Karun Naga, Partner at The Foundry, on Creating Medical Technologies and Building Innovative Companies
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In this episode we talked with Karun Naga, Partner at The Foundry, former CEO of Allay Therapeutics, serial medtech entrepreneur and operating executive, and former intellectual property lawyer.
The Foundry is a team of entrepreneurs committed to inventing technologies and building companies that redefine the standard of care and transform patients’ lives. The Foundry’s 20+ companies have raised nearly $1 Billion from over 50 venture capitalists and corporations, creating more than $3 Billion in shareholder value.
Karun recently served at the CEO for Allay Therapeutics that closed a Series C funding round for $60 million in 2021. Previously, Karun was the Director of Corporate Development at Medtronic after their acquisition of the Foundry-based portfolio company Ardian, a catheter-based treatment for hypertension. Karun served on the executive management team for Ardian and was pivotal in protecting its intellectual property.
Prior to that, Karun worked on medical device start-ups in Southern California and as an Intellectual Property lawyer at Mentor Corporation and Jones Day. Karun received his B.S. in mechanical engineering from Michigan State University, his JD degree from the University of Michigan Law School, and his MBA in from the Wharton School at the University of Pennsylvania.
In this podcast Karun and I discussed:
- The business model and structure of The Foundry
- His career journey that led to working with medical device start-ups
- The role he played in the medtech start-up Ardian, the development of that technology and therapy, and the acquisition of that company by Medtronic
- The challenges of the M&A process and the value of working with strategic corporate investors early on in a start-up timeline
- His transition to lead the new incubation efforts and be the CEO of Allay Therapeutics, a post-surgical pain management solution that eliminates the need for opioids
- Advice for early-stage entrepreneurs and those looking to pursue a career in life science innovation
2:03–5:54 The Foundry
The Foundry is a group of hands-on serial entrepreneurs who are in the business of discovering clinical problems and identifying solutions.
Formally thought of as a medtech incubator, Karun discovered in our conversation a more fitting term for The Foundry, a venture studio. The Foundry leverages its network of physicians, R&D professionals, investors, and entrepreneurs to create and build businesses.
“We like to pioneer new therapies, first of its kind ground breaking therapies. Do something that has never been done before. Our measure of success is about getting a compelling therapy to market so that it can impact the standard of care, alleviate suffering, and save lives. ”
8:22–11:10 Early Career Journey Made of Zig and Zags
Karun was exposed to engineering and medicine at an early age. His family worked in the auto industry and manufacturing, but Karun realized that it was not for him. After studying engineering he decided to rebel and study law.
On following the buzz: Going from engineering to law opened many doors for Karun in the field of patent law. The buzz in Silicon Valley with start-ups and venture capital funding drove Karun to the West Coast to work at a firm focused on intellectual property. Karun began working very closely with entrepreneurs and investors, niching himself in life sciences and medical technologies.
“At the end of the day, I said to myself I really want to do what they are doing and want be them I don’t want to be their lawyer.”
This realization enabled Karun to pivot to working in-house at medical device start-ups and later a portfolio company of the Foundry.
11:43 Discovering and Building a Revolutionary Device-based Therapy to Treat Hypertension
While at The Foundry, Karun and his team learned that hypertension can be driven by overactivity of the nerves connecting the kidneys to the brain. By reducing that signaling, the patient’s blood pressure could be lowered.
The big question: How do you do that?
The team’s customer-centric thinking led to a big discovery: the ability to access the renal nerves from within the artery using a catheter.
On retiring risk for a new therapy: Developing the right kind of models on bench and in an in-vivo setting was critical for the company and took a lot of innovation. The goal for the team was to prove that the device and therapy is safe and has potential for clinical benefit.
On inflection points for the company: In the clinic, Karun very early on saw profound drops in blood pressure. This positive indicator made Karun’s job of protecting the ideas extremely important. Capturing all the learnings and investments was imperative, so that the propriety technology remains theirs so they get the financial benefit of sweat equity. The second inflection point was the randomized controlled clinical study conducted in Europe. The positive results from that study provoked an M&A process with a lot of corporate interest.
20:07 Ardian’s Acquisition and the M&A process
On the dating game of an acquisition: Karun emphasized the importance of working with people you know and trust, getting to know them at first, determine their interest, and slowly show them more.
“Investing is a great way to advance the relationship, because they help contribute to de-risking the project with their capital. They also, by having some involvement as an investor, give you access to their know-how and resources.”
On risks and challenges with exclusive relationships in the M&A process: Karun emphasized that you do not want to have an exclusive relationship that discourages other buyers. One advantage for early investors is strategic rights i.e. right of first refusal. Strategic investors may have the advantage of having early access and insight into the technology. This insight may enable a better picture when making acquisition decisions and financial evaluations. It also may discourage other buyers.
27:00 Quarterbacking his first venture-New CEO of Allay Therapeutics
Deep dive on alleviating pain and the opioid crisis: Karun and his team, developed a drug delivery technology that is inserted into the surgical site and releases pain medication in a controlled manner over several weeks. This innovation would ideally take opioids out of the equation entirely for these patients after surgery.
Challenges as the new CEO: Straddling both worlds between device and drug was challenging and has a more intensive regulatory process. The serious chemistry and drug development was new for Karun, so building a team that had proper expertise of devices, drug development, and chemistry was critical.
Allay Therapeutics had positive clinical data coming from a clinical study conducted in Australia and closed on a Series C $60 million funding round in 2021. A new biotech CEO will continue to advance Allay Therapeutics into the next phase.
34:27 Next Steps for Karun and Advice for Early-Stage Entrepreneurs
Karun now serves as a CEO of another “new co” in stealth mode at The Foundry and is in the process of closing financing.
Karun’s journey has been made of a lot of zigs and zags, but he does not regret it. He encourages those to have different experiences and embrace the struggle. Struggle pushes your limits and is a great exercise in self awareness.
Secondly, he emphasizes the importance of people.
“Make people a priority and never compromise”. You want to make sure the people you are working with are people that you trust, admire, and can lean on.”
