Dennis Wahr, MD, CEO of Holaira, Inc. and co-chair of the Medtech In-vesting Conference, says “the best is yet to come” for Medtech and shares his strategy for successful VC fund raising.
Dennis Wahr, MD
Dennis W. Wahr, MD, FACC joined Holaira as the President and CEO in September of 2012. Prior to Holaira Wahr was the Founder, President, and CEO of two successful Minneapolis based medical technology companies including Lutonix which he co-founded in 2007 and sold to CR Bard in December, 2011 and Velocimed, founded in 2001 and sold to St. Jude Medical in 2005.
Tom Salemi: Hi, welcome back to the Medtech Talk Podcast. I’m your host, Tom Salemi. Last week we shared a conversation with Lisa Earnhardt, CEO of Intersect ENT. Today I get to speak with another accomplished CEO, Dennis Wahr, CEO of Holaira. Dennis of course is experienced two sizeable exits in companies he has led: Lutonix and Velocimed were both acquired, generating strong returns for their investors. Today, Dennis leads one of the hotter companies, a pulmonary company in medtech. So we’re happy to have him on the Podcast today. But we’re even more happy to say that Dennis is co-chair of the Medtech Investing Conference. Dennis has been working tirelessly with us to develop a compelling agenda, packed with the right topics and having the right speakers on the podium. So I’m very happy to be working with Dennis and Justin Klein, General Partner of NEA, as co-chairs of the Medtech Investing Conference. They, along with our esteemed advisory board, have really built a great meeting. So today we speak with Dennis about his experience in medtech and about his work for the Medtech Investing Conference, which is May 6 at the Loews Minneapolis Hotel. If you want to find some information, go to medtechconference.com.
TS:: Hi, Dennis, welcome to the Podcast.
Dennis Wahr: Happy to be here.
TS:: Dennis, I’ve been talking to you for a number of years, and you’ve obviously had some great success in medtech. You’ve cofounded and sold two companies, you started Velocimed in 2001, and sold it in 2005, and you cofounded Lutonix in 07 and sold it in 2011. And I find the timing interesting, in that you started one company in what was a down period for medtech, 2001, and then Lutonix, which in 2007 was obviously a very – it was beginning to weaken a bit, but it was still, I think, a hot time for devices. What was the difference between starting a company when the sector was down and starting a company when the sector was at least at the time doing well?
DW:: Well, from my perspective, I think it doesn’t make a lot of difference. I think the economic questions is probably more related to what the economy is like when the company exits, not so much about when it’s founded. I think that down cycle can be a great time to start companies because during those periods, big companies are more likely to be laying off talented people that you can attract and accelerate development, you know, activities. I would probably point out that in terms of both Velocimed and Lutonix, both companies exited during relatively good economic cycles.
TS:: And you’re right, that’s the most important part, to make sure you exit at those good times. But are people more willing to – you mentioned people getting laid off, and obviously when they do that, they’re eager to take on new ventures, and they’re available to startups like yourselves. But when the times get tough, is it difficult to lure good talent away from big companies because there’s a reluctance there to take a change?
DW:: Yeah, that certainly is a factor that could work in the opposite direction. Although most people that are willing to leave a big company, which by the way, I think is a great place to train to get ready for entrepreneurship. You know, people that have spent a few years in a big company, they’re kind of oriented that way anyway. I think they’re pre-programmed to want to be more entrepreneurial. And so when that type of situation comes along, they’re ready for it. Another point I might make is that obviously VC forms operate on relatively long timelines. And the firms themselves are actually not that sensitive to short term downturns in the economy. And because of the fact that any company that you start in medtech typically is looking at a 5 to 10-year development time, it’s kind of expected that all companies are going to go through some up years and some down years. So the way I look at it is that pretty much any time is a good time to start a medtech company, as long as you have a good product concept that’s worth developing.
TS:: You gave a great address to open last year’s Medtech Investing Conference, of which you were co-chair, and you’re co-chair again this year. We’re very happy to be working with you. And you reminded everyone at that address that medtech takes time, and innovation needs patience. What would a potential theme of your opening address be this year? I’m guessing you haven’t started working on it yet since it’s about 3 months away. But what would you say the state of medtech is today? Are we in a down period? Are we in a slowly improving period? How would you classify the state of medtech?
DW:: Well, I think the last few years, you know, last couple years has definitely been relatively down for medtech. I think the statistics show that. But at this year’s Medtech Meeting, we’re going to review 2014, and I think people are going to see that 2014 was clearly an up year, at least relative to the previous years. Several medtech companies went public, many new companies were started, several VC firms raised new funds. I think we’re turning a corner. Despite the fact that 2014 was an up year, I think the best is yet to come, and the reason for that is because a great time to be an entrepreneur and develop new technology is just as things are beginning to change. And I think that there’s little doubt that the delivery of medicine is on the cusp of revolutionary change on all fronts, not just technological advancements. But you can also say the same thing for how medical care will be delivered, how patients will be able to use publicly available information in the Internet, find the best hospitals, the best doctors, and the best insurance plans. In fact, recent initiatives out of HHS will drive this change where the emphasis will be on the value proposition. And the buzz phrase is going to become value driven healthcare. These are kind of things that are music to the ears of entrepreneurs because the system will welcome change.
TS:: That’s something that we’re going to try to hit upon at the conference. We’ve put up the agenda and it’s up on medtechconference.com. But the very nature of entrepreneurship or innovation in medtech is changing. There’s a lot of really precise questions that you have to answer when you’re starting a company. Are medtech entrepreneurs evolving and making the changes necessary to create medtech’s next generation of successful startups?
DW:: I believe so. I’m certainly a believer in it, and I know other people that I consider my colleagues are as well. I mean this kind of change is going to require high value medical products, better information systems, treatment algorithms, you know, that address big unmet needs. Quality of care is going to be able to be measured and ideas that can do this and at the same time reduce overall healthcare costs will be big winners, you know, at the expense of older ways of doing things.
TS:: Great. We’re going to take a quick break and we’ll be right back.
TS:: And we’re back with Dennis Wahr, CEO of Holaira, and co-chair of the Medtech Investing Conference. I think this quote is has gone around VC circles forever. It’s about fundraising, and the suggestion is the time to eat the hors d’oeuvres is when they’re being passed around, which I always took to mean basically you don’t say no to money if someone offers it to you. I think it’s been assigned to Eugene Kleiner. I’m not sure exactly what the origin was, but we’ll give it to Eugene Kleiner. You don’t really necessarily subscribe to that philosophy. We’ve had a conversation about how you’ve raised money for your companies, and you have a very binary approach to fundraising. How do you approach fundraising for your startups?
DW:: Well, I start from the point of view of a personal belief that good ideas with an excellent value proposition and excellent management with relevant expertise and a track record of success and persistence – you know, certainly persistence is key here – will get funded. I think they always have, and I believe that that will happen going forward whether it’s good times or bad times. And I think one of the reasons where people sometimes, I think, make a mistake is they look for excuses for why not to do something as opposed to do something. So you have to have a positive attitude about it. That’s my philosophy. You know, I guess a couple other things I might add, you know, I think when you go out to raise – I mean you have to be very disciplined about how you raise money. I think you need to avoid being in what I call continual fundraising mode. You need to, I believe, put together your so-called pitch or road show, organize it very well, go out, make a concentrated effort, and try and get to the closing as soon as possible. And then when you raise your money, stop, and then don’t raise money again until you really need it. You know, people who are in continual fundraising mode, I think, make it easier for potential investors to take them less seriously. I think that process is important for raising money.
TS:: I guess it works. I know one VC who has wanted to invest in new companies, but has not been able to find his way in, or at least at the price you’re able to get from others. So is that just a matter of supply and demand that if you open the door for only a short time, then you can get the right people in, and are you able to get a price that you find acceptable?
DW:: I think that’s important because if you establish a reputation where if somebody comes by and they want to invest, and you just let them in at any time, well then that sends the message that when you actually go out for a formal round that it lets people know that, well, we’re busy right now, we’re looking at some other deals, so Dennis will take our money later on if we want to get in. You know. So it gives them – it allows a potential investor to procrastinate as opposed to just, you know, get to their yes or no decision, and knowing that that’s going to be what they need to do.
TS:: Talk a moment about Holaira. It’s an area, the pulmonary, is one that has drawn a lot of attention from VCs in the past, with I think mixed results is probably a charitable definition of the success. What is Holaira doing that’s different, and how much of the story can you share with us?
DW:: Well, I think there’s quite a bit public about the story. We presented our data for the first time publicly at the European Respiratory Society meeting last fall. Holaira has a completely novel therapy. We do pump, we denervate the parasympathetic nerves that go to the lungs, and we do this by applying RF energy to the right and left main stem bronchus. When the parasympathetic nerves are denervated, it results in a generalized bronchodilation through the whole lung field, which therefore has the potential to improve outcomes in patients with COPD, which is a huge unmet clinical need. Actually the size of the COPD market rivals the size of largest medical markets in the world. So it’s a very exciting company. We are right now, we’re in the middle of our – or I should say the data we presented at ERS were our phase 1 clinical results. We are now in the middle of our phase 2 clinical trial, which is a randomized, sham-controlled trial. And then assuming that we re-document the treatment effect that we believe we saw in phase 1, we will then move on to a phase 3 pivotal study.
TS:: Great. Does denervation obviously took on a different meaning after Ardian’s difficulties. I know it’s a completely different part of the body. You’re not renal denervation. But does Holaira get painted with a broad brush at all? Is denervation itself sort of looked at sideways? Or is it accepted that this is a completely different approach, and you’re not feeling any sort of impact from some of the difficulties that renal denervation companies have had recently?
DW:: Well, last spring when we went out to do our financing, we actually kicked that off at the JP Morgan meeting. And the news about Ardian hit one week before JP Morgan. So as we went out to start the road show, obviously there was no doubt in our minds what the first question was going to be. And in many ways I think we were fortunate because that allowed us to explain why what we do is different, and what the advantages are, what we believe the advantages are of our therapy as part of the road show. And had we finished the road show, and actually would have been before the Ardian data came out, that actually would have been worse. But I think my personal belief is that I actually believe that renal denervation probably works as well, although it’s the sympathetic system, not the parasympathetic system. I believe that recent big, I mean extensive analysis of the renal denervation world suggests that it probably would work, given the right device and proving that you really are getting effective denervation.
TS:: You think it would have – and going back to your comment, you think it would have been worse had you completed your road show before the news came out?
DW:: Yes, yes. Because as a result, we were able to correctly address the issue of why we are different than Ardian. So that actually was an advantage for us. I think the thing that really made the difference for us was that we actually in our phase 1 trials had tested 2 different energy levels of denervation. And fortunately for us, the data from the phase 1 trial showed that there was a clear dose effect, you know, a higher energy dose gave better efficacy than the lower dose. And so in some ways, our phase 1 trials were a randomized trial. And it was that fact that allowed people to get comfortable with pulmonary denervation, and why this has a good chance of working.
TS:: Interesting. And final question: in between Velocimed and Lutonix, you spent a short time with Rivervest. You donned the black cape and the black hood and became a venture capitalist. What that experience like? Was that – did you consider that as a transition? Or was it just sort of an EIR waiting for the next greatest opportunity to come along, which you found in Lutonix?
DW:: Yeah. I think it was a good time. Rivervest had been an investor in my first company, and they invited me to join them. In fact, I started with them I think the first day my commitment was finished after the M&A. But it was a good 2 years because during the 2 years at Rivervest, they raised their second fund, and began making investments in that fund, and I was deeply involved in the process. It was great perspective because I learned firsthand how challenging it is for a VC group, first of all, to raise a fund, and then how challenging it is to deliver results, you know, how to pick the right companies. And I think knowing how VCs think, what their view of life is, I believe has made me a better CEO. However, my heart was and always has been to be in company operations. So that’s my preferred way. So when the right thing came along, which was Lutonix, the drug coated balloon, I got so excited about it I had to go back and be involved back on the operations side. Rivervest, I will say, was a good group to work for. It’s also been gratifying to see how well they’ve done. I mean their second fund has clearly been a star performer within the life science sector, without a doubt.
TS:: They really show the emergence of a lot of successful firms within the opposite – not on either coast, in the middle of the country. So no, that’s a great firm. So you literally finished your Velocimed obligation, and then the next work day you were at Rivervest? You didn’t take any time off at all?
DW:: Zero. They asked me to join them, and part of it was they were going out to raise their second fund, and I think they wanted to add to their team before going out to raise that fund. And so they kind of said, you know, like we’d just like to have you come right now. So I did. I literally never a day off. And then after I sold Lutonix, I promised myself I would take a little bit of time off, and I did. You know, after we sold Lutonix, I took what a call a 6-month sabbatical. And then got real excited about the Holaira opportunity.
TS:: That’s great. Glad to be working with you on the conference. Thanks for your time today, Dennis.
DW:: All right. Thanks, Tom.
TS:: Once again, thank you Dennis Wahr for sitting with us today, and thank you for serving as co-chair of the Medtech Investing Conference. If you enjoyed this conversation, then you should come to the Medtech Investing Conference on May 6 at the Loews Minneapolis Hotel. Go to medtechconference.com. Check out our agenda, check out the speakers we have, and we’ll see you in Minneapolis.