Investors in healthcare and medtech start-ups have become more risk-averse compared to a few years ago, with series A and series B financing rounds getting more difficult to finalise, even for truly innovative companies. Even strategic investors or potential business partners tend to wait for more solid R&D results before cutting actual deals.
The extensive time it takes to bring innovative products from R&D to market is a peculiarity of the healthcare industry. The extensive and stringent processes set up by governing authorities around the world possibly make it one of the most regulated business environments to operate in. By nature, the healthcare industry tends to be very cautious when dealing with risks and its tough regulatory environment is under increasing pressure due to rising costs, reimbursement issues and patient expectations.
With the start-up ‘valley of death’ – i.e. the difficulty of covering negative cashflow before a new product starts generating revenue – getting deeper and longer, it is becoming more difficult for many companies to survive. Finding the right investing companions is, therefore, crucial to the success of a healthcare or medtech start-up venture.
The extensive time it takes to bring innovative products from R&D to market is a peculiarity of the healthcare industry
Successful financing
Within such a tough environment, Xeltis is a significant example of very successfully financed start-up. We completed an oversubscribed series B financing round of €27m at the end of 2014, with Life Sciences Partners (LSP) of the Netherlands and Kurma Partners of France leading the round, and active participation from VI Partners of Switzerland and from Xeltis’ current shareholders. There is certainly a compelling combination of convincing elements in the Xeltis business model that made our investors assess their involvement in our company as a positive, calculated risk.
Since I joined in 2011, Xeltis has developed from a small university spinoff to one of the most attractive start-up companies in one of the most dynamic sectors in the medtech industry. Xeltis is developing highly innovative cardiovascular products that promise to change the standard of care in cardiovascular surgery and to reduce long-term treatment costs.
Delivering better healthcare and reducing the economic burden for healthcare systems is a key goal for healthcare regulators, policymakers and consumers when looking at new products. Over the past five years, the ability to demonstrate a benefit not only for individual patients, but also for society as a whole has become a critical element for the commercial success of novel products.
Innovative, scalable science
At Xeltis, we are developing the first ever bio-absorbable cardiac valves and vessels that support a new therapeutic approach called endogenous tissue restoration (ETR). Our novel products are made of bio-absorbable polymers and are structured as a porous matrix that, once implanted, allows the body’s natural healing process to pervade it with new functioning tissue. As the natural heart valve or vessel forms, the implanted matrix biodegrades, leaving the patient with a real, healthy one made of their own tissue.
ETR may reduce the risk of complications caused by foreign material in the body, as well as the risks associated with the repeated procedures normally needed with existing replacement valves, therefore lowering overall healthcare costs. The Xeltis technology is based on the Nobel Prize-winning science of supramolecular chemistry by Professor Jean-Marie Lehn. It stems from world-leading work in the chemistry of materials, biomechanics and microstructures at the Eindhoven University of Technology – a European centre of excellence for technology and open innovation.
The Xeltis technological platform can be applied to a number of heart valves and vessels, and our robust pipeline therefore has an extraordinary potential to change standards of care in cardiovascular treatment. We have already secured positive clinical data from trials in patients using a heart conduit and a patch for specific cardiac procedures.
The first product we are planning to bring to market in a few years is a pulmonary valve for paediatric patients with a long lifespan ahead of them, and for whom it would be even more important to avoid repeated surgeries every few years. The purpose of the Xeltis series B financing round, finalised last December, is to support clinical trials and bring the first ever bioabsorbable pulmonary valve to market.
Long-term strategy
The successful series B financing round for Xeltis was made possible by having the right investors on board since seed financing and the series A round. In this regard, 2011 marked a substantial change in the company’s strategy.
Our initial approach was similar to that of other companies, and focused on growing tissue-engineered heart valves in the lab for subsequent implant in patients. Based on early promising results, in 2011 we decided to completely shift our development towards ETR as an alternative and potentially more successful approach for patient treatment.
It was thanks to our long-term investors that we were allowed to explore this additional route further and to find the solution that eventually accelerated the Xeltis research and business pathway. Short-term exit or liquidity pressure would have prevented us from shifting our business plan to become what we are now.
An exceptional combination of interdisciplinary excellence is what started Xeltis. The company is a combination of experts in biochemistry, medicine and engineering, who may not normally have had the opportunity to work together around the same lab bench.
As a company and as individual professionals, we delivered the value creation expected by our investors at all different stages of our development. We have built relationships with them based on personal trust, and this is turning out to be mutually rewarding. To date, our in-vitro, in-vivo and clinical trials have yielded positive results, making our start-up the exciting venture that it is now.
Today, Xeltis sits ahead of the competition and has been recognised as a start-up to watch in the medtech arena. Indeed, the company was selected for the Tech Tour Medtech Summit in 2012, recognised as promising start-up by IMD Business School, awarded the Biovision Next Gem award in 2013, and nominated for the Out of the Box Technology award at PCR in 2015. Additionally, Xeltis has been selected as one of this year’s ‘Fierce 15’ – a list of the 15 most promising companies in medical technology – by US publication Fierce Medical Devices.
The European CEO Best CEO in the Medical Device Industry 2015 award comes as great recognition to conclude a very positive year at Xeltis. We have a solid plan and financial resources to grow the company and bring our first product successfully to market, and we are continuing to work on nurturing a pipeline of products that may potentially change standards of care in cardiovascular treatment in the not-too-distant future.