Monarch Medical’s mission is to transform how hospitals and caregivers handle "drugs of concern," or compounds that, when mismanaged, can lead to injuries or even death – the aptly named "never events" that ought to be anathema to healthcare.
Formed from the EndoTool division of Hospira (NYSE:HSP), which Eigen Capital acquired and re-branded in September 2012, Monarch Medical’s flagship device, the EndoTool glucose management system, is designed to help physicians manage insulin, a potentially lethal formula when used improperly.
The EndoTool software aims to model, predict and adapt to each patient’s needs, Monarch head Dr. Wilson Constantine told MassDevice.com earlier this year. Constantine joined Monarch alongside the divestiture from Hospira, bringing with him some 20 years in the medical device industry, including stints at Stryker (NYSE:SYK) and Smith & Nephew (FTSE:SN, NYSE:SNN).
Monarch has data showing that the EndoTool system helps 99.4% of patients gain control of their glucose levels, and it helps them maintain control 97.25% of the time after that, he told us.
In an interview with MassDevice.com, Constantine told us about his upbringing in the medtech industry, his path to Monarch’s corner office and why the company chose to focus first on insulin:
MassDevice.com: You spent some time at Stryker; can you give us a primer on your background?
Wilson Constantine: I’m a physician. My road to Stryker is kind of unusual.
I had experience working with them when I was at Integrated Surgical Systems. We had a surgical robotic that we’d use in the OR, back when Howmedica and Stryker were separate companies. I worked quite a bit with them in Europe, including the folks we would later come to meet back in this iteration of life. I was actually phoned in 2006 by a [venture capital] client of Perkins about a company they were looking to fund. It was 2 guys on a piece of paper with innovative technology used in orthopedics.
“I got to feeling that I was under the umbrella of this behemoth and innovation wasn’t really going to be happening for us.” Wilson Constantine
Basically, the idea was to utilize all these different instruments from the OR, improve the efficiency and improve the outcomes. I met with the VC and everything went positively and they said, "You have to make sure you can get along with the founders."
When I walked in the room with the founders, I found that I actually had worked with them in the past at ISS. It’s a very small world, so we had some pretty good conversations and we built up a demonstration. We developed up the entity and we were acquired in 2008.
Through the acquisition, my new charge was evangelizing on a global basis. We launched a product in Australia and Europe and other parts of Asia and developed it and moved into some other roles. We got to the point where the opportunity to do things was limited, and I got to feeling that I was under the umbrella of this behemoth and innovation wasn’t really going to be happening for us.
So I started looking at other alternatives and I actually came into EndoTool – at the time it was still part of Hospira. The Eigen folks had reached out to our VC that had funded us for names and one of the names they gave them was mine. Originally I was contacted for a board position at the company – they were considering spinning it out. I think the financial model made sense and they were unsure about the management of it.
I flew out, met the group and they did a project review, and I guess I didn’t keep my mouth shut enough. I was asking a million questions and the investors pulled me to the side and said, "You’re our new CEO."
It’s a fantastic technology and you never get the opportunity be a startup again. EndoTool lives on its own. It was acquired by Hospira, and in very short order Hospira had issues with the FDA – not with this device but with their pumps. So McKinsey came in and looked at strategic alternatives for the entire company and those are kind of playing out now in the market.
One of them was, "We know you don’t understand software, we know you want to play the market with your pumps. Spin it out and put something in the language that will allow you to have 1st right of refusal, and when they’re ready for your pumps, when you’ve cleaned up your regulatory house…"
“The quality system at Hospira was not a glowing ideal of what quality should be and their warning letters have validated that.”
Eigen reviewed some of their assets and realized this was an entity that had never lost a customer at EndoTool. The software has great stickiness, the entire customer base is very enthusiastic about it and we’re kind of pounding on the doors of Hospira for more and more innovation. It was an opportunity for Eigen to take on a product that had good brand value, had a stickiness within the market and had an un-tapped potential.
There are competitors in the space that really validated the model. We think we have something better, our data shows that we have something better and we’ve been trying to focus on innovation in the last 7 to 8 months. Certainly how you assess these things is, "quality 1st." The quality system at Hospira was not a glowing ideal of what quality should be and their warning letters have validated that. We were able to take a quality system that filled 19 binders and cut it down to 4.
So, quality is 1st, and 2nd is, "Who are we?" and "Why do we do what we do?" We think about what we do and what value we provide to the market, so we retained [Nobles Communications] to go out and talk to current customers, non-customers and our competitor’s customers to kind of get an assessment of who we are and who they perceive we are.
There was a little bit of mismatch, which is always the case when you’re insulated within a larger company. So we assessed who we believe we are, we looked at our innovation pathway and the market of what we wanted to develop, and we looked at the "why" – why we do what we do.
The "why" is providing innovation for mitigating risk in the healthcare environment. This defines the next 24 months of innovation. I don’t generally believe in anything more than 24 months – I don’t think anyone can manage that – so we do a rolling 24-month calendar.
The 1st project we had – that’s coming out with insulin-on-board and some of the other functionality, including pediatrics, with a browser based platform – was told to me 2 years to 2 1/2 years by the team inside. I brought that into 7 months, and we actually just had our clinical validation and our submission goes into FDA in the next week or so. We’re writing the 510(k) essay this week, and we’re bringing in the appropriate expertise.
“I don’t generally believe in anything more than 24 months – I don’t think anyone can manage that.”
The 1st person in writing a 510(k) is the branch chief of the FDA for this section. We’re getting the right people involved at the right time, so that we can execute appropriately, and we’re not wasting a lot of time. We are also fortunate that we have the largest installed base of all our competitors. Our expansion, which is not only going deeper but also broader, is doing very well for us.
MassDevice.com: What was behind the decision to drill down and focus on the glucose management space? Was that part of the "who are we" question?
Wilson Constantine: Why do we do what we do?
What we are is a system looking at prophecies and drugs of concern in the healthcare environment, and one of the most dangerous drugs in a hospital is insulin. If you get just a little bit too much, you become super-hypoglycemic and you go into a coma. Medicare has recognized this and has created these 5 "never-events" under the umbrella of poor glycemic control, or manifestations of poor glycemic control, which have a negative effect on, obviously, reimbursement.
What we’ll be showing – we have the data now, but we’re in the process of publishing it out – is that the incidence – this ratio of manifestation to poor glycemic control – per thousandth, nationally the average is 0.05 and our sites are at 0.01 or less. So we’re going to type dollars down to every basis point of movement per thousandths of patients in that arena.
We’ve also looked at the [surgical care improvement project] and other quantitative quality measurements – SCIP is 1 that’s for cardiovascular patients because we know data shows that if you’re having your sternum cracked during open heart surgery, if you’re not controlled in the glycemic space, the infection rate is substantially increased.
MassDevice.com: Why is that?
Wilson Constantine:Your body is too busy trying to balance out your glucose levels. When you are "sweeter" – your sugar level is too high – or when you’re not "sweet" enough, bacteria flourish.
You can imagine a scenario when there’s a lot of sugar floating around the body and it gets anaerobic activity. You can get bed wounds, you get external infections – anywhere there’s an infection, it just flourishes like crazy. When you become hypoglycemic – when you’re not sweet enough – you’re body is stressed out and it’s turning everything off and your organs shut down to try to maintain life. Your digestive system shuts down, the vascularization of some of your muscles shuts down and that stagnant blood flow affects bacteria count.
MassDevice.com: What’s your hope for 510(k) for the next generation of the device?
Wilson Constantine: We are mitigating as much risk as we can, so we’ve got the appropriate people involved and we think that we are actually going to be somewhere close to the 90-day mark. That’s what we’re hoping for.
If you think about our innovation pathway, we’re doing IV insulin today, we’re expanding IV insulin and the transition to subcutaneous, meaning from the IV to under your skin on the ward, in this filing. Our next filing that will happen before the end of the year will be pure – what we call suspended sub-q – so managing that patient on the floor, transitioning them to outpatient, and then obviously looking at a 365-day-view of that patient to not only manage the direct drug of concern, but also to look at the life of that patient.
“Being a partner in innovation is as important as being a partner in quality.”
It’s important to look at the quality indications. As a company, 1 of the initiatives we’ve taken on is that every employee in our group will be NAHQ certified – National Assn. for Healthcare Quality. Everyone is a member and we are leading toward certification because we believe that being a partner in innovation is as important as being a partner in quality, and those are linked. We are bringing in certification that not only manages costs but also balances comparative effectiveness analysis – doing this as well as something else out there but at an appropriate price level.
MassDevice.com: What’s your endgame – another buyout down the line or maybe an IPO?
Wilson Constantine: This is private equity-based. In the venture capital world, we’d probably look at a sunset for acquisition or going public – there is no sunset in the private equity space. The intention of these shareholders/investors is that this will be a long term asset that they can continue to invest in to increase its value, but there’s not intention of spinning this out or going public or having any kind of liquidity event.