ABH’s wound healing product for diabetics had made the company profitable in less than three years, but it needed more cash. Dermagraft is a bioengineered skin substitute product consisting of human fibroblast cells on a scaffold. The product is used to treat diabetic foot ulcers. With Dermagraft sales growing, ABH executives last year concluded that they needed to build a second manufacturing facility at a cost of up to $100 million, said Dean Tozer, ABH’s senior vice president of corporate development. ABH was founded in 2004 and had raised $10.4 million in two rounds of venture financing. But the company’s investors were looking for an exit.
Tozer said that discussions with private equity firms came close to a deal. But in the second half of 2010, management decided to pursue an IPO. The offering would have valued the company at more than $600 million. But on the morning of May 17, the day before ABH was expected to go public, the company instead announced it had been acquired by Shire for $750 million.
Tozer spoke Tuesday in Chapel Hill, North Carolina at medtech11, the annual conference hosted by North Carolina medical technology group ibiliti. It was the first time he had spoken publicly since the company’s acquisition by Shire.
The theme of medtech11 is “convergence” and Tozer offered insight on navigating through the regulatory process a product that is part medical device and part biological. He also offered tips on commercialization. Here are some highlights:
Forget what you know. The U.S. Food and Drug Administration considers Dermagraft a device. The Centers for Medicare & Medicaid Services considers the product a biologic. European regulators classify it as a medicinal product. You can’t think about your product as being in a single category. You’ve got to be able to think about all of them. So Tozer’s advice is to forget what you know. “If your product is a convergence product, it doesn’t apply.”
Find the right people. Because Dermagraft doesn’t fall into a single category, ABH needed to find the right people who could talk to the FDA and CMS. Finding the right people was also important for sales. The company established strong incentives for sales growth and the team met them. Since Dermagraft’s 2007 launch, sales had grown to $147 million in just three years.
Leverage. ABH was in the enviable position to choose between either an IPO or a sale. With growing revenue and more than $35 million in profit, the company was a strong IPO candidate. Shire entered the picture late in the game in the weeks before the company was set to enter the public markets. “The leverage we got was a viable IPO ready to go,” Tozer said. The Shire deal was done in 19 days. Tozer said the company chose to be acquired by Shire because of the volatility of the market.
Show them the money. Companies increasingly must show the economic value of their technology. Clinical trial data is important not only to make the scientific case for a product, it can also make an important economic point to payers. Payers want to see how a new product will avoid cost when compared with the standard of care. “It’s really starting to affect how trials are designed,” Tozer said.
More on clinical trials. ABH did a retrospective data analysis that showed that Dermagraft is cost effective after six months. That’s important to payers because their data show that people typically change insurance every two years. If a product doesn’t avoid cost before then, it won’t save the payer money.
Dean Tozer, Executive Vice President, Chief Commercial Officer
Mr. Tozer joined Nuo Therapeutics in April 2014. Prior to joining Nuo Therapeutics, he was Senior Vice President at Advanced BioHealing Inc. where he was responsible for the acquisition and reintroduction of Dermagraft® into the U.S. market. Following the acquisition of Advanced BioHealing by Shire Regenerative Medicine, Mr. Tozer became Vice President of Corporate Development where he led the business development efforts for that division, including the 2012 acquisition of Pervasis Therapeutics. Mr. Tozer has more than 25 years of experience in the global healthcare industry and has an established track record of successfully launching and marketing wound care products. He also has eight years of global healthcare experience with Searle Pharmaceuticals, a Monsanto company. Mr. Tozer was also a founding executive and officer of the Alliance for Regenerative Medicine, where he served as Treasurer. He earned a Bachelor of Commerce degree from St. Mary’s University in Halifax, Canada and is a Certified