Article

Working with Industry to Develop New Tools

Open access:

The copyright in this work belongs to Radcliffe Medical Media. Only articles clearly marked with the CC BY-NC logo are published with the Creative Commons by Attribution Licence. The CC BY-NC option was not available for Radcliffe journals before 1 January 2019. Articles marked ‘Open Access’ but not marked ‘CC BY-NC’ are made freely accessible at the time of publication but are subject to standard copyright law regarding reproduction and distribution. Permission is required for reuse of this content.

Within the world of medical devices, it is the surgeon and other medical personnel who may be considered best placed to create and design new tools. However, in today’s high-pressure and highly regulated environment there is little hope that typical inventors, working from their garages, will be able to get to the clinical testing stage by themselves.

So, what steps should would-be inventors take on the path towards commercialisation of their idea? And how best should they protect themselves? Dr Thomas Fogarty is a consummate entrepreneur and inventor of many things, including two mainstays of modern medical life – the embolectomy catheter and the centrifugal clutch. Here he shares his wisdom on how to tackle these issues.

“Number one, I think industry is critically important to the development of any new technology,” Fogarty opens. “Physicians really can’t do a whole lot without them; not necessarily helping with design, but rather with commercialisation. They play a very important part in moving technology forwards.” Industrial partners can be important allies to innovators in many different ways – for instance, through developmental grants or sometimes through support of a product during its early stages. “And, of course, that is beneficial in terms of saving money because [the inventor] will usually forgo any salary at the early stage of a start-up,” he adds.

However, many physician inventors, particularly university-based ones, have concerns about working with industry, worried, for example, that a company might appropriate their intellectual property. “I am certain some companies do that, but I have not experienced it – largely because I know my way around; I know how to protect myself and make absolutely sure that my idea is not stolen,” he explains.

The ‘Good Ole Days’

When Fogarty invented the catheter in the 1960s, the regulatory landscape was quite different from that of today. For a start, the US Food and Drug Administration (FDA) was an agency for food and drugs alone, and there was no regulatory body for instrumentation. Since then, the application of tighter regulations has improved safety, but it has also made it much more expensive and time-consuming to develop new instruments.

“Regulations increase the size of the clinical study required, which is one of the more expensive aspects of product development. And they will make that clinical trial longer and more complex compared with what was suitable in the past,” Fogarty recalls. “For example, the original balloon and embolectomy catheter cost me around US$2,000 to develop before it was ever used in a patient.” Many of the parts used, he confesses, were liberated from the hospital where he worked. “And most of the help that I engaged were friends of mine; many of them were my physician mentors who gave me a lot in the way of information, not necessarily money.”

Approval for the embolectomy catheter was achieved relatively easily. Armed with a prototype and an idea, Fogarty approached the Chief of Surgery for permission to use it. After a few successful tests in animals, the Chief granted permission for use in humans, provided he could be present at the first cases. “And he was, and it worked, and it was approved.” Around two-thirds of that original US$2,000 cost went to a patent attorney to get the patent prosecuted. An equivalent device invented today would cost in the order of millions – if not billions – of dollars to get to market, with most of the increase in development costs reflected in a higher price.

Who to Approach and How

An inventor with an idea should consider approaching industry at a relatively early stage in its development to avoid wasting time and money going down the wrong path. It is best to go with something tangible to show. “I like to go with the prototype. It can be a very crude prototype, but it has to be a prototype that gets across the message about what benefits this is going to bring to a patient,” Fogarty elaborates. The need for the device should be obvious. Prior to the development of the embolectomy catheter, if patients had an acute arterial occlusion, whether an embolus or thrombus, 50% would require an amputation and 50% would die. That was clearly not acceptable.

Nevertheless, even a great idea that fills an obvious need must be pitched to an investor or sponsor company. “Certain people require different amounts of information. It is variable, and it depends on how much they need that product,” Fogarty elaborates. “If they really need the product, they are going to go out on a limb and try to gather that intellectual property and the know-how of these individuals.” One way to do this – and Fogarty’s chosen path more often than not – is to establish a start-up company specifically to manage the early stages of product development.

Establishing a company shows dedication to an idea, and allows the physician/inventor to retain some control over the product and the people working on it. However, it is vital that novice entrepreneurs know their limits. “If a doctor has never managed a team before, he should not try to manage that [start-up] team,” he advises. A first-time company founder should not necessarily be its CEO. “If he wants to be anything other than a Chief Technical Officer (CTO), I would not be interested in working with him… My experience indicates that physicians do not make good CEOs. Occasionally they will, but in general they do not. Of course, if they have been around for a bit and have worked with small start-ups, it is a little bit different; they may be able to make it work.”

The other advantage to setting up your own company is that it makes life for the large companies a lot easier, which will, in turn, give the inventor a better price for the eventual product. “Large companies are inept at developing new technology. They do not do it well. A lot of them, by admission, would rather buy something than try to develop it internally. Their hierarchy impedes them. So, the smart companies just wait and buy an emerging company.” Thus, by setting up a credible young firm with a good, experienced CEO and taking an idea through to proof-of-concept, inventors can improve their chances of making decent returns on their ideas.

Protecting Yourself

Both your invention and your discussions with a potential industry partner need to be protected. In the US, all the documentation that is required to prove that an idea is your own is a notebook that details what is to be divulged, which is then countersigned by a third party. Overseas, more in-depth paperwork may be required, such as a preliminary filing of the intellectual property with the patent office. “Those are both very individual steps you can take to protect yourself,” Fogarty says. When approaching industry with a view to working with them, it is always wise for the inventor to prepare an agreement to sign upfront before making any disclosures. “If they are honest, they will sign it,” Fogarty predicts. “That is a routine thing that I do and everybody else should.” A binding agreement ensures that a company will not engage in anything that would violate the confidentiality of the invention. Alternatively, an inventor may choose to observe a company’s activities closely until he or she is personally satisfied that it is reliable.

The Rewards

Aside from any altruistic aims of new device development, inventors will want to maximise their financial returns when commercialising their ideas. However, there are no hard and fast rules about what to expect. “Remuneration is variable, depending upon the product and how much it is needed in the marketplace,” Fogarty explains. “There is a recent example of a [medical device] company having an initial product offering and raising more than US$1 billion, but that is a pretty extreme example. And, while it could be that high, on the lower end you could get a very small amount, or nothing at all.”

When negotiating with a larger firm, the inventor could always consider a profit-sharing or licensing agreement to capture more of the downstream value. “In other words, you get a royalty for producing the product for that particular company, and the company gets a product that is hopefully successful,” he explains. “The reason the royalty works is, if the product doesn’t sell a lot of units, the company doesn’t make a lot of money, and also the inventor doesn’t make a lot of money. If you develop something that is widely and quickly accepted, on the other hand, then that arrangement also makes a lot of sense, both for the inventor and the company that has acquired it.”

This has paid handsome rewards for Fogarty, who arranged for a royalty agreement with Edwards Lifesciences around the balloon catheter. “That turned out very well,” he recalls. “The company made a lot of money and I made a lot of money because the product was widely accepted and, at the time I came up with it, it was needed and everybody recognised it was needed.” Another of Fogarty’s inventions was a system for fixing aneurysms. “Essentially, I bought a lot of stock in the company that I created (AneuRx). That turned out extremely well, as a major company (Medtronic) bought it very early, even before I tested it in any patients.”

What is interesting is the extent to which the market for a good invention will grow beyond its current size, if it is a good idea. While arterial occlusions were a moderate and relatively unsexy medical problem at the time, that did not stop the catheter from taking off and becoming an important, game-changing instrument. “At the time it was a niche [product], but look at what it became,” he comments. “Other physicians came up with other applications for the balloon catheter, so it grew and grew and grew.”

Conclusion

In medical devices at least, the days of back-yard inventors designing, developing, testing and commercialising their own ideas are long gone. With high costs and strict regulations, in order to have any realistic hope of succeeding a new product must be partnered with industry. This necessarily means taking steps to protect yourself and your idea, and may even mean starting up your own company and effectively becoming part of the industry.

Fogarty concludes with two pieces of advice for young, budding surgeon–inventors: “Number one, it is always more complex than you think. Number two, you have to surround yourself with good people – those who have wisdom, which usually means older people, and also very young people, because they have no boundaries.”