Read time 10 minutes

Earlier this month, I was invited to speak at the SiS: Women's Health event in London on the Successful Exit Panel, with the following overview:

“Hear directly from founders who have navigated the complexities of selling their companies, learn how they maximised value, and get actionable advice on achieving a seamless transition”

I enjoyed the opportunity to share some of our company’s story (focused on our acquisition), discuss my thoughts on exit strategy (including some of the challenges around valuation), and introduce my business (OBG Access) helping other medical device start-ups with their commercialization goals from concept to exit.

I loved the energy being surrounded by founders, investors, and healthcare leaders.

In this month’s newsletter, I share some key insights from the panel in the hopes to inspire and educate others on a similar journey.

Before I get into the Exit Panel Insights, I wanted to update you all on two things:

1. Free 30 minute intro call - I’m late to the party with Calendly but have now set this up. For anyone interested in an informal conversation about OBG Access or any specific topic from a newsletter, please feel free to book a call. Look forward to connecting with you!

2. Recent Podcast recorded in New York - I enjoyed a recent conversation in New York with Alex Koshykov (Host of Health2Tech - Digital Health Events). I shared the story behind our company, from concept through to exit. For anyone building a medical device business in women's health, you might find a few useful insights as I touch on several stages of our journey. You can find a link to the full podcast at the end of the newsletter.

Insights from an Exit Panel in London

“Safe Obstetric Systems scaled rapidly in the US market with your innovative medical device used during difficult c-sections, the Fetal Pillow. What strategies did you use to achieve this rapid expansion?”

Our device (Fetal Pillow) was cleared by the FDA in late 2017 and 2018 marked our official US launch. I’ve discussed our distribution strategy several times in previous newsletters and would encourage you to read through some of those for a deep dive.

We launched in the US through direct sales efforts in major cities on the East Coast and a network of independent distribution partners for national coverage. At one point we were working with 8 independent distributors which amounted to around 35 sales rep out in the field promoting our device. This distribution network became our key focus to drive commercial success.

I personally sold Fetal Pillow directly in New York and was able to obtain approval at all major hospital groups in the city. These prominent hospital systems and key opinion leaders would help drive adoption nationally.

I also shared the importance of a US clinical study. There were several publications on our device outside of the US but when we were approached by Brigham & Women’s Hospital (part of the Mass General Brigham group) who were interested in conducting an RCT, we knew this could be a huge opportunity. If their results were consistent with the outcomes seen in other studies, this would undoubtedly have a huge positive impact on US adoption.

Other marketing efforts to achieve rapid expansion in the US market included attending key national obstetric conferences and advertising in clinical journals.

Ultimately, we needed to spend substantial time in the US market ourselves supporting distributors, attending national meetings, and driving direct commercial activities. These would all help build rapid adoption in the US market.

“What were the key factors that led to your successful acquisition of Safe Obstetric Systems by CooperSurgical, and how did you navigate the acquisition process?”

I shared some context on the relationship with CooperSurgical (we built this relationship over several years prior to the acquisition) and emphasized the importance of developing relationships with potential strategic partners early in your journey.

I then talked through some of the value drivers that I believe led to our successful exit, including the following:

1. Innovative device that solved an important clinical problem – this device was the first solution to a clinical problem that had not previously been addressed. Previously, these difficult deliveries could only be managed with manual techniques, often leading to complications for the mother, and sometimes for the baby too. The value proposition supported our pricing structure and substantial margins (see below), which could certainly attract the attention of a strategic partner when reviewing our business from a financial perspective.

    

2. Evidence of clinical efficacy - several independent studies were published over the years which demonstrated that Fetal Pillow was clinically proven to reduce maternal and fetal morbidity during difficult second stage cesarean sections.

3. A robust cost-benefit analysis - we were able to build a cost-benefit analysis (resource costs for the hospital could be linked with study outcomes) which demonstrated potential savings, each time a device was used. With the use of our device, the reduction in maternal complications could lead to a significant financial benefit (a point of focus by Value Analysis Committees).

4. Intellectual Property underpinned our commercial advantage - with patents filed across major geographies (notably the US), we would have a head start on any major players considering entering this niche market. Ultimately, IP protection would become a focal point in any future exit negotiations and due diligence. An acquirer would need to ensure their investment was protected from any competitive threats.

5. Attractive financial metrics - rapid revenue growth, substantial margins etc. Clearly there is a strategic element to many acquisitions, but if the numbers don’t stack up, it’s unlikely to progress any further than due diligence. Medical devices that add significant value in the form of clinical outcomes and financial savings for the hospital system, can often command a premium price, which in turn can lead to substantial margins per unit.

6. Regulatory approvals in key markets - Regulatory approval is critical in determining both the immediate market potential and long-term strategic value of an acquisition. It ensures legal compliance, reduces risk, and maximizes the acquisition’s commercial potential. In our case, our device was initially approved in Europe and then most importantly, FDA cleared in the US. From early discussions with potential strategics, it was clear that prior to FDA clearance, there was reduced appetite for taking on that regulatory risk.

In our case, the above factors provided an opportunity for a trade acquirer to accelerate growth through an existing sales force and distribution channels within their network. They would also be able to capture additional margin by selling direct to customers (vs. the independent distributor model we had in place). There would also be a strategic incentive for for a women’s health medical device business to differentiate itself with a unique and innovative product.

Many start-ups see an exit as the ultimate goal - interestingly, we never chased after that end result. We believed if we were able to make an impact with our device, build a market, and do all the right things as a company - maybe a larger player would take an interest, otherwise we would go it alone.

In the end, it made sense for a strategic acquirer to take it off our hands. As a small team, we could not do it justice and get the device out to as many mothers and babies as we wanted to (our mission was to make childbirth safer globally).

Valuation was a challenge in some respects given the unique nature of our device and a lack of comparable transactions in the industry. Agreeing the earnout component and practicalities around how this would work became a focus of negotiations.

We also spent a lot of time building a commercial plan with CooperSurgical – we needed to ensure we were aligned in our strategy, given it would impact the potential of hitting the earnout target (beneficial to both parties).

It was an interesting experience as a small start-up now working with a large multinational player to define details around the national launch (and ensuring they followed our advice).

For further reading on this topic, refer to a previous newsletter: “Value Drivers Behind Our Exit”.

“You integrated the Fetal Pillow into CooperSurgical’s product portfolio post-acquisition, What did founder life look like and what were the biggest challenges in this integration process?”

Three of us remained with the business for one-year post-acquisition to support the integration. From a commercial perspective I spent much of that year training their sales teams across the country on our device. This was a critical part of the integration to transfer our years of knowledge over to the acquiring company.

Some of the specific challenges related to ending distributor arrangements, transferring over regulatory systems, and moving customer contracts/ pricing agreements over to Cooper (particularly given that a new pricing structure was put in place post-acquisition).

Successful negotiation of the earnout/ milestone targets were also critical to achieving maximum value on the deal. As a small team, agreeing a detailed commercial plan that would benefit both parties was a key challenge.

“What are the most important considerations you can share with founders preparing for an exit - your most important considerations?”

On reflection, our company sale was an incredible learning experience. I shared a few practical tips on preparing for an exit.

Start preparations early - You never know when formal interest from an acquirer might come your way - prepare ahead of this. If an offer comes your way, or if you decide to go to market, it’s a hugely time consuming process. By having your affairs in order ahead of time, you can continue to focus on your business objectives.

Build relationships now - If you’re operating in a niche part of the industry, as we were - women’s health, but specifically medical devices related to childbirth, how many of the industry leaders would truly understand your business and the value behind it? You can start unpacking this by developing relationships with key players in the industry who might one day be interested in acquiring your technology.

Bring the right advisors onboard - critical for success. Meet with as many potential advisors as you can. We met with several before deciding on who would be best placed to support our objectives as shareholders.

Ensure as a shareholders you’re aligned on objectives - are you all in agreement this is the right time to exit? Where do your valuation expectations sit? This is likely to be the biggest milestone in your company’s history, but also in your personal and professional life (one for a separate newsletter!).

Have a clear vision for growth - what are the plans if you don't sell now? There might be acquisition interest but nothing is guaranteed. You need to focus on building your business and generating value. The sale process shouldn’t distract you from this. Are you confident in going it alone?

For further reading on this topic, refer to a previous newsletter: “Preparing for an Exit”.

“M&A partners - how to recruit, when and if do we collaborate with potential acquisition partners?”

You should start building these relationships early - with key players in the industry who might one day be interested in acquiring your technology. If for instance they’re building a portfolio of innovative obstetric medical devices, this would clearly have been a fit for us.

Strategically, this could benefit both parties longer-term. It was always important for us we had the right partner on-board to take the product forward globally, and one who’s vision aligned with ours. This was just as important as the financial aspect of any potential deal.

From a practical point of view, narrow down the key players in your industry, and further drill down to those that are operating in your niche market already or those that have an interest in entering your market. Could your innovative technology be their entry point?

We built many of these relationships by attending national conferences, engaging with the industry, and through introductions within our network. We built a relationship over several years with the company that would eventually acquire us. They kept a close eye on our business over the years and monitored our progress.

There’s nothing to lose in building these relationships - you can make some great connections and learn a lot from them as you continue to scale your business.

Thank you for reading this month’s newsletter - a passion project to share some of our journey with others who might be on a similar path. If anyone in your network might be interested, please send it on! And as mentioned earlier, below is a link to my recent podcast in New York.

Need strategic support for your business?

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, OB decision makers, hospital systems, and distribution partners throughout the US market.

We develop strategic plans for US market entry and help 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 or book a call!

Nish Varma

[email protected]

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.