Antonio Brown, the NFL, and the Case for Maximized Success

You’ve seen the stories. Oakland Raiders wide receiver Antonio Brown likes his old helmet. A lot. So much, in fact, that he’s been insistent on its continued use even after the National Football League (NFL) deemed the helmet to be unsafe and banned Brown from wearing it. Brown is now on the hunt for a newer version of the same model, taking to Twitter to ask for help. But if we might be so bold, we’d like to recommend that Brown consider a VICIS ZERO1 helmet.

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Therapeutic Startups — The AngelMD Investing Thesis

Rising drug prices and ever-increasing costs are two of the most debated subjects in healthcare. The Centers for Medicare and Medicaid Services (CMS) predicts (PDF link) that we will see 6.1 percent annual prescription drug cost increases until at least 2027. CMS expects healthcare spending as a whole to grow by 5.7 percent per year for the same timeframe. 

These numbers can be intimidating, but medications continue to be one of the most cost-effective clinical interventions available to physicians.

A new report by the IQVIA Institute for Human Data Science showed that large companies have cut their R&D budget shares from 31 percent down to 20 percent over the past decade. While that might seem like bad news for drug companies, it is actually good for startups. The pharmaceutical industry is relying more on acquisitions to fuel its growth as R&D budgets continue to feel the squeeze.

At AngelMD, we have seen many therapeutics companies come into the network. In fact, our first exit from the past 2.5 years of investments will come soon, and it comes from the therapeutic space.

For each innovation category that we invest in, we develop stringent criteria that a startup must meet. This holds true for therapeutics as well, and is directly responsible for the success that we have found with those investments. These criteria fall into five categories:

  1. Non-dilutive capital
  2. Large market opportunity
  3. A focus on the team
  4. Human trial status
  5. Acquisition negotiations

The preference for non-dilutive capital is obvious — less dilution means better potential outcomes for the company and for its investors. What is less obvious is the fact that the capital is available. Our preference is to not consider investments during the drug discovery phase. One way that we accomplish this is by looking for companies that surface as technology transfers out of academic medical centers, or those spun out from large pharmaceutical organizations. There is a better chance that companies meeting these criteria have been able to leverage non-dilutive capital during the early stages of drug development.

Small, fractional markets do not fit well within our investment thesis. Rather, we are constantly on the lookout for companies that are focused on a large market opportunity with a projected strong efficacy and safety profile. That is not to say that we will not consider drugs that address an existing market. But for that to align with our investment thesis, the therapeutic must have a projected advantage over the status quo.

As is common in the world of startups, the team is an outsized factor for success. Here is what we want to see:

  • Key scientist(s) involved, in a full-time role
  • A CEO that has previously led a team that delivered a therapeutic to market
  • A quality leader, skilled in managing the clinical trial process
  • *Bonus* – We afford preference to teams that have members who have worked together at a large pharmaceutical company

Clinical trial stages are also important to us. We look for companies that are positioned for first in-human testing. That is to say that we want companies that have already passed animal testing and are actively looking for healthy volunteers to test safety and dosing.

Finally, we want the startup to be focused on an exit, and making the right moves to do so. The company needs to be in active negotiations with a pharmaceutical company for acquisition after successfully completing early human testing. The capital requirements for testing beyond Phase 1 are potentially enormous. In fact, we prefer that a company enters into a contract that will offset at least some of the costs associated with 1a and 1b testing. This ties in with our desire to find companies using non-dilutive funding and providing better outcomes for both the startup and its investors.

This is an overview of the investment thesis that we follow for AngelMD. That said, it might not be the right thesis for you as an investor. But, as a community of investors, we can grow wiser when we share knowledge with one another. Do you agree or disagree with any part of our approach? We’d love to hear your feedback via your AngelMD profile.

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Oncology: The 900 Pound Gorilla of Startup Funding

In 2018, startups in the United States raised over $13 billion in capital. Of that, nearly 15 percent (or $1.7 billion) went to oncology-focused companies. On the surface, it’s easy to see why so many investors would want to put their funds toward cancer. Most would consider curing the elusive family of diseases as a moonshot, especially as cases continue to grow at an alarming rate.
But digging deeper, there’s more to the story of why oncology raises so much money, and a host of new technologies have come into play. Let’s dive in and see the details.

Everybody Wants to Rule the World

When thinking about the biggest ideas in medicine, it’s become almost commonplace to say “a cure for cancer.” From students to scientists, pageant contestants to investors. Even former Vice President Joe Biden feels the pull:

“I promise you if I’m elected president, you’re going to see the single most important thing that changes America, we’re gonna cure cancer.”

It’s not a surprising goal. Almost every person can name at least one person close to them affected by the disease. That prevalence means that cancer gets a lot of attention. That attention means that, for better or for worse, oncology is a major talking point.

Talk is Cheap, Cures are Expensive

If you’re a startup that sees your potential funding go toward oncology instead, that talking point is part of the problem. Between individuals, organizations, and the government, cancer gets a huge amount of attention. Some investors, swayed by the noise, choose to pass on other areas and put their money into oncology instead. That bias extends into government funding as well. The National Institute of Health, for example, spends nearly double on the National Cancer Institute as it does its next closest center.

That said, cancer is an epidemic and worthy of the money requied to study, treat, and prevent — if not cure — the diseases. But it’s worth considering whether investors are robbing Peter to pay Paul.

On the Horizon

It’s impossible to talk about cancer in 2019 without also talking about CRISPR. The genetic engineering field is relatively young. CRISPR as a term and dedicated field of study within genetics has only been around since 2002. But the gene editing idea may indeed hold our best chance at curing cancer at its source.

For those not in the know, the Cliff’s Notes version of CRISPR goes something like this: It is a gene editing technology that identifies and “cuts” certain strands of DNA, and then “pastes” replacement DNA in its place. As it relates to cancers, CRISPR should be able to target and remove germline mutations (inherited gene faults) that are tied to cancer growth.

Skirting the Edges

The up side of oncology getting so much attention is that there are many other fields that can work with the cancer while having other areas of cocus as well. Immunotherapy, pharmaceuticals, nanotechnology, and epigenetics are all specialties that see continued attention from oncology. But these fields all have larger umbrellas over them, covering many other areas of treatment as well.

For those who may think that the oncology gorilla is eating too much from the startup funding buffet, there are other fields that can benefit from the attention that cancer commands.

We’d love to hear your thoughts. Are investors ignoring other areas, opting for moonshot oncology treatments? Or does the field deserve even more attention than it gets today? Sound off via your AngelMD profile, and use the #AMDoncology hashtag. Let’s start a discussion.

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6 Elements of a Successful Medical Device Startup

As the premiere destination for healthcare startups, we’re fortunate to be able to see, evaluate, and invest in the very best. But along the way, we also see the mistakes that startups make. We discussed the challenges that face direct-to-consumer healthcare startups, and that opened a new line of discussion. Could we apply that method to startups from other specialties as well?

It makes sense to start with the segment that we see most often at AngelMD — Medical Devices. Launching a Medical Device startup is challenging. In my career I have had the opportunity to be involved in many early-stage device companies. After reflecting on those successes and failures, I have developed a list of six key factors to building a successful medical device startup.

1 – Quality First

The first element of a successful medical device business model is to design and build your device from day one with an FDA quality system. This will dramatically shorten your device development and approval cycles.

According to the FDA, The Quality System (QS) Regulation is in place to ensure that manufacturers “establish and follow quality systems to help ensure that their products consistently meet applicable requirements and specifications.” Rather than dictating how a manufacturer must produce a device, QS provides the framework that all manufacturers must follow, allowing the manufacturer to fill in the details themselves.

Navigating QS Regulation isn’t a skill set that we would recommend to someone without experience. If no one on your team has medical device development experience, it is critical to secure an expert consultant to help put that quality process in place.

2 – Know the Codes

The second element of a successful medical device business model is to create a product with a known reimbursement code. Many entrepreneurs, including physicians, are shocked to learn of the complexity associated with securing a new CPT code required for reimbursement.

In order to establish new CPT codes, an individual, a physician, or a specialty group must submit a coding change request form. The CPT Advisory Committee then reviews the proposed code. The change request must address the following:

  • A complete description of the procedure/service (e.g., Describes in detail the skill and time involved. If this is a surgical procedure, include an operative report that describes the procedure in detail)
  • A clinical vignette which describes the typical patient and work provided by the physician/practitioner
  • The diagnosis of patients for whom this procedure/service would be performed
  • Copies of peer reviewed articles published in the US journals indication the safety and effectiveness of the procedure, as well as the frequency with which the procedure is performed and/or estimation of its projected performance
  • Copies of additional published literature which you feel further explains your request (e.g., practice parameters/guidelines or policy statements on a particular procedure/service)
  • Evidence of FDA approval of the drug or device used in the procedure/service if required.

But that’s only half of the story. In addition, a device startup needs to address the following questions:

  • Why aren’t the existing codes adequate?
  • Can any existing codes be changed to include these new procedures without significantly affecting the extent of the service?
  • Give specific rationale for each code you are proposing, including a full explanation on how each proposed code differs from existing CPT codes.
  • If a code is recommended for deletion, how should the service then be coded?
  • How long (i.e, number of years) has this procedure or service been provided for patients?
  • What is the frequency with which a physician or other practitioner might perform the procedure/service?
  • What is the typical site where this procedure is performed (e.g., office, hospital, nursing facility, ambulatory or other outpatient care setting, patient’s home)?
  • Does the procedure/service involve the use of a drug or device that requires FDA approval?

If CPT Advisory Committee approves the creation of a new code, there is still a six-month lag in its implementation. New CPT codes are released bi-annually on January 1 and July 1. If a code is approved on January 1, it is not made active until July 1.

It’s worth noting: AngelMD only considers providing capital to startups that are able to leverage existing reimbursement codes.

3 – Will Someone Use This?

The third element of a successful business model is a medical device that generates a financial or clinical return on investment. The market is moving toward pay-for-performance and it is critical that medical device startups are able to intersect with this market dynamic.

In years past, when fee-for-service was still the status quo, it might have seemed like a good idea to come up with “yet another device.” In modern healthcare, with performance-based reimbursement, the focus has to shift. During the clinical testing phase, it is important to measure positive impacts on healthcare delivery costs or improved patient outcomes.

4 – Stack Your Team

The fourth consideration is the composition of the management team. In the AngelMD network, physicians are actively involved in the early stages of startups. Unfortunately, that isn’t the status quo. The healthcare industry as a whole sees far too many companies that have a goal in mind, but no team to get them there.

In the larger startup world, it’s become more common to see non-technical founders who then find a technical co-founder to help them build their dream. The same should hold true in the med device world. If you are not coming from a medical device background, it’s important to select a business partner that has medical device experience that can complement your own skill set. Ideally, that person will have direct experience in a segment that your device is targeting.

5 – Know The Costs

The fifth element to consider — and you should evaluate this both early and often — is the projected cost of manufacturing. More than a few medical devices have failed because of the inability to manufacture the device at a price that is still cost effective.

6 – Find a Guide

The sixth element of a successful medical device company is to secure a ‘sherpa’. The role of the guide is to help the company navigate through the FDA’s approval process. FDA regulations are constantly changing, and the approval cycle can be shortened by having an expert to manage your company’s submissions and interactions with the agency.

A simple understanding of the FDA’s regulatory process isn’t enough. For example, there are changes that are specific to digital health, diabetes management, and a wealth of other device categories. There are also incentivized paths available that can help to shorten the approval process for some types of devices.


There are challenges to launching a new medical device, but physicians and entrepreneurs have never been ones to back away from a challenge. By arming yourself with the tools to be successful, and knowing the potential pitfalls, you’ll be better prepared for the journey ahead.

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