Michael Ackermann: A Tearful Tale of Biodesign [Entire Talk]

Well, thank you very much for the kind introduction. And how are we doing out there, everybody? Anybody who has an election hangover, this is an election free zone. So today we're going to talk about something fun. We're going to talk about innovation in healthcare, and in part through telling you the story of Oculeaf, the company that I co founded out of Stanford to treat dry eye disease. And it won't be a surprise to most of you, if anyone has read the news in the last couple of years, you know that healthcare is changing, right? So we're seeing increased expenses. There's a lot of things that are changing in the environment as a result of that. It may even be hitting your own pocketbook. But what I thought we would do is just look at the change by the numbers. So the graph on the left here shows health care spending as a fraction of our GDP over the last 50 years. You'll see that it's going up and to the right. And 2014, the last year for which data was available from the government, we spent 17.5% of the GDP, 17.5% of the entire gross domestic product on healthcare spending, an astounding $3 trillion. And we're feeling it, right? I mean, so we're starting to hear about pressure on prices, we're starting to hear about healthcare premiums going up as some of that cost gets shifted to the patients. And we're hearing about it in terms of consolidation in the industry. Another phenomenon is happening. So the plot on the right actually shows the fraction of Americans that are insured, right? And you'll notice in the last couple of years, largely because of the Affordable Care act, there's a very large increase in the number of Americans that are insured as well. And I do believe that even under a Trump presidency, there's going to be some impetus to provide a program for driving insurance amongst the population. So what's happening is that we're running out of room for growth in healthcare spending. We have more people who need to be treated, and we're all starting to feel the pinch, right? So we're feeling it as patients and we're certainly feeling it in the industry. So our government also makes available the expenditure in terms of where this $3 trillion is going. So let's take a look. So more than half of that $3 trillion is going to hospitals. It's going to doctors and to clinics. About 9% of it's going to drug companies. About 3% of it is going to medical device companies. And then a series of other Things including, I think, notably a 7% that actually just goes literally to support the infrastructure of the insurance companies and the federal Medicare and Medicaid. And every slice in this pie is feeling it. So there is drive on every single one of these to start becoming more efficient. And we can see that in terms of consolidation. And so what's happening on private practices are being brought up and consolidated into hospitals. We see hospitals that largely had been independent for a long period of time consolidating into hospital systems, both regional and national. And we're seeing consolidation of the drug companies, we're seeing consolidation of the insurance companies and in the device companies as well. And all of this is in an effort to drive more efficiency in the system. So let's look at another dimension. So now we know where the dollars are being spent, what is it being spent on? So According to the CDC, estimated 86% of this $3 trillion is being spent on management of chronic diseases. And so his chronic diseases include things like heart disease and diabetes, some types of cancer. But it also includes things like dry eye disease, which is what our company was focused on, and something that I'll tell you more about. And so what does all this mean? Well, something that's sending a little bit of a shudder through the industry is frankly, that there's going to be a higher bar, right, in terms of providing efficient treatment. And so that's the technologies that are more expensive for incremental benefit, frankly, probably aren't going to get into the marketplace anymore, at least not as easily. So that's the bad news. But what's the good news is that there is a heck of a lot of opportunity out there. So you have this $3 trillion marketplace, this enormous industry that is literally changing under our feet right now. And there's huge opportunity because someone has to be an agent for that change, right? There's tremendous opportunity in this consolidation as well. So one of the things, and we'll talk about it a bit, that has actually hindered some of this change and change by technology is that there's very separate groups, right? I mean, you go get your broken leg fixed by one physician, you get your eyes fixed someplace else, and your primary care physician who may have referred you to these places, can't even look up in their medical records to see exactly how that went, right? So that consolidation actually can be a real opportunity as well, particularly on the information technology side. And then layered on all this, there's really a tremendous opportunity in chronic disease. And so providing better or frankly, just more efficient ways to care for chronic disease. So logos of our friends and neighbors here in Silicon Valley, right here, we're used to all this technology coming in and completely transforming a marketplace, right? I mean, it's the way that we connect, it's the way that we buy goods, the way that we get around, the way that we interface with the world. And we're used to these big technologies coming in and making a real difference. Right? But here, healthcare, 17.5% of gross domestic product, and none of those logos are a health care company. Right. And it's been very, very slow to be converted by big technology. So why is that the case? Well, there's a few reasons. So one is that there's a very complex network of consumers. So if you're Amazon, it's very clear who your consumer is. It's the person who's buying the goods, right? Well, in health care it's a little different. You have the patient is what we typically think about this is someone who is either being diagnosed or being treated, but frankly, a lot of the time they're not even the one who's making the decision as to which product to use. Right. The decision is oftentimes being made or at least heavily influenced by a healthcare practitioner. This is the doctors, the nurses, the technicians. These healthcare providers very typically operate in a hospital or a hospital system. And so that hospital also has tremendous decision making ability over what products are used for the patients and by the practitioners within their system. So yet another decision maker, and frankly, none of these people are actually paying for any of it. Right? So it's all paid for by an insurance company or it's paid for by the federal government, Medicare and Medicaid. So yet another customer has to decide that this is the right technology to use. This is also a highly regulated industry. So you also have to satisfy the fda and they have their own sets of needs and requirements. And it's also an industry that's very heavily influenced by the professional medical societies. So these are societies that provide guidance to the practicing public. You know, what's the best practice to use and to not use. And they also have very heavily influence over the payer system as well. So what products actually ultimately end up getting paid for and make the list. So okay, why don't we have Amazon of healthcare? Well, one of the reasons this very complex network of consumers, why else? Well, it's also a very conservative industry by nature. Right. And that's actually probably justified. So we are talking about people's health. If we make bad decisions, there are very Real and bad consequences for it. So every physician, before they start practicing, they take the Hippocratic oath and they vow to first do no harm. And that attitude actually pervades not only the physician community, but the FDA and industry as well. So it's everyone wants to make sure that things are safe. Another thing is that medical innovation oftentimes relies on new science and sometimes new science happens a lot slower than new software. So it could be a tough thing to go there. We have a distributed provider system and meaning, as I mentioned before, you go one place for your knee and another place for your eyes, another place for your heart. Same thing with the payer system. All these different payers all over the place. And then also finally both ethical and legal privacy concerns as well. So maybe it's no wonder why we haven't seen this big enormous splash, right? We haven't seen someone come in and just completely transform this healthcare space. But what really excites me and what I think should really excite you, and I'm hoping that a few of you in the audience will want to take a good hard look at healthcare because frankly, I mean this is really a once in a career type shift or opportunity. What we are starting to see is a lot of little splashes and we're going to start seeing a heck of a lot more than that. So coming into one disease space at a time, coming in attacking one inefficiency at a time and this is really going to start snowballing. So for the rest of today, I'm going to talk to you a little bit about Ocule, this company that I spun out of Stanford with some others. This is the device that we developed for treating dry eye disease. Take a good look at it because it's not the device that we started with. So that's all part of the story too. So Biodesign, it's this center over in the Clark center, so right down Campus Drive. And it's just a really neat space. And so the plug there is that they also have an undergraduate and graduate course sequence in addition to this fellowship that I was a part of. So I would encourage you to take a look at it. And what they've done is they've taken this philosophy that I think has really pervaded a lot of Silicon Valley in the last couple of decades that also was developed here, this empathy based design. So this is by David Kelly and Tom Kelly, other folks at the D School here at Stanford, really formalized this process. And the idea is that by going and understanding the consumer Right. And getting, gaining empathy for them, then you can really understand what their needs are and develop a solution for that need in the healthcare space. Paul Yock and Josh Macauer, the founding faculty of Biodesign, took that same principle and brought it to healthcare. And in healthcare, again, the consumer is a little more complex if you have this network, but the same principle turns out to be really powerful. So the mantra there is a great clinical need is the DNA of a great solution in healthcare. For a long time we've talked about bench to bedside and this is where you've got this great scientific idea. And we have a way we're going to convert this into clinical practice. And that's been really one of the mainstays of innovation in healthcare. And frankly, it's still very important. Right. The catch is you have to have a great scientific innovation in order for that to work. Right? So unlike me, I certainly didn't. I came into Biodesign with three other people in our group of four. It was quite literally assigned to go innovate in ophthalmology. Right. I didn't know anything about the eyeball. I knew I had two and that they were important to me. But frankly, I was a little disappointed. I was like, this thing's the size of a ping pong ball. What could possibly be going on in there? I'm sure everything's already fixed. And fortunately I was very naive. But what Biodesign teaches, and again, it's this empathy based design is this really bedside to bench to bedside. So you go back, unless you already happen to be sitting on this great and important discovery, you can go back and say, hey, look, what are the needs? And we know that there's this huge driving force in healthcare in terms of efficiency that can really be the seat and the tidal wave for a lot of that as well. So here we are, this is our group of four. Brandon was an engineer, Victor McCrae is a surgeon, and Garrett Smith was an engineer and scientist. And again, we were assigned ophthalmology to go innovate something. One of my favorite things about Stanford, and I'm sure you guys are experiencing this already, but this is just, it's incredible because you have a question about something and the world's complete expert is literally two buildings down. You just go knock on the door, you talk to somebody. We actually got very fortunate that there was a very passionate and innovative MBA student who also happened to be an ophthalmologist and in fact a specialist in dry eye. She had spent additional trainings specifically studying this and so we partnered up with her, Vandana Jain as well. So as part of this bio design program, there's this immersion, right? So first you gotta go get the empathy, right? So we spent four weeks and we literally just watched clinical care. So we sat around, we goofed off a little bit. This is Garrett here empathizing by sitting in the patient's chair. But we watched patients come in and we watched physicians do surgery. We watched what the issues were. I was just amazed, frankly, by coming in with a very naive beginner's mind, how quickly it is you can start identifying issues, identifying inefficiencies, and identifying opportunities. So in the short three to four weeks, we identified some 347 unmet clinical needs. We went through a filtering process that was primarily looking at what is a real clinical problem, what represents a bona fide commercial opportunity. It ended up with dry eye disease. And if you're a little bit like me, the first time I thought I heard a dry eye, I was like, dry eye disease, really? Is this a real problem? Turns out it is. So if you were watching television last night, you may have even seen some commercials for some dry eye drugs. And that's because 8% of the population has dry eye. Primarily postmenopausal women. And it ranges from something that can be a bit of a nuisance to something that, frankly, is very debilitating. So it actually a really phenomenal public health impact in a big market. And so our real insight here, what we came up with and what kind of allowed us to hang on to something that was kind of special is that at the time, I think frequently, still people think about dry eye in terms of this very complex system that's going on. There's 40 boxes in this model, and there's 80 arrows pointing around all the things that are happening. And frankly, what we said is, okay, but if you boil it down, there's really only two boxes and two arrows. The body is not making enough of the tear. And the tear is very important. It helps your cornea clear so you can stay clear so you can see, nourishes the eye. And if you're not making enough of it or some part of it, then the eye becomes dry and inflamed. And the more inflamed it becomes, the less able your body is able to make this tear and kind of round and round to go in this cycle. What's interesting is when we layered the pharmaceutical industry on top of this and the device industry, which, frankly, there was very little happening in all of the People that were focusing on innovation for the last 20 years, things in the marketplace, things in the pipeline, everything was focused in that left box. Everybody was attacking inflammation. And no one, not for 20 years, had someone gone and actively looked at restoring these natural constituents of the tear film. So that along with just frankly, some muscle, in terms of going in and understanding the anatomy and what's going on, we kind of had this aha moment where we said, okay, look, maybe we can use electrical stimulation to activate the nerves that innervate these structures and get the body to make its own tear again. Okay, so now we've got this great idea. We're going to use electrical stimulation, we're going to activate this nerve. We got this really cool thing that we can't believe nobody's thought of. And what our thought was that we were going to directly activate the lacrimal gland and we were going to do something literally. This is an image that we showed some doctors. We were going to take this like a pacemaker like device. We were going to take a wire, we're going to run it under the skin, up the neck, and then plug this in. A very thin wire, of course, that we were going to then plug into the orbit or the eye socket. And the reception was not good. So we showed this. The first doctor we showed just about passed out, said, whatever you do, don't show the patients. And so we iterated and we brought this one in. And the thought was, okay, look, now we're going to move to a much smaller device. And maybe the issue was the whole neck thing. Whatever, we'll move it back here and then we'll run the wire up. Right? Well, very similar response. I was like, okay, I don't think you guys are getting it. And the first time that we started getting nodding heads was when we brought this in the upper right. What you see is a little piece of black plastic with some green modeling clay on it. That was our first prototype for what ultimately became the implant that's sitting below it. The idea here was that it was an injectable implant that would sit next to the lacrimal gland, the gland that makes the majority of this tear. And it was going to act like a little pacemaker. And again, having looked at where we ended up, something must have gone sideways with this one. Right? Because we didn't end up with it. And I'll tell you about that. But so now we're kind of going into the second year here at Stanford. Okay. Identified some new partners. So Jim Louden was a postdoc in the physics department, Mark Blumenkranz and Daniel Palenquer, faculty here at Stanford. And we were able to raise some money, right? So basis was mentioned earlier. We were fortunate enough to get a $25,000 check from the Basis competition, put a little bit of money in the bank. We're able to use that to get some venture backed seed capital and do some early work. So I'm going to take a pause here because what I'm telling you sounds like a very linear story, right? We go out, we're going to go in the clinic, find some deeds, we got this great deed. Now we're going to go and come up with a solution to it. That's terrific. Now we're just going to just go raise some money and then that all work out and move forward. And in retrospectively you can draw a straight line through every one of those points, right? But what you don't see is there's a lot of other points on that too. And so this was actually a very difficult time. This was a stressful time. There was a group where we're trying to figure out do we want to be entrepreneurs or do we want to go work for a company, right? And so what I'd like to do is talk a little bit about managing personal risk and something that for those of you who are interested in entrepreneurship, who are sitting in this room, I think is very relevant. And part of the reason that I bring it up is because oftentimes I see young entrepreneurs taking what I believe anyway to be probably unreasonable risk, sometimes going all in on something that is very, very high risk. So at least I want to pose a couple of thoughts and then kind of swing back the other way in terms of what you can do to manage that risk as an individual. All right, so here you're thinking, do I want to go out and be this entrepreneur or do I want to go and perhaps work for one or work for another company? And so I'm going to give you some unsolicited advice, but I think hopefully it'll be helpful for you. So the first thing is consider your opportunity costs, right? So I'm seeing a lot of young faces in the room, which makes me think that the vast majority of you are students, right? So you wouldn't be here if you weren't very capable and didn't have a lot of opportunity, right? So by jumping in, going all in on something you really are, there's a cost to that. So you're giving up something that might be there and just to Kind of plug that side. Now that I've been at Allergan for a year and a half, I realize there frankly are a lot of opportunities and big companies, right? So there's really tremendous opportunity to make impact because these companies are actually already in the marketplace and they're there with the customers. There's a lot of opportunity to innovate within these companies because they have resources and also personal growth, because you're being taught by people who do something really well. On the other hand, if you have something that's interesting, if it's something that you really have the bug, you have good people around you and getting encouragement from it, then give it a go. It's something that I used to describe it as. 90% of the time you're living the dream and 10% of the time it's sheer misery and there's nothing in between. But that's a pretty decent trade off there. But what I would recommend is, to the extent possible, hedge. So if you're thinking about starting a company, you're in a really great position right now because you're at Stanford or perhaps you're working someplace else and in a similar situation. This is the best incubator in the world, right? And it's the best incubator for you in particular, not only because of all the resources that are here and all the people that are here, but also because if something doesn't work out a year later and this thing goes belly up, your next employer, all they know is that you were a really involved and interested student at Stanford who had this great side project of something going on. It was really creative, right? And if instead you kind of go all in on something and it doesn't work out well, then the story is a little bit more complex. All right, so enough of that. What I will do is kind of talk to you about what we did. And for me and for our group, we set a threshold and said, okay, look, we're coming up on this two year mark. We're about to be released, punted from campus, right? So what happens then? And do we want to set a threshold? Because frankly, I was applying for jobs at the same time, right? I didn't know what was going to happen in cultivating relationships because it was uncertain. And for us, our threshold was really raising a bona fide Series A. And I'm not saying that this should be the same threshold for everyone, because every story is different. But the reasons that we chose this is primarily because if we were able to get real money into the company Then we could set have a much higher probability of success. And that's because there's capital. That's because we've got better people around the table, people who are experienced and know what they're doing. And frankly, on the worst case side, it is a really great experience, right? You're getting experience managing a project, managing individuals, et cetera. So in our case, what we needed was basically data showing that the device works. And fortunately in our case it did. So we did some early animal work and actually some even early clinical work, and we were able to raise a pretty solid Series A from three Venture, Kleiner Perkins, NEA and Berson Ventures. So at that point, we're really off to the races. And it was really a very fun time. Moved into kind of a shoebox of an office, especially when you need laps. But 1800ft, we started packing in at some point. We're growing. We had literally little cubbies set up on the conference table, people working in the copy room, and it was a lot of fun. So we built an implant and ran our first clinical trial. And I kind of told you the end of the story on this one a little bit. And that sometimes the first idea isn't always the best one. Right. So we build this implant, we get in There, we treat 40 patients, and fortunately, safety was very, very good. No one got hurt. But some patients got efficacy and some of them didn't, Right. So it was working out really well for some, it was not working out quite as well for others. And simultaneously, we're feeling this healthcare environment changing under our feet much faster than we thought, than we thought that it could. Right? So here we are, we're building an implantable device. It's a procedure, it's invasive, it's going to take a very long time to get approved and actually get onto the market. So especially looking out and saying, five years from now, what's the healthcare environment going to look like? Is this really what we should be focusing on is also expensive for the payers, expensive for the patients. And so fortunately, this coincided with us actually having a really nice insight. What we realize is actually that our best performing patients, despite having an implant on one side, actually were getting tearing on both eyes. Now the reason that's really exciting is because it turns out those two eyes aren't connected. Right. The only way they're connected is through the brain, which tells us that we're actually activating reflex. So we got to thinking and said, okay, is there another way we can activate a reflex to make this happen? And Actually, Jim Louden and I were down in Mexico eating fish tacos. There's Jim eating said fish tacos right there. And had this idea of actually activating the nose. So inside the walls of the office, we have this affectionately called the reflex, the wasabi reflex. So everybody in the room who's ever put too much wasabi on your sushi, kind of backdrop it in your nose, you know exactly what this reflex is. You got a bunch of tears pouring down your face. Now, what you may not know is that actually for every single person in this room right now, this reflex is actually active right now driving your tearing. So unless you have a cold or allergies, you're breathing through your nose. So every breath that we take, both in and out, very gently activates the same nerve that that the wasabi does and drives a third of your tear production right now. And so it turns out that if you activate it, then it can be a really nice and effective thing for dry eye patients. So not only were we able to get the better efficacy from it, but it really fit within this archetype of what we were looking for for the healthcare environment as well. It was something that was non invasive and better for the patients, is cheaper for the payers, cheaper for the patients, provided a practice building opportunity, which means the doctor can actually provide this product out of their office, provide a revenue source where they're getting cut in other places, and also provides a really nice opportunity to leverage information technology with a Bluetooth enabled device. So here's the device that has two components to it. The blue part is a rechargeable, rechargeable electrical stimulator device. There's a little disposable that goes on top. And that disposable has some hydrogel that allows kind of a connection to the nose. And as I mentioned, it's Bluetooth capable and has an additional companion app. And what's really nice about this is now we can leverage the technology that this valley has developed for everything else and introduce it into ophthalmology, where it's never been there before. And what allows us to do is it allows both the patient, but very importantly the physician to track how the patient's doing. What it also does is dry eye is an environmental disease. So we can use geolocation, weather data and say, all right, using humidity and wind and temperature, et cetera, is this going to be a good dry eye day or a bad dry eye day? Something very important to these patients. And then frankly, something as simple as being able to leverage your Smart device to order refills. Right. The same way that we order anything else. And it checked all the boxes. Right. So it's better for the patient, better for the healthcare provider. We pulled it out of the hospital system, so there's no surgical procedure there. It's cheaper for the payers, it's less invasive and less risky and therefore cleaner. Path through the FDA unfortunately has been very well received by the societies. So I will show you a quick video here. You get to see this thing in action. So what you're looking at before I start it, this is a close up of someone's eye. The bullseye rings are a function of the device and the light source that's on there. So it's not anything funky going on with the patient. What you'll look at is the lower lid margin there. What you'll see the patient just started using the device. Within about 10 seconds or so, you'll see a pretty dramatic increase in the tear, like there, the tear production level. And what also was really fun for us, as it turns out I mentioned there's different components in the tear coming from different organs and actually this reflex activates all of them. Where our first device was actually going after one. That's something that's actually very important from a clinical perspective as well. So this is healthcare. So we do clinical trials. We completed seven trials a day, treated almost 700 patients. And the device is currently sitting with the FDA right now. So fingers crossed, we're hoping we can launch this in the first half of next year. So as mentioned before that we were acquired by Allergan in August of last year. I did want to touch on that as well. So in addition to the obvious, in terms of providing return for the shareholders, most importantly, Allergan creates this enormous lever for us. Right? So if we're a very small company and we're trying to go out and treat patients that are not only all over the United States, but frankly all over the planet, it's really hard. I mean, you gotta hire one rep at a time. It's something that Facebook advertising alone isn't gonna take care of because you do have this complex network. You need a healthcare provider to actually ultimately prescribed that device In Allergan. They're the world leader in the space right now, right. They have sales representatives in the office of 23,000 eye care professionals in the US alone. That's almost all of them. Just a really tremendous opportunity for us to be able to make a really meaningful impact on public health in a very short order of Time I did also just want to touch on it now that I've actually spent some time in a big company and just and reflect on it a little bit as well. Sort of in line with some other things we've talked about in addition to kind of this management of risk that I think is important certainly to some of our staff. And I've also learned a lot, right? I'm there, I'm working into place, we're about to launch a product and we're going to launch it in a world class way. And learning from people who are very, very good at this, people who are scaling manufacturing, learning how to do that. And I think that's also true for our staff as well. Being able to come in and really learn from people who are frankly some of the best in the business, particularly at some of these later stage parts of the product cycle and again making this opportunity to make impact. One of the things that has been really fun about this is that there's money there, right? I mean I mentioned when you were in the startup, you know, you have confidence that there's going to be the next check if you're doing the right things. But frankly there's a lot of uncertainty there and when you're at a profitable business there's a lot of resources. And so actually within our group we have two pipeline products that weren't there when we started and actually some really innovative folks within our group have developed two new technology ideas and they're up and running. It's really nice to be in a place where that can happen. And I think that to echo sort of the opportunity for intrapreneurship as well, just relaying that that can actually happen in a big company. So I'm going to leave you there. What I am going to say is that this is just an amazing time in healthcare. Literally this almost 20% of our entire economy that is largely untouched by the types of technologies that this 20 mile radius has been transforming the world with. And it's a really exciting time to be there. There is a lot of opportunity not only to come in and move the market with share, but frankly to really do a great thing for our community and for our country. Right. We need it. It's getting really expensive, we're having a hard time keeping up with it. So I hope that some of you guys will take a look at healthcare and maybe take a look at the biodesign courses as well. So with that, thank you very. So sure. So when you were finishing the product design program, you set your threshold at raising a Series A, but you could be essentially trying to get to that threshold for a while. When did you know it was you were going to pursue that pathway versus pursuing company? I'm guessing there was like a time crunch there as well. Yeah. So the question was when? It's not like you can kind of magically time when you're going to get the financing and when we're. So the threshold was the Series A, and how do you sort of time that and especially with respect to other opportunities that might be happening. And, you know, it's not easy. Right. You're constantly reading the tea leaves, you're constantly trying to push out your hedge opportunities and saying, oh, look, you know, we got a few more months because things are really exciting about this, et cetera. And then also, frankly, just really digging in and trying to drive people to closing of the A. I think one thing that has certainly happened, and what I would recommend is, to the extent possible, and you're in a great position to do that, is I would talk to somebody who's experienced at fundraising. I think the way that I would go and raise a Series A now is just so different than the way that I would raise that I raised it the first time. I think that there's a lot of things that you can do to really not only garner interest and excitement, but frankly manage a process. Because everybody talks about running a competitive process and how you try to get multiple term sheets and really get the best value for your company, et cetera, but the reality is people don't reach the end at the same time unless you really drive them to do that. And that's something that I didn't actually learn until raising later money.

You have this innovative digital device that's taking in a ton of data. Can you talk about if you're using data and data science to make both the device better technically and also from a business model perspective?

Yeah. So the question is basically, how are we leveraging the digital aspect of the product and how is that driving both the business model, but also the technical side as well? So, I mean, I think just as data enables a lot of other things, I mean, it's not valuable in and of itself per se, but can really be a great enabler. In our case, we use it again to enable care. So it's something that allows physicians to check in, they can look at a portal, see how patients are doing. And Mrs. Jones, I'm sorry you're not feeling good, but maybe it's not a big surprise because you haven't been using your treatment again, also in terms of providing direct value to the patient from looking at the environment and other things that directly impact dry eye. But where I think things can be actually incredibly powerful from a business perspective perspective is that in lots of industries, the customer relationship, the relationship with the customer is very direct. Right. So Google knows more about me than I know about me, Right? Because I do everything on Google. But in the healthcare space, when someone writes a prescription for drugs, you don't even know who has the script, right? You literally don't. Even that person is completely anonymous. And so what that does is it makes it really hard to know what could be making things better for that patient. How do you make patients more compliant? How do you impact care in a meaningful way there? I think this is something that's really powerful with a technology like this is you have that direct link, you have that direct customer relationship and you can nudge them, right? And you can say, look, you're not using the way that it should, or the doctor can nudge them and say, look, you're not using it the way you should, etc. So.

So one major difference between a software startup and a medical technology startup is all the regulations. So there's the fda, there's cms. Can you comment on how the landscape is now or maybe how they're trying to, to streamline the process, make it faster from product creation to market?

Yeah, so the question was a big difference between software and healthcare is that it's highly regulated. Right. And then in addition to the regulation, to even be able to get onto the market, you have this entire reimbursement side that has to be covered too. Right. So not only does it have to be approved, but somebody has to agree that they're going to pay for it. And so how does that impact things and how are things potentially changing? So what I would say is that in some ways it's very tempting to think about those things as barriers because frankly, they are barriers. Right? I mean, you got to go through a lot to do that. And you have to have knowledge of this system. Right. You have to understand what this regulation thing is all about to be able to get a product onto the market. And you have to understand what this reimbursement thing's all about to get there. What I will tell you is it's a great thing. Here I am, I am a total neophyte, just spun this thing out of Stanford just four years ago, and I don't have some high schooler at Pali High coming up with a competitive version of our product that's going to launch immediately after. There's some complexity there, but there's an incredible network of people in this valley and beyond that understand the nuance and frankly, it's not rocket science. Right. So it doesn't take a lot to understand it. You just have to be able to get in and get that understanding and then play by the rule. And once you get on the other side, actually it's really a really tremendous barrier that actually ends up being very protective. And there are things that are working to make it go faster, but inherently these are. They're long processes. Right. But I think that's part of the trade off. I mean, the markets are equally as large. Even a very tiny fraction of a $3 trillion market is still can be a multi billion dollar market. Right. I mean, it's still enormous markets and so there's really enormous opportunity. But you're not competing with. You have intellectual property, you have fda, you have reimbursement barriers that really prevent competitors from coming into the space. Sure.

So you spoke about when moving to Allergen or Allergan, how that provided more resources and stuff. I'm kind of curious on a leadership level. It went from you and your partners kind of running your own company, your own team, to now being part of a much bigger organization.

Organization.

How did that work out for you?

Yeah, so the question is about leadership and going from something that's a very small company and starting off in a real partnership level to even in a growing startup, frankly, and then transitioning to now a company with some 25,000 employees in it. What is that like and what does that mean? And frankly, it's actually very different. And one of the things that I've actually really valued about my learning experience at Allergan, it's a very different type of leadership. Right. When you're going and even in the startup phase where you start, it's you and some buddies around a table, everybody's involved in every decision. Right. You're sitting there and you're making calls and you're going off and doing things. You don't have to have any real structure from a management perspective. And as that grows, you have to both evolve leadership and management. And there's a distinction there. So leadership in terms of setting vision and setting culture and that really has to start becoming real as you start having more than just a few people around the table. And that also is leadership in a startup where you're setting a vision. So our vision is we wanted to Be the world leader in dry eye. Right. And it's got to be ambitious, right. Because you're going out there and you're trying to change the world and if you're not, if you're not shooting for that world changing thing, then you're never going to get there. And setting an environment that's a good place to work for others, et cetera, but also setting up a management system that is able to kind of tolerate and make functional a larger increasing group of people. And so we've gone from having no management system, it was the whiteboard it and three people around a table making calls to having a formal management system in a small private operating company to now in this huge matrix based organization. So there's people in other parts of the organization that are making really, really important calls on what we're doing. The leadership is actually previously it was my team, those reporting to me and then actually out to the world in terms of being an evangelist for the company. And now actually a lot of my effort is spent internally. I spent a lot of time with internal sales. Right. So I'm going in and selling other parts of the organization on what we're doing and really have to influence people that aren't reporting to me oftentimes. And it's actually, it requires a different style and you have to motivate people in different ways. And so it has been different, but frankly it's been part of the fun of this experience.

Anybody else question Michael? So in hindsight now, before the fun, besides the funding, was there another indication that you had that you were onto something compelling? In hindsight, besides just the fact that you had external VC invested in you, was there another milestone that you think when you knew you were onto something big?

Yeah. So the question is what were the other signals that we were onto something important as opposed to just this funding event? Right. And frankly they're the same signals that you get for whether or not you're onto a right life partner, you're onto anything else you do in your life and that's. Are people around you excited about it? Are you getting positive signals from it or are you getting negative signals? Right. And frankly it's not just this and or but it evolves and there's constantly negative signals. But can you keep evolving that and iterating very, very quickly to where people. There's momentum in that and it's actually people getting more and more excited or is it something where it's like, okay, I'll take this meeting because you're at Stanford And I owe your professor the courtesy of sitting down with you for 20 minutes. Or is it something where people sit in, they're like, oh, my gosh, Actually, this is really interesting. You should think about this, this, this. So that's a lot of it. Yeah.

So is a new administration and a potential change to the Affordable Care act, something that a prospective medtech entrepreneur should factor in if they're thinking about building a medtech startup?

Yeah. So the question is, what does Trump mean for health care? Right. And what does Trump mean for anything? I don't know. So there's, frankly, it's a big question because it's. I think there's a lot of uncertainty around what the agenda will be, and I think there's uncertainty not only in terms of communication, but I think that frankly, there's uncertainty within the administration as to what the position is going to be. There has been talk of either completely dismantling or meaningfully changing the Affordable Care Act. That certainly will impact health care. I think there's also been talk from the Trump campaign about maintaining some sort of system that promotes high insurance percentages within the country as well. What I do think is that fundamentally, I think that the same problems are going to be the same problems, the same things that are driving all this tremendous change. I mean, we're kind of tapping out at this 17, 18% of GDP. Even if it goes to 19 or something, it's still an issue. And whether or not we're dealing with 95% insured population or an 85% insured population seem to be the same sorts of things. But it may have some impact on how acute it is or is not, If you don't mind. Can you tell how it is applied and how long it will stay and how to avoid sneezing?

If you insert something on the nose.

It will stimulate sneezing. Yeah. So the question is, how does the device work? Right. And does it activate sneezing? And actually, I would say the first time or two you use it with. Patients often do sneeze because you've got something in your nose, you're activating these nerves. And the same thing that if you were to get something stuck up there, your body might try to sneeze. It's really those first couple of times it activates that. But you saw in the video, it's literally 10 seconds or so. Most patients use it twice a day. So you leave it in your bathroom, use it in the morning, they use it in the evening, and basically use it until they get the effect what are the side effects? Does your nose drip or. I mean, what are the things you were fighting against? What are the things that came up? Yeah, so the question is, what are the side effects and what are some of the things from a clinical perspective that we're up against? And frankly, beyond kind of the occasional sneeze that happens, one of the things that's interesting actually is that the tears actually drain into your nose. That's actually part of the function of this entire reflex. So those tears wash out the wasabi. And if you're watching a really sad movie or a sad election perhaps, and you really cry, you start sniffling. Right. And that sniffling is a function of those tears being in the nose. And so there is some sniffling that can occur, particularly if you really give yourself a good dose. But one thing we've been extremely. I'm trying to think of, I think the other side effect that occasionally happens is if patients have a really, really dry nose and you place something in your nose, then you might get a little bit of spotting of blood. But one of the things that's been really great about this particular technology is that it is so low risk. It's something that from a trial perspective, the FDA formally designated as a non significant risk product. And it's so great because now we can actually reach a much wider fraction of those 30 million people who have dry eye because it is so low risk yet effective, unlike the procedural treatment that we had.

When you were in the process of observing the biomedical industry and looking for inefficiencies, how did you narrow it down from the hundreds of problems that you found to just one? It seems like it would be difficult to choose one problem.

So the question is, we have these 300 and some odd needs, how do we kind of narrow it down to one? It seems like it must have been difficult. The answer, yes, it is. And so really there's a few things we applied, kind of a high level filter of what is a genuine clinical problem and what has commercial potential and what I mean by that, and I think this is actually quite true. Well beyond healthcare that's you've got to look at what is the potential value, what is the market potential of this product and is the investment that's required to get there, to actually get this out there commensurate with that opportunity? Right. So if you're going to have to go through and some big long health care projects aren't cheap. Right. I mean, I think getting a medical device to market on average is 70 to 100 million bucks. Right. So those are big dollars. And if you can't be convinced that at the end of that you're going to have hundreds of millions, if not billions of dollars in revenue, then it's really a tough. It's a tough call to make in terms of being able to garner the investment on the front end to do it. Now, on the other hand, if you're going to be making something that is less intensive in terms of price, I mean, you're making a surgical instrument, something like that, then maybe it's hundreds of thousands or whatever it is to get there, then the market opportunity doesn't have to be the same either. We, rightly or wrongly, were looking for a big opportunity and that was one of our filters. And then frankly, we're looking at these different problems. And Dry Eye was the one where we had the idea of how to fix it. So that was part of it, too. Yes. Do you see opportunities to apply some of the learnings on the design side and medical device experience to therapeutics and the world of molecules in more traditional pharmaceutical. Yeah. So the question is, is there anything that can be applied from this device side to the pharma side? The short answer is yes. I'm actually very, very excited about Biopharma right now. And there's a lot of reasons, but some of the challenges on the pricing side don't exist to the same degree anyway. Obviously, it's been a political football, but to the same degree on the drug side as they do on the device side. And I think there is that opportunity. I think it's. But I think it tends to be a certain blend, a certain type of therapeutics. So, for example, we actually had a drug program at Oculave. We spun it out into another company. That company is an independent operating company right now, and that was a pharmaceutical that. Rather than going through and having this really key insight, we've realized that there's this receptor on this cell that nobody else realized was there. We've gone through and designed a molecule to go in there and tag that receptor. Instead, we said, actually, look, you could possibly activate the same pathway, the same nasal pathway, frankly, using a pharmaceutical spray as well. And so we went through a pretty organized process of actually going down screening molecules. But we were screening molecules that were already out in the marketplace. Right. Somebody else had already taken them to a certain level. And it turns out that the ideal molecule was actually sitting in a company that was going defunct the molecule. They had run it through phase two trials. It was very, very safe, but didn't treat gastroparesis, and so we bought it off them. And so, yes, I think you can still use those same techniques, but I think it's maybe not as much on the discovery side, but certainly on the development side side. Okay, that's good. Thanks, guys.