BB&T Contributing Editor

JAY YADAV, MD

CEO of CardioMEMS

Jay Yadav, MD, is founder and CEO of CardioMEMS, an Atlanta-based company that is developing implantable wireless sensing technologies focused on improving the outcomes for major diseases such as heart failure. Its sensors are manufactured using microelectromechanical systems, or MEMS technology.

An interventional cardiologist and neurologist who is known for his work in carotid stenting, Yadav also is on staff at the Piedmont Heart Institute in Atlanta and is chairman of the Piedmont Innovation Center.

He was the founder of AngioGuard, which was acquired by Johnson & Johnson, and initial investor and director of SMART Therapeutics, which was acquired by Boston Scientific. He also is chairman of Icon Interventional, Arterain Medical, and Novobionics, three early-stage companies focused on vascular disease, stroke, and obesity, respectively.

Yadav is co-chair of the Metro Atlanta Bioscience Leadership Council, chairman of the Medical Device Committee and a director of Georgia Bio and The Indus Entrepreneurs.

BB&T: Your company is developing implantable wireless sensing technologies, with an initial focus on heart failure. Could you talk about the evolution of the technology?

Yadav: I was noticing an increase in our heart failure admissions at the Cleveland Clinic. More and more beds were getting utilized by these patients. One of the observations was that we do right-heart catheterizations on these patients to gain information about their cardiac performance and we use that information to treat them. That's a crucial piece of information, and I was wondering if there was a way to get that information noninvasively on a daily basis, so I started researching that. I was looking for a wireless technology – I didn't want to have batteries and leads, the way we were doing things for years. You know all the complications that are associated with those batteries and leads, right? I wanted a new way to do it.

So I was looking for a wireless, battery-less type of technology. I found these sensors that were being developed at Georgia Tech for the combustion chamber inside of military jet engines. Then we needed a way to communicate with them and the MIT Media Lab had some efficient wireless technologies. So I licensed those patents from those institutions and we started the company up down here in collaboration with Georgia Tech. Then we developed a lot of our own patents – we have about 100 patents in the company now – to further refine the technology.

BB&T: You describe that technology as being based on the belief that real-time monitoring of vital information enables “proactive patient management.“ How does such management fit into the concept of improving outcomes while at the same time dealing with the new mantra of controlling healthcare costs?

Yadav: In any system, whether it's healthcare or business or whatever, you really cannot get better outcomes without improving efficiency, or productivity, as the economists would call it. So they're really linked, particularly for chronic conditions like heart failure – cost and outcomes are intertwined. One of the reasons costs are so high is that outcomes are not very good, and that leads to inefficiencies. So they really are not contradictory concepts, and certainly we have found that to be true with our technology. If you look at heart failure specifically, there are about 6 million patients, some 1.1 million hospitalizations a year, almost a 30% readmission rate at 30 days, and $20 billion in direct hospital costs just from hospitalizations for heart failure. So it's a very expensive, inefficient, chronic disease condition.

What we have developed is a way to manage patients while they are at home, better medical management based on hemodynamic information that before our technology could only be obtained through a right-heart catheterization. But now we can get it every day. Using this information, the doctors can make medication changes which lead to better outcomes, and we have demonstrated this in our clinical trial with a 28% reduction in hospitalizations at six months, a 39% reduction at one year. So those are affecting hospitalizations, which reduces the cost of healthcare.

We have done an economic study as part of a randomized trial, and our ICER [incremental cost-effectiveness ratio] for quality was approximately $14,000, which is very low – far lower than drug-eluting stents or CRT devices, etc. So we have demonstrated that not only does this hemodynamic monitoring produce better outcomes, but it's also cost-effective, and one would expect that given the nature of this disease.

BB&T: That ICER figure usually is two to three times the figure you have cited.

Yadav: Exactly. It came in very low, and part of that is due to the fact that the clinical endpoint of our trial also was a cost endpoint. We're a little bit ahead of the curve. We started the company 10 years ago, and cost was important then, but it's even more important now. So our timing has turned out to be good – we really are targeting costs also. It works out very well both for patients and for the healthcare system.

BB&T: Some impressive results were reported in the CHAMPION clinical trial of your Champion Sensor System earlier this year, indicating substantial gains in the treatment of heart failure patients thanks to keeping closer tabs on their condition via pulmonary artery pressure monitoring. What are you hearing from the medical community following release of those results?

Yadav: There really is a lot of excitement across cardiology. One of the neat things in our study was that all specialties within cardiology implanted the device to take care of the patient. So we had heart failure cardiologists, as one would expect, but we also had electrophysiologists and we also had interventionalists. Really, the whole gamut of cardiology, which is unusual. You generally either get electrophysiologists putting in devices or interventionalists putting in devices, but you don't have both, and you certainly don't have heart failure or general cardiologists putting in devices.

So there is a lot of excitement. Cardiologists are frustrated in the care they can provide these patients, because they do see recurrent events and return hospitalizations. And they take up a lot of their time also; there are a lot of phone calls that have to be made, a lot of them driven by incomplete information. Two large monitoring studies were done at the end last year, one in the U.S. and one in Europe. Both showed that a program where nurses called patients every week or every day turned out not to reduce hospitalizations. So the nature of the information makes a big difference. What we're providing now is physiologic, right heart cath-type data every day, which is very efficient, it's trend-based management. So there is a lot of excitement among both cardiology nurses and cardiology doctors.

BB&T: You used the phrase “incomplete information.“ That really has been the bugaboo in dealing with HF patients over the years.

Yadav: You can talk with someone all day and if you're not learning anything useful, it's not very efficient. If a person were to be examined by two cardiologists, for example, the level of agreement is only about 55%. It's almost random – flipping a coin would be 50-50. Just on the basis of history and exam, it's very poor. That's why we get so many tests done, stress tests and echograms and so forth. Using our type of technology is going to make the whole process much more efficient.

BB&T: Where do you stand on commercialization of the Champion system, and how are you faring on the reimbursement front?

Yadav: We submitted our premarket approval application and we're just going through the process with the FDA, so we're waiting for the panel meeting and approval. We don't yet know when that's going to be, but we're hopeful it's all going to happen this year, and then we'll commercialize it. We've had very good progress on reimbursement with CMS [Centers for Medicare & Medicaid Services]. We received our own ICD-9 code this year, and we also received a DRG assignment, so reimbursementwise we're in extremely good shape. And we're making progress with the FDA on our PMA.

BB&T: It sounds like you're doing well on reimbursement, which in the past has almost been an afterthought for some device companies. You obviously are finding that getting ahead of the reimbursement curve makes a lot of sense.

Yadav: It makes a huge amount of difference. We started working on it several years ago, for the reasons that you mentioned. We also utilized Paul Marshall, a very experienced guy who retired from Johnson & Johnson. He got all the drug-eluting stuff through, and has worked with us from the beginning and has been extremely helpful. But really it was driven by data; CMS was really impressed by our randomized data, and ultimately it boiled down to that. They're interested in good outcomes for patients, and I think if you present them with compelling randomized data, they're fairly receptive.

BB&T: What's next in the pipeline for the company?

Yadav: Really, it's heart failure commercialization. That's really the focus of our company; we've been working toward it for the past several years. The technology is a platform technology, there are a lot of other applications available. Certainly in cardiovascular we can expand quite a bit into other categories: pulmonary hypertension and other types of Class IV indications like patients on left-ventricular assist devices, for example. Hypertension, of course – we have a very interesting hypertension application.

There are many other disease states as well. Within nuerological, there are a lot of possible applications. Liver disease, there is a tremendous opportunity there for our technology. Incontinence, urological applications. Almost every area of the body has a fit. We're in an ongoing collaboration with Synthes, a large orthopedic trauma company. So just a number of opportunities, which we will look at as we proceed with heart failure commercialization.

The ability to put in a small wireless, battery-less device deep within the bottom to get information – that's an enabling technology for a number of different areas. In almost every disease space, doctors want to know that type of information, so there is a lot of interest. We just have to go about it in a careful, stepwise fashion.

BB&T: Everything that you have mentioned is primed for proactive management because the cost and difficulty of management as it exists today is just prohibitive.

Yadav: Just pick any disease condition. For example, liver disease. As patients get more advanced liver disease, the pressure builds up in the esophagus. That's a pretty bad condition with a high mortality rate, and it turns out that gastroenterologists and hepatologists treat patients with the same type of drugs that we use in heart failure to lower the pressure. There really isn't a good way to measure the pressure, so they do an endoscopy. We have done some animal studies where we put our sensor in the portal vein and were able to measure pressure very well, so there's a lot of interest from gastroenterologists and hepatologists for us to pursue that; we just haven't had time to do so. But that would be a very interesting area for us to look at, just as an example.

BB&T: CardioMEMS has had a solid record of attracting financing over its 11 years of existence, including successful IPOs, and it also has drawn a $60 million investment from cardiovascular “big guy“ St. Jude Medical, which has an option to acquire the company for an additional $375 million. What is the status of that agreement at this point?

Yadav: I can't go into too much detail, but it's progressing very well. We have a very good working relationship with them and we're looking forward to bringing it to a conclusion. They're very professional, and I have really enjoyed working with them.

BB&T: You have been a major part of two other companies that have been acquired by major players in the med-tech industry. How does CardioMEMS compare at this point of its existence to Angioguard, which was acquired by Johnson & Johnson, and SMART Therapeutics, which was acquired by Boston Scientific?

Yadav: They're just so different; the technologies are different, the applications, the disease states, the economic environment are different. In both of those instances the amount of evidence that we had to generate was far less, the technical complexity was far less. CardioMEMS really is a very complex technology and device. There's a delivery system, a permanent electrical implant, an external electronics unit, a very large software component and a fairly sophisticated, web-based database for physicians and nurses. So just a much higher level of complexity. And I think the perspective of the large med-tech companies has changed over the years as the economic environment has changed. They want much more mature products at this point, the risk tolerance is much less than it used to be. The bar certainly is set higher in terms of how mature the product is.

BB&T: There was an interesting panel at the MedTech Investing Conference in Minneapolis in May on whether to build a company to spin off or build it as an ongoing business to run. What are your thoughts on that subject – are there different ways to pull together a company?

Yadav: I'm always skeptical of people who make those kinds of comments – I wonder if they've ever started companies. I'm not sure how you start a company to spin it off. I start companies, period; they're all designed as companies to produce a technology and bring it to market. I'm not sure how you would do it otherwise. They're all designed to be commercial entities. If you do it well, then very often they get acquired along the way, but that acquisition is not a planned event, it is something that happens if you do it well and achieve certain milestones. I'm not smart enough to do it any other way. We build them for the long run and they happen to get acquired. That's the only way to do it.

I think if you are somehow trying to cut corners, doing it “lite“ or doing a virtual company, I've never seen that come to a good end. The implication is that you do less work or use less resources if you build to sell. I don't see the logic of that reasoning. If you're deploying the same resources, then what's the operational difference? If you're not deploying the same resources, then are you doing it the correct way?

The point is that you have to meet certain requirements for a medical device which have to do with safety and efficacy, and there are no particular shortcuts to meeting those requirements. Once you have demonstrated those parameters, you can look at different commercialization strategies. Some of those strategies involve partnerships, while others involve having independence, so at point you can make a distinction. But up to that point you really have to do all the same steps.

BB&T: You are deeply involved in collective – or maybe collaborative – life science programs in the Atlanta area and the Southeast. What are the challenges of developing medical technology companies in a region that isn't among the traditional “hot spots“ for such activity?

Yadav: there certainly are a lot of differences. My first company, AngioGuard, was in the Minneapolis area, in Eden Prairie, and SMART Therapeutics was in Fremont, in the Bay Area, so we have experience with different places. There are pluses and minuses to different areas. I'm from the Southeast, so I'm tied to the activities here in the Atlanta area. We certainly have a lot of great universities such as Georgia Tech and Emory, plus great hospitals. These institutions are in fairly close physical proximity, so there are a lot of clinical resources, a lot of expert physicians, a lot of great engineers are available nearby. And we have a small venture community, although nowhere near the size of that on the West Coast – we've got a small, high-quality group of venture investors.

There aren't as many experienced people in different areas like clinical/regulatory that might be available in other locations, so we have some challenges there. But we've been able to recruit good people. The advantage is the lower cost of doing business, and there's a very pro-business climate here, plus the universities are very responsive to our needs. All in all, I think it's a very favorable environment here.

BB&T: Much is being made these days of the perceived exodus of life sciences innovation from the U.S. to Europe and elsewhere as a result of unavailability of venture financing and inconsistent and restrictive regulatory actions by the FDA. How do you see the situation?

Yadav: It's almost a perfect storm. You've got this tremendous economic downturn, a lot of turmoil in the public markets, the unavailability of IPOs as public exits, pressure on the large med-tech companies. And now on top of that you have an increased regulatory burden, so it's not a good environment. I think the FDA is very professional, but they're under a lot of political pressure from a number of groups that the burden of proof needs to be higher, the 510(k) process under more scrutiny, the PMA process more challenging.

I really think there is a failure of educating the public and Congress on risk/benefit analysis, the cost of incremental degrees of risk reduction. The risk-reduction cost is extremely non-linear; dealing with the last little bit of risk is extremely expensive and ultimately does not have good economic utility. But we never have those sort of mature discussions; we have these discussions where all risk is expected to be eliminated, and that is unrealistic. We don't have that in any arena of life, and to expect that in medical devices is unrealistic. It is very frustrating.

The big concern is not necessarily an exodus of innovation to other places; it's just a lack of innovation. Europe does not really have a well-developed venture community, or really a record of innovation in medical devices, and we don't see it yet in Asia either. That's not to say it may not happen five years, 10 years down the road, particularly in Asia.

My big concern is that the bright young people who ought to be working in the health sciences will be working in other technology areas – social networking or some other Internet thing. That's a huge concern. Why would you go into these incredibly complex, capital-intensive processes where you don't get revenues for 10 years? It's unrealistic. And VCs clearly are not backing PMA-type technologies at all.

We can't control the economic climate, but certainly we can control the regulatory climate. There needs to be some direction to the FDA to have a more balanced look at managing the risk/cost equation. Right now it's very skewed. What people seem to forget is that patients are ill; they're suffering from diseases which we don't have adequate treatments for, so a lack of treatment carries with it a substantial penalty for these patients. But we never talk about that when we talk regulatory matters.

BB&T: Is there a question you wish I had asked but haven't?

Yadav: The only thing I would add is that it's one of those Dickensian situations – the best of times and the worst of times. Although we have all these economic and regulatory challenges, from a technology perspective, it's a great time. The types of things that we're accomplishing today are just really tremendous advances in our ability to treat patients less-invasively, so that's very, very exciting. What we're doing at CardioMEMS, for example, gathering information that can keep people out of the hospital – that's really exciting. So we have great innovation going on, but the question is, is it all going to fade away because of these changes that we've talked about?