Running on OCTANe

Entrepreneurs can find an “accelerator” to bring their innovations to market.

By Christine Bahls, executive editor

John Hendrick wants cataract surgeons to use his Zepto. This device, which looks like a fat human-thermometer, has shown in phase 1 and 2 studies that it can provide what the laser-shunning surgeon wants: a clean, simple capsulotomy. But, before he can get Zepto into the hands of U.S. surgeons, there is the matter of a well-designed and successfully executed 510(k) premarket approval. And for this John Hendrick needs money.

Mr. Hendrick, who has worked in the majors — Allergan, AMO — has experienced the pre-FDA-okay trials and triumphs before. But despite that experience, a little advice, he said recently, is always welcome, especially from people who know what they are talking about.

One such person is Dick Lindstrom, MD. Dr. Lindstrom told him about OCTANe, a business accelerator and champion of strategic partnerships. What Mr. Hendrick heard from Dr. Lindstrom: Make a business presentation that OCTANe’s principals would consider a winner, then OCTANe will introduce him to institutional investors for their investment consideration. Also, OCTANe would consider investing as well, through what it calls its “visionary venture fund.”

So Mr. Hendrick took Dr. Lindstrom’s advice and contacted OCTANe. (Dr. Lindstrom is on its board of directors.) What OCTANe does is provide companies direct access to key opinion leaders through its visionary venture fund: the KOLs are limited partners in the fund and therefore have an equity stake.

Dress rehearsal

OCTANe, based in Orange County, Calif., resembles a dress rehearsal for the Big Show for young entrepreneurs. OCTANe refers nascent start-ups or a bit beyond to nearby incubators. The companies it wants are those that “have gone through the angel round,” says Bill Carpou, OCTANe’s CEO and president. “We help them with later seed or early A round.”

Since its founding in the early 2000s, OCTANe’s directors have created four divisions, each with a different supportive entrepreneurial mission. They chose ophthalmology as a division because Orange County is loaded with innovative thinkers, which leads to expertise. “We have a lot of advisers; it gives us a level of expertise that no one else can bring,” says Mr. Carpou.

The founders of OCTANe had one goal when it started: to keep the county’s brain trust, and that collective business, from leaving the county. If an entrepreneur secured OCTANe funding, the recipient had to promise to keep the business, and all jobs, in Orange County. OCTANe has since modified that goal, in the case of its ophthalmic-only division: OCTANe wants the focus to be vertical.

Since its inception, says Mr. Carpou, the company has helped raise $1.2 billion in funding on 200-plus companies; 12 have repaid the money. Those 200 are primarily technological and medical in nature.

The ophthalmic division was created last November. Recently, OCTANe helped two ophthalmic companies: Mynosys, Mr. Hendrick’s firm, based in Fremont, Calif.; and IanTech, based in Reno, Nev., which makes devices that remove a cataract’s hard center. OCTANe has helped these firms raise the funding for their respective studies.

“That is our visionary venture fund,” referring to the ophthalmic division, says Mr. Carpou. OCTANe raised its initial funding through its KOLs, he reports.

The KOLs

The key opinion leaders identify potential investments that are already in clinical trials, says Mr. Carpou. The device must have a short pathway to an exit. “We don’t want to be invested in a long time [period]; 24 months, max.”

If a majority of the KOL investors agree that a device could be worth investing in, then OCTANe staff members go to work: they perform due diligence, test the prospective company’s strength, and so on.

James Mazzo, an OCTANe founder, says one area that OCTANe staff look at is the prospective client’s track record. “Are they a medical device company? Pharmaceutical? Then they look at the category [of the prospective device]. If it is a ‘me too’ product, then we don’t support it. If the product is original, then we ask them to present a business plan.”

That plan is presented, Mr. Mazzo says, “to the various sources we have,” and those sources include senior level executives from various fields (as Mr. Hendrick will explain below). If all the answers are to the senior level executives’ liking, OCTANe helps find the trial investigators.

Mr. Mazzo, now head of Zeiss’ ophthalmic business unit, says that bringing a product home is an art form. Having key opinion leaders who know how to recruit patients and who know how to follow patients is vital. “Not every ophthalmologist does this well,” says Mr. Mazzo, “You just don’t fall in love with physicians because they have a name. They need to have support staff. When you show data, it has to be pristine. Doctors get audited. The company will pay the price.” Other things prospective clients will be asked: What is your regulatory strategy? What is your endpoint?

The presentation

From the first time he saw the nanopulsed, disposable Zepto — designed by a NASA engineer and a researcher from UC San Francisco — Mr. Hendrick was keen about its prospects. This was in the mid 2000s. The morning after he saw the demonstration video, “I did my own little market research. I felt very confident this would be a significant product.” The next day, he says, work began in earnest to put Zepto on the ophthalmic market.

In time, Zepto gained its CE mark in Europe.

Mr. Hendrick appeared before OCTANe’s “vetting” team — those C-level execs — with the company’s business plan. Comprised of 15 people from all types of backgrounds, including marketing, technology, finance, engineering and medical, the vetting team asks the applicants the tough questions. “One at a time, they critique you. … For a new person, it’s daunting. Myself ... I enjoyed it,” Mr. Hendrick says.

So did they, apparently: the company opted to invest in bringing the Zepto to market.

With an approved IDE, two trial investigators chosen and a 510(k) safety trial set to start this month, Mr. Hendrick says these events are a long time coming: The capsulotomy is an aspect of a cataract procedure that has never been successfully dealt with. “If there is a problem, it will happen at the capsulotomy.”

This is something that is needed, he says.

Says Mr. Carpou: Mynosys and IanTech could have gotten funding anywhere. “But they came to us. We have 25 leading KOLs who can provide these companies with the help to let them grow and commercialize.” OM