For the past two decades, Josh Makower, MD, has sat on the innovator’s side of the table creating innovations and innovators through his work with the Exploramed incubator and Stanford Biodesign Program. Now, Makower takes his considerable abilities to New Enterprise Associates, where he’ll invest in medtech companies on behalf of one of the indus-try’s most venerable firms. Hear where he sees opportunity and how Astronaut Steve Austin influenced his career path.
Tom Salemi: Forgive the opening of the opening of the Six Million Dollar Man, the wonderful show from the 70’s that inspired us all to be better, stronger, and faster. But it seemed appropriate given the guest that we have today. Dr. Josh Makower, who’s now a General Partner at NEA, counts the Six Million Dollar Man as one of the things that inspired him early on in his innovating career. And he’s been studying innovation or innovators and doing innovation from the moment he got out of med school. He went on to co-found the Stanford Biodesign program, the principal hotbed of medtech innovation and innovators. He started the ExploraMed incubator, working with NEA to create many great success stories, including Acclarent. And today, Josh shares his thoughts on the state of medtech, Twitter, and his earliest inspiration, the Six Million Dollar Man.
TS: Josh Makower, welcome to the Podcast.
Josh Makower: Thank you very much, Tom. Great to be here.
TS: So explain something. This is kind of off topic, but you’re obviously a technology guy, medtech, and you literally wrote the book on medtech. Why don’t medtechers tweet? This is again off topic, but I’m tweeting out there, trying to get out there. But medtechers don’t tweet for some reason. You have 252 followers. I mean you’re a main guy in medtech, and no one’s listening to you. And to be fair, you haven’t really said much for a couple years. So why aren’t medtechers out there?
JM: That’s true. Well, interestingly, I have over 700 followers on my Coravin identity. And I have a few identities on Twitter. So you know, tweeting is a lot more of a consumer outreach type of media, at least from my perspective. Obviously there are those that are trying to promote themselves and the brand and so on, and that’s absolutely necessary when you’re a consumer-focused person. But medtech is really focused in a much more tighter set of customers. Usually medtech is – you know, focus messages on physicians. Maybe to colleagues, but it just doesn’t connect directly to our world as much as consumer does. And I think you’ll see as we develop more med consumer projects you’ll see a lot more tweeting going on. But really from those have the authenticity and are central to whatever that project or that theme is, so it’ll be – my Coravin identify is all about wine and all about that technology and our customers and what they care about, and doesn’t cross over much into any other spaces. And I think similarly, back in the day, I was exploring tweeting when we were sort of engaged in the sort of the FDA reform discussions, and I thought that that would be an important outlet, but I didn’t do much of it. And honestly, I don’t know, some of it seemed kind of a little bit more self-promotional, and I’m just not into that. So it didn’t really resonate too much with me. But on the Coravin side it’s completely natural because we’re actually trying to drive utilization and awareness of a product that does something really unique, and consumers want to find out about it, and that’s a great way to sort of get the word out.
TS: I am all about self-promotion, so that must be why I’m out there. Coravin, is that counted as a drug delivery device? Why don’t you give it a – if anyone doesn’t know what it is, it’s a real fascinating little tool.
JM: Yeah, it’s a great technology. It’s a way to take wine out of a bottle without ever exposing the wine in the bottle to air. So if you’re a wine lover, and you every so often just want to have a glass, this is a great technology because you can have a great glass of a great bottle, and not worry about what’s left in the bottle ever spoiling. And so this is a technology that is invented by my buddy, Greg Lambrecht, and we cofounded this company about 4 years ago, and it’s doing fantastically. You’ll find it this Christmas, or this holiday season in most outlets across the country, and really world. We’re a global business and growing rapidly. And it’s becoming a core tool for the wine industry. And the way I include it in my portfolio of projects that I’ve worked on and make it consistent is it’s all about quality of life. And so Coravin is product that greatly improves your quality of life if you’re a wine lover; so therefore, it’s a fitting investment of my time.
TS: So this NEA job that you took, this is just to pay the Coravin bills? Is that the deal?
JM: That’s right, exactly. That’s all it is.
TS: Let’s hop into that. We’ll get into your background in a bit, but you’ve joined NEA. You’ve obviously been working with them for close to 2 decades, if not 2 decades, as part of ExploraMed. But what made you sort of put on the suit and the fancy clothes of a VC rather than the overalls or whatever you wore in your little workshop in Stanford?
JM: Right. Well, I’m actually wearing jeans right now, but they’re black jeans so you can’t tell that they’re actually jeans. So I’ve got a way to morph my entrepreneurial behaviors into the VC world.
TS: Don’t let ‘em break you, Josh. Keep true to yourself.
JM: I’ve had to wear a collared shirt a lot more than I have over the last decade or so. A tee shirt doesn’t always fly around here. I have been working with NEA for 20 years, as you mentioned, and really respect the organization. And obviously, NEA has a tremendous reputation and a position in the marketplace, and ability to really move and make a real change. And I have always wanted to make a major impact in whatever I spent my time, and I couldn’t think of a better place than NEA to continue to do that. They’ve been my financial partner for all these years, and I really credit NEA and John Neara and Ryan and others, Ry Drant and others for my success and supporting the things that we were doing, albeit risky, and a lot of those paid off. And I think as a result, that’s probably what gave me the opportunity to move here at NEA. And I think the platform opportunity and the fact that NEA is still very strongly in support of funding and being a part of the medtech investing community is a perfectly great place for me to transition to the next step in my career. And I was really looking to do something just a little bit different, and honestly, it is just a little bit different. I still, you know, in my role, although I am an inventor and a founder and play a role in getting things started, a lot of the job – you know, those were fleeting opportunities when we were getting things together. But a lot of the remaining job was working with the CEOs and leaders of those businesses and being a good board member and a part of the team and helping advance those projects in any way that I could, utilizing whatever background or capabilities I had to benefit the business. And so what I see myself doing is still that in companies that we would back. So I’m feeling like there’s a lot of compatible and very similar skill sets that I’m applying here as I would apply in my previous role as an incubator leader. And actually will continue to do new projects through the incubator. I’m working on trying to pull ExploraMed into and under the NEA umbrella for it to be a place where I can work with young or early entrepreneurs with ideas and/or not even ideas yet, but just great people who have a high probability of creating something awesome, and putting them into the ExploraMed structure and allowing that to be a tool to allow us to create new businesses through. So we’re still going to do work through ExploraMed, but obviously a majority of my time will be spent looking at new projects, both large and small and investing in them.
TS: Do you think you could really get into a late stage deal, really find that interesting?
JM: Yes. Absolutely. I think what matters to me is it really has to be something that is novel and making a big difference. And I think the tougher needle to thread is does it meet the financial criteria that NEA is looking for for returns. And so there’s a lot of things that we do, small and large. But I think that there’s so much to be done in healthcare and so much need. And really, there’s so much innovation. I’m particularly excited about the innovation in the consumer oriented spaces and health IT and device enable services, you know, the sort of new concepts of devices that enable new ways of treating patients and reducing the cost of care and improving outcomes. There’s so much tremendous things to do there, and that’s going to really be exciting. So I’m excited about playing a role in advancing those therapies through the investment activity at NEA.
TS: So I hear those areas, and I don’t know, maybe I’m just being overly trained to look for buzz words, but it sounds like maybe you’re going to do less pure medtech than you’ve done before, and look more into those areas where medtech enables other types of industries, as opposed to investing in a new implantable whatnot, or some traditional medtech technology?
JM: No, we’ll still look, and we’ll probably invest in them. We just have, actually, NEA has just made an investment, traditional medtech firm in the peripheral vascular space. And so we will continue to do those deals. But the criteria is different than it was 10 or 15 years ago. The world has changed. We’re not going to get paid for – we’re not going to get paid a bigger price that just improves the quality of care anymore. We actually need to reduce cost as well, and that’s – that used to be an analysis that was sort of secondary, and not it’s probably primary. You probably have to reduce costs as a primary objective, and then secondarily also improve outcomes. It’s sort of the way that the world is working with reimbursement. And that is the major front right now that is limiting the growth of medtech is reimbursement. So recognizing that, I think we’re going to use a little bit of a finer filter on the projects that we would get behind. But I think there’s still a lot of opportunity in traditional medical devices that has the capacity to achieve those goals. So absolutely we’ll be participating and investing in traditional medical devices going forward, along with some of the new era of device technology, which I think is being born, which is in the consumer healthtech space.
TS: We’ll take a quick break to remind you that Medtech Talk Podcast is affiliated with the Medtech Investing Conference, the premier medtech conference for venture capitalists, entrepreneurs, and executives exploring the next opportunity in medtech. We’re happy to report that we have picked a day for our 2016 event. It’ll be on June first, in Minneapolis, at the Lowe’s Minneapolis Hotel. Go to medtechconference.com for more information as it becomes available, and keep listening to the Medtech Talk Podcast. Now back to this conversation with Josh Makower.
TS: And I know when you were at ExploraMed you were looking at consumer opportunities. We had Bill Facto at the conference a few months back, and he explained that during his time at ExploraMed with you, you were looking in that area.
TS: But I was thinking more I know NEA will invest in devices. But you have been personally on the front lines of pushing back against the FDA, pushing for reimbursement, naming names of insurers who you think haven’t treated medtech fairly.
JM: Guess so. Yes.
TS: And I hear you talk today, and you’re looking at all these other areas. Is this a sign that the battle is not going well? Or do you see some areas of improvement in those spaces with the FDA? Are reviews getting easier?
TS: Is reimbursement getting easier? What’s your state of the medtech industry?
JM: Everything that I hear and I’ve also experienced with the FDA is so much better than it was back in 2010 when we began our advocacy effort to try to make changes. I mean Jeff Shurin has done a fantastic job in really balancing the risk and benefit. And what we were all getting hung up on and was that the review teams were sort of spiraling downward, down these theoretical pathways that were not We; further investigation, not reasons to delay IDEs, and really not reasons to delay approvals because they were all theoretical risks. Not all; obviously they were – look, there were still a lot of things that they were rejecting that deserved to be rejected. And I’m not saying that everything that’s put in front of the agency over that time frame was worth of moving forward. But it did feel to those of us deeply in the field that there was a lot that was facing amazing roadblocks and delays at great cost that was not appropriate. And I think that while initially the position was that it was a quality of submissions and all that that was their – the industry had lost its way in terms of all of those aspects, I think the truth ultimately got borne out through studies that we did as well as others validated through repeating those studies in different methodologies, you know, basically so that now this is a gross problem that is moving in the wrong direction, and if we want to preserve innovation in the United States and really our industry, and really the ability to advance new therapies for patients in the device arena, we’ve got to do something, and we gotta do it quick. We definitely did something, and I think the FDA has really responded in a very positive way, in a balanced way that still is not – there’s nothing easy about moving a project through the FDA right now, but it does feel like it’s a much more fair and balanced conversation, and much more focused on the right risks, as I’m being told by many fellow entrepreneurs and company leaders. It does feel a lot better. The tone of the conversation is better. There’s a lot more dialog around the right issues, and that’s what’s important. And the right things will move forward and the things that should not move forward won’t. And that’s the way it should be. But at least we’re going to see some more innovation coming out. And I just see the numbers of approvals and the numbers of applications that are being accepted for IDE I think is a very positive sign. So there’s big changes there. The big problem that we still face, and that honestly has been very tough to get our fingers around because of the industry itself is there isn’t – the nice thing about FDA, good and bad, was that there was one big governmental agency, and they were controlled by Congress, and therefore they were people who one could complain to to ask for change. And it really– a requirement that those concerned at least need to be listened to alongside the alternative opinion point of view as well, and hopefully some balanced process could result that would lead us to something that would be much more beneficial for the citizens of the United States. Whereas when it comes to the insurers, you have so many different participants in this space, and many of them are profit motivated. They’re not government agencies solely set up to service the population, and there isn’t a central place to go complain. And many of the private insurers don’t really want to hear the complaints, and certainly wouldn’t want to hear it from industry. So therefore, we have a much more challenging road ahead to figure out how we advance new therapies and get them paid for. And we’re seeing it now in companies that I’m affiliated with that have new products that even have a great code with the CPT-1 approval, and a great payment assigned through that process. And then yet still, we’re arm wrestling every individual insurance company trying to get the same treatment, and it’s very difficult and very time consuming and very expensive. So I don’t know how we get out of that box, but it is an issue that we have. Perhaps on some domains of healthcare where it’s a life or death situation and there really is a dire consequence by an insurer not paying for something, I think there’s probably more likelihood to pay, and therefore things like orphan diseases and other certain more biotech oriented projects are getting a lot of support, more dollars than medical devices would ever for. But unfortunately, a lot of our projects really relate to more modest quality of life improvements that are really meaningful on an individual basis, but no one’s going to die. So I think some of that is frustratingly diminished in their eyes, and therefore chase much more significant hurdles in trying to get medical directors to get behind some new technologies looking for the next study and the next study. And it’s not clear whether they really are looking for studies or whether it’s just a delaying tactic to try to see whether there’d be enough of an uprising amongst the participants that they see people leaving because they aren’t going to have this or that singular therapy through a different insurer. I don’t know. But that is our big – if there is one big issue looming over medtech right now, it’s probably reimbursement.
TS: And you had identified in some interview, I forget where, Wellpoint as a troublesome entity, but then you also said that other insurers were there as well. And that actually – I’m reading Steven Brill’s book and Wellpoint is features prominently there.
TS: So it was a great point by you. What led you to sort of assume this mantle? You were out there, you did surveys, you were obviously testifying before Congress, Mike Carusi was out there. But what led you to sort of take the charge? You were out there in the streets, really pushing back hard.
JM: Yeah, I was. And really still am. At that point in time, there was a real call for action. I mean look, I’ve spent my whole career focused on creating technologies to improve human health. And I was very fortunate to have a couple of successes that provided me with abilities, you know, maybe it’s time to give back and take some personal risk, and really advocate on behalf of the industry because I saw so many colleagues who had all these same concerns as I did, but for one reason or another just could not – you know, their boards or their investors or their – they were too afraid of repercussions or backlash or sort of some of that happening as a result of speaking out. So I was sort of in the place where I felt like I could do it and it was a responsibility that I needed to listen to, and so I went ahead. It’s not my nature to go pick a fight, but this was – I was really fighting on behalf of all our colleagues who were suffering, and really for the patients that were being denied the opportunity to ever see even the chance to have a technology that would improve their health. There was so much [?] Unfortunately, it didn’t happen fast enough, and we’re still seeing the fallout from those years is still happening. You know, the VCs have departed, many of them. Many businesses have failed or been sold for nothing, and thus generating no returns, and therefore LPs and VCs are saying why are we investing in medtech, and all that kind of stuff has happened. And I don’t think it’s over. There’s probably a couple other firms to exit medtech investing coming soon, and in the next years ahead. But you know, there’s a few residual survivors and strong believers, and I do think there’s going to be a rebirth and this whole field is going to come back together. But we’ve been irreparably damaged by that period of time, and hopefully the stuff that I did and that my colleagues and I did, helped stop it from being completely wiped out. But we couldn’t prevent some of the damage that has occurred regardless of the improvements that we actually did make.
TS: It’s an unscientific sampling, but we actually had a really strong showing at our Medtech Conference in May. Justin Klein, your colleague, is a co-chair of that event, and there was a lot of energy and positive feelings, but you’re right, you look at the numbers and the population of people who are committing capital, at least traditional VCs, and it seems to be shrinking. Did you get any kind of repercussions or blowback from your very public stance?
JM: You know, I really don’t think so. I think that – look, initially, there was a little bit of tension between Jeff and I on stage and in front of Congress and all that. But I think as the dust has settled, and I really tried very, very hard throughout that whole process, and it was never about accusing any individuals or really even accusing anyone at the FDA of doing anything wrong. It was more of point to look, the system is broken and we need to fix it because we’re hurting innovation, and that’s what the spotlight that I was trying to pull on that issue is innovation and the next generation therapies that are absolutely needed and so important are being threatened by all of this that’s going on. So it’s too much. We need to be balanced, we need to allow the good things to progress, and good things are dying right now. And that was really the central theme. And I think as the dust is settling, I feel like even people who might have thought that I was being aggressive have realized that a lot of what I was saying was right and it’s been validated, and I think major changes have occurred as a result. And I think we’re seeing some positive evidence that we’re moving in the right direction. And I give credit to Jeff and the other leaders, Bill Maisel and others at the FDA for really listening and trying their best to really steer what is a massive ship, you know, and very difficult one to turn around. But I think it’s in a much better place, and I think – I really thank them for that and am very happy to have participated in whatever role that I played in making that happen.
TS: I don’t think you ever took off your shoe and pounded the table with it. It was always very measured and –
JM: Thanks. I appreciate that.
TS: – and you’ve always had data to back up your point. Just going into your background a little bit, where did you grow up? I know you ultimately went to MIT, but you started at Case Western. How did you sort of find your way into the medtech world?
JM: Yeah. You know, it’s interesting because when I was a little kid, like 5 years old, I sketched in a notebook, and I was drawing inventions of – I was really inspired by the Bionic Man.
TS: Who wasn’t?
JM: Yeah, exactly. And all those ideas as we can build him better and sort of the idea that technology could really enhance or improve people’s lives. And I just always loved the idea, just sort of totally fascinated with the wonder and the complexity of the human body and all the parts, and how with this miraculous design how it all works together. Just still to this day it fills me with a lot of wonder and excitement. And so while that was there, I had other interests, and music was one of them. I actually entered college as a music major.
TS: No kidding?
JM: Yes. But very quickly switched to engineering. After a couple of theory classes and a couple of instrument classes, I realized, Oh, my God, I can’t spend four years doing this. I like music, but I don’t like it that much. And just found my way to engineering and bioengineering. And what attracted me to music was the creative aspects, and I think the opportunity to apply creativity to improving people’s lives, because I couldn’t think of a better way or topic to apply it to. So I just love that idea. And so I was very drawn to it. That’s why I went to medical school after engineering school, just to really learn about the body and learn about physiology. And that was a fantastic journey for me, always having a little bit of an engineering mind as I looked at things and different lens, and being partially dyslexic, always sort of seeing the reverse image of the image sort of helps you to see things that aren’t there, and recognizing how many things we took for granted, and we didn’t really understand about medicine that sort of really propelled me forward to believe that there’s a great opportunity to create a career around building things that would create a difference. And so when I got my first job with Pfizer as a technology analyst, I was very fortunate to be given an additional assignment my Hank McKinnon, who was the CFO at the time, that I should find out why our companies aren’t inventing and innovating as much as they were when they were independent startups, and try to figure out a way to do it internally. And that led me down this path of identifying processes for innovation. And that was sort of the origin of what is now the Biodesign Process that we teach at Stanford. And then I utilized that same process in my own career inside of Pfizer as we created new products, but also when I started ExploraMed in 95, that same process was the core asset that NEA backed. John Neara and Bob Anderson wrote the first checks for ExploraMed on the basis that that methodology would be able to create new companies. And we’ve proven that that’s the case, and we’ve been able to create a couple of really great big companies out of that. And they haven’t all been successes, but we’ve had a few, and I think there’s some more coming. And now it’s great to see the students of Biodesign at Stanford utilizing those same tools to create businesses and create technologies for patients as well. So, so far so good.
TS: Where was young Josh Makower drawing those pictures? Where did you grow up?
JM: Oh, I grew up in – well, I was born in Massachusetts, and my parents were going to University of Massachusetts in Amherst at the time. And then we moved to the Connecticut area, and then to the New York area. I spent most of my youth in the upper – sort of outside the City in Rockland County area before I went off to college.
TS: So you’re a Northeast guy, which explains the willingness to step up and push back a little bit.
JM: I guess so.
TS: Josh, I know one of the more recent projects, and I think probably will be one of the more successful projects to come out of Stanford was Oculeve. We had Michael Ackerman on the Podcast a couple of weeks ago. What role did you have in putting that together?
JM: Well, Michael was a fellow of the Stanford Biodesign. And so we had the opportunity – and that original concept was conceived within the Biodesign program at Stanford. So during that time I was his mentor and faculty member. But I don’t in any way want to take away form the tremendous insight and execution that Michael pulled together for that deal. I mean I think it’s incredibly remarkable, incredibly unique. He’s an unbelievably talented guy, and he did something miraculous in a very short period of time. And really evolved and adapted that idea to an even more executable idea during the course of just a couple of years after it left Biodesign. So I’ve been a mentor of Michael’s, continued to be one. He seeks me out for various advice on strategy and technology from time to time. But again, I put it all to Michael. And of course, Ali Behbahani here at NEA was on the board and I know contributed a lot to the development of that company. But my role was really just sort of being an advisor for Michael and helping him any way I could.
TS: Did you teach him how to be stealthy? Because he was pretty stealthy in keeping a lid on the idea, and even when I thought I had figured it out from the Stanford article, he advised me in my interview that no, that was actually the old idea. We have a new idea that’s even better.
JM: Exactly, exactly. Well, I do think that there’s an element of surprise that is important and I obviously executed in my own career as well. So perhaps he might have picked something like that up. But again, he’s a remarkable individual and a great entrepreneur and inventor. And actually did a great job as CEO of that early stage business. So that’s all him, that’s all him. You can be a good mentor, but only if the mentee actually has a got going for him, and in this case he’s got the full package. I’m really impressed and proud of him.
TS: That’s great. Are you looking yourself at ophthalmology deals? Or do you leave that to Ali? Or is it open to anybody?
JM: Ali is our resident expert in ophthalmology here at NEA. So whenever anything comes in in that domain, I of course send it over to him. But we as a team are very interested in ophthalmology projects, and look forward to participating in more of them as we go forward. And we just actually just closed another investment in ophthalmology that was originally founded in an incubator that we backed, a little business called ClarVista. And that’s a very exciting project. Also, Ali is on the board there. So it’s a great new project in ophthalmology. So yes, we will still look, and we intend to invest in ophthalmology going forward.
TS: Well, when we’re done with this interview, ClarVista was a guest on this week’s OIS podcast, so make sure you check it out. Final question: What would you tell a slightly older Josh Makower who’s looking to get into medtech? What does the future of this industry look like in your eyes?
JM: I think that there’s – it’s funny because I just met with the new crop of fellows for this year’s Stanford Biodesign class, and had exactly this comment, which is whatever it was, it’s not going to look the same, and you shouldn’t expect it to look the same. I mean things change, and the environment has changed, and it’s going to change. So as you are an innovator, you’ve got to be responsive, gotta be flexible. And so you can’t use the same models and ideas on a perch exactly that we used before, but we need to be adaptive to the current environment. And the current environment is calling for the consumerization of healthcare. It’s calling for lower cost, much more accessible technologies that really have a still similar impact. And so those can still be implants, but they need to – there isn’t going to be the $200 million checks being written for these projects right now if they have very, very long regulatory and reimbursement pathways. There needs to be much more thoughtful ways of executing right now. Maybe we’ll be able to get back to that someday, but right now, the domain in which seems to have green lights over innovation for it are clear. And those involve much more straightforward, with a cost focus projects that span traditional medical devices and into consumer and healthtech.
TS: Great. Well, it’s supposed to change. You’re right, that’s what innovation is all about. Thanks for revisiting your history, and for giving a glimpse forward. I can’t wait to see what you at NEA.
JM: Thank you very much, Tom. I really appreciate the opportunity to talk with you.
TS: Josh Makower, thank you for joining us on the Medtech Talk Podcast. Thank you, folks, for tuning in and listening to this great story of one of the great minds in medtech. Excited to see what he’ll be able to do at NEA. And don’t forget, go to medtechconference.com for more details on next year’s Medtech Investing Conference, the premier event in medtech. It’ll be on June first at the Lowe’s Hotel, and I can’t wait to see you in Minneapolis.