Episode 53: Transitioning a Pediatrics Research Project to a Commercial Healthcare Business with Picterus CEO Tormod Thomsen
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In this episode you’ll discover:
The importance of business development in digital health startups
Transparency with your investors
Taking patient monitoring out of the hospital
The advantage of building a key opinion leader network
Keep scrolling for a transcript of this episode.
Key Takeaways
One common scenario in digital health startups is that they have a high technical and clinical competence, but they don’t have a plan for how the final product is going to be positioned in the market and how the company is going to be financed in the long term.
Bring in the right investors as early as you can and have a transparent conversation with your investors about how the journey of the company is likely going to be. Be open about the hurdles that clinical companies have to face in terms of regulations and other expenses.
The hospital systems end up spending a lot of resources following up, which ends up taking from the resources that could be spent on treating patients. That’s why any product or service that could take patient monitoring out of the hospital without compromising care will get a lot of traction everywhere.
Build the right key opinion leader network in order to really understand how to get the product into the market. It might take some investment of time, but it’ll be worth it. Know where the right places are to go, who the right people are to reach out to, and what is the best approach to get them to buy into your product.
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“Everything you can do to move services or patient monitoring out of the hospital without compromising care is something that is well getting a lot of traction everywhere.”
Learn More
Website: https://www.picterus.com/
LinkedIn: https://www.linkedin.com/in/tormod-thomsen-a4b1509/
Read the transcript
Announcer (00:01):
You are listening to Decoding Healthcare Innovation with Carrie Nixon and Rebecca Gwilt, A podcast for novel and disruptive healthcare business leaders seeking to transform how we receive and experience healthcare.
Rebecca Gwilt (00:17):
Welcome back to Decoding Healthcare Innovation. I am your co-host, Rebecca Gwilt, co-founder and partner at Nixon Gwilt Law, where we help digital health companies navigate law and policy to build great businesses. Today I am delighted to share the pod with Picterus, CEO Dr. Tormod Thomsen. We're going to talk about going from hypothesis to research to evidence-based product to commercial business entering the US healthcare market from Europe, and the particular challenges of building pediatric solutions. Welcome to the pod Tormod.
Tormod Thomsen (00:49):
Thank you, Rebecca. It's a pleasure being here. Thank you for inviting me.
Rebecca Gwilt (00:53):
Yes. Well, we met in London and I months ago, maybe May months ago, and I said, you've got to come talk to me. It was a busy room, but I have been looking forward to this conversation for a while. Tormod, you are a seasoned investor, board member, healthcare industry, CEO in Norway. I'm curious, how did you get into this industry?
Tormod Thomsen (01:17):
Yeah, thank you for that, Rebecca. Well, I'm trained as a psychologist, although I never worked as one, and when I finished my studies, I went directly into doing a PhD in cognitive neuroscience using the MR Machine to study brain function. And while doing that, we were a group of researchers with some product ideas and the technology we were using were quite new and very naively. We thought that if we had a hundred thousand dollars in a year, we could build a company to be cashflow positive and seven years and $13 million later, we were getting close to that. So we did all the mistakes in the book, but we also did some good decisions and the company is still around. This was in 2001, so the company is still around after more than 20 years, profitable global market leader and it's small niche.
Rebecca Gwilt (02:16):
Yeah, it doesn't sound like you did too shabby. And so you made the jump from clinician, essentially and academic to CEO. How did you do that?
Tormod Thomsen (02:28):
I started studying psychology because I was mostly interested in organizational psychology, not really legal psychology. And then when I got really into cognitive neuroscience and this company opportunity presented itself, it was a possibility to combine those two interests. Building a company involves a lot of organizational psychology, building the team, all of that. So for me that was a good way of combining the knowledge I had developed in my PhD with my original interests for getting into psychology.
Rebecca Gwilt (03:01):
Yeah, yeah, it's incredible. The people I talk to, the variety of different pathways folks take to where they end up. You almost couldn't plan it that way. You just sort of have to live through it.
Tormod Thomsen (03:13):
No, exactly. It's exaggerated.
Rebecca Gwilt (03:17):
So what drew you to this idea of a smartphone app to monitor newborn jaundice?
Tormod Thomsen (03:22):
Well, I have to be honest and say that this idea is not mine. The company was started before I joined by a pediatrician, a professor in biophysics and a master student in physics. And the idea came from the pediatrician. He was doing his master's in global health at Yale, traveling Africa sub-Sahara and Southeast Asia. Realizing what I mean, the magnitude of the problem with untreated jaundice in newborns in low resource settings. So the idea was really coming from that experience and connecting with the professor in biophysics with the question about whether the smartphone were now at the point where the cameras were starting to get quite good, could be used to take pictures that could be used to estimate so called bilirubin, which is the substance that accumulates in the body when you are developing jaundice. So that was the start of the company.
Rebecca Gwilt (04:22):
And so you joined as CEO at what point, what did that look like?
Tormod Thomsen (04:27):
I got to know the two of the founders in 2019 while I was running a doctor ultrasound company, also based out of Tron, Picterus was founded and I met two of the founders. We started talking and it ended up with them inviting me or asking me if I wanted to onboard as their chairman. So I started as chairman and an investor, the company mid 2020. And then 18 months ago when we had a product that was regulatory approved or C mark, I transitioned into the CEO role because we didn't really have anyone in the team with a lot of commercial business development experience. So in order to bring the product to market, I stepped in as the CEO. And we've been, I think it's fair to say we've been going through sort of a transitional period where coming from a very sort product, the technical product development, clinical research focused to a more commercial company, which is a necessity for a company like pics at this stage. We've been going at it for many years developing our products, and now we need to show that we're able to bring it to the market and sell it.
Rebecca Gwilt (05:38):
Yeah. This is one of the things I wanted to dig into, and it sounds like given both of your experiences, you have taken companies that have gone from concept research even to commercial. I'm imagining there is advice in there for both founding researchers as well as business experts that want to come into companies like that. What are some challenges that you've come up against in that process?
Tormod Thomsen (06:06):
Yeah, I mean, I've been involved in three, four companies through this journey, and I think a very common mistake, at least for Norwegian or Scandinavian startups is that they have typically a very high technical clinical competence. That's really where their focus is. And they don't really plan for how the final product is going to be positioned in the market, and they don't really have a plan for how the company is going to be financed long term. So I think my learning is to bring in the right investors as early as you can and have a very sort of transparent conversation about what's a likely journey for this company will be and what will the financial requirements be. I think companies that are constantly running behind racing small equity rounds and spending a lot end up spending too much time on the financing part instead of being able to focus on really the business development, the commercial phase when you have a product that you can start promoting, and as a medical company, you have a lot of regulations you need to bring on for extensive costs before you can have revenue matching those expenses. And that's where the investors coming obviously. And to be prepared for that is I think a learning experience. And I would say most founders are too optimistic on that part. They're really focused on solving a technical challenge or doing a clinical study to document that is working without really having thought about this later stages.
Rebecca Gwilt (07:44):
Yeah, I mean, I imagine as someone who came up with, if you're someone who came up with an idea, figured it out, researched it, proved your hypothesis that you would be really in love with the idea of what you created and it would be easy to put less focus on how to commercialize this beautiful idea that you came up with. So I love the idea of thinking about that early on, and maybe that does take diversity in leadership, that it takes a creator, but it also takes someone who's thinking about the short and long-term and the more nuts and bolts aspect of building a company as opposed to vision and the good that it's going to do in the world.
Tormod Thomsen (08:32):
Yeah, no, definitely. And then also you have all these sort of transitional pains as you're going through different stages of the company. When you start out as a founder, if you're a very small team, everyone is involved in all decisions. They know everything that's going on,
(08:49):
And sometimes many of these founders are very sort of omni potent and they make all the decisions. And at some you have to bring in people with a different knowledge than yourself, and then that's when it starts to get a little bit painful. People are less involved in everything, and you have to trust on others competence in areas that you really don't have any background or knowledge about. And that's sometimes quite difficult. I think a lot of companies also end up failing on that stage, and shareholders and founders are disconnecting and starting to spend energy on everything else than what is really developing their business.
Rebecca Gwilt (09:28):
Yeah. Well, I imagine having gone through this process several times, those lessons have been hard fought.
Tormod Thomsen (09:38):
Yeah. I mean you never stop being surprised on what you can experience.
Rebecca Gwilt (09:47):
I have to agree with that. I have to agree with that. Okay. So you've now decided to expand the company from Norway into the US. Why does the US provide such an attractive market for European companies who practice here know that there is a massive and very complex system of regulations and system of healthcare in this country. I'm interested in why we would be so attractive despite all of that complexity.
Tormod Thomsen (10:24):
No, I think that's a really good question, Rebecca, because for us, if you look at the number of BIRTS, you have, what 5 million BIRTS in Europe in the European Union, you have what around four in the US out of a total 140 million BIRTS. So the US is not the biggest market in terms of number of BIRTS, but for us, it's interesting if you look at the, we have a product that works both in a high resource setting and in a low resource setting with different use cases. And I think in the US you definitely find both, right within the same country, there's a huge difference in healthcare service depending on where you live on where you are on the socioeconomic scale, right?
Rebecca Gwilt (11:07):
Absolutely.
Tormod Thomsen (11:08):
So from that perspective, it is interesting because we can sort of go after both those settings within the same market, you could say, obviously the money spent in the US healthcare system also makes it an attractive market. Some of the countries where have really high burp numbers, there's also not a lot of money to pay for healthcare services. So obviously having a willingness and ability to pay for a product like that, ours is also making the US attractive. And then also in terms of partnerships and investors, the US market is definitely very interesting from a company from Europe, I mean Norway, where we are based. It's a very small country with a very limited number, competent investors in this space.
Rebecca Gwilt (11:57):
What are some of the surprises that you've come across as you've moved into the US? I assume some of that that you just described, you knew already, right? You did your homework. What are the challenges or some of the surprises you've faced as you've moved into this market?
Tormod Thomsen (12:15):
I think what we've learned is definitely the big difference between the effort based and the value-based healthcare systems. And our product is a product that prevents babies from coming back to the hospital. I mean, some of the problem with newborn jaundice is that if you wait too long, the baby will need a lot more treatment than in worst case of blood transfusion rather than phototherapy to treat jaundice.
Rebecca Gwilt (12:43):
And that's more revenue for hospitals when they come back.
Tormod Thomsen (12:46):
If you're an effort based healthcare system, then these babies that are discharged will come back through the ER and end up in the nicu, and that's where you make a lot more money there than you do in the maternity ward.
Rebecca Gwilt (13:02):
That seems like a scary set of incentives.
Tormod Thomsen (13:06):
Absolutely. So we definitely are targeting the value based or value driven healthcare systems to really make sure that we have somebody that can see the whole cycle or the total patient cost, right? Because obviously for the totality of it, it's a lot better to keep these babies or to detect babies that will need treatment early on to avoid unnecessary escalation into a serious jaundice, which requires treatment in the nicu.
Rebecca Gwilt (13:40):
Yeah, yeah. Speaking of which, you've aligned yourself with some prominent support in the US such as Intermountain Health Group. How did you make that happen? What advice do you have for other European companies that are looking for supportive institutions and partners in the US?
Tormod Thomsen (13:59):
I think one of the things that I think Picterus have done right is that we've been actively building key opinion leader networks doing clinical research with a number of centers all across the world. So we've collected data from 5,000 babies in all different settings with different ethnicities and in different resource settings. And through that network we got introduced to some of the researchers at Intermountain Healthcare and Intermountain Healthcare is really I think one of the better healthcare systems probably in the us. So they evaluated our product, they realized the value of being able to introduce this into the patient flow, and that's where we are kicking off a partnership for them to start the first instance, validating our product, but more long-term also looking into how we can position this and establish reimbursement for the solution in the US market. So that is an incredible valuable partner for us.
Rebecca Gwilt (15:05):
It's an interesting pathway. We don't often see that sort of clinical, I don't often see that the people involved in clinical research are the people who up the chain are involved in business and commercial relationships within these health systems. Do you think that that's because Intermountain is a particularly sort of innovative forward looking system, or do you think that that's happening more often than I've seen?
Tormod Thomsen (15:36):
I'm not sure if I have a good answer on that. I'm not the specialist or I don't have the full overview, the US healthcare system with all the different providers out there. But definitely, and we are in an early stage of the partnership with Intermountain, but all the experience I have with them so far is great. I mean, the people there are just on every level, whether that's the neonatologist or the venture people or the business development people, they're really enthusiastic and supportive and they're making things easy for us in terms of getting started and getting things moving forward. So that's been a very positive experience for us from must sake.
Rebecca Gwilt (16:17):
Yeah, I was just speaking to a cohort of companies in the plug and play accelerator, and one of the points I was making, I mean it was like an hour ago, one of the points that I was making was make sure you walk into the room with an ROI. And I imagine that demonstrating the effectiveness and return for a product that a system has actually been a participant in the clinical trial and research stage for gets you there much easier. The amount of trust that they have in your product, having such a sort of up close look at it, probably gives you a leg up in those discussions.
Tormod Thomsen (16:59):
I think so too. And I mean we see a little bit the same pattern also across many of the European countries and even in other markets that the hospital systems end up spending a lot of resources following up babies that are principal health, and that's taking up a lot of the resources that could be sent on actually treating patients that are sickly. So if you can
(17:24):
Establish systems where you can monitor these babies out of the hospital and making sure that the baby will come in immediately when there is a need for it, but keeping everyone else at home that really well, obviously it frees up a lot of time for everyone in the hospital to really take care of the babies that need it. And what we see all over the world is that healthcare workers is as far as resource and healthcare blowing through the roof. So everything you can do to move services or patient monitoring out of the hospital without compromising care is something that is well getting a lot of traction everywhere.
Rebecca Gwilt (18:04):
Absolutely. Absolutely. We're seeing a massive increase in the use of technology and monitoring tools to reduce staff burden in health systems and decrease the related costs. We've actually been doing a lot of work lately with pediatric digital health companies and there are some additional legal layers and risks that come with that work. But I'm interested in from your perspective, are there particular challenges you've seen in building pediatric digital health solutions that you think is sort of different than other solutions?
Tormod Thomsen (18:45):
I mean, pediatric is a niche compared to many other areas of medicine. So you have I think fewer players dedicated in that domain. And that's also one of the things that makes the year's market interesting for us because it's big enough to have a number of players actually developing solutions in that space, which you don't see in smaller markets. So that's definitely interesting. There's also the initiatives from the FDA to support development of pediatric products, which is I think a good initiative to help companies like us get support to develop solutions and deploy them in the market. So we are in contact with several of these pediatric device consults in the US to get support both from clinicians and looking at health economics and these things. So it is also a very positive initiative for us.
Rebecca Gwilt (19:46):
Yeah, I am definitely seeing some more over the last year, a significant amount of specialization in digital health solutions. The market for primary care, internal medicine based solutions is pretty saturated. So it's been very cool to see bespoke, personalized, very focused healthcare solutions. And it sounds like for pediatrics in particular, there's possibly more opportunity than challenge.
Tormod Thomsen (20:24):
Yeah, I agree with that. Also, I think we just received a grant of 2.5 million euros from the European Union through their ESC accelerator program. And that grant is going to support a project where we're going to look at how independent can parents be from the healthcare system or the healthcare professional without compromising quality of care because we've developed a disruptive measurement technology that is really easy to use. So parents or anybody can use the technology to measure, but obviously you should be a healthcare professional to make decisions about what should happen to the baby, should the baby come back to the hospital for a follow-up, how should this baby be taken care of? And we want to investigate how independent can we, I mean, we're happy to move the clinical responsibility for the baby from the period into the parents,
Rebecca Gwilt (21:19):
But you can upskill parents,
Tormod Thomsen (21:21):
But exactly, we can upskill parents and that also will have a transfer value to countries where healthcare workers have less education and less knowledge about all this and newborn care. So it has sort of a double effect or
Rebecca Gwilt (21:38):
Yeah. Yeah. I think it'd be hard to find people more focused and motivated to monitor and look after these kids than a mother or a father who's staring at them right after their birth for the first three months of their lives.
Tormod Thomsen (22:00):
Because a lot of times, I mean in many other situations when you are a patient yourself and you're going to take care of yourself at home with patient remote patient monitoring solutions, you're not feeling probably your best and you can be sort of limited in terms of capacity and all of that give you to pain and other things. But as you say, this is a situation where you have one or two fairly healthy parents you could think, and that really provides a good opportunity for remote patient monitoring.
Rebecca Gwilt (22:35):
Absolutely
Tormod Thomsen (22:35):
Same time, we know it's a scary moment of life for most, at least first time parents to come home with that with a newborn. And they rely heavily on support from healthcare professionals and they need both the emotional support and the practical support in taking care of the newborn. So obviously there are limits to what you can outsource to the parents, but we still believe we can help them a lot with digital tools and the type of technology we are developing.
Rebecca Gwilt (23:05):
Yeah. I'm also a zealous advocate of upskilling doulas to do some of this work. They are an incredibly underappreciated and underinvested in resource for women who are giving birth, and they have tremendous skills, much more than a run of the mill parent like me would have. So anyway, that's my, anytime childbirth comes up, I try to plug the doulas. Okay. So as we close up the interview, first you mentioned one bit of funding. I know you got a second bit of funding as well. What was the second award you got?
Tormod Thomsen (23:48):
Yeah, in connection with the grant, we also have an equity commitment from the European Investment Bank through the ESC Accelerator program. So there is an equity commitment there, 3.2 million euros that we need to match with private investors. So we're in the process of doing that right now, but obviously it's a little bit easier to raise money when you have already someone committing money. And
Rebecca Gwilt (24:14):
Sure
Tormod Thomsen (24:14):
The grant will cover a lot of our R&D expenses for the next two years, which I think all in all makes this investment opportunity a little bit more attractive than some of the other options that are out there.
Rebecca Gwilt (24:28):
Yeah, I wanted to congratulate you on that. It is not easy to raise that kind of money in this market. I hear about it every single day, so that's super exciting. And the last thing I'll just ask is will you share one piece of advice for European CEOs that are looking to enter the US health market?
Tormod Thomsen (24:50):
I think the best piece of advice is to build the right key opinion leader network to really understand how to get the product into the market.
Rebecca Gwilt (24:59):
Say more about that.
Tormod Thomsen (25:01):
I feel we've spent quite some time, we have a business development director that has really helped us to map the US market and to really understand who are the stakeholders and then where are the right places to go in terms of conferences to meet the people and what is the approach to really get their buy-in on the solution and so forth. And I think by making good preparations before actually entering and getting, we are waiting for our 5, 10K to come through so we can start selling our product, but having the right connections and endorsements and direct people could have lined up before that. I think that's worth the investment in time.
Rebecca Gwilt (25:44):
I absolutely, absolutely agree that the US healthcare system is complicated and nonsensical for some, and having a resource in the country that knows how it works that's sort of been in the mix can help you develop even sort of the basic approach for how to commercialize in the country that might not be immediately obvious and your sort of move toward focusing on value-based systems that work in the value-based space. That's absolutely something that wouldn't be intuitive if you didn't know sort of the market here. So amen to that. Thank you so much for your time and talent today, Tormod. If folks want to learn, if they want to hear more of these insights or they're interested in exploring a business relationship with what's the best way to get in touch?
Tormod Thomsen (26:35):
Yeah, contact me. My email is very easy. It's my name tormod@picterus.com
Rebecca Gwilt (26:43):
Okay. And we'll be sure to include your LinkedIn profile and your email address in the show notes.
Tormod Thomsen (26:49):
Great.
Rebecca Gwilt (26:49):
Thank you so much for listening to Decoding Healthcare Innovation. I'm Rebecca Gwilt. I hope you enjoyed today's discussion on moving from research to commercial, from Europe to the US and lots of CEO wisdom in between. If you haven't already, please subscribe to D Healthcare Innovation and follow us on LinkedIn. And as always, you can check out the links and resources in the show notes and find out more about our work with healthcare innovators at nixongwiltlaw.com. If you're European business seeking to enter the US market, be sure to check out our case study with Antidote Health at the Nixon Gwilt Law website for some sage advice and see you next time.
Announcer (27:29):
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