Is FDA approval a Golden Ticket? And more insights from January '22

Hi there!

The theme this month is to take a look at hurdles of entering the US as a MedTech startup. I'd suggest getting the FDA approval is more like a tip of an iceberg in the process. Have a look at the article below to learn more about what's under the surface.

In the meantime here are a few things that might interest you as well:

Getting the Team Right

One of the companies on our watch is Astura Medical, which progresses on their journey of making it in the US. I featured them in my #CompaniesToWatch series last year, because they impressed me with their products and vision. Now, I'm happy to learn that they just hired Tom Frazer and Brett Heim. Getting the team right is crucial in a small company, and as it feels, both gentleman bring bags of experience to the table.

This post dives deeper into building the Astura team.

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In the not?too distant past, obtaining FDA approval was a sure-fire sign of being able to sell your medical device in the US market. By getting this approval, which has always required patience and significant investment (in fact Companies often gained CE mark to enter the EMEA market to acquire clinical data and additional revenue while waiting – but I will touch on this in another insight later this year), you gained access to the most attractive and financially affluent market in the World. Provided you knew the right doctors you could access hospitals up and down the USA and start to see significant returns on your investment.

This “golden ticket” in turn lead to rapid commercialisation strategies whereby, Companies with the new FDA approval would hire a US President/VP US Sales, along with a team of regional sales managers/area sales directors (RSM/ASD) to build out product introductions across the length and breadth of the Country. Of course, results were reliant on the strength of the product and the sales staff’s surgeon/distributor networks. But with the right blend you could at least be sure you’d get some market penetration within the first 6-12 months.

The start of a new era?

Fast forward to present day. European and other outside the US (OUS) companies are still adopting the same strategy. Build and manufacture their product in the home Country, selling within home markets, but as soon as FDA approval is granted and the high wealth US market is open, they enter the USA building big sales teams expecting/waiting on the big pay day. However, it rarely materialises.

FDA - tip of an iceberg

In today’s market, getting FDA approval is only the first hurdle toward US success. With hospital approvals, private payer coverage and competition at high levels, it’s difficult to differentiate your offering and gain access to key hospital groups (GPO/IDN). Even with the most innovative product and the right distributor/surgeon relationship, it can take between 6-12 months to gain access to hospitals – if you even gain access at all. There is also a trend which sees some hospitals trying to reduce the number of vendors they work with. This all contributes to even the best RSM/ASDs in the market sometimes not being able to invoice as much as $1 in sales for the first 12 months.

Company culture at risk?

Therefore, when building teams of 4-5 RSM/ASDs plus a VP of Sales, coupled with investor pressure who want to see a handsome ROI, this can lead to a sour environment and a big deficit. On top of that we are already seeing the ramifications of such strategies as the market has now been flooded with 10s – 100s of candidates who are spending no longer than 1-2 years with a business having built next to zero revenue. Are these candidates bad at their job? Clearly some of them are. But I believe in the current environment, there are a lot of victims of circumstance. If they haven’t made any progress within 3-6 months they are under pressure, leading to tension within the business and a breakdown in relations. This in turn leads to candidate burnout, resulting in resignations or firings, which leads to having to start again with someone new, restarting the whole process.

Strategy Worth Reinventing

How to avoid this is the $1 million question. It’s worth looking at or considering a couple of options. Number 1 is to look at different strategies, for example hiring 1 or 2 market development managers to develop the market for 12 months with little financial target. Of course, this will be a costly 12 months and will hurt burn rates. But keeping the right candidate in place for a longer-term project allows the candidate to make progress and for the market to see stability. If you can accept/afford an initial 12-month loss, I believe this is the right move. Another strategy could be to hire a National Contracts Manager, responsible for gaining hospital approvals Countrywide, so when the RSMs/ASDs are hired, they have accounts they can penetrate immediately. The 2nd option is for companies to conduct market research before filing for FDA approval. There are Companies out there who can provide expert advice as to how open and ready the US market is for your offering.

the US remains the “golden ticket” market,

Overall, the US remains the 'golden ticket' market, where revenues, when selling in only one state, can be greater than selling across multiple European Countries. However, there needs to be an air of caution. With the costs of setting up a subsidiary, applying for FDA approval and developing a competent sales force, it can make return on investment difficult and by no means guaranteed. At a minimum, patience is going to be crucial.

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Matthew Henshaw, Founder / CEO / Recruiter, he acts as a talent adviser and startup mentor in the medical device industry.

My aim is to be at the forefront of innovative medical technologies. I know professionals I represent will only be interested in the most disruptive solutions. Connect with?me on LinkedIn?and schedule your online consultation to learn more about building a successful team in MedTech.