Nine to Noon Interview Transcript
9 July 2021 at 9:37am
Kathryn Ryan: New research has found New Zealand's burgeoning healthtech sector has significant economic potential but access to lucrative foreign markets is being slowed by hurdles in the earliest stages of development. The healthtech sector generated an estimated $2.85 billion in revenue in just the last year with record growth since COVID-19. struck. But research on Callaghan Innovation has highlighted the key challenges for Kiwi healthtech businesses, including complicated clinical trial regimes, complex regulatory requirements and difficulties accessing investment in educational support. It's launched a program to support the sector to overcome these challenges and grow businesses. Our guests are Andrew Clews the Head of Health Technology at Callaghan Innovation. Kia Ora and welcome Andrew. Kia Ora. And Mōrena and welcome to Garth Sutherland, Chief Executive of The Insides Company, which creates medical devices for gastrointestinal conditions. Garth, good morning. And prize for the best company name I’ve heard for a while - just say what you do. Andrew, let's talk about the healthtech sector. Can you define it for us? Because these things can get a bit nebulous sometimes, how do we define what's in healthtech?
Andrew Clews: Yeah, of course, Kathryn. So we were working with around 200 companies at Callaghan Innovation across the healthtech sector and that spans digital health technologies, medical device technologies and biopharma and therapeutics. So it's quite a wide set of subcategories under that big umbrella. And what we're seeing is tremendous growth happening across the sector, obviously anchored by big companies that are familiar to most Kiwis. So Fisher & Paykel Healthcare being a big one. But then there's some really cool, and really interesting new technology companies and Garth's company is one of those starting to show up on our radar, and we're seeing them needing to address some fairly common problems as they move through that commercialization pathway.
Kathryn Ryan: Are they overwhelmingly exporters, they need a big market? Right? This is a fairly niche area in theory.
Andrew Clews: Yeah, I mean most health technology businesses are looking internationally first, and there's a number of things that are driving them that way. Obviously access to larger markets to get some scale and sustainability, they're looking to attract investors internationally. And they're oftentimes following international regulatory pathways, you know, about 90% of the companies in health technology are internationally focused. And they're also looking to the US FDA primarily as the regulatory pathway for a lot of those businesses and as they scale and grow, they then can look at New Zealand as a market opportunity, but not often until they're a little bit further down the track and a little bit more sustainable.
Kathryn Ryan: So biggest markets, North America and Europe. However, Asia is outpacing other regions when it comes to growth, sales growth.
Andrew Clews: And for some companies. Yeah, for the more established ones, definitely.
Kathryn Ryan: So what was the impact of COVID and helping the sector growth simply that some of them are working on technologies that fit? Absolutely with where demand is right now?
Andrew Clews: Yeah, I think COVID has certainly had an impact on the sector. And I think, more than the direct impact related to COVID itself, it's been this highlighting of activity across the sector and a focus of people's interest on what's going on and supporting businesses that really positively impact human health. So it's really a good news story. This is a real sunrise sector for New Zealand, and we're seeing, you know, much more interest from angel investors, we're seeing a whole bunch more second generation entrepreneurs in the sector that might have built a company and gone on to build a second company and Garth is one of those. And we're seeing researchers across our university system and entrepreneur clinicians also seeding this group of new companies coming through.
Kathryn Ryan: I'll give some examples. Just very quickly for listeners HeartLab uses AI to read echocardiography. In fact, that's happening in lots of areas, isn't it that AI does the first lot of scanning, it still comes back to human eyes. But it can do in any number of medical contexts, can do some hard yards and some scanning. So that's one company. Exsurgo has created an at home mini brain scan machine. The server software is this service stuff is very big as well. What were you going to say about Exsurgo?
Andrew Clews: I mean, there's a lot of these companies that are building technologies that support clinicians, so they're allowing clinicians to be better and faster at what they do, and really support their clinical practice. And that's ultimately benefiting everybody in the long run.
Kathryn Ryan: I know we're doing greater service as a software as well which has all the booking machines. Just things that speed things up and smooth processes. Zero-Cast I love. The good old plaster cast that so many people lugged around but no more.
Andrew Clews: That’s right so Zero-Cast have developed a mechanism for being able to cast a broken wrist for example, which is the most common fracture and allow much more freedom of movement and a lot more comfort to the patient. But you know, it's a tough thing when you're trying to disrupt a market that is pretty ubiquitous and has been used for a very long time. That plaster cast process.
Kathryn Ryan: Garth, tell me about The Insides Company and what you are making and where it fits.
Garth Sutherland: Yes, we're a gastrointestinal medical device company. The company was started by two colorectal surgeons out of the University of Auckland, who saw complications with patients following gastrointestinal surgery. And so they came up with a device that performs a process called chyme reinfusion. And that's where we take the intestinal contents that are stored in a bag outside the patient's body after surgery and we reinfuse those back into the gut, so that they can continue the journey all the way through to the back end. And the patient receives a lot of benefits from that: nutrient reabsorption; reabsorb all the water; keep going to the toilet naturally. And they're able to get out of hospital sooner, and able to receive all the nutritional requirements from oral eating as opposed to synthetic foods. So it's an incredible technology developed at the University of Auckland. And we spun out from the University a couple of years ago, and we're taking this technology to the world.
Kathryn Ryan: Also, does it have a good long term impact for the intestine in that the whole intestine is able to be used at various stages. So it's not atrophying.
Garth Sutherland: Exactly Kathryn. When a patient has a section of gut removed, a section of bowel typically for in the case of bowel cancer, a stoma is formed at the end of the small intestine, and the food's diverted away into a bag for a while that surgical join heals. What our technology does is after a couple of weeks, enable the contents of the bag to be restored back into the gut and continue all the way through. And the gut, you can think of actually a little bit like a broken arm, if it's not being used it atrophies and shrivels up. So it's really important to keep the gut having food through it. The gut’s interesting, it also gets its own nutrition from the contents inside it particularly in the large intestine. So as opposed to the surrounding blood supply. So it's really important to keep it working.
Kathryn Ryan: Let's use you as a bit of a case study then on what's involved in getting technology like this to market because the particular thing about medical devices or any kind of therapeutic, is there are very stringent regulatory, understandably, regulatory environments that you're making your way through, and they're different in different countries right Garth?
Garth Sutherland: Yes, that's right. There's a bit of a beaten track for medical devices. So the first thing is developing a device and it normally goes into trials to prove that it's safe for use in human trials. And then it’ll go into a feasibility study with patients to collect some clinical data around the efficacy of the product and the safety. Using that data, then we can apply for regulatory approval and transfer it into manufacture. Regulatory approval here in New Zealand is through the MedSafe process and in Europe, you get a CE mark, and in the US you go for a US FDA clearance. Australia is TGA. So it's a variety of different regulatory bodies to get clearance for depending on the go to market strategy.
It’s quite expensive, so typically, these companies will raise multiple rounds of funding at the different commercial milestones. And then the key thing, of course, is starting to get adoption in the marketplace getting used by physicians and patients. And getting reimbursed is a really big hurdle for a lot of these companies. Reimbursement is where either a DHB is paying for it, or an insurer is paying for it.
Kathryn Ryan: Andrew Clews back to you. What is it then that Callaghan’s doing to try and help companies shorten the pain of learning all these things navigating all these things?
Andrew Clews: Yeah, well, I think Kathryn at sort of a broader level, obviously across the broader suite of Callaghan Innovation products and services that we deliver there is from like a co funding standpoint there is, the bigger things like the R&D tax incentive, there's project grants that help companies build out their technical challenges and address the technical challenges around their research and development. There's a whole bunch of different student grant products that we have that we place people into businesses to bring some really critical skill and talent into those businesses. And then with respect to healthtech, specifically, we noticed a lot of these challenges were fairly common across a number of these early stage businesses. And we worked across the ecosystem, and with MBIE (Ministry of Business, Innovation and Employment) to figure out how we might address health tech, specifically, and launched late last year, a program called the HealthTech Activator, which is basically a deepening of our sector engagement, support for health technology and recognizing that some of those challenges are pretty unique to healthtech. So we've focused activity around Capital Planning, you know how these businesses need to really effectively plan to have enough capital to sustain their growth. Garth mentioned the regulatory space, obviously getting people equipped to understand the various regulatory pathways they need to consider and to see regulatory as a strategic consideration. It's not just a market entry consideration. Reimbursement, which is how you're going to get paid. And as Garth mentioned, you know, there's a variety of different ways that you can get paid, and particularly some of these bigger markets like the US, you've got to understand the various perspectives that insurance payers have and that hospital systems have and the various trade-offs between risk and cost. And then the clinical trials pathway is one that is relatively complex, depending on where you're trying to target your clinical trial and the type of technology you are developing, and perhaps most importantly, market validation. So early stage market validation work to support these businesses around what they're developing, what the real impact of that is commercially, and whether they're really impacting patient's health.
Kathryn Ryan: All right, great. Last word to you Garth. At the funding, we're getting much more venture capital funding in New Zealand at the moment. I think that would be fair to say, it's certainly all the feedback I'm getting. But is healthtech one where people go, Oh, looks a bit hard. And yet we talked to Fisher & Paykel and I know we always trot out the same names when we talk about, you know, the hugely successful leading companies, but really, they are the role models and you want others to reach their standards and surpass them. But is it an area where the venture capital that is there tends to be either a bit weary or perhaps lacks the knowledge it needs?
Garth Sutherland: Well, you make a good point, mentioning Fisher & Paykel because anyone from Fisher & Paykel will say it takes about 10 years to bring a new medical device to market. And that's quite a long time in terms of a traditional VC return on investment model. So the VCs who invest in healthtech, normally have an expertise in this area and all of the milestones along the way and the capital requirements. So in New Zealand, we've got a couple of these focused specifically in health tech. That's their mandate, and there's more coming in. So we've got Pacific Channel is one, Brandon Capital Partners is another, CaraMed is coming into the market and then we've also got Nuance coming in. But there's also a number of more generalized VCs who will play in this space as well, such as Movac and so forth. But there's a lot more capital coming in, which is great because these companies are capital intensive.
Kathryn Ryan: Excellent. Thank you very much, both of you. Garth Sutherland of The Insides Company and Andrew Clews of Callaghan