Medtech Market Reality Evaluating Risks & Benefits of Market Entry

Hello, and welcome, everybody, to our very first, Lean Rocker workshop on commercialization, the reality check. I'm so happy that you could attend. What I'm gonna do, just so you know. is give you the option of being promoted to panelist, because we're going to be a small group today, or not a huge group today. And if you do want to be promoted to panelist, keep your microphone on mute until, Until you are speaking. and are asking a question. If you want to, submit questions with the Q&A function, feel free to do so, or use the chat function to communicate with me. I'm going to put a few announcements in the,

in the chat in a minute or two about, events that you may have missed or that are coming up that you may wish to attend. In the meantime, yes, welcome everybody. This is a new format, the workshop format. And I am very pleased to introduce Renee Franz from LeanRocca, who has commercialization, and how do I make that noise stop? And, the, And yeah, we're here for the MedTech Reality Check, 2026, what you need to know. So, without further ado, I'm gonna start promoting people, and go on mute, and allow Renee to take over.

Thanks, Sean, and thanks, everyone, for joining. As Sean said, this is our first time at Lean, our IQA, actually doing a workshop. And, the good news is, I think 100 and some people have registered. I'm not sure y'all will be in attendance, but we were, we were thinking workshops might be a little bit smaller, you know, maybe 7 to 10 folks. So, as Sean offered, become a panelist if you'd like this to be more interactive. What I'm gonna do is I'm just gonna walk you through some slides, high level, to help you understand the different concepts that we're then going to memorialize into both a business market assessment tool and a product development, specification trace matrix. So those are tools

That we've created, that we've shared with you ahead of time, and you are, you know, of course, don't have to fill them out. But you are welcome to use them as, we go through this process of evaluating the market, and or use them at a later date, and just sit and listen to the information that we're going to share. So, who am I? I've been doing medical device development and commercialization for over 30 years now, at both at the executive level, leading teams, as well as, you know, boots on the ground and research development. and sales and marketing. And through that process, I've guided over 200 different medical devices into the market. Everything from disposables to major pieces of capital equipment to cardiac ablation systems. So I have a wide range of experience.

And they like to say to me, I'm always the messenger, don't shoot me. because I have so much experience, and I've seen what goes right, and unfortunately a lot of what goes wrong, when I have to share the bad news, oh, this is going to cost a lot more, because we have, you know, discovered that we used the wrong sterilization process, or were classified a different way in Europe, than what you had thought maybe you were, that's where that comes from. So… without further ado, let's just talk about assessing the market. I think that is one of the most important first steps, is really How large is my potential market?

And what is the value of my product, and how it fits into it? What's its potential for growth? And we'll capture a lot of this in the tools that we're going to be sharing. You need to also be thinking about what products are competitors, because as we go through the business market assessment tool, you'll need to be thinking about what percent of market share you think you can capture, based on either A, if you know there's competitors. what you think you can gain in market share from them, or B, you're entering a whole new market. And there isn't direct competition, and so you have to be thinking about, okay, what's my indirect competition, and how do I think I can achieve market share? And that's really important for forecasting your market growth.

Another really important piece is a feasibility analysis. So, I can't… Emphasize enough, really understanding your regulatory and your reimbursement strategy. Again, when we go into both the tools, the Business Market Assessment Tool and the trace matrix, we're going to take some time to talk about The regulatory aspects mostly, and of course, reimbursement is really key, especially here in the U.S, because if you're bringing a new product to market, it's much easier to get into the market if there's already an established reimbursement path. And if there isn't, there's definitely experts. We know some that we can refer you to that can help you figure out that journey, because it's really important.

Especially if you're working with investors, they want to know not only how your device will be classified, you know, both here in the US, Europe, and other markets, but also how are people going to pay for it? So, also really taking a deep dive, looking at your technology, digging into the market size. digging into the clinical need, and not just the clinical need, but what type of clinician is going to use the product. We're going to touch more about… or more on that here in the next slide. And why that's important. And then your intellectual property. Protect early and protect often. That's really the value of what you're selling. Whether you want to take this product that you have all the way through the market, or you have investors.

any way you look at this market, protecting your IP is key, because you don't want people to sloop in and do exactly what you're doing, and, you know, basically wipe out all of your hard work, capitalize on it, and move the ball forward. So, path to market entry. It used to be it was much easier to enter the market in Europe than in the US, but in recent years, with the transition. from MDD to MDR medical device regulations, that has changed. We are going to talk more about that when we look at the business market assessment tools, and you're going to put in specific costs for entering those markets, and we'll talk about the differences then.

Let's talk about the clinical need. This seems like a no-brainer. But it's so important to spend your time validating your idea with clinicians. And how, you know, thinking about, you know, okay, how are we going to validate this idea in a market? How do you know if an idea is right for the intended market? We have some examples of products that were brilliantly designed, but not right for the intended market. And then… quickly, upfront, tease out if it's just an idea, or if it really is a viable product. So… Part of that is the clinical needs assessment, so you're defining a problem, you're looking at previous solutions, you're looking at past research, and I would say equally as important to those other four is the fifth one, the voice of the customer.

And here's why. So, this is an example of a product, a company that came to us from Europe. They had a mobile app. And it was designed to scan lesions on the skin and tell you if it might be a skin cancer or not. So, in the targeted market in Europe. it was really important for people to know, hey, could that be cancer or not? Because they had more limited access than we do in the U.S. to seeing a dermatologist. So the thought process was it would move them up in the queue to be seen quicker by a dermatologist. If the app said, hey, that might be cancer. When they came to us, the first thing we did for them is a voice of the customer needs assessment. So that's this right here, number 4. And…

what we did is we went right to dermatologists, and we said, hey, would you use this in your practice? And they said, well, can we use this app Instead of doing a biopsy. couldn't do that. And dermatologists and even primary care physicians said, well, it's really not that useful to us, because for the most part, we have relatively easy access to a dermatologist. So, having an app that says it may or may not be cancer is not going to move you up in the queue any faster to see someone here in the U.S. So that was really important for the company to understand. They had a market in Europe. And they didn't have a market.

At least right now, in the US. So it saved them a heck of a lot of time and money that they could've… that they would have invested here to try to come to market, and done all of the product development, and then realized, hey, nobody's gonna buy it. So, do your voice to the customer early and often as you are developing your product. Here's some examples of the designing the right technology for the intended clinician. So, the first example is of a device that was used to treat acute wet macular degeneration. It's brachyotherapy, and basically putting radiation beads into the eye. And the device was developed in Europe.

Where they commonly use, subtendance anesthesia technique. But their target market was the US, and we don't do that technique here. We do a retibular block. So the problem was translating the way the device was designed. It was designed and tested in Europe, but they wanted to sell in the U.S. And it just didn't translate over, because we don't do… our clinicians don't do that procedure here. Another example is a cardiac ablation device that was designed to treat atrial fibrillation, which is an irregular heartbeat. So, if somebody has persistent chronic atrial fibrillation, and they just can't get it under control with more common methods, medication, maybe, you know, electrical shock therapy to the heart, maybe ablation.

A lot of times they'll be referred to a surgeon for a Cox-Maze procedure. So surgeons are trained to, in this case, crack the chest open, go into the heart, and cut the external surface of it. This company had a device, it was brilliant, and it worked well, that could actually remotely enter the exterior of the chest. It went up through the xiphoid process into the pericardium, and it… you could remotely control it and make the same burn patterns With radio frequency energy remotely, that you could do as a surgeon with the chest cracked open. The problem was, the surgeons were not trained in that remote technique. And though the product worked well, and they raised $70 million, it did not make it into the market and its intended format, because the end user could not use it.

So again, I can't… Express enough. How important it is to do voice with customer, and even a lot of usability research before you actually embark on your journey of developing your medical device. The other thing that you need to think about, and we'll actually put this into practice in the business market assessment tool, is choosing your own commercialization adventure. So I've based this adventure on what it looks like in the U.S, We don't have enough time to look at Europe and other markets today, but I think it's important to talk about this, because it determines how quickly your revenue ramps up.

So, if you have a known problem and a known solution, so you're bringing a feeding tube, another feeding tube to market, maybe another Foley catheter. That should have, as long as you're better and or cheaper than what's out there, that should have a relatively quick adoption period What you really need to make sure that you do here in the U.S. is get on group purchasing organizations, so that'll really be key. But as we talk about assessing your market ramp, this is the fastest Growth projection that you'll see. Then there is, when people have a known problem and an unknown solution. you're gonna have to spend time generating awareness. So, an example of that is, most clinicians know, unfortunately, IV medication error rates are really high.

They don't know what the solution is. They've tried investing in smart pumps, that's helped somewhat, but it hasn't solved the problem. there is a product on the market that actually labels the IV line. It makes it very intuitive for the end user to know, like the clinician, hey, I know what's flowing through that line. So. What you have to do here is you have to allow for, in your market projections, your revenue projections, the time it's going to take to educate the market, and then get what's… get through what's called value analysis committees. and then actually sell the product. So, in this instance, it's like a 3-5 year sales cycle, because you have to generate awareness year one.

Year two, you're spending trying to get on value analysis committees. That can take a year to get approved. You do your study, and then you have to get back on value analysis. That can take up to another year. So you can see why the revenue really, you know, would ramp slowly in those first three years, because They don't know that they need this product yet, and they don't have room for it in their budgets. And then the most time-consuming is an unknown problem with an unknown solution. And this may sound kind of silly at first, but this is an excellent example, this product I'm about to talk to you about, of an unknown problem.

Back before 2003, most folks didn't realize that up to 30% of nasogastric tubes that were placed in the stomach didn't land in the stomach. 30% were not, and that could lead to pneumonias, micro-aspirations, and even killing a patient. So… This particular product was developed here in the U.S, As an alternative to what was called auscultation, so they're just blowing air bubbles into the nasogastric tube, listening with the stuff, and trying to say, okay, well, the end sounds like it's in the stomach. It… but it may or not…

Well… It looks like we're experiencing technical difficulties. There was a message that the screen share was frozen, and now Renee has disappeared. I'm hoping that she comes back. Because this is… awkward, to say the least. I'm just checking my phone and see if there are any messages. Show. Let's see, while we're waiting for Renee to come back, I put some messages in the chat file about last week's events and upcoming events this week, and Renee is back.

We lost you for a second there.

I don't know what the heck happened, that was really strange.

Welcome back.

what I was talking about? I'm not sure.

You were talking about air bubbles, and, then you, somebody put a message up that maybe the screen share was frozen, so…

Okay.

Yeah, we were on…

So, yeah, so unknown problem, unknown solution. Don't want to scare anyone here. I'm going to give you this example, but this is about 10 years from product development to actually, generating revenue. And so, what does this look like? So the problem that we were trying to solve here, people didn't even know they had. They… most people didn't realize when they were blowing air bubbles into the stomach, doing a procedure called auscultation. to confirm nasogastric tube placement, that it really didn't work well. 30% of the tubes that they placed with that method weren't in the stomach, and so they didn't know they had a problem, because the cause of death

on the certificate, if they happen to feed somebody into their lungs and drown them, was actually cardiac arrest. Their heart stopped. Well, of course their heart's gonna stop, you know, not… you just drown them with feeding solution. So, because they didn't know they had a problem, they didn't know there was a solution. So there was a doctor here in the U.S. that had, lost a couple of patients. to misplace feeding tubes and said, there's got to be a better way to do it. So he developed a device that used pH and, is the only FDA-cleared device that uses pH, here in the U.S. to confirm nasogastric tube placement.

And so, this whole process started in 2003 in the UK and the US for recommending to stop doing auscultation. 2005, the UK started posting papers on it. 2015 is when we really started, develop… developing, refining the product, and educating U.S. hospitals, and it wasn't really until after 2021 that this product started to get market penetration. Again, I'm not saying this to scare you, but if you have developed a very much needed product, like this one, that people just don't know they have a problem with, so they don't know there's a solution, it's just gonna take time, and you need to be realistic about it when you're doing your fundraising, and when you're also doing your market forecasting. And we're going to talk about that also when we go into the business market assessment tool.

And I'm not going to spend too much time on this one, but every once in a while, somebody will have a great technology, and it's super cool, but they don't know what problem it solves, therefore, they don't even know what the solution is. So, you know. Before you even go down the road, if you think you have a great technology. But you don't know what the problem is and don't know what the solution is, figure that out first before you start these exercises that we're gonna talk about. So… you know, assessing the opportunity. So, we've already talked about, high level, how to assess market needs before you invest significant money, and we've also talked about adoption. It can be really challenging, because of

those buckets I was telling you about, it's a known problem, it's an unknown problem. Depending on where you fit, you need to be realistic about how long it's going to take to get your product, creating revenue in the market. Worrying about your costs now, it can be very easy to over-design. We'll talk about that when we touch on the product trace matrix tool. And then, it's easy to outprice yourself. Count your pennies while you're, you know, looking at your exponential growth. So, before I jump into the business market assessment tool, are there any questions? No?

I… I don't see any questions. Wait, let me check. Yeah, no, no questions. Okay. Let's keep moving.

Alright.

Do you want me to put a poll up.

Jumping back… yeah, that's a good idea while I'm jumping back and forth between documents.

Okie dokie. polls. Please, enter the poll, if you… Choose you. Just general information about Who's here today? And.

All right, so I guess while you're doing that, I'll talk about the first tool that we have, that we've created for you and shared. It's a business market assessment tool, and we're going to look at, you know, forecasting revenue for product. And then look at cost considerations by market, and then very high level, what your pro forma would look like. So here's the table of contents. Everything that's in this document that's highlighted yellow, you would customize with your product's information. So you can see there's quite a bit of yellow space here for you to customize. And then we have 3 different tables to help you forecast revenue. And that's based on Table 1, you're already selling the product. Let's say you already sell the product in Europe, so you have prior year sales. You can then forecast out

your future sales, and then you can drop in your U.S. sales. That's the simplest. I wouldn't think many, if any of you at all, have prior year sales. I think most people are likely startups, but if you did, this would be the table that you would use. This right now is in Word format, but, you can easily copy this table over to Excel. The second table is, if you're launching a device, so this is, like, a known problem with a known solution. Like, you're launching a new feeding tube, or you're launching a new Foley catheter. you already know, you know, there's lots of Foley catheters sold a year, for example, so you already know the annual incidence. Or actually, in this model, let's use, peripheral IV lines.

So, there's 212 million peripheral IV lines sold a year in the U.S, And then… what percent, usage do you think folks would be using of your device? That's where you would look at, and, well, in this case, you could do your TAM-SAM-SOM model. So, if you did total annual incidence of 212 million peripheral IVs placed a year, and you assumed 100%, And then you put in your average sales price, let's say I'm making this up, $3, that would give you your total potential revenue. That's your total available market, or what's known as TAM, T-A-M.

And then you could go in and say, okay, well, I know that's the total available market, but I think, realistically, we would only capture maybe 50%. With our product, so you would put that calculation in, and then that would give you your serviceable, attainable market. And then you would go into, okay, your estimates by year 1 through 5. And that's where, you know, it comes into play, thinking about the launch cycle for your device, like, where we talked about if it's a known problem with a known solution. a known problem with an unknown solution, that's where taking the time to estimate this revenue really is important. So, in this case, if it's a new feeding, or it's a new IV set.

And you know that you have, let's say, a less expensive product, sorry, this should actually be down in the US column, Then what you would do to is you would say, okay, I know year one, it's going to take us a while to get, you know, through value analysis, but we're less expensive. Maybe I'll put in… I'll have 5%. you know, market share. But I really think that by getting on, group purchasing organizations like HCA and Vizient. you know, I've got really competitive pricing. I bet I could hit 10%. By year two, and then you could just kind of forecast your revenue out from there. That's how you would use this tool.

And then, if you have the, let's say it's an unknown problem with an unknown solution, but you know, like, the annual incidents, in this case, let's just use… the feeding… the nasogastric tube placement example. So, you would know, for example, how many feeding tubes are placed a year. And then you would assume, okay, well, let's just say total available market would be 100%, and so that would tell you what the total available market is, you put in your ASP and your total potential revenue, so that's your TAM. And then you would say, okay, but what is the service available market? They're not going to use this, for every feeding tube. Let's say, you know, you're not going to launch it right away for home use. So then you might drop that down to maybe it's 80%, and that becomes your serviceable, obtainable market.

And then you project out your serviceable, obtainable market here, which you'd put in a very slow ramp. I mean, you might even go as low as a half a percent here. a percent, maybe two, and by year five, that's when you hit your serviceable, attainable market. And what you want to make sure you do for all of these tables, regardless of, you know, how you're forecasting your revenue, depending on you know, how much data and information you have about your product and market entry, list your assumptions here. So. let's say… I'm gonna make these numbers up right now. Let's say there's, you know, a half a million…

feeding tubes. placed a year. Sorry, I can't type with an audience. In the U.S, And then cite the source here. And I always… I cite the source, and then I provide a link, so I put, like, the website link here. Again, I'm making this up as we're going along. This isn't necessarily accurate information. And I'm more than happy to open this up, and we can actually play around with some of this information with any of your real-life scenarios. We can forecast for you. So, let's say our average sales price is, $5. Our TAM, you know, what's 5? Times… 500,

Five times. That's 2.5 million. And then, let's say, you know, half of that's accessible. That's your SAM, so that's $1.25 million, and we think we'll have, you know, Pardon me, Let's say 50%, market share by… Year 5? So what's that? $625,000. So that's your sum. And that assumes… 50%.

of Sam, by year 5. And so what you would do is you would just build out this list of assumptions. That support the information that you have in the revenue forecasting part of this tool. Are there any questions about that before we start talking about costs?

So there's… there's a question, with respect to clinical need value… validation assessments, how do you guide innovators, especially clinician innovators, to avoid All-too-common cognitive bias that the problem they want to solve is truly easily recognized problem worth solving in any given market. If that makes sense.

That is a great question, because we come across that a lot, and we work with a lot of clinician inventors, and what I recommend doing is working with a third party to actually go out and talk to other clinicians. With a list of questions that you've vetted to do the voice of the customer. Because, yeah, all too often, clinicians, they see a problem that they feel like needs to be solved in the field, and it's legitimate, and it's definitely an issue that they have, and they create a device that makes life easier, I think, for them, but it's not always a problem that everybody else sees, and the solution itself may not be scalable.

Or, if it is scalable, what I see a lot, and we're going to talk about this in the product trace matrix, is they've outpriced themselves in the market. So, so, not… not a direct… I can't… I always have to be very careful about, you know, talking about client information, so I'm going to use a device that I helped bring to market, close to 35 years ago. And so, there's no conflict here in what I'm sharing. But it relates to this idea of, do the clinicians need it, or the end users need it, and is it at the right price point, too? So, I was working with an engineering team that fell in love with this idea of creating a sealer for blood-backed tubing. You have to make alo… you have to seal a…

a blood bag piece of tubing with multiple aliquots so that you can do the HLA testing to match that blood to the potential recipient of it. So matching the blood donor blood to the recipient. And so. A lot of that's done with just one radio frequency sealer, and you just kind of away, and you make your seals. Well, this engineer had this great idea, and he said, no. I want to make this like library books, and they all stand next to each other, and you can have 1, 2, 3, 4, or 5, how many ever seals you need to make, and you just do one A chunk at a time, when it seals everything, it's gonna make it so much faster.

Well, what they didn't think about was, great, you want to have this whole layout. Well, now you're taking up a lot more counter space in a blood bank. And, each of the units cost about $3,000, and if you wanted to just make 5 seals at a time, that's $15,000, when they were only paying $2,000 for the other sealer. So it was a brilliant idea, it was all developed, ready to sell to the market, but nobody bought it. Because it took up too much space on the countertop, and it was… just one of those units was more expensive than the traditional method, which was about $2,000. Did that help answer your question?

I think so, yes.

Okay, great. Alright, so now we've talked about revenue considerations, and now we're going to talk about cost. So you're gonna have cost by geography, and in the trace matrix that we'll share after this. That's where you're going to really hone in on, hey, where am I going to sell? Where's it going to make the most sense? You can actually start here with a business market assessment, and then, based on that, create your trace matrix. That clearly defines the markets that you're going to sell into, because that will determine your design inputs, your outputs, and all of your product testing. So, you have here costs, by unit, by location, so that's, you know, EU, US, other geographies. You have your one-time costs.

So you have, you know, your marketing costs, and then here's where you have your regulatory costs. So, for those of you who aren't familiar with Europe, Europe, as I mentioned before, used to be really easy to go to market to. We would typically develop technologies in Europe and then bring them to the U.S. It was, the regulatory burden was less. That has changed over the past 5 to 10 years, and so now it's actually a much higher threshold. To get your device cleared in Europe, so the costs are more. So even… I'm gonna give you an example. Even a company that we were working with that had A very simple surgical drain had been selling in Europe for 40 years, and as the European regulations changed from MDD to MDR,

they got up-classified from a Class 2 device to a Class 3. Not that the device did anything different, but they were in the pleural cavity, so it made it a higher classification, and they had… they were looking at spending about a million dollars to just keep their device in the market under the new MDR standards. So, it's really important here To understand, hey, what's it gonna cost me from a regulatory perspective? In the U.S, I mean, sorry, in Europe to get my device cleared. What's it gonna cost me in the U.S? So there's some things that you'll need to know before you do that, if you don't already know. So how…

How will Europe classify my device? How will the U.S. classify it? Eileen, we can help you with that. If you don't already know, we do regulatory pathway assessments. And that's a helpful first start to saying, okay. I'm making this up. It's going to be a Class 2 device in Europe, but it's a Class 1 here, and here's the approximate cost. That's where you're going to add in those costs. As well as other geographies that you might want to sell into. R&D. So this is… this is really important to… I'm going to give you the example of a whole blood mixing device that I helped bring to market 35 years ago. It was really…

it was an electromechanical device, and at that time, we didn't have auto-ranging power sources, so we wanted to enter into the U.S, Europe and Japan, all at the same time. So we had to, in the research and development process, validate our product to be able to function at 110 volt here in the US, 220 volt in Europe, and 100 volt in Japan. So those were research and development considerations that you have to We had to figure in, right away and up front. And then you have to think about your prototype testing, and the IQ, OQ, PQ. So, there is a cost to creating all the prototypes. And the final product, or what you anticipate being the final product, going through, validating your processes, all the equipment used to make it, and then the final product itself.

So knowing what those costs are, or at least estimating, that's really important. And then you're gonna have, once you're in the market, reoccurring costs. In Europe, you have notified body, fees, you have audit fees. Here in the US, you have to register every year with the FDA. You also have, audit fees. And then… Any other variable costs? that you think would be a percentage of your revenue. So… That would then allow you to figure out, like, your cost, your cost of goods sold per unit in the EU, US, and other markets. Again, you'd be dropping this in an Excel spreadsheet, creating formulas, so you'd be able to figure this all out.

And then you have your other operational expenses. So, any commissions you might pay a sales organization. Just general maintenance fees. That could be patent maintenance fees, you know, patent filings, any other maintenance you may have to do on equipment. And then I always put in. depending on the product and how many known or unknowns there are, I put in anywhere from 10% to 20% additional monies for just things you don't know about. I bucket the world into known knowns. known unknowns and unknown unknowns. So, what does that look like here when you're doing cost? Well, you know, for example, a known known is… you know you're going to market in Europe, and you have to get regulatory clearance, and you know, and we can help you to figure this out, that it's gonna cost you, I'm gonna say, in this case, a million dollars. Those are knowns.

An unknown unknown my… or a known unknown is, hey, we're gonna have to do the research and development, and we want to enter multiple markets. We know that, but we don't know what those costs will be for each market yet. That's a known unknown. And then your unknown unknowns would be this other bucket. There are always things in the development process that hit you. Or in the marketing process, that you're like, oh my god, there's just no way I could have known about that. But it's a cost, and it's real, and you have to figure that into your… into your pro forma. So that's what that bucket is. That's your unknown, unknown bucket.

And so then this gives you a total for your operating costs. And then here's where you're going to drop in that information. So again, in a spreadsheet, you would have all of this linked. So the revenue exercise that we talked about will all link here. Your cost of goods sold from the cost considerations will all link here. And then that will be connected to showing you what your gross profit is, your gross margin. Any additional expenses? your expense-to-revenue ratio, your net income, and your EBITDA, and your EBITDA margin. So, all of this part right here will be really important when you're talking to investors, whether it's venture capitalists, angel investors, or strategics, like the large medical device companies that may want to put money into, into your

Invention, or your idea. So… Any questions about this tool when you're assessing the different markets? I guess I should say, what I like about this is that this shows you each market, what it's gonna cost. And you can figure out, like, your net income, your net margin. your, EBITDA by market. And so, it allows you to say, you know what? I'm gonna be… my… I'm making this up. My market potential in Europe is $5 million, but I'm gonna have to invest $3 million to access it, whereas my market potential in the US is $10 million, but it's only gonna cost me $2 million. I think I'm gonna enter the U.S. first.

That's another really useful way to use this tool. Any questions on that before I jump into the product specification?

How do I get a copy of this tool?

Glad you asked, Sean. We'll email it to you.

There's a question also, how do they deal with the FDA changes and uncertainty under this administration and MDR and IVDR? Okay.

Wow, I wish I had a crystal ball, But what I can tell you, at least from you know, a cost perspective, that would… that's an unknown unknown, that goes under other. From a timing perspective, That's also an unknown unknown, depending on how things change.

Absolutely.

Yeah, I mean, one thing that I've been helping clients do to help mitigate some of the uncertainty is, especially new products, I am finding contract manufacturers for them in the U.S, And the reason for that is, one, it helps hedge against tariffs. So, I mean, it's just awful right now. I have one company trying to bring molds in from China, and we're looking at $50,000 in tariffs. If you… if, you know, we're gonna make the product here, but the molds are still being made in China. So by… ideally trying to do, everything here in the U.S. right now, if you're going to be selling into the U.S. market. One way to hedge against some of that uncertainty is to build the product here. And hospital… U.S. hospitals like that, too.

Because during the pandemic, many hospitals ran out of supplies because products were coming in from overseas, and they were literally just sitting on ships, and they couldn't clear customs. So, they… hospitals were desperate for masks and all kinds of other things that they couldn't get access to that were just sitting on ships. So, it is not uncommon for hospitals to ask, especially when they have to sole source a product, because you have a really innovative technology, hey, where do you make that product? And if your target market's here in the US, I think it's a great idea if you can find, you know, reasonable manufacturing to make it here.

Excellent point, thank you for that.

Any other questions before I jump over to the product specification document? The design trace matrix. We also have this tool for you. So, a lot of people, especially if you consider your device to be very simple, it's a Class 1, I'm just gonna make this up. Maybe it's a new syringe. It is still worth your time to go through this exercise, because it's so important for you to understand all of the different, user inputs that may impact your final design. So, I mean, some of this is self-explanatory. You put your product name in, is it a new product, or is it an existing product that you're just going to make an update to where you're at.

in your project phase. You're going to describe the product here. Indications for use, this is a really important one. Whatever you want your indications for use to be has to align with your regulatory clearance. And it can be a cat and the mouse game. And what do I mean by that? Well, sometimes. You know, you have a better mousetrap, but there's something similar on the market. In some cases, it may benefit you to take on an indication for use for the simpler device and go through 510K clearance, rather than try to hit a de novo, let's say, because then you might be able to start generating some revenue while you collect the data.

to, expand your indications for use. So that's just something to think about. And then, what's the clinical utility of what you're bringing to market? What problem are you solving? The device type and use. This is important, too, if you have especially a device that touches the skin, or goes… comes in contact with bodily fluids, like blood, because this helps determine, you know, biocompatibility testing, what level you would need to do. Disposability, this is important, if it's disposable or reusable, because if it's, disposable, you only have to validate, you know, for the device use in extreme conditions, but if it's reusable, you're gonna have to validate whatever you say. Let's say you're… it has to be

has a life cycle of 10,000 uses, you're going to have to validate the device, you know, usually at least 10-20% beyond that, so 12,000 uses. So that's an important piece. Shelf life is also important, and folks overlook this on disposables, but I want to give you perspective on this. You know, every year that you validate for shelf life, it takes more time and more money. But, if you want to sell through distributors, which most people do, and especially if you want to sell just through distributors outside of your region, so if you're in the US, for example, and you want to sell to Japan or Europe, most distributors require that you have at least a 24-month shelf life.

Well, by the time you make your product, package it, you get it on your shelves here, and you get the order from the distributor, it could be a year or two. You don't want all of that product going bad on you, and… expiring. I've had clients that have had millions of dollars worth of inventory that they've… they've had to dispose of because they only had a 2-year shelf life. It took 2 years for the product to get market traction. We've talked about why that can take a long time, and by the time that all happened, their product was expired. Don't let that happen to you. Go for, if you can, at least a 3-5 year shelf life on your product, if it's a disposable

This is where you'll put in your regulatory classification. And then this is where you're going to really get into your user requirements. Functional characteristics. Again, out of respect for any, you know, current clients with devices in the market, I'm going to focus on that whole blood mixer. Unless any of you have a product that you want to run through this. I can open it up to that. And while I'm waiting for you to think about that, I will just use the example of the whole blood mixer. So, functional characteristics. So, this device that we were designing was used on blood donors. And it needed to not only weigh and mix the blood, but it had to shut off at a very specific weight so that

the blood to anticoagulant ratio was correct, and also would not harm the donor, so it wouldn't take too much blood from the donor. So there were a lot of functional characteristics. You'd see one line here, but you can actually add to this table and, insert rows below. And you can continue to add as many of the functional characteristics as your device needs. What are the physical characteristics? So, for this whole blood mixer at the time, they were just using what was called a trip scale. So, And it kind of sat on the edge of a blood donor bag, so you didn't have to bend over very far. It was right there next to the donor, so you could mix the blood, you know, hook the donor up to the blood bag, disconnect them when they finished.

But a little scale on the ground, that was a… that was a big, you know, that's a lot of movement for a phlebotomist to have to go down there constantly and… and work and look at the scale, reconnect the donor. So, in that case, we had… the mixer was on the ground, but we had… it looked like a KitchenAid mixer, a gooseneck that came up with a pad that sat on the top, and so the phlebotomist didn't have to bend over very far, they could activate and deactivate the blood mixer by just operating this gooseneck design pad. So that was the physical characteristic that we thought was really important.

We didn't have to pay too much attention to chemical characteristics. We had to think about mechanical characteristics, because we were trying to weigh and mix blood at the same time. So that was… that was challenging when you have, fluid in motion, and you're trying to take a weight and collect it accurately 30-some years ago. But we did overcome that. And then we knew we had to do, you know, at least 10 collections a day, over about 300 days a year, over… we wanted a device life of about 10 years. So that gave us the number of uses per device that we had to validate to. Then we had user interface requirements. That was part of those, those physical characteristics that we talked about, but it was really important that whether we were working in grams.

Or, you know, different factors, milliliters. It was really easy for the user to program not just how they would collect blood in grams or milliliters, but also, the exact amount of blood that they could take from that donor. Equipment interface, so for this particular device. It needed to, operate on, both AC power and battery. And, that leads to this next one, storage and transport temperatures. So, when they were counting on AC power. One of the things we didn't initially think of, but should have, and this is why storage and transport temperature's so important, is that the AC power cords we sold into Canada in the winter

And so the devices were stored at negative 40 degrees in some cases in very cold parts of Canada, and they would do a mobile collection and maybe enter a school. Well, the device didn't have a lot of time to warm up, and the AC power cord, For our original devices was fine, it worked in the cold, but we… our purchasing person changed them out, didn't validate it at storage and transport temperatures. And the material shrunk when it got cold, so all the AC power outlets were falling out of the walls, and they couldn't do mobile collections, and it was in Ontario, Canada, and they had a blood shortage in that reason for a month until we could figure it out. So it's so… these are very small details.

That can have a huge impact, like the butterfly effect on your product's performance in the field. If you need to do biocompatibility or toxicity testing, of course, that would all be included here with this blood… shaker device, we didn't need to do that. How are you going to dispose of it at end of life? If it's RoHAS compliant, you need to be thinking of all that. If it's a disposable, how is the hospital going to get rid of it? I had one client that had a really big device, and they wanted it to go into a sharps container, and the sharps containers just weren't big enough. So, you need to be thinking about

disposal, right in the very beginning. Is what I'm making, if it's gotta go in a sharps container, is it even going to fit? Shelf life requirements and anticipated safe use. Sterilization, so important. I've had clients that have taken devices, they really wanted to do gamma sterilization, because it was easier on the environment, but it's harder on the device. They went through gamma, guess what? The product didn't work well, they had to go back through ethylene oxide sterilization. So, you really need to hone that Down, if you can, from the beginning. All of your packaging, any special shipping requirements, the claims that you want to make, the languages that you want the device

to actually be accessible in. That's really important. Warnings, descriptions, the targeted end user, we talked about that with all the examples I gave about devices that, you know, maybe were targeted for one technique that's commonly used in Europe. And then sold into the U.S, where we don't use that technique. So understanding that information is critical. Environmental considerations for the product, any geography-specific special requirements. So, for the blood mixer, what we didn't realize. One of our calculations was the specific gravity of blood, so we didn't realize that different populations throughout the world had different

specific gravities of blood, so the device worked great here, but we got to Japan, where their specific gravity of blood was different, and we were overdrawing the blood donors, which is a risk to them. It can make them sick, but also it can affect the ratio of anticoagulant to blood, and so the blood can clot. So, we… we had… we learned over time that, you know, if we were going to be in Japan, not only did we have to be 110 volts with that device, or I'm sorry, 100 volts with that device, but we also had to program a different specific gravity for blood for it to accurately collect. Electrical considerations, we talked about that, and target cost.

I touched on that with the blood sealer, example that I used. I cannot emphasize this one enough. you really need to understand up front what you want your target cost to be, because you don't want to outprice yourself from the market. And… if you allow, in most cases, engineers just free reign to design whatever they want, and this is nothing against engineers, but it's just sort of like being a kid in a candy shop. They're gonna just do… they're gonna make the best widget, and it might end up being really expensive. And you may not be able to sell it. So I gave you the example of the sealer that people were used to paying $2,000 for, but now we were trying to get them to pay $15,000 for this new widget, and they wouldn't do it, and the product didn't,

Didn't materialize in the market. So anyways, here's a section for approvals, and you know, if you so wish, with whatever your customization, you could add this to your design history file. So I know I've done a lot of talking, we only have 3 minutes left. Are there any questions?

So there was a question, about Europe and the fact that it's not a unified market, and so what you're dealing with is Sales and distribution within individual markets, and I know that's a complex issue, but, I think that's one of the many reasons why, people are… turning to the U.S. market first. And I'm wondering if you might say a word about, the pre-sub meetings with, FDA, and taking advantage of that.

Yeah, so, I don't know if you want me to comment any further on Europe, but you're spot on, Sean. I mean, it costs more from a regulatory perspective now to go to Europe. Your average sales prices are lower in Europe. And, in some markets, and in particular, as much as I love Italy, for example, it's a very difficult market to sell into, because you're working with all these sub-distributors, and in Italy, at least my experience has been, I've had to give people a 120-day net payment terms, so it's just… You're right, it's very… disparate and difficult to sell there. I can tell you if you're raising money.

experienced medical device investors will not invest if you say, I'm going to Europe first. Because of those reasons. So, and then speaking about presubs, no, presubs are… that's an… another nice thing about regulatory clearance here in the U.S, is that you can, for free. get feedback from the FDA before you put together your submission. And guidance on how they may likely view your device, you don't get that opportunity in Europe. You know, you go before a different notified body, there's no pre-sub process. But you do have that opportunity here, and we are seeing, you know, pre-subs and 510Ks, remarkably, despite everything that's chaotic here in the U.S, they're pretty much on

on point where they've been over the years. They're doing their reviews in a very timely manner. And again, they're… they're free.

Just one final question. Which would you say are the most common costing items? Usually companies overvaluate or undervaluate? Like, what do they overestimate or underestimate their costs on?

Oh, that's such a good question. So, okay, product dependent, but I can say 9 times out of 10, everybody underestimates the cost to do regulatory, and I would say 10 times out of 10, 9.8 times out of 10, they underestimate the cost of quality.

And they've…

fight you on that. And then, you know, fine, you don't want to put the work into doing regulatory and quality right up front. If you get caught later on, when your product is launched, it could put your company under. So, it's very expensive to not do it right. It's more expensive to not do it right, but those are areas that we get a lot of pushback in. Where do people maybe… Save money that they didn't think that they would? I have to say, you're usually over budget in pretty much every area. The only area that, if you're really strategic with how you maneuver it. you might be able to save money doing your… not your clinical, like, formal clinical trials, but I call them clinical evaluations.

If you go the route of, at least here in the US, going in as a quality improvement project. Because many hospitals, especially magnet hospitals, have to do quality improvement projects. And they can slide your product in for that, and most of the time, you don't have to pay for any of the research fees, because they have to do this work already. So that's kind of a tip on how to get your product evaluated and not have to pay for it.

I love that. That's funny. We're at time. This is our first workshop. I hope you enjoyed it. Please feel free to send your feedback to me directly if you prefer to. There will be a short survey, and we look forward to more workshops coming up. and more webinars. Thank you so much for your time today, Renee, and thank everyone on the phone. For dialing in. Take care, everyone.

Thank you, everyone. Have a wonderful day or evening, wherever you are.

Bye.

Aye.