TIPS FOR MEDICAL DEVICE START-UPS – AND SOFTWARE PITFALLS TO AVOIDSYNCRO MEDICAL e: solutions@syncro.com t: 215-359-9355 w: www.syncro.com

© 2006-2016 Syncro Technology Corp., All Rights Reserved

CONTENTS

TIPS FOR MEDICAL DEVICE START-UPS – AND SOFTWARE PITFALLS TO AVOID

03 INTRODUCTION & BACKGROUND

04 ADDRESSING EARLY STAGE CHALLENGES

05 SHIFTING GEARS TO MARKET ENTRY

06 AND FINALLY…

06 CONCLUSION

07 IMPORTANT POINTS AND PITFALLS TO AVOID

08 WHO IS SYNCRO MEDICAL?

SYNCRO MEDICAL - TIPS FOR MEDICAL DEVICE START-UPS – AND SOFTWARE-RELATED PITFALLS TO AVOID

02 SYNCRO MEDICAL e: solutions@syncro.com t: 215-359-9355 w: www.syncro.com

Medical Device Startups, particularly those whose product is software-enabled, face countless challenges in the journey from initial concept, through the development process, to launch and beyond.

This article discusses some of the software-related issues medical device companies have to address in order to navigate the process successfully.

The content for this article derives from an interview conducted with Aaron Peterson, VP, R&D at Heart Test Laboratories, Inc. Peterson candidly discusses the challenges his firm encountered during the stages leading up to initial product launch. He offers a variety of tips/suggestions to fellow R&D leaders of early-stage firms.

After reading this article, you’ll have an invaluable insight into the actual experiences of a medical device start-up firm that has already navigated the route you may be contemplating. Armed with this knowledge, you will be in a better position to avoid some of the mistakes and pitfalls … saving you time, money and effort in the process.

BACKGROUNDAt the time of our interview, Heart Test Labs (HTL) had been incorporated for several years. The core technology underlying HTL’s product had been acquired from an overseas inventor. Until 2013, significant effort was expended raising funds, finalizing research, obtaining patents, and developing prototype units. Following management transition from R&D to an experienced operational team in mid-2013, HTL has focused on readying the product for regulatory approval and market introduction.

HTL’s product is called MyoVista. It’s a low-cost, non-invasive screening tool intended to be used in the assessment of heart disease. Using conventional ECG data, the system applies proprietary interpretive software and data visualization to provide a report that may be used by GPs and Cardiologists to identify heart disease. MyoVista addresses the cardiac “diagnostic testing gap”, with the objective of reducing unnecessary, and considerably more expensive testing options.

SYNCRO MEDICAL - TIPS FOR MEDICAL DEVICE START-UPS – SOFTWARE PITFALLS TO AVOID

TIPS FOR MEDICAL DEVICE START-UPS – AND SOFTWARE PITFALLS TO AVOID

03 SYNCRO MEDICAL e: solutions@syncro.com t: 215-359-9355 w: www.syncro.com

ADDRESSING EARLY STAGE CHALLENGES

In-House or Outsource?

One of the many initial decisions Heart Test Labs had to make was whether to recruit & hire an in-house engineering team or outsource the hardware and software development effort.

HTL decided early on to outsource much of the development effort – a decision they never regretted. According to Peterson, avoiding the need to hire a complete in-house engineering team had compelling benefits:

• The risk and implications of hiring the wrong staff was avoided, as the responsibility for staffing was effectively passed to an expert third party.

• There was no concern about hiring to the peak, and then needing to layoff employees at a later stage of the project when staffing requirements diminished. Outsourcing allowed them to easily adjust staff levels without any of the difficult and distracting HR concerns.

• By establishing specialized partnerships, HTL could immediately tap into the experience base of industry experts.

That said, there were some issues that became apparent in adopting an outsourcing strategy:

• Single-vendor, “one-stop-shopping” partners were problematic because they tended to be strong in one particular area but just “filling in” in other key disciplines. Therefore, HTL pursued a “best-in-class” outsourcing strategy.

• On the other hand, engaging too many specialist firms and/or freelancers at the same time could stretch a small firm’s engineering management bandwidth too thin.

• Over time, HTL found that the right number of vendors for them was 3-5 at any one time, otherwise there were too many moving parts to manage effectively.

Finding the Right Partners – Peterson acknowledges that it took some time to find the right development partners. As he discovered, selection of wrong partners proved quite costly to HTL in terms of time and cost (more on this later). Therefore, based on his experience, he offers several suggestions to help other medical start-ups accelerate this process:

Look for a true partner. Will they just meet spec… or are they capable of providing needed guidance and recommendations for improvement? Is the vendor interested in the success of your new product, or are they there just to complete tasks?

Leverage your network. Where possible, ask your contacts in the industry who they used successfully for

product development. Press your contacts for an honest appraisal of the vendor. A lukewarm recommendation is a warning sign!

Ask lots of questions. Grill the vendor. Make sure they have the specific capabilities you’re looking for.

Be sure the vendor asks you lots of questions. It’s a very good sign if they ask you about topics other vendors didn’t, or issues you hadn’t yet considered.

Where possible, favor vendors with relevant domain experience. While Peterson’s example is on the hardware side, this advice is just as relevant for software. The first vendor HTL engaged to develop an advanced ECG acquisition board moved very slowly as they had no applicable ECG experience. They had highly credible hardware development experience, but again, no specific ECG background. After a great deal of cost and effort, HTL selected another firm that had pre-existing knowledge of ECG systems, after which the process began to move much more quickly. The firm with relevant domain knowledge was a tremendous help in getting a troubled part of the project back on track and helped HTL internally to gain valuable insights about the nuances and functions of the acquisition board.

Start small. Peterson explains that when he first engaged Syncro Medical for UI work, he started by assigning just a few screens. Because he was wowed by the initial mock-ups and suggestions for improvement, he quickly expanded the project to include a total revamp of the UI.

Knowing When to Terminate Partners – Because both time and funding is at a premium for start-up firms, it’s critical to know when to terminate vendor relationships that aren’t working. In retrospect, Peterson acknowledges that some of HTL’s early

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SYNCRO MEDICAL - TIPS FOR MEDICAL DEVICE START-UPS – AND SOFTWARE PITFALLS TO AVOID

vendor relationships should have been terminated quite a bit sooner than what actually happened. For example, a contractor engaged to help decipher the original IP acquired by HTL proved to be ineffective in that role, and significant time was expended trying to make things work. Peterson recommends terminating problematic contracts promptly, rather than spending precious time and budget trying to correct an unsatisfactory situation. Also, if problems start to become evident, move quickly to find an alternative vendor so as to keep your options open, and to avoid prolonging a bad situation.

Stay Aware and in Control – Closely linked with HTL’s strategy to outsource much of the development was their decision to retain the systems integration and testing roles within the company. According to Aaron Peterson, this allowed HTL to have complete visibility and control of the project across all disciplines. As the systems integrator, Peterson was aware of technical issues and trade-offs as they emerged. Further, because he had a good handle on scheduling dependencies across disciplines, he could quickly intervene in these situations in order to avert potential conflicts. By having primary responsibility for system testing as well, he and his internal staff could quickly identify and flag problems.

For start-up firms, Peterson strongly recommends the approach HTL used for systems integration and testing.

Communication – A related benefit of keeping the systems integration function in-house was that all communications were channeled through a central point. As a result, HTL stayed well informed about up-to-the-minute details on all aspects of the project.

Getting All the Right Pieces – This is a critically important aspect when you’re acquiring or licensing the core technology from a third party. In HTL’s case, the core technology was originally developed by an overseas inventor. For a variety of reasons, the inventor was slow or reluctant to provide all of the required components.

For other companies acquiring its core IP from a third party, Peterson recommends doing a thorough due diligence effort upfront to make sure you have everything needed and that you can build the application. Don’t defer this important task. Peterson did this effort himself in the very early days before HTL had built a vendor team. He eventually engaged a vendor to help port all of the properties of the original custom operating system to a modern, commercial OS.

SHIFTING GEARS TO MARKET ENTRY

Aaron Peterson reports that Heart Test Labs is now nearly complete with initial product development. Regulatory submission is happening soon, and commercial product launch is anticipated within the next few months. With this change in focus, the engineering effort will need to adapt accordingly. Peterson discusses how he expects to address some of the new challenges that lie ahead.

R&D Spend – Now that the initial development effort is nearly complete, R&D spending needs to be scaled down significantly in order to preserve capital. An initial high spend rate was anticipated and planned for, since much of the system (both hardware and software) had to be designed and built from scratch.

Because HTL utilized an outsourcing strategy, it will be quite easy for them to throttle down effort and spending after the initial surge. They won’t have to deal with any messy and potentially costly HR termination issues at this stage.

Development Focus – The focus of the development effort will now be shifted almost exclusively to software. Because the product cadence for the hardware platform in this segment is assumed to be 18 months, further hardware development will be put on hold while effort is concentrated on new and deferred software-based features.

Given the reality of frequent change and adaptation for early-stage medical product companies, Peterson adds a few more factors to consider when choosing a software engineering partner:

Flexibility to adjust staff levels quickly to accommodate changes.

Depth to be able to handle a wide range of potential needs. For example, Peterson feels confident that Syncro Medical can handle needs beyond the UI focus of the initial development effort – including existing / legacy code base improvements, system architecture, bar code scanner integration and system performance optimization.

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SYNCRO MEDICAL - TIPS FOR MEDICAL DEVICE START-UPS – AND SOFTWARE PITFALLS TO AVOID

06 SYNCRO MEDICAL e: solutions@syncro.com t: 215-359-9355 w: www.syncro.com

SYNCRO MEDICAL - TIPS FOR MEDICAL DEVICE START-UPS – SOFTWARE PITFALLS TO AVOID

Field Updates – During the initial year or so after launch, Peterson expects to issue a number of software updates as features are added. During the early stage of building the installed base, these updates will be handled onsite by HTL’s distributors. Plans are already in place to develop a capability to provide secure, remote electronic updates.

AND FINALLY…

Peterson concluded our interview by offering a couple of additional insights for medical device entrepreneurs to consider.

Take Full Advantage of Excellent Partners – As mentioned above, HTL initially engaged Syncro Medical to address certain gaps in the UI for the purposes of getting through clinical trials. However, once Peterson got a feel for Syncro’s considerable UI capabilities, he frontloaded UI work that had previously been planned to take place after clinical trials. He seized the moment in order to revamp the entire UI to support eventual commercialization of the product. (For company funding purposes, it certainly didn’t hurt to have the revamped UI and workflow available to show to potential investors.)

Don’t Try to Go Too Fast! – While it may sound counterintuitive for a company racing to bring a new medical product to market, Peterson strongly advises not to try to move faster than what’s reasonably possible. In this situation, haste does indeed make waste. By working toward unrealistic schedules, you’ll in fact spend more money and squander precious time. Set realistic goals. Work smart. Engage qualified, experienced development partners to help you reach the finish line.

CONCLUSION

With thanks to Aaron Peterson of Heart Test Labs, we’ve used the actual experiences of an early-stage medical product firm to identify software-related challenges faced by start-ups. Peterson offers fellow entrepreneurs valuable insights and practical suggestions about how to avert or overcome these obstacles. Having worked with many medical product start-ups, Syncro Medical understands the hurdles faced by early stage companies. This article is part of our effort to ensure that our clients, prospects and readers are well informed and equipped with the knowledge to ensure a successful outcome to their development efforts.

TIPS:• Balance strategic outsourcing vs direct hiring

• Prepare a detailed questionnaire before speaking with potential vendors

• Take full advantage of high performing partners

• Retain System Integrator role to remain in control

PITFALLS:• Don’t fall for a “full service” vendor when

you need specialists

• Don’t hesitate to terminate underperforming or problematic partners

• Don’t agree to an unrealistic development schedule

ADDITIONAL RESOURCES: • How to Select the Right Medical Software

Engineering Company

• Outsourcing Medical Software Development: Why the Managed Project Model is Superior to Hiring Individual Contractors

• Skip the Software Architecture Step at Your Own Risk!

• Proving the Concept: How to Get Started Before You Start

• A Team of Teams – 3 Ways to Make the Best-in-Class Model Work

• Medical Software Development – Project Planning Guide (Whitepaper)

SYNCRO MEDICAL - TIPS FOR MEDICAL DEVICE START-UPS – AND SOFTWARE PITFALLS TO AVOID

07 SYNCRO MEDICAL e: solutions@syncro.com t: 215-359-9355 w: www.syncro.com

TIPS FOR MEDICAL DEVICE START-UPS – AND SOFTWARE PITFALLS TO AVOID

SYNCRO MEDICAL e: solutions@syncro.com t: 215-359-9355 w: www.syncro.com

SYNCRO MEDICAL is a division of Syncro Technology Corp. © 2006-2016 Syncro Technology Corp., All Rights Reserved

SYNCRO MEDICAL - TIPS FOR MEDICAL DEVICE START-UPS – AND SOFTWARE PITFALLS TO AVOID

WHO IS SYNCRO MEDICAL?

Syncro’s roots date back over 30 years. We’re a US-based software engineering firm focused on accelerating time-to-market for our clients’ new and enhanced medical products. We’ve successfully completed over 350 projects for companies ranging from start-ups to multi-national manufacturers. Our work spans several platforms: embedded, Windows, mobile, web. Syncro Medical maintains extremely high satisfaction ratings through our rigorous attention to process and quality assurance. View our latest client ratings presented as Syncro Medical – “by the Numbers”.

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