engineering, with plans to go into the communications field. “I tional and other programs, which, at the time, had started a didn’t have any idea that I would end up in the medical field,” new program designed to help post-doctoral fellows create he says. companies and commercialize technology. At Kaufmann, he ran into medtech industry veteran, investor, and serial It was in a class in medical imaging, part of his electrical entrepreneur, Jay Watkins. Formerly the co-founder and engineering course work, that Mazin came to the concept CEO of Origin Medsystems, Watkins is a well-known figure that would eventually become RefleXion. As he recalls. “It in medtech circles. He later became a VP at Guidant, which just really blew me away what an elegant application of en- acquired his previous company, and subsequently signed on gineering principles to medicine I was seeing—how CT and as a venture capitalist at De Novo Ventures for more than MRI scanners work, how ultrasound works—how math pro- 14 years. duces clinical images. I was hooked.” Mazin began searching for an advisor for his PhD thesis and ended up working with Norbert Pelc, ScD, the Chair of BioEngineering at Stanford’s A Crazy Idea and a Phone Call School of Medicine, who was doing research on new types In the late 1990s, Akshay Nanduri was also studying at Wa- of CT scanners. Mazin spent the next five years or so in the terloo University, where he majored in computer engineer- radiological sciences lab, earning a PhD on new CT scanners ing, having stayed close to his high school friend, Sam Mazin. and continuing with post-doctoral studies. Out of college, he joined a telecom start-up, a six-year stint that lasted until the company was acquired. Having cashed Mazin notes that he saw something interesting in his work out, Nanduri, like Mazin, left Canada to do graduate work in in the radiology lab. “The imaging people, the ones who look the US, not at Stanford, but at the Massachusetts Institute into the body, and the radiation oncology people, those who of Technology (MIT), where he pursued an MBA at the Sloan treat with radiation, don’t really talk to each other a lot,” he School of Management. In 2008, Nanduri got a phone call says. “There were very few joint sessions where the physi- from Mazin “about this crazy idea in radiation oncology.” cists and scientists in one part talked with the physicists and With no medical background, Nanduri was skeptical at first. scientists in the other.” In fact, Mazin recalls one talk given by “I told him I didn’t want to touch it with a ten-foot pole,” he a radiation oncologist physicist in 2007 who, discussing the recalls. “Plus, I felt it would be difficult to add value in a com- challenges of the field, noted how difficult it is to see the tu- pletely foreign field.” mors during a course of treatment. “Suddenly the idea just hit me—to use signals coming from tumors themselves to But Nanduri did have an idea: MIT has a business plan guide radiation.” In that kernel, RefleXion was born. competition. “I thought we’d put a team together that could help us understand the implications of the idea.” Winners The idea wasn’t to assess the shape or size or location of the of the competition would receive $100,000 to be used to tumor, Mazin says, but actually to sense it in real-time. “When start a company. you’re delivering radiotherapy treatment, radiation is invisible; the beam is just going into the patient,” he explains. “There’s Reluctant at first, Nanduri became more excited about really no way to actually verify where the target is. Because the Mazin’s idea as the two did research for the business plan tumor is inside the body, it’s really difficult to have a real-time competition. “We interviewed 20 to 25 radiation oncolo- perspective on what’s going on.” The body moves with respira- gists, and I got hooked based on the feedback we were tion and in radiosurgery, millimeters are crucially important, getting,” he says. “Clearly there was a need for seeing and he notes. Currently, radiation oncologists employ a variety of treating at the same time.” There had been other innovative techniques to help target the tumor, such as implanting gold start-ups in the field, he goes on, “but we still felt there was seeds that establish reference points. “But there’s no direct something missing from the market, something clinicians way to actually see where the tumor is,” he says. were really hungry for.” Mazin’s concept, they decided, was exactly what the radiation oncologists were asking for: “for At the end of the lecture, Mazin had a thought that, in es- the first time, the tumor was talking to the machine,” says sence, became RefleXion’s concept statement.