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Welcome to the OBG Access Monthly Newsletter where I share insights into building a medical device business in Women’s Health.

I started this newsletter to help other medical device companies on a similar path. An important part of that journey will likely be navigating the US market.

I’ve recently spoken with a handful of early stage companies incorporated outside of the US. A key objective is US market entry but a lack of familiarity with this vast and complex market understandably creates some uncertainty.

I’ve had time to reflect on taking that leap as a small UK-based business. In this month’s newsletter, I share some of those thoughts.

Is there a specific topic you would like to hear more about? Perhaps it’s our initial experience of bringing a device to the market, regulatory pathways, or the exit process and how that deal transpired?

Just reply to this email with any areas of interest and I’ll include that in a future newsletter.

My new website is now live and includes a short cases study on our journey with Fetal Pillow - you might find it an interesting read: www.obgaccess.com

The Commercial Opportunity

As a small UK business, breaking into the US market was no easy feat. But the experience taught us invaluable lessons. Success in this market led to our acquisition. Why did the US become our key focus?

Size of the opportunity - it’s great to see the continued focus on improving women’s health in the US, most recently evidenced by the Biden-Harris Administration's ARPA-H commitment of $100m to accelerate women’s health research. The US market offers significant opportunities for value creation, improving lives for families, and wider reaching effects across society. The size of the market continues to expand rapidly with new innovations, strategic collaborations & acquisitions, as well as a favourable regulatory landscape.

Just to compare - around 3,000 maternity hospitals in the US vs. 150 in the UK. Our US customer base and adoption quickly dwarfed that of our UK business. By achieving success in this market, even on a small scale, we were able to generate interest from strategic partners and demonstrate the potential value behind our business.

Culturally more receptive to innovation - in my experience of meeting with many clinicians over the years, it’s been a welcome response to new technologies with potential to improve patient outcomes.

Perhaps given the sheer size of the medical device industry in the US, it’s more common for clinicians to be engaging with new innovations and industry partners.

Just look at the number of companies exhibiting at the national obstetric conferences - it’s an impressive sight and somewhat overwhelming as a small UK business looking to gain a foothold.

We found that these cultural differences provide a faster path to improving obstetric outcomes and building a viable business.

Opportunities for strategic partnerships - in recent years, several large healthcare companies have started to enter or expand into women’s health. Given the size of the industry and concentration of key players that operate in the space, if the ultimate goal is a strategic partnership or to be acquired - the US market makes the most commercial sense.

Proof of the Business Model

If your product or device is not being adopted in your home market, understand the reasons why. Is there demand for the device in a clinical setting? Are your assumptions around the market size correct? Do you have clinical data to support your claims? How does clinical practice differ in the US?

You should be able to answer all the above comprehensively. Often, the best approach is to speak with several clinicians in the US and understand their pain points.

In our case, we demonstrated a clinical need for our product on a smaller scale, before tackling a larger and more complex market such as the US.

We sold directly into the UK, a challenging market in several respects - NHS budget constraints, limited clinical data at the time, and scepticism from clinicians who needed convincing to change their practice.

Once we were able to break down these barriers and create a market, it was proof we could bring our product to larger territories.

There would be many other hurdles to contend with such as regulatory approvals, navigating the US healthcare system, and building an appropriate infrastructure.

Our success in the UK also funded our international expansion efforts and ultimately meant we never raised any external finance.

Proof of your concept and business model in your home market positions you well for success when entering new territories.

Analyse your Market ahead of time

We had many years of experience selling into the NHS and other regions outside of the US, but we would now be starting again in potentially our most important market. What could we do to get a head start and ensure we focused our limited resources effectively? Below are a few examples to get you started.

Build a target list of key states and break this down by hospital groups within each. Given that our device would be used in maternity facilities at an estimated 2-4% of all births, we identified target facilities based on delivery volumes. We would ultimately focus on specific US states with the largest birthing volumes and then identify the largest birthing hospitals and systems within each.

I identified the largest hospitals (by number of births). If I could build a list of top 10 hospitals in each region, this is where I would focus my time. It would also provide me with an understanding of the hospital system structure in each state (the important groups and IDNs we would need to approach).

Local conferences and committees in each region - build an understanding of local activity in your target market. This might include making contact with the regional ACOG Groups and attending their meetings. Identify key committees where you might be able to increase awareness of the problem your device solves. In our case with Fetal Pillow, we built awareness of the clinical problem over many years. This would ultimately underpin our commercialisation efforts at the appropriate time.

Build a detailed sales strategy. Once I spent some time building a list of target hospitals and key clinicians to approach, I would then develop an actionable sales strategy. This would include building an independent distributor infrastructure for national sales coverage.

I would prioritise which States and distributors to visit and the hospital systems to target. I would map out the year ahead based on this analysis and work closely with our distribution partners to determine how we would get our product in front of the key groups.

Build US Relationships Early

Years prior to FDA clearance, we attended major national obstetric conferences and built an initial base of contacts we could approach once our device was cleared for use.

We were able to get in front of physicians, key opinion leaders, hospital groups, and potential future partners (including distributors, contractors, and larger industry players etc).

By meeting clinicians, we created excitement and interest in our innovation early (we were approached regularly by US physicians who wanted to try our device). Building your network early positions you well when launching in a new market such as the US.

Following FDA clearance we had access to an extensive list of clinicians and hospital groups to discuss next steps in adoption. This would of course only be the start of the sales cycle (but it was an important starting point).

These relationships might one day to lead to national distribution opportunities or acquisition interest (both in our case). We built many of these relationships by attending national conferences and engaging with the industry.

How can you start building your network now?

How will you Distribute your Product?

Should you consider selling directly in your new market?

This is a key consideration when entering a new market. You will likely have had experience selling directly in your home market, either through your own sales force, or through distribution partners.

When entering the US market, given the structural differences compared with the UK (for example, private vs. public) we understood the importance of being on the ground and learning intricacies of the market ourselves. We could take the knowledge and experience of our product and bring this to clinicians in the US.

Even if we ultimately planned to build a local team or work with distribution partners, face to face conversations with clinicians to understand their needs and challenges would undoubtedly position us well to manage the dynamics of a new market.

Consistent engagement with clinicians and working through the sales cycle with knowledge already built from several years of selling into the UK meant I was well prepared to articulate the value behind our product and start building the US business.

Ultimately, this wouldn’t be the most cost-effective or best approach long term, and we would need to find local partners in the form of direct hires or distribution partners. We used a mix of the two over the years and this allowed us to maintain a lean cost base whilst ensuring national coverage with representatives on the ground in all the major states.

How do you build an effective distribution network?

Building a direct national sales force would require substantial funding, in a market we were just entering. We decided a better commercial decision would be to build an independent distributor network. We were able to develop several important relationships over the years - through direct market presence and attending national conferences.

We would meet with national distributors, large corporate players in women’s health (some looking for new products to add to their portfolios), individual sales agents looking for new products to represent, and independent groups.

These relationships opened up the door for introductions to potential partners - typically stocking distributors who would purchase our product and sell to the end customer (taking a share of the profit for their efforts). These groups would typically cover several states, with their own reps (often 1099s or sales agents) and teams working locally to represent a product.

This would be effective in that local reps would be selling and promoting our device to key hospital systems in their territory, a limitation of what we could do from the UK ourselves. Once our product was approved at a hospital, they could continue to provide training and local support.

Because these distributors would purchase stock from us and then sell to the end customer (hospital), this was beneficial for us from a working capital perspective - we would not need to spend substantial resources in trying to promote our product in such a large market.

We were effectively trying to replicate our personal experience, knowledge and skills in each of the reps representing our device. We would need to spend substantial time with each rep training them on the product, no easy feat when we lived in the UK.

Some of the key questions I would consider when appointing an independent distribution partner:  

What experience do they have selling obstetric (insert your niche) products? Do they already have key relationships (as mentioned above)? Do they have a successful track record in products currently being sold? Does the size of their team sufficiently cover their territories? Do they have the right attitude in terms of passion and belief behind the product? How many products are they already selling, and will they devote enough time to your product, a new innovation which will likely require more time upfront?

US Corporate Infrastructure

All the above would need to be supported by an infrastructure for selling directly into the US market. Below is a checklist of a few key items you will need in place:

US Entity - we set up a US Subsidiary of our UK parent company. You would need to take advice in the correct entity structure, often a C-Corp will be the most suitable for what you’re trying to achieve.

Order to cash process - systems in place to invoice the customer, record the sale correctly in your US books, and receive payment (bank account, remittance processes, cashing of cheques etc).

Vendor set up documentation - you will quickly learn the information hospitals require in setting you up as a supplier for the first time (usually this will include incorporation details, a W9 form, Purchase Order processing information, any small business exemptions etc).

I would suggest appointing a local US accountant to manage the annual filings and provide advice on more complex areas such as transfer pricing (particularly between parent and subsidiary where stock is being transferred).

We used a streamlined process to sell directly in New York and several other territories, but the majority of our national sales coverage came through independent distributors.

We would need to hold stock in the US market to serve both distributors and direct customers. We outsourced warehousing and logistics to a national partner. This was an effective strategy to maintain a lean cost base.

There would be many other factors to consider depending on how you decide to do business in the US. One route we were considering at a future date - building a national sales team. This would require several other considerations around legal and HR for instance.

In Summary

• The US represents a commercial opportunity that outsizes all other developed markets and is where you’ll likely develop strategic interest.

• Prove the business model in your home market and overcome challenges closer to home, before you take on the vast and complex US market.

• Understand your target market in depth ahead of time (perform exhaustive research - where will your time and effort be utilised most effectively).

• Build valuable relationships early - critical for long term success and gives you a head start in the market before your official launch.

• Put a distribution plan in place, either direct sales, a national partner, or an independent distributor model (likely it will be mix of these). These partnerships will be responsible for success in the market.

• Ensure your international infrastructure is in place (think funding, corporate structure, finance operations, logistics, supply chain, order to cash processes, distribution model etc).

How can I help?

OBG Access is a consulting business that provides strategic support for early stage medical device companies in the women’s health space, including commercialisation and international expansion.

We offer access to a large network of key opinion leaders, clinicians, hospital groups, and distribution partners throughout the US market.

We can develop strategic plans for US market entry and build a corporate infrastructure for non-US companies entering the market.

We can also provide an objective view on company valuation, prepare your business for an exit, and provide access to potential buyers or strategic partners.

I appreciate you taking the time to read this month’s newsletter. Any questions, comments or feedback, feel free to email me.

Enjoy your week!

Nish Varma

www.obgaccess.com

A note on the author - Nish Varma

After several years working in finance, I partnered with my father, an obstetrician who invented a medical device (Fetal Pillow) to solve an important clinical problem in his field (detailed in issue one).

After initially launching into the UK market in 2011, several years later, Fetal Pillow was cleared by the FDA in 2017. We then focused our efforts on bringing Fetal Pillow to the US market.

I spent the next few years building our US business and in early 2021, our company (Safe Obstetric Systems) was acquired by CooperSurgical, a leading global player in Women’s Health. I spent one year post completion working for the company during an earnout period to support the national launch strategy.

It was a 10 year journey to commercialise and bring the product to market - we were able to prove our business model in the US and that garnered interest from some of the key industry players.

This newsletter is a passion project to share some of our journey with others who might be on a similar path.