February 26, 2014
Interviewed by: David Snow
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Devices of Value: Baird Capital Backs Insightra Medical

Baird Capital’s Mike Liang describes his firm’s investment in Insightra Medical, which makes medical devices helping patients with hernias. Liang describes the international sales push at Insightra and how Baird’s operations group is helping.

Baird Capital’s Mike Liang describes his firm’s investment in Insightra Medical, which makes medical devices helping patients with hernias. Liang describes the international sales push at Insightra and how Baird’s operations group is helping.

Devices of Value: Baird Capital Backs Insightra Medical

PE Value-Creation Stories with Mike Liang of Baird Capital

What led to Baird Capital’s investment in Insightra Medical?

Mike Liang, Baird Capital:

I was introduced to this company through a common network of someone I knew with the CEO. When I started looking at this company—this plays in to some themes we have talked about and what interests us in terms of commercial-stage business that had great clinical data, had international experience and was selling already internationally. This company hit a lot of this. Their initial key products are focused on the hernia market. There are two different types of hernia: inguinal and ventral. The main issues with those are either chronic pain—when people get these procedures done and were in pain for some time—or the hernia comes back, there is a recurrence. In the case of ventral hernia, 30% to 40% of the time, the hernia comes back.

 

When I was introduced to this company, they had 500 patients of clinical data, many patients over five years without an instance of pain or recurrence. As an investor, that is something. When I see they have clinical data of that magnitude, out that long, with those spectacular results, that got me interested.

 

What key facts did your due diligence into Insightra seek to confirm?

 

Liang: We wanted to understand the robustness of clinical data. How real was it? How much would this translate in terms of the U.S. market and with U.S. clinicians believing in the data and starting to use the products?

 

We spoke with several different physicians, both one-on-one and as different market surveys we did. We wanted to understand the price points of the products and how they would be priced relative to existing products on the market. We all know we are in a very difficult time, in terms of the healthcare system and the cost to the system, so we could not necessarily have a product that was at a huge premium to where the products were today, even if it had superior results. We spent a lot of time with pricing pressures, where people would be comfortable buying those types of things. For these commercial-stage businesses, in particular, it is about spending time on operating expenses and focusing on how you ramp up the revenue and how much time you spend on U.S. commercialization versus OUS and what is needed to get those things up on a cash-burn basis.

 

What are some key ways Baird Capital will help drive value-creation at Insightra?

 

Liang: What makes this company stand out relative to others I have seen is the international expansion and commercialization plan they have relative to the U.S.

 

The U.S. certainly will be a key market for them—it is a big opportunity. The majority of the revenue over time will come from the U.S., but it takes time to ramp up the U.S., in terms of the sales reps you have to get up and running, trained and educated. U.S. physicians may believe and see OUS data, but they want to test it in their own hands before they start ramping up. This was a company that was able to commercialize in India with their direct sales team. They have been focusing on Europe, of course, as well as the Middle East and Latin America and this was a way to mitigate some of the adoption risk you see in the U.S. As they are getting revenue in other regions? With the U.S. coming on board, it was a way to offset some risk if the U.S. takes longer to hit.

 

We have a portfolio operations team in Baird Capital, which is there to help all of our portfolio companies across our U.S., U.K. and China teams for whatever they need.

 

In this case, because there was such an international focus, because of our team and our experience in Asia, as well as things we are doing in Latin America, particularly in Brazil, our portfolio operations team was able to come in and work alongside us as the deal team. They were able to work with the company in terms of not only saying, “Let’s figure out our assumptions for the market, what our costs are, and how we need to ramp up our team and infrastructure,” but, more importantly, “What are some ways we can get into Brazil? Who are some partners we can use for manufacturing suppliers and who can help us go through the regulatory agencies and get there?”

 

 

 

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