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CVRx’s Investment In HF And Wider Medtech Industry Set To Pay Off

Executive Summary

CVRx president and CEO Nadim Yared believes his company’s second-generation chronic heart failure device could present a serious commercial challenge to the traditional major players in the field. Meantime, with 10 years under his belt as CEO, Yared is focused on building the company, rather than on exits.

  • CVRx’s second-generation device is about to enter a pivotal trial in the US ahead of an FDA filing for an application to treat heart failure, a market that extends to 5.1 million adults.
  • FDA has shown its collaborative qualities in helping CVRx design trials for the PMA class device in novel and innovative ways, and has left the company deeply impressed.
  • Company president and CEO Nadim Yared believes that revenues from the Barostim Neo device could become large enough to elevate CVRx among the top four global heart failure companies.
  • Not content with merely steering CVRx into the commercial phase for the HF application (Barostim Neo also has an application in hypertension), Yared holds decision-making roles in other organizations, including AdvaMed, which has tapped him for its key post.

Nadim Yared is a consummate networker. Indeed, the device industry entrepreneur who leads private Minneapolis-based CVRx Inc. has a lot to network about, as he stewards Barostim therapy for the treatment of chronic heart failure and hypertension onto the US and EU markets.

There, and once established, he is confident that the heart failure device (the first intended application of which was hypertension) will succeed in reaching a part of the market – a large part – that the existing CRT-D devices cannot. On this basis, CVRx would break out of SME status and provide serious competition to the industry’s current big three.

CVRx’s second-generation Barostim Neo is designed to electrically activate the baroreflex, the body’s natural mechanism that regulates cardiovascular function. By activating this afferent pathway, the device reduces sympathetic activity and increases parasympathetic activity to restore autonomic balance.

Ten years in the role of president and CEO of CVRx as of September 2016, Yared presents himself as someone with a broad and deep knowledge of his immediate industry, but also as a champion of the wider industry as it reaches out to payers and other stakeholders on issues of broad market access appeal.

These qualities have made him a key player over many years within the US industry association AdvaMed, alongside his CEO role and other directorships. This industry involvement culminated recently in Yared being designated as AdvaMed’s chairman-elect for the next two-year term.

Views On Compliance

Yared’s ability to share experiences and give counsel was on display at the ninth annual Global MedTech Compliance Conference (GMTCC), held in Dublin, Ireland. There, sitting alongside counterparts from Olympus Corp. of the Americas and Teleflex Inc. on a panel addressing global compliance issues, the CVRx CEO, head of a US-focused company of 80 staff, assumed the mantle and outlook of a globally much larger player, as he shared his views on key industry developments and requirements.

“The principle of compliance needs to be embraced by the culture of the company from the ground up. We find that as we develop our culture from within, a new set of core values emerges,” he told the meeting’s 300 delegates. If this sounds like it might have come from someone with a longer industry pedigree, you’d be right: prior to joining CVRx, Yared spent almost 15 years at two industry majors, first at GE Healthcare and then at Medtronic PLC, holding general manager posts in X-ray imaging and navigation, respectively.

The point is that Yared appears to possess antennae that seek out ways to represent the broader industry that also suit CVRx’s needs into the bargain. In 2008, two years after taking over at CVRx, he saw that the US device sector needed more support, and decided to throw himself into macro industry developments, just as the global economic downturn was starting to bite.

Eight years on from that, sitting high up in the Convention Center of Dublin, overlooking the River Liffey on an uncommonly warm May day for the Irish capital, Yared related for In Vivo the story of how, back in 2008–09, he was inducted into the US medtech lobbying hall of fame.

Perfect Storm

“We had had the ‘perfect storm’ – the global financial crisis that began in fall 2008, the beginnings of the Affordable Care Act [the PPACA] and, linked to it, the device excise tax. While our industry was supportive of the need to reform health care, we were not supportive at all of how the device excise tax was being brought in, and at the time, we went through a soul-searching period,” Yared said.

There was also pressure to reduce the cost of care by delaying the introduction of novel technology. “The belief was that the delayed launch of new technology would reduce the cost of care. That is the perception of few people, and in fact, the opposite is the truth.”

Another element in the mix was the fact that the money flow had frozen for a while, and it had become very hard for venture-backed companies to raise money. There was no liquidity in the market and the cost of getting a company from “A to Z” was increased by a multiple of two, given the rising market access costs in the regulatory and reimbursement/payer fields.

Add to that what the CVRx chief calls a certain “frothiness” – a favorite Yared expression – that was evident among the strategic consolidators when looking to acquire at-risk technologies, and there it was clearly: the perfect storm. He explained: “Over the years, there had been some ‘big misses,’ where companies had acquired a technology too soon, or the technology had not panned out as expected.”

This made the consolidators more risk-averse rather than risk-neutral. “It was indeed the perfect storm for our industry, and I figured that it would be very hard for a small firm like CVRx to be able to succeed without removing some of these obstacles.”

Working Up The AdvaMed Ladder

Yared joined AdvaMed in 2008, as a rank and file member, in order to participate in the association’s meetings. But once in the door, he helped create a new interest group – a working group called the Emerging Growth Companies Council (EGCC). “Five of us were very vocal about it, and we started to grow the number of participants and also stepped up engagement with AdvaMed.”

“Under the leadership of Michael Minogue [CEO of Abiomed Inc.] and Ashley Wittorf [AdvaMed], we converted EGCC into a larger body with its own separate board of directors. That was four years ago. The group has now evolved to a point where it can manage its own policies and define its own strategic plans and agenda. In another developmental step, we rebranded it to AdvaMed Accel. That was during my time as chair in the last 24 months.”

Nadim Yared

This was all happening at a time of structural disconnect between AdvaMed and fellow US industry body, the Medical Device Manufacturers Association (MDMA). Now, they work well together, and each has its own areas of specialization and advantages – but eight years ago there was a divergence of opinion.

“We, as an industry, were taken advantage of because we were divided. Some politicians sought to leverage and play off the associations against each other – MDMA served the needs of the smaller companies, and some were pressing MDMA to accept a device excise tax waiver for emerging companies. This would have been just for the smaller companies; the larger companies would have had to pay more. I didn’t believe this was the best solution – but we all ended up getting hit by the device excise tax anyway. We managed to halve it, but it has still been very deleterious to the industry as a whole."

A Bid For Tax Equality

Yared said: “My opinion from the get-go was that we should have one equal system, and for several reasons: 1) if we only tax the larger companies, it would hurt the smaller companies on multiple fronts: one day we will become a large company ourselves; 2) some of our funding is coming through these large companies anyway: if they are taxed higher, they cannot use their funds to invest in small companies; and 3) the same principle holds for the rate and volume of exits: many of the smaller companies get acquired by the larger companies, which creates an incentive for funds to invest in the industry.”

He reasoned that if these larger companies were paying more in tax, they would have less money to invest or acquire smaller entities – thus there would be fewer exits, and less investment by venture funds. “It’s all linked,” he said, adding, “I was against the suggestion of the segregation of the device excise tax for that reason.”

The Special Skills Of A Small Company CEO

On top of this, Yared explained that he had moved from a large company to a smaller one, and saw that the internal circle of contacts was more limited. “In a large company, you’d be, say, general manager of a division, and you’d work with colleagues and share thoughts and problems. In a small company, a CEO position can be a very isolated job, and one where you don’t have peers, but instead you report to a board of directors, and a team of officers reports to you.”

He continued, “So people like me at CVRx have to look outside the company for their peers.” His executive coach at the time recommended he join other networking groups – like the Young Presidents Organization (YPO) for chief executives and business leaders who have achieved success before the age of 45. “But I actually found that being a member of AdvaMed served a broader purpose. There, I networked with small and large companies and observed how they operated and worked. It gave me a lot of insights as to how other CEOs behave, interact and lead.”

“It allows us to compare ideas and network with peers.” Yared then went a step further and joined the board of a publicly traded company, Hansen Medical Inc., specializing in cardiovascular robotic systems. Adding more to the daily workload can be risky from a time perspective. “The CEO of a small company has many tasks to perform, but only one objective. If you join another group, the workload mushrooms. Hansen Medical does not compete nor overlap with CVRx, but it’s still competing for my time during the day.”

When the Hansen role came up, it was around the time that the CVRx board of directors had recommended that Yared actually join the board of a publicly listed company, to gain exposure to the role of CEO of a public entity. “It just happened that Hansen Medical was looking for a board member with product and commercial expertise in the cardiovascular capital equipment markets – and I’ve been on the board there for over three years now.”

Networking, And More Networking

Yared is also on the board of the Medical Device Innovation Consortium (MDIC), the Minneapolis, MN, non-profit organization that operates in partnership with the Food and Drug Administration to improve the medical technology environment. The group is something of a public/private partnership that also combines input from the Centers for Medicare and Medicaid Services (CMS), the National Institutes of Health (NIH), and patient advocacy groups in its aim of advancing regulatory science.

MDIC provides a non-competitive, pre-market arena where companies can collaborate and share resources to address regulatory issues from a science – rather than a policy – perspective.

A prime example is the issue of how to leverage software modeling to reduce the need for clinical trials. “In this case, instead of developing a product and later discovering problems, how can we assess the product’s clinical efficacy through software modeling – and then verify it in a smaller clinical trial setup?” Yared asks. He believes that, if more companies work together with FDA, CMS, and NIH on this, it could become the standard. Such issues, and the need to solve them, is what gave rise to MDIC, where CVRx is a founding member and Yared has served on the board since its inception. “I’ve been a very big advocate of its work,” he said.

And Another Role For An Industry Champion

“Advocate” is just the word, as Yared has ensured that, primarily via CVRx, he has a wide input into the industry’s development, getting involved in key issues like the threat of cyber terrorism. His apparent appetite to help paint the bigger picture and thereby be exposed to key issues calls to mind another active ambassador and medtech problem solver for the US industry: Becton Dickinson & Co. chairman, CEO and president, Vincent Forlenza. Forlenza is the current chairman of AdvaMed, but he is to be succeeded by none other than Yared for a two-year term, the CVRx CEO revealed during our interview. (See (Also see "Becton Dickinson Adds A Bigger Jewel To Its String Of Pearls" - In Vivo, 8 Sep, 2015.).).

As for CVRx itself, there are multiple directions the company could opt to pursue in terms of partnerships. “Like Michael Porter’s ‘Five Forces,’ which addresses the different forces within an industry, you’re always thinking about your customers, your competitors, your distribution and supply sides. Belonging to associations like this trade body [AdvaMed] or being in a public-private-partnership [MDIC] allows you to identify potential partners and gauge their expertise in the field, in say regulatory, legal, manufacturing, distribution and marketing.”

Events like GMTCC and the annual AdvaMed meeting also yield a lot of useful contacts, and access to suppliers on panels and on stands.

Industry Association Value For Small Companies

“While AdvaMed has been a great place for us to establish contacts at very high levels, it’s not a substitute for making connections at all levels with different organizations. But it’s a perfect place to start: through the partnering system at the AdvaMed annual meeting, I built a lot of connections. Now, if I need to contact a head of a division or a functional officer at another company, I know where to start, to get the linkage or the introduction,” Yared said.

He views the US industry association as the prime forum for connecting and networking. The AdvaMed annual meeting encourages large and medium-sized companies to bring their VPs of business development, so that small companies can network with them and identify business opportunities – right up to M&A.

CVRx’s Priorities

As for CVRx, the company is not targeting any transaction or deal in particular right now. “We are always looking for additional expertise, for example, distributors outside the US, as we don’t have distributors in all the countries we would like. And we always tend to rely on outside expertise in different fields, such as in health economics, marketing research or biostatistics. But as to the bigger strategy, we are not looking to do a business deal with another entity at this stage.”

Yared has a firm view on the route that his company is taking. “We’re building this company right now. The best route to success is always to build a company as an independent enterprise – if things happen along the way, so be it. But the plan I stick to religiously is: ‘You’re building the business as a company, not as a product.’ Anytime I need to make a decision, I run this question past myself: is it a product line or a business?”

Targeting A Slice Of The Big Three’s Territory

And the CVRx team is developing the company precisely because it has the potential for success. “There are some start-ups where you know the technology cannot be developed on its own, because it has to be wedded to another product line. A good example of this would be an adjunct tool to a specific surgery or procedure. In those cases, it’s hard for the developing company to own the procedure. And it means that down the line, the tool must be purchased by a company with a third-party device that can identify the procedure,” explained Yared.

He gave the example of a knee cutting guide. It is very difficult to make a sustainable business out of a knee cutting guide. It would be easier to develop a product line that is sold/distributed by a knee implant manufacturer.

Concerns of this nature are not on CVRx’s radar. “We have a therapy that has the potential to make us the fourth-largest cardiovascular device company in the world – and maybe even larger than that – just with this product line,” says Yared. “We are targeting two very large markets: heart failure and hypertension. In the medical device industry, the CRT product line for heart failure represents one of the larger, if not the largest market segment.”

“Medtronic, Boston Scientific [Boston Scientific Corp.] and St. Jude [St. Jude Medical Inc.] manufacture CRT, but their devices can only address 25% of HF patients,” said Yared. “We have a product that can address the remaining 75% alone – and that does not even include the business to be done with the hypertension device. The market potential is huge, and it requires a lot of muscle and big shoulders to be able to carry and develop it. It is hard, but doable, and it will require a lot of work and sweat.”

Strategy For Market Penetration

Yared won’t say when CVRx could be joining the big three club in heart failure, as you might expect. “It’s a step by step thing. Right now we are commercializing in Europe, where we are focused on getting the product reimbursed country by country, building awareness of the therapy as we go.”

Barostim Neo is already reimbursed in Germany under the ZE code (for certain specific procedures and treatments, the supplementary payment – Zusatzentgelt – is possible).

And in the US, it was designated an Expedited Access Pathway by FDA. “We have just started the US enrollment for our pivotal HF trial,” Yared said.

Unique Partnership With FDA On Barostim Neo

A PMA product, the Barostim Neo System has unique features. The system consists of a single extravascular lead that is placed on the carotid sinus, an implantable pulse generator (IPG) that is placed above the collarbone and stimulates 40 times more frequently than a pacemaker, and a wireless programmer system that allows for non-intrusive, fully customizable patient follow-up. The procedure to place the lead and IPG is minimally invasive, taking about an hour and a half, skin to skin. In Europe, where Barostim Neo is CE marked, the therapy is used to improve the quality of life of HF patients, demonstrating consistent benefits to those who are not eligible for CRT. And now in the US, the long-term effects of restoring autonomic balance in heart failure patients will soon be observed via the upcoming pivotal trial.

“It is very exciting, and we are conducting the study in two stages, where each stage leads to a separate FDA approval,” said Yared. He stresses that the trial has been designed very jointly with FDA. “It became a very collaborative, interactive exercise, once FDA determined that our product line has the potential to become a useful treatment, has no known substitutes and meets an unmet need in heart failure – a debilitating and life-threatening condition.”

Yared continued, “FDA has provided a lot of resources to support and guide us in the design of the trial. So we must give the Center for Devices and Radiological Health [CDRH] kudos for that – they did a really good job.” The CVRx chief almost marvels at the path of events with US authorities. “In 25 years in the industry, I have never seen such a strong collaborative, interactive effort.”

“With FDA, it’s usually a very different process. Normally, you submit proposals and they comment on them,” he said. But he was pleasantly surprised by the experience. “This time, FDA came forward with creative ideas, and we would come up with others. We evaluated them on a weekly basis. I think this program will be a landmark for FDA in terms of how can we reduce the time to market by a year or maybe even two – not by cutting corners, but by working very closely and using advanced scientific tools, such as Bayesian statistics, to get to answers faster and in a less burdensome way.” He continued: “I did not expect FDA to provide this level of attention, but they have provided us with real, genuine help.”

If I Had My Time Over Again…

Yared will be celebrating 10 years in the CEO role in September 2016. He is proud of his achievements, but is not above taking advice. “Is there anything I would have done differently? It would be presumptuous – stupid even – for anyone to look back and not learn from the past; you can always do better,” he says. Using another favorite expression, he adds, “With hindsight 20/20, there are many other things you could have done. But it’s often hard to know that at the time.”

One regret is the pace of market rollout at CVRx. “I would have wanted the product to have been already approved in the US and accessible to US patients. We should have gone much faster,” says Yared. The reason, he explained, was that it takes time for some innovative technologies to mature. “We had a first-generation device [the Rheos] that demonstrated the impact of the mechanism of action and showed that the therapeutic targets we are going after are very potent, and safe. But the apparatus itself was suboptimal.” That pushed CVRx back to the drawing board in 2010–11, whereafter it developed the second-generation device, Barostim Neo.

More Funding To Come As Rivals’ Fortunes Mixed

The last time In Vivo sat with Yared coincided with CVRx’s Series F funding. That was in December 2013, and Yared had said back then that it would be the last round of funding. (See (Also see "CVRx: Pioneering Hypertension And Heart Failure Devices – Big Markets Take Big Funding" - In Vivo, 20 Dec, 2013.).) And although that Series F was the last to date, the situation for CVRx has altered, and even while we spoke at the GMTCC, Yared was pondering new funding options for CVRx.

He explained that one of the biggest differences between then and now is the change in market prospects for certain rival technologies that were being developed to exploit the market CVRx is entering. “We have seen the successive failures of competing neuromodulation technologies with dissimilar mechanisms of action – renal denervation [Medtronic’s Simplicity III], vagal nerve stimulation [Boston Scientific’s NECTAR-HF].” Medtronic’s DEFEAT-HF trial of spinal cord stimulation for the treatment of heart failure, in fall 2014, was similarly disappointing: the implantation of a spinal cord stimulator was not associated with clinical benefit or improvement in outcomes as a treatment for advanced heart failure.

“While these outcomes have thrown a veil of uncertainty over the field of neuromodulation for the treatment of cardiovascular disease,” said Yared, “it just becomes ever more important for us to remind our stakeholders how Barostim Neo functions differently, as it’s still the only device designed to work at the very top of the autonomic cascade. We also saw the need to raise more money to conduct a pivotal trial before a possible IPO or exit, as from a financial point of view, the market became a bit more risk averse.” Yared sees all this as a test, of sorts. “When we went to raise the Series F, the goal was to conduct a Phase II trial and get the data – which are ‘phenomenal.’ Execution of the trial was within our control, but the rest of the environment was not, and so, as we see it, our ability to react is being tested,” he said.

Clearing the field of opponents is not always the straightforward ride it may seem. “When a competitor abandons a market, it is good and bad. Being alone in the market requires you to do more ‘heavyweight lifting’ to convince regulators, payers, physicians, consumers and users to adopt the technology. When two or more do it together, it’s easier,” said Yared.

Having said that, being a unique player in the market has its own advantages. “I will not say I wish for more competitors, but the disappearance of those competitors in a spectacular way can be seen as a burden on the entire industry – not just for the person or player directly affected,” Yared added. For the time being, CVRx aims to collect enough clinical and health economic evidence to prove the points it wants to make with Barostim Neo – CVRx’s flagship brand.

Right now, and like his “predecessor-in-waiting” at AdvaMed, Yared has his plate more than full, with the Barostim Neo pivotal trial enrolling now, funding to secure and launch plans to shepherd into place. If high ambition, a cool head, a realistic outlook and an intense work rate with a potentially ground-breaking technology should be any yardstick, this Minneapolis company must be worthy of close attention in the coming 24 months.

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