angelMD Partners with the American College of Cardiology

When it comes to innovation, one of the biggest challenges is connecting those who are driving it with those who will use it. That connection is one of the missions that we hold at angelMD. Our partnership with the American College of Cardiology helps both angelMD and the ACC to better engage around the future of healthcare.

At angelMD, we know how busy the lives of clinicians can be. That’s why we’ve dedicated ourselves to being a resource where medical professionals can learn, advise, and invest all in one place. The ACC partnership will allow us to work together to deliver the latest information about health technology innovation, entrepreneurship, and investing.

The partnership will bring content to the angelMD and ACC websites, newsletters, blogs, and social media platforms. But this collaboration is about more than reading. We are also developing a series of angelMD-hosted webinars and surveys to both gain and share knowledge about innovation in healthcare technology.

ACC members attending the College’s 67th Annual Scientific Session will get to see some of the top new innovations first-hand. A pitch event held during the Session will focus on both medical devices and digital health. It’s a great opportunity for cardiology professionals to get face to face with the people who are working to make their lives better.

Make sure to keep an eye out for new content and upcoming events. We’ll always announce them on the angelMD blog, as well as our Twitter, LinkedIn and Facebook accounts.

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It Pays to Invest Early and Lead Syndicates: A VICIS Case Study

angelMD Senior Investment Analyst John Leader

Investing in startups is a risky business, and even seasoned investors oftentimes steer away from up-and-coming companies. The distinct fear for many prospective investors is that any invested money is gone without a market to make it liquid again should the need arise. However, this also comes with an assumption that the investment doesn’t appreciate in value over time, and that it only changes on the event of an exit.

Thanks to angelMD, this assumption is far off-base.

Tracking the growing value of a illiquid investment is easier than people believe — but not always available to the average investor. All angelMD portfolio companies are required to submit quarterly reports that detail both the narrative around the company’s progress as well as semi-annual unaudited and annual audited financial statements.

The Impact of Appreciation

A savvy investor can compare a company’s financials from quarter-to-quarter, and even year-to-year to analyze the progress of the company and their investment. Additionally, the accompanying narrative from the CEO provides insight on the company’s progress towards key milestones and objectives like FDA submission/clearance as well as clinical trial results.

These reports provide investors an inside look an otherwise privately held company, but they come at a cost — most companies will only provide them to investors to invest $250 thousand or more. That’s where the benefit of syndication via angelMD comes into play for the everyday investor: for an investment minimum of $10 thousand, we aggregate your investment with dozens of other investors to give you a seat at the table as a “Major Investor” on the company’s cap table.

While reports are a nice way to monitor your investment, many investors want to see actual appreciation in their principal balances, and that comes through follow-on rounds of investing. Most medical startups require a large amount of capital to clear all regulatory hurdles and bring a product to the commercial markets. This requires multiple rounds of financing over several years, each a different, and hopefully higher, valuation. This is where investors can see the true appreciation in their investments.

VICIS, A Case Study

A great example of this is our first syndicate for VICIS, where investors committed their funds back in January of 2016.

VICIS creates football helmets that reduce concussive impacts 20-50%. With the publicity around studies linking football with CTE, a degenerative neurological disease with a high incidence rate in football players, VICIS has been a popular startup on the angelMD platform.

In January 2016, the company was valued at $10 million. Eighteen months later, in July 2017, VICIS has over a $100 million post-money valuation.

As a result, had you invested $10,000 in the initial syndicate for VICIS in January 2016, you would be able to measure the increase in your investment’s value by factoring in the appreciation in their valuation while factoring in for dilution as well. As more individuals invest their money at a higher valuation, your early stage investment grows accordingly and is validated by their interest level.

These are real dollar figures that represent not only the growth in VICIS’ business, but also in the unrealized portfolio gains to investors. Yes these investments are still illiquid, but through follow-on rounds of investing, the market is identifying VICIS as a valuable asset that is taking positive steps towards an eventually profitable liquidity event.


Overall, just because you cannot track an investment every day like you can on the stock exchange doesn’t mean that your money just goes out of your bank account never to be heard from until an exit 2 years down the road. There are ways to track them, and through the angelMD community, we work together to do just that. A major part of my job is to speak with our valued syndicate investors to share updates on their investments and to relay any questions you may have ot the startup executives to them and get you answers — service that would normally cost six figure checks, available to all angelMD members through the powers of syndication.

If you’d like to speak with me about the mechanics around early stage investing or about how you can get more involved in our investing process, please send me an email, or you can click here to schedule some time to chat over the phone.

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The Case for Investing in Orphan Drugs

Investing in biotech companies developing therapeutics seems like a natural for physicians and other healthcare providers. One area that should particularly be considered are “orphan drugs” — products being developed for a rare disease. A disease is classified as a “rare disease” if the patient population in the US is less than 200,000 patients. It is estimated that there are over 7,000 rare diseases and that 10 percent of the US population has one of these rare diseases.

 

In total, not so rare at all.

 

Investing in companies developing a drug for a rare disease may align with the personal interest of health care practitioners. Individuals in the medical field have a deeper level of scientific knowledge than a typical investor, and they have a broader appreciation for the medical consequences of the disease and for therapeutic alternatives.  In addition to their medical background, there are some other compelling reasons to consider companies developing drugs for orphan diseases.

 

Orphan Diseases represent a very attractive sector of the pharmaceutical industry. Big pharma continues to rely on licensing or acquisition of smaller companies to supplement their portfolios.  This trend bodes particularly well for startup companies developing products for these rare diseases. Orphan drugs are expected to account for over $200 billion in worldwide revenue by 2022, this represents an 11 percent annual growth rate, over twice the industry average.

 

Here are some orphan drugs facts showing why orphan drug companies may be a valuable addition to an angel investment portfolio:

  • Orphans drugs account for 1/3 of all new FDA drugs approved.
  • The likelihood of approval for an orphan drug is much higher than for a traditional pharmaceutical drug.
  • 30 percent of orphan drugs generate over $1b in annual sales.
  • Orphan drugs cost less to develop (a bit less than ½ as much).
  • The FDA registration trials require fewer patients and the trials are frequently quicker.
  • Physician adoption following FDA approval is faster for drugs for rare diseases.
  • Typically, orphan drugs enjoy easier market access with lower price resistance from payers (the average orphan drug in the US is priced five times higher than a non-orphan drug).
  • Partnering deals for orphan drugs on average are 30 percent above non-orphan products.
  • Companies developing orphan drugs receive tax benefits and other financial incentives.

Drugs for orphan diseases, are a major trend in the pharmaceutical industry today. There are many companies developing highly specialized drugs for very specific diseases.  Many of these companies represent a novel investment thesis for angel investors, and potentially provide a great leap forward in medical care while providing attractive financial returns.

 

Sources:
Evaluate Pharma: Orphan Drug Report 2017, June 2017
Hughes DA, Poletti-Hughes J (2016), Profitability and Market Value of Orphan Drug Companies: A Retrospective, Propensity-Matched Case-Control Study. PLoS ONE 11(10): e0164681. doi:10.1371/journal.pone.0164681

 

 

Craig W. Philips, Entrepreneur-in-Residence University of Washington
Contact: philips2@uw.edu

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Science behind the Startup: Noninvasix

Perinatal hypoxic-ischemic encephalopathy (HIE), caused by oxygen deprivation to the brain, occurs in one to nine of every 1000 live births, and can lead to neurodevelopment disorders ranging from mild behavioral deficits to seizure disorders and cerebral palsy1,2. Additionally, an estimated 23% of the 4 million worldwide annual neonatal deaths are associated with signs of asphyxia during birth1; however current electronic fetal monitoring systems have limitations and their impact on neonatal outcomes is controversial3,4.

Enter Noninvasix

Noninvasix Inc., a Texas-based medical device startup, has developed patented optoacoustic technology to directly measure neonatal and fetal oxygenation levels to try to improve neonatal outcomes. Noninvasix’s technology relies on the thermo-elastic response of hemoglobin to certain wavelengths of near-infrared (NIR) radiation. NIR radiation ranging from 680-2400 nm with pulse durations of approximately 10 ns can be pulsed through the scalp and skull into the superior sagittal sinus (SSS), a large cerebral vein. Oxygenated and deoxygenated hemoglobin responds differently to pulsed NIR radiation. For example, at 1064 nm, hemoglobin absorption increases with oxygenation, while at 700 nm it decreases with oxygenation. The absorption of NIR radiation results in a measureable optoacoustic wave with distinct pressure profiles between oxygenated and deoxygenated hemoglobin and is detected with a piezoelectric transducer5.

 

Noninvasix’s clinical prototype has been tested in both fetuses and neonates at The University of Texas Medical Branch at Galveston, and has also demonstrated results in large animal studies.

 

Noninvasix’s technology differs from the current noninvasive oxygenation measurement standard, NIR spectroscopy (NIRS), in that it detects an acoustic wave rather than a light wave. Noninvasix’s optoacoustic technology has a higher spatial resolution than NIRS measurements, as acoustic waves scatter less in tissues than light waves do6. As a result, Noninvasix’s optoacoustic technique can measure venous blood oxygenation alone rather than measuring a mixed blood saturation of venous, capillary, and arterial blood5,7.

 

Dr. Rinat Esenaliev, Ph.D., Noninvasix Vice President for R&D, and Dr. Donald Prough, M.D., Clinical Vice President are co-inventors of the technology. In 2012, they, along with a team of researchers, demonstrated that their optoacoustic device and the gold standard invasive device, a CO-oximeter, resulted in similar oxygenation measurements. The optoacoustic-predicted oxygenation levels and the CO-oximetry oxygenation levels had a correlation coefficient, R2, equal to 0.931. This study was conducted using NIR radiation of 700, 805, and 1064 nm in adult merino sheep, which have a scalp and skull thickness comparable to humans, but a SSS that is approximately five times smaller than that of humans. The 700 and 1064 nm wavelengths resulted in oxygenation-dependent absorption profiles, while the 805 nm wavelength acted as a reference signal as hemoglobin absorption is not dependent on oxygenation at this wavelength5.

 

Noninvasix’ technology may also be applied to other medical needs including intracranial hematoma diagnosis and the treatment of traumatic brain injury which can cause hematomas 6. In a 2014 study, Dr. Esenaliev and other researchers identified blast-induced intracranial and extracranial hematomas in rats based on the time course of the optoacoustic signal8, and Noninvasix is still developing other applications for their platform technology.

 

  1. Eghbalian, F. Frequency of Hypoxic-Ischemic Encephalopathy among Hospitalized Neonates in West Iran. Iran. J. Pediatr. (2010).
  2. Lai, M.-C. & Yang, S.-N. Perinatal hypoxic-ischemic encephalopathy. J. Biomed. Biotechnol. (2011). http://www.ncbi.nlm.nih.gov/pubmed/21197402
  3. Sartwelle, T. P. & Johnston, J. C. Cerebral palsy litigation: change course or abandon ship. J. Child Neurol. (2015).
  4. Clark, S. L. et al. The limits of electronic fetal heart rate monitoring in the prevention of neonatal metabolic acidemia. Am. J. Obstet. Gynecol. (2017).
  5. Petrov, I. Y. et al. Optoacoustic monitoring of cerebral venous blood oxygenation though intact scalp in large animals. Opt. Express (2012).
  6. Esenaliev, R. O. Optoacoustic diagnostic modality: from idea to clinical studies with highly compact laser diode-based systems. J. Biomed. Opt. (2017).
  7. Pellicer, A. & Bravo, M. del C. Near-infrared spectroscopy: A methodology-focused review. Semin. Fetal Neonatal Med. (2011).
  8. Petrov, A. et al. Optoacoustic detection of intra- and extracranial hematomas in rats after blast injury. Photoacoustics (2014).
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Building a Safer Digital Health Landscape

Our lives have been going digital since the invention of computers. But even as we enjoy the conveniences that can come with these advances, we are opening doors to threats that never existed before. While hackers might not be interested in your smart refrigerator, they are absolutely interested in breaching the digital systems that we use in every aspect of our lives.

 

As you’ve no doubt seen, healthcare is especially susceptible to issues related to security. While there are regulations and technology in place to protect this digital infrastructure, hackers are always adapting. It’s therefore critical that the companies in charge of protecting and providing this data stay ahead of their nefarious competition.

Modern Threats

The latest large-scale attack on the healthcare industry occurred when a virus, masked as ransomware, found its way from Eastern Europe all the way to the United States. On the surface, this new virus appeared like the ransomware named “Petya” from 2016 which locked users out of their systems unless they paid a “ransom” to the hacker. Instead, the new virus nicknamed “NotPetya” infiltrated and destroyed files and functionalities.

 

Companies like Nuance Communications, which stores and transmits both patient and insurance data, were deeply affected by the virus. Rather than helping providers via its Dragon Medical Advisor and Radiology Critical Test Results products, Nuance instead found sensitive information destroyed.

The First Step to Safer Data

Although legislation like HIPAA and HITRUST serve to provide standards for data security, it’s clear by the Nuance attack that legislation alone can only go so far. Practitioners, and the companies that serve them, must also do their part.

 

The biggest and easiest step to take right now is cooperation, which involves two parts:
The sharing of threat indicators and sound practices will help ensure that the industry can merge its efforts to keep data secure. The National Health Information Sharing and Analysis Center (NH-ISAC) is an example of a forum that already exists for this exact purpose. The more companies that join the forum, the more information and brain-power there is to prevent or mitigate cyberattacks in the future.

 

The second part of cooperation involves outsourcing. It can be hard for CEOs to let a third party control part of their operation, but when it comes to things as complex as cybersecurity, often times someone else can do it better. There are numerous companies that specialize in cloud-based healthcare data management and security. Their commitment to security allows them to focus their efforts on protecting against threats.

Outsourcing: Galen Data

Many companies have joined in on the movement toward a secure medical world including angelMD startup Galen Data. Galen provides custom, compliant, and affordable cloud storage for small to medium sized companies. Galen is able to make storage systems faster than competitors while upholding safety compliance because the infrastructure is existing and tested. After customizing the system, Galen can focus efforts on maintaining, monitoring, and updating it for the customer.

 

According to Galen Data’s CEO Alex Condon, the healthcare data security field has two major issues that can lead to breaches. The first issue is that smaller companies simply don’t know the best practices, which is why it is beneficial to outsource. The other issue is that data is shared a lot in healthcare, which makes it subject to phishing or ransomware attacks on the individual level. Alex claims that, to minimize this potential threat, companies have to limit the amount of people who have access to certain data.

The Future of Data Security

While many companies like Galen Data are taking the right steps, the industry must always be looking for new ways to stay ahead of the curve. Right now, we can do what Abbott’s Executive VP of Medical Devices Robert Ford calls for: create an industry standard that protects data while still leaving room for innovation. Ford acknowledges the fact that this will not get done by government, so it will fall on the healthcare industry to make and follow its own standards. Abbott released what they are doing in this report to help guide the conversation.

 

In the long term, there are more complex solutions for data security that need to be kept in mind. Healthcare IT News ran an interview with Robert LaMagna-Reiter, Senior Director of Information Security at First National Technology Solutions, where he discusses the possible use of AI and machine learning in data security. AI systems could self-monitor, self-heal, and with the ability to predict threats, could prevent attacks from ever happening.

 

It is important to understand that cyber threats are real today, and working together is the best way to create a safer digital health field. This includes forums like the NH-ISAC and in bringing innovations to the field like AI, machine learning, and quantum computing. The more minds that we have working together, the safer healthcare data will be in the years to come.

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