nurturing early stage HEALTHTECHS: part 3
how to make the cut
JULY 2021
by Mary Stuart
This is Part 3 (and last!) of a short series of posts published weekly this summer and reproducing, with permission by The MedTech Strategist, an article written by senior writer Mary Stuart. The MedTech Strategist is the leading sources of global business, regulatory, and reimbursement analysis and intelligence on the medical device industry. Its readers are comprised solely of top-level medical device executives and professionals spanning the entire globe, mostly CEOs and Vice Presidents of the world’s largest medical device manufactures, as well as investors at growth-stage life sciences venture capital firms predominantly based in the United States.
Nina Capital’s goal is to bridge start-ups from the pre-seed stage to the Series A, with the exception of three companies in which it participated in the Series A round: Ultromics Ltd., Kheiron Medical Technologies, and Subtle Medical.
The team wants to see founders that have identified a compelling healthcare need, and, says Zanchi, “that they are able to speak about it on an expert level: here is the patient journey today, here is how care flows, and here is how money flows. This is what’s not working, here’s the gap, the waste, the inefficiency. This is why it doesn’t work and here is the direction that needs to change for it to work.” That would be slide number one, she says.
Then, and this is where the needs-driven Biodesign framework comes into play, the team wants founders to identify what needs to change for their vision to become a reality. “We want to see that they’re clear on that vision and have the ability to translate that into specifications for change.”
Finally, says Zanchi, they need to then connect that vision to their own technology solutions and have some early evidence that it fits that vision, perhaps lab or bench testing, or testing in a small patient population, depending on the type of technology innovation. “That’s what I mean by early evidence.”
That’s important, she says, because these are early-stage companies; they have very few data points to back-up their claims. “We get a really good sense for the quality of questions these founders are asking. Are they measuring the right things?”
Most of the companies Nina Capital invests in haven’t yet done a large clinical study, haven’t gotten regulatory clearance, or are at the pre-commercialization stage. The firm thus faces the risk that once the company scales up, the promising early evidence does not play out, but in mentoring companies as it does, it has a chance to mitigate that risk.
Zanchi says that while the fund will, for the most part, invest in companies based in Europe, “we want to think about how the value proposition translates on an international basis.” She notes that the team has seen compelling companies that are serving health systems with idiosyncratic payment models. For example, she says, “Germany has been amazing at intelligently designing new reimbursement schemes for digital therapeutics, and that’s fantastic, but on the flip side of the coin, we are seeing some German companies designed for Germany that don’t have great opportunity for internationalization. That’s not what we go after.”
She points to portfolio company Ultromics (Oxford, UK) as an example of a company that can adapt to the models of different health systems. The company has developed AI software and a cloud-based platform that makes ultrasound much more powerful as a frontline modality for screening for cardiovascular disease. (See “Cardiac AI Pushes Past Human Limits,” MedTech Strategist, January 25, 2021.) In the value- based single-payor system of the UK, the National Health Service is offering Ultromics’ EchoGo through its NHS Supply Chain. In the US, EchoGo is reimbursed under a Category 1 CPT code that pays for every study.
Says Zanchi, “We do understand that there is one thesis for one type of healthcare system and the rest is still to be worked out, these are start-ups, after all. We want to see a set of hypotheses, and the ambition to respond to the alignment of incentives in no matter which healthcare system.”
The companies Nina Capital invests in are generally solving serious medical problems in cancer, ophthalmology, orthopedics, cardiovascular disease, stroke, and surgery (i.e., none so far are digital health apps for wellness). And as far as investing in deep tech, they’re not just talking about complicated artificial intelligence methods; one portfolio company is even based on particle physics. Indeed, two of the co-founders of Terapet SA (Meyrin, Switzerland) were formerly responsible for operating the Large Hadron Collider at CERN, where the Higgs boson particle was recently discovered. Terapet is making proton therapy for cancer safer with a way to achieve more precise dosing.
Sometimes, the portfolio companies themselves will create an awareness of unmet needs in healthcare. In working with several portfolio companies developing AI applications, the team ran across some challenges around the acquisition and moving of healthcare data, which led it to a new investment theme: data liquidity. That is to say, it’s tough for healthcare industry participants to share data to advance innovation, for example, for the training of machine learning algorithms.
The challenges revolve around creating large, curated and representative data with expert labeling or annotations, in a way that protects the privacy and confidentiality of patients. Data sample sizes are limited for some geographic areas, and the preparation of data is lengthy and expensive. Moreover, Zanchi notes “There is low portability of healthcare data. There are regulations that protect privacy and confidentiality, which makes it difficult to move this data across companies and organizations, even international offices within the same multinational company. How do you strip healthcare data of all of the aspects that can create risks without reducing utility?”
Nina Capital has invested in three companies finding solutions to some of these problems: BioLib, Replica Analytics Ltd., and Segmed Inc. (See “Replica Analytics: Synthetic Data Solves Real Medical Problems,” this issue.)
For its first fund, the average deal ticket size is €250,000- 500,000, with a minimum of €150,000 at pre-seed, and the firm reserves half of the fund for follow-on investing in its portfolio companies. As companies approach the Series B round, Nina Capital generally steps back. “That’s where our expertise is less helpful,” notes Anastassiou, “and with our ticket sizes, we can’t have a meaningful impact on those $20-$30 million rounds with $100 million valuations.”
It’s too soon to say what kind of success Nina Capital is enjoying in terms of what VCs measure: ROI. The company was founded in mid-2019 and has a five-year time horizon or longer for its companies. Anecdotally, two companies have gone on to raise subsequent equity rounds at higher valuations, with more to be announced soon.
Nina Capital is in it for the long haul. Says Zanchi “We take a long-term view on value creation and our partners share the same attitude on what it takes to create change in healthcare — and to reap the value of that change.”
To return to Part 1: the need-driven process at the birth of Nina Capital, click here
To return to Part 2: when technology and healthcare converge, click here
Contact us at info@nina.capital to request a copy of the full article in PDF.
Originally posted on MyStrategist.com June 1, 2021
