valuing early stage medical technology stephen t. parente, ph.d
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Valuing Early Stage Medical Technology Stephen T. Parente, Ph.D. Minnesota Insurance Industry Chair of Health Finance Professor, Finance, University of Minnesota Director, Medical Industry Leadership Institute April, 2012. Agenda. What’s the problem (and gamble)? - PowerPoint PPT PresentationTRANSCRIPT
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04/20/23
Valuing Early Stage Medical Technology
Stephen T. Parente, Ph.D.Minnesota Insurance Industry Chair of Health Finance
Professor, Finance, University of MinnesotaDirector, Medical Industry Leadership Institute
April, 2012
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Agenda
• What’s the problem (and gamble)?• Can research universities serve as medical
technology incubators?• One university solution:
A Medical Innovation Valuation Laboratory• Valuation overview• Critical ingredients• Case example• Strategic metrics of success
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What’s the Problem?
• Medical Technology pipeline is not optimal at present.
• Investors look to universities to be a possible channel for medical technology pipeline.
• Investors frustrated by slow and diffuse innovation generation process at universities.
• Universities (private/public) frustrated by budget challenges and prefer secure, diffuse funding sources.
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Universities as Medical Technology Incubators? Past- Yes; Future- Gamble• University Defined:
– An institution for higher learning with teaching and research facilities constituting a graduate school and professional schools that award master's degrees and doctorates and an undergraduate division that awards bachelor's degrees.
• ‘First’ American University candidates– Harvard University: Medical school in 1780 gave it University status in 1781– William and Mary College: Law school in 1779 and first chairs in Medicine &
Chemistry– University of Pennsylvania: Pennsylvania state charter with University in its
name 1765– Yale University: First doctoral degree granted in 1861 (though the dissertation
was 6 pages long)– Georgetown University: First graduate degree in 1821.– Johns Hopkins University: First ‘research university’ .
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First American Research University Transplant: Johns Hopkins University
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Transplanted from Who
University of Bologna, 1088 University of Berlin, 1810
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What is the Purpose of a Research University Then &
Now? Government and Philanthropic resources provided
for:A. EducationB. Economic developmentC. Societal wealth creationD. All of the Above
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A 21st Century Opportunity for Economic Development
• The modern University Production Function– Education– Knowledge creation– Intellectual property (IP) and innovation for
sale, license or use
• Squaring with research university intent:– Revenue from IP and innovations permits tuition
to be kept at a level affordable to all.– Students gain knowledge through coursework
and creation of new knowledge & products
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Knowledge Creation / Revenue Competition beyond University
Walls• Common economic challenges
– Revenues tied to fiscal health of region/state/nation– Workforce expenses hire than general inflation
• Common solutions– University/corporate business park(s)
• Bio-business parks galore
– Executive/continue education– Activist philanthropic ‘sharp shooters’– Global outreach / revenue seeking– ‘Soft money’ funding of research positions that are
underfunded without continued funding
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Land Rush for ‘Public’ Bio Science Parks
U of M(N)
Other U of M(I)
Other other U of M(D)Wisconsin
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Private University Competition
Harvard
U Penn
Yale
Northwestern
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Gloves are Off: High Risk/Reward
• National Institute of Health $$ to fund salaries and indirect fees.
• Look for spin-offs from grant research.• Use ‘Technology Commercialization’ to
sell/license for revenues.• Balance research/discovery/peer review
against projection of IP• Incubator $$ can be tough. • Competition from corporate labs as well.
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All Looking for a Prize in Crowded New Medical Technology
Market
Want this
Probably not this
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Q: Why a Medical Innovation Value Laboratory? A: Hedge the Gamble
• What a quick way to validate early medical technology that is University based or related.
• The Valuation Lab initiative revisits this original conception of the Publicly Research University – economic opportunity - where the combined talents of several separate colleges at the University would provide the human intellectual capital to identify opportunities in medical innovation that advantage economic development.
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Medical Valuation Laboratory (MVL) Research University Core Parts
• Signed memorandum of agreement from 8 colleges to engage students in their schools including:
1. B-School: Carlson School of Management2. College of Liberal Arts3. Institute of Technology4. Law School5. School of Medicine6. School of Nursing7. School of Pharmacy8. School of Public Health
• Full-time Laboratory managing director• Faculty co-directors• University faculty/expertise through ad hoc market rate contract
consulting agreements
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It only took 5 months to sign….
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Laboratory’s customers
• University scientists, physicians, engineers with new ideas for an innovation or a process.
• Service/technology innovators, including:• Mayo clinic telehealth program to extend specialist consults• Insurer telehealth to provide cost avoiding dx management.• iPhone medical applications and services• Jacksonville engineer with a new polymer to reduce rate of
tissue rejection of implantable medical devices• Since 2008, 95 laboratory projects have been completed• Current product rate is 30 valuations per year.
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Range of Valuation Projects
:
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From Hypothetical to Real in 1 Year
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Valuation “why does it matter”?
“Absence of sufficient financial means will relegate the most promising business concept to the category of “great unrealized ideas”
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Definitions
• Value: An amount considered to be a suitable equivalent for something else.
• Valuation: The process or method for assessing the value of something.
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Current Medical Technology Trends
Money is hard to raise Valuations are lower Terms sheets are more complex Expectations on “time to market” and “time to exit”
are considerably longer Exit options are essentially limited to M/A______________________________________________ Good ideas will get funded Innovation increases during difficult economic
times
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Seed Seed StageStage
Early StageEarly Stage
Expansion StageExpansion Stage
Late StageLate Stage
Early Adopter Customers
Early Majority CustomersEarly Majority Customers
Late Majority Customers
Innovation Customers
Friends & Family
Angels
Institutional - VCs
Public Market
Emerging Business “Blueprint”Emerging Business “Blueprint”Based on “Crossing The Chasm”
By: Geoffrey Moore
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Medical Industry Valuation
Example
NeoChordAmy Raatikka
Andrew Senn
Ilya Pekurovsky
Kimberly Beyer
Kristen Spargo
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Obvious Cautions from Lab
• Intellectual property rights are not the same throughout the world.
• Capital cost and investment has potential unfair subsidy in different countries.
• Human capital exchange could leave some countries winners and some losers.
• BUT, the humanity always benefits from competitive innovation.
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Lab Strategic Metrics of Success
• Human capital to create extraordinary disruptive innovations increases
• Worldwide patents on extraordinary innovations increase
• Medical innovations that are not only cost-effective, but cost-saving
• Medical innovations that not only increase the longevity of life, but the quality of that longevity as well