The case is about Newland Medical Technologies, founded by Sarah Foster She found a niche in medical equipment market, in the form of a requirement of better Stent in Urology. She developed a product named SRS (Stone removal Stent) after rigorous brainstorming with her friend. The case talks about various barriers faced during the business plan development and its execution by her.
Sarah Foster was a J&J employee working with hip implant design. When her division moved from Boston, she left the job. She found an opportunity for Stents in urology. In 1999 Foster and doctor Grainer started Brainstorming a sheath covered Stent.
During 2000-2001, they developed a Stent with a series of expansion bulbs along with its length, they named it SRS. 2001, she got patented her product and In gained FDA approval as well.
Two main customers are urologists and medical centers. Urologists determined the procedure and which device would be used. Purchasing of hospital is influenced by Center for Medicare and by Medicaid Services In the internet age, patients were becoming strong influencers.
Main competitors of SRS is market leaders in basket retrieval and ureteral stent devices. Revenue leader Boston Scientific had made many acquisitions. Unit leader ACMI was under restructuring and a change of leadership. Dornier MedTech and Siemens Medical Systems might have an early-stage interest in SRS as it worked with ESWL. In a sense, every stent competitor was a potential distributor or R&D partner.
In summer 2001, she completed business plan and named her company as “Newland Medical Technologies”. first phase she raised $600,000 from her In friends family, Dr. Grainer and her own savings. One third of this capital was exhausted in Patenting the product and other legal works. In 2002, she accepted into MBA at F.W Olin Graduate School of Business. She estimated $ 1.7m would be required to commercialize SRS.
She raised $65k from a business development foundation in Rhode Island for prototype development. In second phase she got an investor as Mr. Cunningham who invested $250,000 an two other angel investors who invested $75k each. In 2004, she had 2 additional team members and offered to “back pay” their salaries
By getting to know the researchers at the animal testing facilities at New England Medical, SRS was tested on their pigs. Product design and manufacturers problem were found. A nd apart from this they were compelled to assemble a supply chain of specialists.
In late 2004, after 60 successful patient trials and positive feedbacks form various physicians they began their full scale effort to build a critical mass of advocates and at least 1 major distributor. In March 2005, a Boston-based Taylor Medical Supply angered to test SRS in few of their markets in US. Meanwhile, she focused on raising funds.
2 investors, Chris Fallon and Claudia Grimes, expressed interest in their company as they felt that the company was at an excellent point for a lucrative early-stage acquisition. With endorsement from two prominent medical centers and a few acquisition prospects considering the possibilities are building for a speedy harvest. She and her husband decided to start a family. She become pregnant that very month.
She had problems with angel investors and Fallon and Grimes began to demand changes in the deal structure to get better returns. In Oct 2005 their investment banker brought an offer from a distributor based in Florida. The $9.5m term sheet provided a generous fiveyear earn-out by develop a line of innovative stents with no funds. Fallon and Grimes would have additional equity. She decided to confide in her original investors.
If it was not...