Nothing to sneeze at: Lessons learned from the Acclarent experience.

J. Johnson & K. Wu

Earlier this year, J&J announced its intention to acquire Acclarent, Inc. for $785 million, making it perhaps the biggest exit of the year in med devices and definitely creating a buzz among fellow entrepreneurs.  Perhaps you, like many others, are thinking to yourself, “How can I do that?”  and “What are they doing that I should be doing?”

So, how did Acclarent become a success?  How did they avoid pitfalls that might have led them to becoming one of the often-quoted 9-out-of-10 startups that fail?

At this year’s NFL Biodesign Alumni Annual Event, we had the opportunity to explore these questions and get insights from those in the trenches at Acclarent since its inception 6 years earlier in 2004.  In an intimate panel discussion with President & CEO, Bill Facteau, VP of R&D, John Chang, and founder Josh Makower provided insights and highlights of how Acclarent navigated uncharted waters with the development of Acclarent’s ENT product line.

There were the usual suspects inherent in medical device development such as obtaining regulatory approval, protecting IP, and collecting clinical data.  However, some of the most interesting learnings came from dealing with the unexpected, both being prepared for luck and being able to address unanticipated curveballs.

John White, a strategic marketing manager at Acclarent and Biodesign fellow, led the engaging interview that drew out key insights and lessons, several of which are shared below:

• Be prepared for luck.  If you’re like us, you may sometimes wonder how what you’re doing now will relate to what you do in the future.  What if you head into a completely different therapeutic area or discipline entirely?  How will some of the minutiae you’re working on now play any role down the road?  The “Aha moment” of Acclarent on which its core technologies are based provide a clear answer to why it’s important to have a diverse set of experiences and skills.  Both Josh and John had significant cardiovascular therapy expertise (TransVascular), and while searching for unmet needs, the Aha moment came when Josh looked at a coronal CT scan and noticed that it resembled an angiogram.  And if it looked liked an angiogram, why couldn’t you use tools for angioplasty for opening blocked sinus passageways?  Thus, the idea of Acclarent was conceived.
• Think beyond your thought leaders.  At the early stage of company development, I’ve often been told that it’s key to bring on board highly-skilled physicians who are thought leaders in their fields in order to be champions of your technology.  Certainly this is important, but what about the vast majority of other physicians who are not on the bleeding edge of their fields outside of academic centers and elite hospitals?  These physicians far outnumber the few thought leaders in the field and likely represent a substantial portion of the target market.  As Acclarent discovered through their CLEAR clinical study, the real value in their product lay with being able to enable procedural success among physicians from all different backgrounds. The study demonstrated that  private practice doctors could achieve similar outcomes even with less training on average, enabling Acclarent to capture a significant fraction of the target market.
• Find out who is being displaced and do your homework early.  When rolling out a new therapy, there’s always somebody with a vested interest in the status quo that has something to lose; find out who this person is early on.  “We had no idea how far certain influential ENT physicians would go to discredit Balloon Sinuplasty.”  The conflict included bad press about the procedure and came to a head when the payment policy lead ruled that existing reimbursement codes could not be used for the procedure, putting up roadblocks to prevent sales of the device.  In hindsight, the team learned that the existing codes were the bread-and-butter of many ENT practices and that Acclarent’s bone-sparing technology threatened careers built around the message that effective sinuplasty requires bone removal.  You never know which part of your plan will not come through, so do your homework as thoroughly as you can on every aspect.  Reimbursement, though an early concern for Bill, had been validated by other reimbursement specialists—but came under threat by well-entrenched KOLs.
• Proper physician training is paramount: standardize the procedure, train rigorously, listen to feedback, and iterate.  The introduction of a new set of techniques and tools can be daunting and challenging for time-pressed surgeons.  However, initial success is critical and early failure can be catastrophic to a company.  Acclarent’s technology was no exception and required ENT surgeons to develop a new set of skills.  The newness of these tools to the ENT community is perhaps best highlighted by a quote from an ENT physician shown a coronary stent, to which he responded, “Oh! A stent is a tube that expands!”  In order to guide their physicians and send a consistent message about proper usage, every aspect of the procedure was standardized to ensure consistent results and have a single method that could continuously evolve from feedback from multiple customers.  Procedural standardization didn’t happen by itself:  all sales reps receive 2 weeks of intense training, during which they are required to memorize over 14 pages of messages, practice with role playing, and are tested for use of exact language.  In addition, successful product introduction depended on the success of new surgeons, so sales reps attended every case.  The company spent over $30M on training over a 5-year period.
• Closing the loop on product development: “We’ll teach you, then you can teach us.”  When interacting with physicians there is always a struggle of trying to differentiate physician wants versus real needs, the latter ideally being addressed by a new product feature or the product itself.  In Acclarent’s case, learning from physicians was a two-phase process.  Only after a significant amount of training was a physician considered to have enough experience and understanding of the procedure to provide meaningful feedback to Acclarent.
• Be data driven.  Anecdotal observations can be key to product development, but also may lead down the wrong path if hunches aren’t properly supported by data and harder evidence.  In Acclarent’s case, collecting data on sales activity enabled raising the money needed to build a 125-person sales team (expensive!).  Existing CRM data provided a convincing argument to the board for need of additional investment.
• Showing off your assets may not be such a bad thing.  Early on, many physicians—including some closely associated with the company—balked at the $1,800 price of Acclarent’s single-use disposable tools.  What the physicians saw was the final price tag.  What wasn’t obvious was the significant costs associated with development and manufacturing of tooling. While not necessarily a recommended sales technique, showing the SAB and select physicians the P&L was an out-of-the-box way to justify the price of the technology and provide them with a means to communicate the value of Acclarent’s technology to their peers.
• Create evangelists in your end users. Physicians adopting Acclarent’s technology were so excited by the procedure that they became a natural selling force in the community.  Ultimately, these individuals also played critical roles in the battle against the status quo.  Additionally, once shown how product costs were rationalized, these same individuals became natural champions of the product, often speaking up to justify the costs of the products to their peers.
• Lastly, sell the forward-looking value of the company.  At each round of funding, Bill spoke to how the company was growing into its valuation.

Thanks to all, especially the panelists and John White, for contributing to a thoughtful discussion which hopefully we’ve been able to capture a small portion of here.