Transcription
Roger Brooks 0:05
Thank you for having us. And if Scott Pantel is out there, thank you very much for all the fabulous energy you apply to this conference. And of course, his team. It's so wonderful to have. So what an amazing panel of people we have here. So I'm going to we'll go around and they can, we'll let them do a brief introduction to themselves. And then tackle a question of maybe the biggest mistake they see in early stage med tech that's preventing companies from taking advantage of their their situation. And why don't we start with going?
Gwen Watanabe 0:46
Hi, good afternoon. My name is Gwen Watanabe. I'm a managing director of H.I.G. Capital. H.I.G. Capital has $55 billion of assets under management. And I'm one of the managing partners for the Health Care Fund. We focus on commercial growth. So after FDA approval, and then you've really figured out your sales model, and then growing from there.
Roger Brooks 1:15
Right and your preventable mistake, you see.
Gwen Watanabe 1:20
Oh, God, so I would say, launching before you have really understood your commercial model, so meaning hiring, you know, let's say 30 salespeople, and then just sort of doing a shotgun approach, versus, you know, going deep into, let's say, pick a territory or Florida and hiring three, three folks there, and then figuring out your sales model, and then expand regionally. That'd be my, what I see.
Raymond Cohen 1:56
My name is Raven Cohen, I'm the Chief Executive Officer of Axonics Inc. We're in the business of providing incontinence solution primerica solutions primarily to women. The biggest mistake I would say that I see people make is they don't do design research before they start to develop their products. And I'm happy to talk more about what my definition of design research is.
Luke Duster 2:18
Thanks. Hey, my name is Luke Duster. I'm a partner at CRG, which is a boulder based credit firm focused on commercial stage companies in the healthcare space across the spectrum. We generally invest between 20 to $200 million per company. So we're coming in later stage, the biggest mistake I see companies make regardless of where they play is raising too much money, and then spending it quickly. If you raise a lot of money, spend it slowly, which means controlling your burn.
John Simpson 2:49
So I'm John Simpson, I am the CEO Simpson Interventions, a very clever name that I worked really hard to do a complex search to see what we're doing. We're a small startup and we're developing a coronary device. I'm trained as a interventional cardiologist. So that's kind of the fit when Luke Duster sort of said raising too much money spinning too fast. You saw his arm go over toward me. So look, I want to publicly apologize for that mistake. We all learn we all learn. But also if I want to make a talk about a mistake, I think one of my mistakes was taking a company public too soon. A little bit along the lines of what everybody else's say no.
Andrew ElBardissi 3:40
Hi everyone, Andrew ElBardissi, partner Deerfield, we're a healthcare only investment firm manage about 16,000,000,000. 2/3 of that is private capital, one thirds public. So we really have vehicles that are able to fund companies from inception throughout their lifecycle is really tough. I get the last mistake. It's really, really elements of what everyone said, but maybe I'll go a little bit broader, which is really not understanding what in your business is going to create value. And so you know, the tie a few comments together, is it the product design? Is it quality, revenue versus quantity of revenue? And not focusing on that in the most efficient way? You could see that in early stage companies all the way through late stage.
Roger Brooks 4:29
Good. There's always something everybody here is so accomplished. I'm gonna fire question at Ray first, who is one of the few I don't know many people. There might be somebody out there in med tech that's taking a company from its inception to a valuation of is it at 3 billion today or then it's been a 3 billion. Talk to us a little bit about that story of how did it all come to be? And was it purposeful was an accidental and weave it in with some things that you learned in creating this that might be helpful advice to others?
Raymond Cohen 5:09
Well, you know, it's always a two bear story, maybe four bear story, right? So I'll try to give you a short version of it. Axonics is, I think, a unique situation because it was started as a whiteboard exercise. Okay, so in other words, there wasn't like, you know, some engineer or physician, like Dr. Simpson invented something, and then you know, you take it forward. So it was intentional in the sense of identifying a segment of the market, ie neuromodulation, as a technology segment, the sense that this is the Body Electric is kind of the place to be these days. And I'm, I'm going back now even to 2013. And I think that's proven itself now that there's lots of therapies that are after many different clinical indications. So, so when I talked about design research, you know, it first of all, it was a matter of saying, Alright, well, what indication? What area do we want to go play in? Right? And if you're going to do that, well, you got to do some real research, right? You know, you can't throw darts, you know, just throw darts. Right, so, so we went and went through a process of bringing a lot of patients who had neuromodulation devices in their bodies, different applications, we brought physicians from all different types of stripes. In our case, it was electrophysiologist. It was interventional anesthesiologists, like E pain doctors, it was electrophysiologist, who actually have more experience putting electronic devices in people's bodies than anything else. So you know, it was gathering all this information about what are the problems to solve? What what are the deficiencies in the existing products, and so on, so forth? And then it was a question of, okay, what market to go into, by looking at how many competitors in the space is their existing reimbursement, you know, what's the size of the market, you know, on and on and on. So that was kind of the genesis for us. And then we were fortunate, in a way, reading the tea leaves to say, Okay, well, we're gonna go after what we call overactive bladder incontinence, because there was only one player who happened to have a monopoly in the space, that was Medtronic. And if for those of you been in the business for a while, you know that Medtronic is really good at starting things. And then they're experts at giving up market share to new entrants. Right, so I thought, all right, that and then, you know, I looked at their product and felt that we could do a lot better so that I could go on, but that was the genesis of it. And then of course, you need to raise capital, right? So you know, you need a good story, you need a big market, and you have to have a good storyteller, right? Somebody with experience has done it before that people like Andrew over here have confidence in writing a check. So when we started, we started with a $32 million series A investment. And, you know, you need the capital to be able to hire the right people and to create infrastructure and to go down the path of creating something that works. Because the second biggest mistake that people make, is they go to the clinic, I mean, to do a clinical study with prototypes. And then you're explaining to your potential, your who's going to be your your first customers. Well, you know, gee, don't worry about that. We're gonna fix that. Oh, yeah, we're gonna fix that. Oh, thanks for your feedback over here. I mean, it's embarrassing. So you know, my other advice is get it together, validate your product, make sure that it's ready for primetime, and then go do some testing on humans. You know, there's a lot of other species that you can test stuff on before you go to people.
Roger Brooks 8:44
So it's amazing, a great story. Great story. So let's let's move on to the capital markets, and maybe how they are today. What's it like to raise money? How is it different from the past? So I'm gonna look to John, who was the creator of ACS per close, DVI, Fox hollow. You raise money for all those companies? How is it different today? When you're out there raising money?
John Simpson 9:14
It's impossible today as the only difference that I can see just
Where's the optimism?
No, I don't know. I don't I don't quite get it. You and I've already had this discussion a little bit, I suppose. But there is a there was always an appetite historically, it seemed to be from take the startup companies then you had the venture guys that would take it to kind of the next level and then after that, then you had the strategics. And to be honest with you, I think ventures gone. were less powerful than it might have been at one time. So now then you have the startups and ventures gonna go into startups go into strategics is it kind of a disaster? The strategic in general, not to offend everybody here, but maybe some.
Roger Brooks 9:57
Just just stick on the Medtronic.
Speaker 5 10:00
I mean, let me let me talk about that. No. So there's this big gap, it seems to me now in terms of raising money. And you know, I think our new device is the coolest thing you could ever imagine, of course, which is what I've thought about all my devices, which unfortunately, was not always the case, Luke will confirm that. The but the the way that you encourage this current environment, to look more carefully at some of this kind of breakthrough, because I'm not too interested in a device that is sort of a little bit better than something else. I'm not a particularly incremental kind of a guy. But the breakthrough technologies, if you use that term, are not very popular. With the current investor base that I've been exposed to now, hopefully, we're exposed to a whole new one right now. So we'll, we'll learn more about that. But it is, it's just very so different now that it's hard for me to characterize it as anything more than some kind of a disconnect between startups not having the venture community anymore to rely on and, and then I've made a fair amount of money for venture guys in the past. They have short memories, unfortunately. So which can be good and could be bad? Well, I don't know. Is it good or bad? Like, a great tracker? There you go. We got the track record here. So I think it's complex and more complex than I might have thought it would be at this point.
Roger Brooks 11:26
Well, let's get everybody to comment on this, which I think is what a lot of people raising money are thinking, where's the capital today? So we always get it used to be? I know, Ray did really well in Europe, because Europe used to be a spot to go to, is it the US venture? Is it China? Is it a SPAC is it a private equity? Where do you go to get early capital? We've got some late capital here. But if somebody wants early capital, where should they go? What would be your advice and strategy if you were a CEO?
Gwen Watanabe 12:01
So one of our companies is early, so meaning, you know, before really having a foothold in the revenue cycle, and they did go to China, and they raised money, giving away distribution rights, and again, I wouldn't, you know, in this market, it's something to think about, you know, if that's an exchange, you know, I'm doing a Series A, and I need to start my company. You know, that is one way to do it. There's obviously, you know, speaking from the strategic side, the role that I used to have, you know, that could affect your outcome negatively, later on, but at least you would have survived, right, to then go on and create a company. So that's, that's one way to do it. There's also built bys. So meaning companies, smaller companies are going to the strategics. And saying, you know, I would like to build this for you, it's off your p&l, your income statement, therefore, but we agree, you know, agree on an exit, which usually isn't as high as, you know, something that raised company did, but it is, that's another sort of structure that you could look at.
Raymond Cohen 13:24
Part of the problem is there's less strategics, than there used to be based on consolidation. So there's just less buyers in the market. And some of them are making some bets, some small bets, but they I haven't seen them do it exclusively, I've only seen a strategic come in on early stage deal when there's a venture Syndicate, and then the strategic might throw some additional money in there. Personally, I think that if, if you have to do that, fine, but you're limiting, you're limiting yourself, if you've got a board member from one of the large companies sitting on your board, I mean, you when it comes time to have an auction or exit, you kind of mess things up. I don't mean to I love you dearly. But I don't mean to disagree with you, if you want to do a deal in China and give away distribution rights, you might as well just give them all your plans and all the designs through your product because they're just going to copy it. I mean, trust me that that's the reality right? And what you need to do is talk to people that's happened so so let me answer the question if I could
Roger Brooks 14:25
Yeah, and explain the downside of having a strategic on the board Well, I
Raymond Cohen 14:29
mean, you know they know everything right? And then you know you want to treat you try to if you if you got interest or you want to try to sell the company well now you got the enemy kind of in your camp, right? In a way right so anyway, that that's a maybe a conversation for a different panel but on the right well, they better have no rights, no
John Simpson 14:48
information that a lot of and they want to do that either. Say employee they want to know right deal.
Raymond Cohen 14:54
Well, that's the other thing. They will everything's got strings attached to it right. So why are you just trying to get your company off the ground and now you've given away the Future of your company. So I don't I don't think that's a great idea. I think it's a tough environment. I agree with Dr. Simpson. This is a difficult environment Vironment. We've been here before some of us who have been around for a while, we've seen the cycles, you know, right now, you can't do an IPO. Right? Okay, so that markets is dead. And venture is a little bit freaked out right now. So they get their hands in their pocket more often than not, but I think you got to start from the beginning. Okay, if you haven't done this before, you better find somebody who is you're willing to partner with who will give you some time and attention, and get that person on your board, get them to help you. Because, as Andrew will tell you, he likes to bet on things, but he likes to bet on people even more. So, you know, I'd say first of all, find somebody who's been successful, who's raised a lot of capital, who's had some exits, who's known in the venture community, and get involved with that person, you know, to help you write I think that's one. And then also don't go to the the most obvious places sometimes you mentioned, I mean, when we raised our series, I raised money from China. So I had the largest venture capital investor in China. Now there's no money coming into China, by the way. So that was a good idea. Back in the day, I went to Europe, I raise money from Europe, and then I raised money from the US as well. So it was a true, you know, kind of syndicate, there's a lot of money sitting out there for medical devices is a medical device conference. there's money out there in venture firms in Europe right now. And, you know, there's, there's less all entrepreneurs there, they don't have access to the same, you know, talent pool as we have in the United States. So, you know, it's kind of like, you know, you got to be a little creative sometimes, to be able to get the capital you need.
Luke Duster 16:44
Right, let me ruin everyone's party. We just finished five years of record breaking venture capital, fundraising, we're sitting on a huge keg of dry powder that still exists for health care companies, and both the private markets and the public markets. That is going to stop. The advice I give my portfolio companies right now is raise your money this year, it's gonna get worse next year,
Raymond Cohen 17:12
Why?
Luke Duster 17:13
The fundraising cycle. Fundraising cycles take years, we just finished a huge bull market where the fundraising market peaked during the last 36 months, it's now going to be coming off that peak for the next several years as LPS funds raising funds, which is you got to think macro. Right? And so today, there's still a lot of dry powder out there. Is it becoming more selective? Is it searching for higher quality opportunities? Absolutely. But it's still there. We're still seeing companies that have exceptional opportunities, like what you designed for Axonics, raising capital in today's market, I think it actually gets tougher next year at this conference.
Andrew ElBardissi 17:51
The real dichotomy here is that we're trying to generalize to all medical technology companies, and that's very difficult to do. So when you know, to try to identify the root cause of why fundraising is difficult, you know, maybe to oversimplify you sort of have healthcare technologies that are incremental improvements with nominal capital to get to some value inflection point. There is a profile of investor that would invest in that. Unfortunately, that is not Deerfield. Okay. And then there are the big bets, where you're putting a lot of capital to work to hopefully develop a category defining therapy of some sort. Those are huge sums of capital required in order to get to that value inflection point. When you look at where we are today, we're all managing our portfolios. We all see the fact that it's existing investors are not investing in new companies for the most part to some degree, and there may be selective opportunities where they decide to move forward with an investment. And the number one priority is how do you maintain the viability of your portfolio. And for investors who maybe this gets to the dry powder point for investors that are focused on those big bets, I thought it was going to be a $60 million investment when I underwrote it might need to be 120. So that dry powder, isn't that dry, it gets consumed pretty quickly. And unfortunately, we're in a cycle where we're all just staring at each other and no one's investing. And until someone breaks that cycle and starts investing in new opportunity by someone I mean like a lot of people right you need critical mass. Then you you you step off that mindset, okay, I don't need to play defense anymore. I can start playing offense. I don't know. I don't know when that inertia is broken, but I don't think we're anywhere close to being broken.
Roger Brooks 20:01
Well, let's let's transition into where it seems like a lot more capital is coming from that. It seems like it's happening with a lot more frequency, the friends and family, the oil money, the places that are not from your sophisticated medtech investor. So these investors get involved. what's some advice you can think of when you come along later stages? And you look at the cap table that's early, and you look at the rights given to the early investors, what do you look at that's preventable mistakes are things that keep you from investing because of what that early syndicate look like, that people can react to today and make sure they do it, right.
Gwen Watanabe 20:48
So a lot of times, when that happens, the valuation creeps up to a level where when, you know, let's say I was gonna go in, I would have to give them a down round. And sometimes when that happens, a lot of folks who were early investors, don't, you know, they're not very happy with that. Really. Yeah. So having said that, you know, I mean, I, I've been a part of four successful startup companies, you know, we would set you know, normal valuations that weren't, you know, off the charts, Sky High Series A, we would take Angel, angel money, LSI, band of angels. Actually, Wilson Sonsini invested in, in our companies, and, and a lot of individuals, wealthy individuals, but at least for the B, so setting it up for the series B, we weren't, you know, in the skyrocketing valuation, were somebody who was going to come in a venture fund, and then have to give it a 50% haircut, I think that is a mistake. Because, you know, we don't want to, you know, make make our partners I view all those shareholders as partners, upset from day one. So,
Roger Brooks 22:06
what's the lesson, be careful about how you set the valuation at the early stage? And yes, expectations profit
Gwen Watanabe 22:12
Set expectations properly, and make sure that, you know, a lot of times you think a high valuation and a Series A is a good thing, but a lot of times, it's actually prohibitive. Like, I'll look at me, like, go Forget it, I'm not even going to have that conversation. Because I know, you know, I know what they're gonna say. And it's and I don't want to put in, you know, my time into something where people are thinking, Oh, well, I want to 100 million dollar pre money valuation for something that has zero sales, then we'll just say, you know, not in our sort of wheelhouse and pass
Roger Brooks 22:45
Andrew what have you seen? And what kinds of advice do you have for like, first of all, I'm sure you've come across a lot of interesting scenarios. By the way, how many boards have you served on?
Andrew ElBardissi 22:56
I don't count, I mean, I'm 30. I think I have like, 15 or so now. So I'm sure I'm leaving some out.
Roger Brooks 23:03
Okay, so you've probably been on over 100 boards, you've looked at a lot of deals, what are they doing? What can what can the entrepreneur do to make sure they get their terms right in the beginning, so that when you come along, you're not dealing with a headache?
Andrew ElBardissi 23:17
Yeah, I mean, valuations a very easy thing. I don't think people understand the implications of structure as well. So typically, you don't see this in series A deals, but a lot of people think, Oh, if I just have a, you know, 2x liquidation preference, and I'll get to x my money out, what you don't realize is, you've just set off a ticking time bomb, where maybe the next round gets put on a 2x. And the next round gets put on a 2x. And before you know it, you're recapitalizing the whole company, because that's unsustainable. The other thing that I think is really important is voting control, or really just voting in general. So when you bring on a number of smaller shareholders, rather than larger institutional investors, you can have a very fragmented cap table where it's difficult for governance to function effectively, right? Because now you have to go out to 150 people to get their votes on what should be pretty routine items versus two or three, you know, large institutional investors who can make the decision, you know, at the board level, effectively as a proxy for shareholders. The final thing I've seen, which is very odd, and is always a non starter, is, you know, I'm gonna apologize the founders here, but when founders have blocking rights, on certain things, because that makes it very challenging for investors to, you know, potentially at times make very difficult this decisions that are maybe not fully aligned with the founders interests. And so those are hopefully that gives you a sense of things that we look out for.
Raymond Cohen 25:02
Too many people have been, you know, the pay attention to the face. What the hell's his name? The Facebook guy? What's his name? Oh, Mark. Yeah,
Unknown Speaker 25:08
Mark Zuckerberg.
Raymond Cohen 25:09
Yes, yeah, they look at him and they look at Elon Musk and they think like, that's the way it should be right? You know, look dilutions part part of what you're talking about is people founders want to control the vast majority of the equity and, you know, my view is 100% of nothing is nothing. Okay? I mean, you know, you can't finance your company, unless you're gonna give up equity. Right? And, and if you're reasonably smart, it's a 1x, liquidation preference, that's it, that's the deal is 2x 3x, that's just gonna kill you on the eggs, you're gonna work your ass off, and you make nothing on the way out. Right? So, so you got to keep vanilla terms. And that's really good advice that you're providing. But I think this concept of dilution, I don't know, like, it must be like page 38, and some NBA handbook that somebody got, like, dilution is not the problem, right? It's okay to be diluted. You know, look, if you can create real value, and that's what we're talking about in this session, you create real value, if you own 123 4% of something that has real value, that's generational wealth for you, as you know, that's generational wealth, right? So, you know, don't don't get hung up on on the percentages, it doesn't matter. It's part of the game. Right? So I think that's, that's good advice. And the other piece is don't with this notion of you, you want to increase the round the price, right? That's unfortunately, like bad advice from venture capital investors, right? Because they want to write up the the paper investment on their books, right? That's nonsense. Don't put valuation at the amount of capital you raised. You raise the capital, that's your valuation, you raise more capital, that's your valuation, believe me, it'll be your friend, if you're successful with the with the venture, and you actually going to go public later. You know, as opposed to doing a reverse stock, stock split to go public, you can go public, you know, one to one, or maybe even get the benefit of a forward stock split. So there's some smart things that you can do early on. And this comes back to advice, like who you getting your advice from? Right? Who are your advisors? You know, because it's a learned experience. I think this is the point, this is we're sitting here, you know, we've been around for a while, right? It's a learned experience, it's not something that you know, you're going to get your MBA, and you're gonna walk out and I'm ready to go now, you know, they forgot to tell you about all this stuff that really is important, you know. So
Andrew ElBardissi 27:33
I just want to I want to touch on one thing sorry, to monopolize the conversation, but I think is, is just a really important point that I've now seen a number of times, board members and CEOs or board members, we are all there to maximize shareholder value. We are not there to support a CEOs mission of being the next Mark Zuckerberg, or the next Elon Musk, potentially, that is something that is in the cards. But potentially it isn't, you know, potentially the best outcome for all shareholders is not to build a standalone company, that is a multi multi billion dollar market cap company, perhaps a technology is best served in the hands of a strategic partner. And perhaps you maximize shareholder value by avoiding unnecessary dilution down the road, by transacting at an earlier point. And I, you know, I feel like there have been, I think, in this environment, maybe not this environment, the 2019 2020 environment, as breeded, this desire or notion where, you know, companies can go public with zero revenue, and they can there's, you know, capitals effectively free. And so now everyone wants to build their own company, I mean, we need to sort of recalibrate as to what our jobs are, on these boards. Were there to maximize shareholder value,
Raymond Cohen 29:00
the best time to sell a company is before you ship the first commercial product.
Andrew ElBardissi 29:05
No argument here,
Raymond Cohen 29:06
right? I mean, that that's like, Huh, what are you talking about, that's the best time, right, you're not going to you may not get the biggest exit, but if you get an exit, that is a big scope, that's a big notch on your belt, and then your next deal, you're going to be able to get access to capital and so on. So uh, so, so don't be greedy. You know, if you can get if you can get out of a deal and make some money on it for your if you make money for your partners, it's like the blind from the Godfather, you know, you're going to do right,
Roger Brooks 29:34
elaborate on that once about, I've often heard this inflection point, your maximum value is here. You go to market and it actually drops off. Now why? Why is that now your commercial? You're selling stuff, shouldn't it go up? Why Why? Why is it hard to sell stuff? It's really ever goes as planned. Is that what you're saying?
Raymond Cohen 29:55
It's hard right, you know, adoption of new technologies. Dr. Simpson will tell you all about that. You got some time it'll take You can spend a week telling you how hard it is right? It's hard, you know, to do all the things you need to do to be able to be a real commercial company. But if you've got a cool technology that fits a need, and, and so on, so if you can get somebody else to buy it, and it doesn't need to be a Medtronic, Boston Scientific, an abbot, or Teleflex, right, it could be a mini strategic, you know, I mean, hell, Axonics bought a company, we paid $200 million in cash and made the all the all the people involved in that project. Millionaires, right. Okay, that's that that's a was a great deal.
Luke Duster 30:36
So I'll fight back. So the original title of this presentation was how to create a billion dollar company.
Roger Brooks 30:42
Right. That's how we started and we got
Luke Duster 30:45
Ray made that show. That's right. Have you? Have You Ever Have you ever seen a pre commercial med tech company in the last five years sell for a billion dollars?
Unknown Speaker 30:55
Now, no, not pre commercial.
Unknown Speaker 30:57
But if you can kind of
Luke Duster 30:58
make a billion dollars here, and that's the goal. We want to be like you, right, we want to see how you did it?
Raymond Cohen 31:03
Listen, you know, if if I had gotten the right offer, before we commercialize them before we went public or sold, it just didn't get the right offer. So I'm not talking about sides of my mouth. No, that's
Andrew ElBardissi 31:16
fair. That's fair. I might be on the wrong panel. I thought this was maximizing shareholder value. So my apologies.
Luke Duster 31:22
The original draft was how to get to a billion dollar thing. And then when shareholder value. I would say though, that's for shareholders. A key point here is, I've seen a lot of bad cap tables you have we all have, those are fixable. If you have a bad business, that's not right. If you haven't done what Ray did to design yourself ahead of time and see what the vision is for yourself commercially. We're going to fit in reimbursement wise, we're gonna fit in competitively. What's your gross margin can be how's the Salesforce gonna look? If you haven't done that work, and designing kind of where you are today, as an audience today, early stage medtech, that's where the problems are going to be. Your cap table. Yes, that's a secondary problem, but it's not the primary.
Gwen Watanabe 32:04
So, Matt, and okay, thank you. So the reason why after you get approval, your value goes down is because now you're being measured by revenue and EBIT da multiples. Versus before that, you know, it's a it's a model on a spreadsheet. It's a story, right? So you can tell your story I'm sitting on the other side is a strategic going, well, you know, this, this and that. But then if you wait, now you have to prove it. And then prove it again. And then quarter after quarter. And now I have my multiples and I'm doing TTM, multiples, MTM multiples, EBIT, ah, this and that right, comps. So that's the reason
Roger Brooks 32:48
that makes sense. So I want to save a couple of minutes at the end for any questions the audience may have. So if you've got that burning question, you think the that everybody would appreciate, please start thinking about that. I'm going to go back to Dr. Simpson. And it has been part of several successful go to markets of therapies as tend to work. And I think we're an industry has probably too many amazing technologies that were never adopted. You had four huge hits, that all showed adoption, what's your thoughts around how people figure out that go to market so that it does become successful?
John Simpson 33:34
I would say that the focus this is everybody says this, it has to be on the patient. So you have to identify a patient need that is really, really extraordinary. And you know, and it's usually an unmet need. And for me historically, it was usually where I had some problem in my medical practice, and my great example, I tell a brief story about Tom Fogarty, of course Windows tombola well, but in the era when I was at Stanford, just started put in stents and the patient ran and regulated. So I was the fellow at the time and I had to hold the groin after they pull the sheets and adequate later patient, and then we just bleed and bleed and bleed and bleed and bleed. And so finally, one day Tom Ford, he came in and I said, Tom, you got to close you got to take the space to the OR we got to close this. I can't do it. I can't hold it up pressure to get the bleeding stops. He's okay. I grew up with him. So anyway, Tom is there so he makes an incision and cut down on the artery. And he takes one stitch good. is done. Close the seals off there. Yeah. I said Tom, I can do that percutaneously and he said horseshit, you cannot do that. Percutaneously so, we couldn't do it so quickly. So several years that it took per close to develop a technology so that it can be done percutaneously but it was such a unique application. I have an unmet clinical need that was pretty striking at the time because it was related to hemorrhage from groin retroperitoneal bleeds, deaths associated with this, it had to be something that was really kind of special. And I think of, you know, I like I remember the early days of balloon angioplasty and over the wire system, I am not talented enough to use the Grinch. Nobody here would know grand secrets system, but it was a fixed wire system, I could never make it work. So it wasn't like I had some great vision, I was desperate. I need a system that has a Google guide, where if I'm gonna put a balloon in somebody's coronary artery, because that's the era you know, we tell people, we're gonna make balloons, we're gonna put them in people's coronaries, go and blow them up with the patient, you're going to get better. Okay, great. But not all the investors bought into that. It's you think it's a tough sell today, try selling balloons in coronary arteries that have never been done before. And it's like, magically, we sent a snake oil that says, Really, this is gonna be. So what I'm trying to say maybe I should say more concisely. A really, really, really genuine patient need, and a really, really unique contribution to solving the need that that patient has. If that's the driver, you have a magical opportunity to build a business, right? It doesn't always happen. But more often than not, that will, that will happen. And that would be my sort of my current feelings on what it takes to get something from zero. So we had, I don't know what five companies or they had zero sales that one day, until, you know, maybe I don't know that our biggest sales day for Fox, I was probably $2 billion in one day. So that was a, it was a good sales day, by the way.
Roger Brooks 36:41
Thank you, John. Thank you. Okay, we've got one minute left, we got we got time for one question from the audience will go with? Okay, so the question is, what's a reasonable expectation for market penetration of a new medical device?
Raymond Cohen 36:59
Well, it just depends what the market is. I mean, I'm in a category right now, where our penetration is probably one to 2% of the total addressable market. Well, if you can generate hundreds of millions of dollars of revenue, then okay, it works. But if you got only $100 million, Tam, right, nobody's going to invest in that. Because it's not realistic, that you're gonna go out and capture so much. And I think another thing just to follow on what Dr. Simpson said, you also need to take into it's not just about can you have you come up with something that solves a clinical problem, but you have to think about what are the economics involved? And you know, can people make money doing this, we work in an environment where, you know, people, institutions need to make money, the physician needs to make money. So, you know, that's, that's part of it, too. You have to think think about that. And then also, you got to think about are people going to be up for using this thing? Right? And, you know, like, if you go into the hospital, it's everywhere. Now. Nobody wants to do any work. I don't want to do any work. It's like, oh, I got to do this other thing now. Well, it's really good for patients. Well, I'm not getting paid enough and my boss treats me like shit. And my health insurance sucks, right? That's what that's what's going on in the healthcare provider business today.
Roger Brooks 38:17
Okay, unfortunately, we are out of time. I know. I would love to keep going.
John Simpson 38:21
So right, right. That was a little grim, but I'm gonna go with you on that. I think that's probably the truth.
Roger Brooks 38:28
Thank you, everyone, for being here. And thanks for being part of LSI
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