Murthy Simhambhatla: 00:02

So you've got to start with the end in mind because that influences just about all the decisions you make in the early days. Decisions we made in 2019 are now starting to pay dividends, such as what should your indication statement be? What is my health economic value proposition? Am I going to figure it out after I have my data? Or do I have a thesis for how this could help payers instead of putting a hole in their pockets at a time when they're already stretched? So thinking ahead of time, I think, is the other critical skill that the leadership team in particular has to develop and embrace. And the last is, yes, you've got to do a lot of planning, but I put a premium on agility.

Narrator: 00:53

Welcome to Medsider, where you can learn from the brightest founders and CEOs in medical devices and health technology. Join tens of thousands of ambitious doers as we unpack the insights, tactics, and secrets behind the most successful life science startups in the world. Now here's your host, Scott Nelson.

Scott Nelson: 01:14

Hey everyone, in this episode of Medsider we sat down with Murthy Simhambhatla, CEO of SetPoint Medical. SetPoint is commercializing the first FDA approved neuroimmune modulation implant for rheumatoid arthritis. Previously, Murthy was CEO of Evolus, leading the company through its IPO, and held multiple leadership roles at Abbott, including president of Abbott Medical Optics and head of the company's IBIS Biosciences molecular diagnostics business. Earlier in his career, Murthy led development of Abbott's Zions drug eluting stent platform following Abbott's acquisition of Guidant. Murthy holds a PhD in polymer engineering and is a fellow of the American Institute for Medical and Biological Engineering.

Scott Nelson: 01:48

Here are a few topics we explored in this conversation. First, how do you build commercial conviction years before novel therapy reaches the market? Second, how should platform medtech companies sequence their indications? Third, what factors determine the commercial capabilities startups should own? And last, the two lessons behind every skeptical investor question.

Scott Nelson: 02:06

Before we dive into the full episode, if you're a Medtech founder or CEO preparing to raise capital, you should check out the Medsider fundraising cohort. This four week live workshop combines small group sessions with real time feedback to help you sharpen your investor story, build a targeted investor pipeline, and run a focused fundraising sprint instead of never ending slog. Over the month, you'll walk away with an investor ready narrative and deck, outreach scripts that actually get responses, a refreshed LinkedIn profile, a simple content plan that keeps you on investors' radar, and a repeatable system for running your raise. You can join the wait list at medsider.com/fundraisingcohort. Again, that's medsider.com/fundraisingcohort.

Narrator: 02:46

Alright. Let's get to the interview.

Scott Nelson: 02:52

Murthy, welcome to Medsider Radio. Appreciate you coming on.

Murthy Simhambhatla: 02:55

Thank you.

Scott Nelson: 02:56

Looking forward to the discussion very much. I've kind of been somewhat tracking with SetPoint for a while. Right? And I think most of our listeners have probably heard of the company's name, maybe at least even at a surface level. But let's start with just a high level overview of your background. I recorded a very abbreviated bio outside of this episode, but let's start there. What's like the one to two minute kind of pitch on your background before taking on the CEO role at SetPoint?

Murthy Simhambhatla: 03:18

Yeah, well, I started my career in electronics and aerospace in the Bay Area with a company that was developing the precursors to a lot of medical technology like Nitinol. And several people from there moved to a medical device company called Guidant, which was developing coronary stents. So I joined Guidant, grew up through the ranks through engineering, and eventually heading up the drug eluting stent program there. And that division of Guidant got acquired by Abbott, and I became part of Abbott Vascular, shepherded the program through FDA approval, and then went off to Australia to run our business in Australia and New Zealand.

Murthy Simhambhatla: 03:58

And after that, I ran a small molecular diagnostics business at Abbott from Chicago, and then made my way to Southern California to run Abbott's ophthalmology business. And after that, I took a leap away from big companies to do my first startup, which was Evolus, a medical aesthetics company with a product that competes with Botox. And after that, in 2018, I joined SetPoint Medical.

Scott Nelson: 04:24

Okay. We're recording this in mid twenty twenty six. So you've been at SetPoint for about eight years, closer to a decade than a half a decade. Right? So you've been at the company for a while. That period of time in the device space, right? Those early Guidant days to obviously commercializing Xience. That was a high flying time in the cardiovascular arena. I'm sure you have lot of stories to share about that, those experiences.

Murthy Simhambhatla: 04:49

Yeah, that is a very exciting time for the industry. There's a lot of innovation. Back in the day, Guidant was launching a new stent every year, but it's essentially obsoleting its products on an annual basis. Then the industry just got shaken up when Johnson and Johnson introduced the first drug eluting stent, which dramatically reduced restenosis rates. But the hunt really was for a stent that could reduce restenosis rates, yet was very deliverable and could address the issue, the emerging issue of stent thrombosis.

Murthy Simhambhatla: 05:26

And that's where Guidant had a pivot from metal stents, maybe with a market leader to losing a lot of share to J and J, and then coming up with Xience stent, which I had the opportunity to lead to regain our place as the market leader in stents. So it's a very exciting time with a lot of innovation and large trials to support the evidence base for the use of these devices.

Scott Nelson: 05:53

Yeah. I'm sure a lot of those lessons and kind of insights, I'm sure you're pulling into, into SetPoint now, but let's get, let's get to SetPoint. I mean, you've been like, like, like, like we just touched on, you've been with the company almost closer to a decade now for those that are not as, as familiar with SetPoint, give us a sense for kind of, and maybe frame this up like I'm a senior in high school, right? And this, I've heard Murthy works in this medical arena. Like what exactly are you doing at SetPoint? What clinical need are you solving?

Murthy Simhambhatla: 06:22

Yeah, so at SetPoint we are developing therapeutic approaches for the treatment of autoimmune disease. So these are conditions where your immune system turns against your own body instead of protecting it and ends up damaging tissue. There's various autoimmune conditions, RA being one of the main conditions, where your immune system ends up attacking your joints, leading to pain, loss of function and disability. In the case of multiple sclerosis, chronic inflammation attacks the myelin sheath around the nerves, and that causes challenges in communication, which also ultimately can lead to loss of function and disability. And you have Crohn's disease, where you have a similar issue, where the immune system attacks your digestive tract.

Murthy Simhambhatla: 07:10

So the common theme in all of these is your immune system is overactive and causes excessive inflammation, which ends up attacking and potentially even destroying tissue in the body. So we've developed a very novel approach for the management of autoimmune disease. The mainstay of the treatment of these therapies is immunosuppressive drugs, because your immune system is overactive, you develop immunosuppressive drugs to tamp down inflammation. These drugs do a pretty good job of protecting tissue and providing symptomatic relief, but they come with very serious side effects, They're very expensive. They cost 60,000 to $90,000 per year per patient.

Murthy Simhambhatla: 07:52

And patient satisfaction tends to be relatively low with these drugs. So our approach is completely orthogonal to how drugs work. And it's based on a discovery made by a neurosurgeon by the name of Kevin Tracey. What he discovered is that the vagus nerve, which is a really long wandering nerve in the body that innervates directly or indirectly many organs in the body, You can think of it as the transatlantic cable of the body. There's two vagus nerves, one on the left side and one on the right side.

Murthy Simhambhatla: 08:23

And each one is a bundle of 100,000 nerves. And the vagus nerve controls a lot of things in the body, like your respiration rate, your heart rate, your GI motility. Now, what Kevin Tracey discovered is that in addition to all of these functions, the vagus nerve is a sensor of elevated inflammation. And when it senses elevated inflammation, it rings an alarm bell in the brainstem, which then reflexively sends a command down the vagus nerve to reprogram immune cells from being angry and producing all of these pro inflammatory cytokines to becoming more quiescent in a calmer state. Now, that's how it works in healthy humans.

Murthy Simhambhatla: 09:04

There's a misconception that all inflammation is bad. We wouldn't survive without inflammation. You break a bone, you get inflamed. It's part of the healing response. You get infected, you get inflamed.

Murthy Simhambhatla: 09:16

That's part of the body's response. The issue with autoimmune conditions is chronic uncontrolled inflammation. So this mechanism is dysfunctional in people with autoimmune disease. And what we've done is figure out how to stimulate the vagus nerve with the right parameters to be able to recapitulate the signal that the brain stem sends to tamp down inflammation. So in a nutshell, that's what we do. We are leveraging an innate mechanism forged by evolution that's dysfunctional and trying to restore it to its natural function.

Scott Nelson: 09:53

Got it. And if I'm a patient, maybe I suffer from RA, right? As an example, I go to a specialist and they recommend SetPoint. Tell me a little bit more about the procedure. How does the device feel, etcetera?

Murthy Simhambhatla: 10:04

Yeah, so RA patients are treated by rheumatologists. So the rheumatologist will refer the patient to a functional neurosurgeon, because the neurosurgeon is the specialist who will actually implant a device. Now our device is tiny. It's the size of a large multivitamin. It's completely self contained with a rechargeable battery.

Murthy Simhambhatla: 10:27

It's got no lead bars, so it's all in that device. And that's implanted in an outpatient procedure that can take about an hour to an hour and a half, and the patient goes home the same day. Once the patient heals, it takes a couple of weeks, they go back to the rheumatologist, and the rheumatologist's office then activates the device. And once the device is activated, it'll autonomously deliver its stimulation, and it's a very low level of stimulation. The patient gets stimulated for just one minute a day.

Murthy Simhambhatla: 10:59

And the device has a rechargeable battery, so the patient is also given a charger that they need to wear around the neck for five to ten minutes once a week. So that's essentially how the workflow is in place for this therapy.

Scott Nelson: 11:14

Okay, so it sounds like a very minimally invasive implant. And tell us a little bit about the stage right now. Again, we're recording this in mid twenty twenty six. So if you're listening to this after the fact, you know, three, six months down the road, this is kind of where the company's at, but you're actively commercializing the device with indications for rheumatoid arthritis?

Murthy Simhambhatla: 11:32

Yeah, that's correct. So we got PMA approval mid last year. Early this year, we got transitional pass through payment approval from CMS, which is a very important step in getting into contracts with hospitals, because at RA, about half the patients are covered by Medicare and about half are commercial pay. So we are at a stage that I call the build stage. It takes a bit of time to get into contract with sufficient numbers of hospitals because a lot of neurosurgeons are affiliated with hospitals.

Murthy Simhambhatla: 12:05

So if you don't get into a contract with a hospital, patients can't be treated. So rheumatologists can refer them, but there's no mechanism to get them implanted. So there's a process of getting into contract with hospitals. And we've also set up a reimbursement hub. This is a very critical enabler of the workflow.

Murthy Simhambhatla: 12:28

So we simplify it as much as possible for the patient and the referring physician, and indeed, the surgeon in the hospital. So the rheumatologist refers the patient, the patient goes to our reimbursement hub, And then an appointment is made with the surgeon, the functional neurosurgeon, for pre surgical clearance. If the patient is a candidate, then there's two paths. If it's a Medicare patient, because we have transitional pass through payment, no prior auth is needed, the patient gets scheduled for surgery. If it is a commercial pay patient, they'll have to go through a prior authorization process.

Murthy Simhambhatla: 13:05

And once that happens, the surgery is scheduled and then the patient goes back to the rheumatologist. So we do the hand holding at every step of the way, because you can't let patients to their own devices with something as new as what we do. So there's a lot of handholding along the way at every step, and there's a lot of visibility for the rheumatologists and surgeons as to exactly where the patients are. So that's the stage we're at, establishing our centers of excellence across The United States with 2027 being the inflection point. Now, the one thing we've seen is there's tremendous patient demand for this therapy, it's somewhat unusual for an implantable device.

Murthy Simhambhatla: 13:50

Normally there's a lot of convincing that patients need, especially if they're on drug therapy. Now we noticed this in the pivotal trial, patient satisfaction with these drugs tends to be relatively low because these drugs are hugely invasive to the patient's quality of life, not to mention their pockets. So in our pivotal trial, we stood up a study website and 24,000 patients took the eligibility survey for a two forty two patient study. So that gives you a sense of the pent up demand. And we have a few thousand patients already waiting on our website for the therapy.

Murthy Simhambhatla: 14:26

So patient demand and patient preference is going to play a very important role. So once we get hospitals under contract, once we partner with the leading edge rheumatologists, I expect the patient flow to pick up and for us to have a nice inflection point in our revenues in 2027.

Scott Nelson: 14:47

Got it. That's super helpful. I want to learn a little bit more about this reimbursement hub because it sounds like that's pretty crucial, especially at this stage. It's a bit unique, right, as well. So I'd love to get some insights there.

Scott Nelson: 14:56

But that pent up demand that you mentioned, I think it just speaks to the difficulties of living with this disease. I mean, I think most of us know that probably are either listening to this interview or reading kind of the highlights of it. Like, yeah, of course, like I've got a cousin or an uncle or a grandparent or whatever that has some version of RA or arthritis or rheumatoid arthritis. Like there's not great solutions. And to your point to see that sort of that pent up demand during a trial, right?

Scott Nelson: 15:25

For an implantable device. Now granted it's a very small implantable device, but nonetheless, I think that's good signs, right? That you're solving a very, very significant, very significant need. With that said, I want to get into the kind of the substantive part of the interview here, but SetPoint Medical is the website. So if you're listening to this, you want to learn either more about the technology, the company, if you happen to know like a friend or family member that maybe would be well served by a device like this, setpointmedical.com, just as it sounds, setpointmedical.com, setpointmedical.com.

Scott Nelson: 15:54

We'll link to it in the full writeup on Medsider, but definitely encourage you to check out the site and the technology. Pretty cool stuff. Let's dive into kind of some cross functional topics, right? That most startups, we have a lot of folks that are interested in medtech startups, right? That listen to the show.

Scott Nelson: 16:07

So I want to kind of cover a wide range of things, but let's start with kind of your role as an operator, a CEO, kind of going from strategics to startups. You ran several very large business units at strategics prior to Evolus and then now at SetPoint. When you think about the myriad of things that you've learned, are are there a few, like, critical aspects or or or concepts that you're you're really trying to instill at at at Setpoint, whether that's based on things that went well at previous in in your previous roles or even things that you've you know, that that you failed with and are are kind of, you know, revising kind of your approach? You know, what what are what are you really trying to try and instill at that point?

Murthy Simhambhatla: 16:45

I mean, I mean, the key is the quality of the team at every level of the organization. There's a tendency sometimes to hire people that you need in the next year or the next two years when you're building something of such potential value that can do so much for patients as this company, you gotta think three years ahead, five years ahead, and ask, is this the right person? What kind of person do I need? Is this the right person? And that person may not entirely be there for what you need in five years, but can they be coached? Can they be developed? Do they have a growth mindset? I think that is the core. Without that, nothing really happens. The second is a team that is very collaborative.

Murthy Simhambhatla: 17:27

So this kind of a company with a long journey such as what we have, which is very cross functional, is not very conducive to the diva mindset. If there's one ego, the ego needs to be about serving the needs of the patient and doing what it takes in collaboration with others to make that happen. So selecting people, not just for the skills and experience and the growth mindset, but for the cultural fit is critical. Once you have that foundation, you can start doing the rest at the company. So with that foundation, the next thing, as obvious as it seems, is not always easy.

Murthy Simhambhatla: 18:08

And that's starting with the end in mind. You almost need to visualize at a time when at least half the people are hugely skeptical of what you're doing. I mean, that's the definition of innovation. If at least half the people don't think you're bonkers or stupid or whatever, you're not innovating. So in that environment, you've got to find a way to dig deep, understand the science, understand the market, and develop a core conviction that's unshakable based on facts, not just based on belief.

Murthy Simhambhatla: 18:42

And once you do that, you've got to visualize what SetPoint needs to look like when it's commercial in 2025, 2026. Well, reimbursement is going to be a big issue. The quality of clinical evidence is going to be a big issue because you're up only against the biggest drugs in the history of medicine. How do you convince rheumatologists? You've got multiple stakeholders.

Murthy Simhambhatla: 19:04

You have the rheumatologist, you have the neurosurgeon, you have hospitals, and your payers. Most therapies will address the needs of two or three of the stakeholders and the fourth will cause it to be a slog. And I'm talking about novel therapies. I'm not talking about a better widget in an existing market. That's also a very important pathway for medical devices, but very different than what we're doing.

Murthy Simhambhatla: 19:29

So you got to start with the end in mind because that influences just about all the decisions you make in the early days. Decisions we made in 2019 are now starting to pay dividends such as what should your indication statement be? What is my health economic value proposition? Am I going to figure it out after I have my data? Or do I have a thesis for how this could help payers instead of putting a hole in the pockets at a time when they're already stretched?

Murthy Simhambhatla: 20:03

So thinking ahead of time, I think is the other critical skill that the leadership team in particular has to develop and embrace. And the last is, yes, you gotta do a lot of planning, but I put a premium on agility. The only thing you know about your plans is they're a starting point and they're wrong. And, you know, so having that recognition, and sometimes it's difficult. Sometimes the more experience you have, the less you know that you don't know as much as you need to.

Murthy Simhambhatla: 20:36

So having that open mindset of moving ahead with your plan and then quickly assessing if there needs to be a course correction and having that agility to iterate quickly is the third critical element. So I say those are the three key elements that I try to instill in the organization.

Scott Nelson: 20:55

Yeah. Three key pillars for sure. And just to touch on a few of those things that you mentioned, that idea of holding conviction, right? Because especially with a novel technology like yours, so many naysayers. Right?

Scott Nelson: 21:07

So many people that either maybe they even they kinda like it, but, you know, there's it's too challenging, too many hurdles, don't know if you can pull it off, etcetera, etcetera. And then others are just like, that's not ever gonna work. Right? But having that conviction, but also but also balancing that against, like, I feel strongly about this plan, but I'm willing to pivot as needed as we learn more information about kind of the path forward. I mean, it's a hard, it's hard, it's easier, much easier said than done for sure. But that certainly should be the goal.

Murthy Simhambhatla: 21:36

Yeah. I I agree. I mean, the question is how do you develop conviction? I think as ironic as it seems, the more skeptical you are about things, the stronger your conviction when you develop it. So I came in massively skeptical when I was first introduced to SetPoint. Thought it was a completely bonkers idea to stimulate the vagus nerve to treat autoimmune disease. And I didn't buy it. Thought it was one of those ideas that is out there. Little did I know there's very high quality research since the early 2000s and even before that, that had been replicated in dozens of labs as the scientific underpinning. It's one thing to have the underpinning, You've now got to translate it.

Murthy Simhambhatla: 22:19

So I was very convinced in the science. And by the time I joined, the company had done some very good work. In autoimmune disease, it's not enough to treat the symptoms. Treating pain by itself is not sufficient. For example, in RA, you can treat pain and flares with steroids, but that's frowned upon for obvious reasons, the side effects of steroids and what steroids don't do is treat the underlying root cause, which results in bone destruction and disability.

Murthy Simhambhatla: 22:51

So when I saw the work the company had done in the early trials, they looked at patients through three different lenses. One was symptoms. Are you providing symptomatic relief? Yes or no. The second was biomarkers. Are you in fact down regulating inflammation? Yes or no. And the third was imaging. You image the tissue, is there objective evidence that you're having a positive effect? And the answer was yes to all of these with the early trials that the company had done, and that gave me the conviction.

Murthy Simhambhatla: 23:23

Now there are two other elements because you can have technical conviction, but that doesn't mean you have market conviction. So the next thing that you need to convince yourself of is if it works, is it going to be big? Because if the pathway is long, and if you've got to raise a lot of money, the market size has to be commensurate with that investment in both time and money, both by the investors and the team. And on that, it became very evident that there's a massive unmet need, that patient satisfaction wasn't very high. And early on in the process, we ran a patient preference study, where it became quite evident that after patients were exposed to the first biologic, their preference for a therapy like this versus switching to another drug was very high.

Murthy Simhambhatla: 24:11

And finally, this was the biggest revelation, by reducing the utilization of these very expensive advanced immunosuppressive drugs, you could completely bend the cost curve for payers. In other words, you're not just making the usual cost effective arguments, You had the potential to get in front of payers and tell them, I'm gonna save you money, and I'm gonna help you break even on the investment in this therapy in under two years. So all of those elements were in place, all the evidence wasn't there, but all the signs were pointing there. And that's what gave me absolutely deep unshakable conviction in the company.

Scott Nelson: 24:53

That kind of that sequential kind of process, right? That you just kind of outlined, I think is so healthy because most of, again, we serve kind of an audience that's largely interested in startups and it's oftentimes easy to get stuck in that first step, right? Like this is a cool idea. It seems like it has legs, right? The science seems to be there even if the evidence is fairly early and you just kind of get stuck there.

Scott Nelson: 25:17

Gravitate towards it and don't think about those other two issues, right? Which are arguably maybe even more important. Especially the second one that you mentioned is, is the need in market big enough? Because the cold hard reality about building a company around an idea is it's going to typically require a lot of capital. And investors that are coming in to support a company are typically not philanthropic in nature.

Scott Nelson: 25:42

I mean, they're going to want a return and these are long windows, right? So it's like, it's gotta be big enough. I think that's such an important point to emphasize for anyone listening, myself included quite honestly, because I see a lot of ideas that are quite interesting and quite novel. And they're like, man, could work, but the market's just not there, right? The clinical need isn't large enough.

Scott Nelson: 26:01

As much as you and I probably wanna help probably people at the end of the day, right. That's why we're in this business. But it's just the pieces need to fit together. But I think the third one that you mentioned is especially interesting because in your scenario, you don't have to like make this sort of these soft economics claims around, oh, we're saving this amount of time and that ladders up to x procedure costs or whatever. It's like these are, like, hard like, cold numbers that very quantifiable numbers, right, that a payer can say, wait a second. Like I'm literally saving 50%. I'm just throwing 50% out, but like it seems to be very, very quantifiable when compared to the high cost drugs that the overwhelming majority of these patients are using.

Murthy Simhambhatla: 26:41

Yeah, I think it's a bit of an exception. I think it's rare. Yeah. And I think it'll become increasingly important in the coming years because for the most part, health care spending as a percentage of GDP has been stuck at about 18%. So it's a it's pretty much a zero sum game.

Murthy Simhambhatla: 26:58

You know, if you've got a new therapy and you're asking people to spend on it, you better take costs out somewhere else. In addition to providing patient benefit, patient benefit being the key thing, that's necessary, but not sufficient. So early on, we asked ourselves, in an ideal world, what would we have at the time of early launch? And we said, we'd like to have three things. We'd like to have a pivotal trial published in a top tier journal, And that happened in Nature Medicine.

Murthy Simhambhatla: 27:29

Then we said the patient preference study is very critical. Do not discount patient preference. It needs to be an important part of how payers view this therapy. So we need to get that published. So that published earlier this year as well.

Murthy Simhambhatla: 27:44

And the third in the trifecta is we said, we want the health economic study published in a leading journal in the field. And that just published this year. So with the health economic analysis, in a nutshell, what we observed in a pivotal trial was that seventy five percent of patients in our study were free of these very expensive advanced immunosuppressive drugs at one year. And that drug avoidance directly drives your health economics to a point where payers break even for our therapy versus drugs, which list for 60,000 to $90,000 per year per patient for the rest of the patient's life. By the way, I should point out, this is the difference between autoimmune disease and cancer.

Murthy Simhambhatla: 28:29

In cancer, the drugs are very expensive as well, but episodic with the goal of trying to get the patient to remission. In RA, there is no such thing as drug free remission. So patients need to be on these very potent drugs for the rest of their lives. That's a lot to ask of the system and the patient. But when you have no other option, you will adopt it.

Murthy Simhambhatla: 28:51

So not only to payers breakeven in sixteen months, give or take, within these very expensive drugs and investing in our therapy, but it's projected that over the lifetime of the patient, you're going to save the system $350,000 per patient. So there's a very clear economic argument. So that was the vision we had maybe seven years ago. And through great execution by a lot of people in the team, that vision came alive with these three publications at the right time to support our commercialization.

Scott Nelson: 29:23

Hey, everyone. Let's take a quick break to catch you up on Medsider courses. These eight week courses are designed to help you learn winning formulas from world class CEOs. Medsider courses cover topics like fundraising, device design and development, clinical and regulatory strategy, commercialization, and m and a. Each course covers the hard earned lessons shared by the Medtech founders and CEOs who join our program. Medsider courses can be purchased individually or they're included at no additional cost with the Medsider All Access Pass. You can explore Medsider courses at medsider.com/courses. Again, that's medsider.com/courses. Okay. Let's get back to the conversation.

Scott Nelson: 30:02

Before we wrap on on this particular topic, I just think that's really important to emphasize timeline. It circles back around a couple of things you said earlier. Thinking about at launch, what do we need to have? Thinking about the end state and reverse engineering or building in reverse, if you will, from there. And also, what does that team look like? We can't people, we can't look for people that maybe can get us to the next year. This is like a five, six, seven, eight year roadmap, right, to get to that end. I think it, I don't know. If there's one thing that you're gonna get out of this conversation, I just think hearing how you kind of analyze this opportunity early on. Right?

Scott Nelson: 30:37

And then thinking about what does this look like in six years, eight years, ten years. Right? And what do we need to effectively get there? Think those are just super, super helpful foundational things that all of us deserve to kind of go back and listen to over and over again. So with that said, I want to chat with you, Murthy, little bit about kind of the platform aspects of this technology, right?

Scott Nelson: 30:56

It sounds like when you came in, there was some early work done with respect to maybe RA. But I imagine, right, there's other indications that you could pursue, MS being one of them, etcetera. So how how have you kind of evaluated and balanced maybe is the better way to say this, balanced kind of the the focus that's needed to get to the the end in mind for for RA, right, at launch versus, you know, all of the other maybe opportunities with a a system like this?

Murthy Simhambhatla: 31:21

Yeah. That's a that's a great question that SetPoint was confronted with, you know, in the early days and indeed continues to, you know, have to think through as we think about future indications. So when the company got started, there was a lot of evidence in preclinical models. There was no evidence that this would work in humans. So before the company embarked on the design of our own device, we got off the shelf commercially available vagus nerve stimulators from distributors in The Middle East, reprogrammed them with a pulse parameters and ran two studies in Europe, two early feasibility studies in Europe, one in Crohn's disease and one in rheumatoid arthritis.

Murthy Simhambhatla: 32:05

And they both had a positive signal. And the reason we went with RA is it by far the largest market of the autoimmune conditions we were targeting. The clinical trial pathway was pretty well established, pretty well set. And we felt that enrolling the study would be a little easier than taking on Crohn's, at least for our first indication. So that's why we picked RA.

Murthy Simhambhatla: 32:33

So that makes a lot of sense. Now, when you look at the other indications, Crohn's is obviously very important, and we will get to that at the right time. But there's a related condition to RA called psoriatic arthritis, where you have skin lesions in addition to joint issues. And these patients are already seen by rheumatologists. So it's a natural thing to try to help those patients and run a study in psoriatic arthritis down the road, because drugs that work in RA are the frontline therapies for psoriatic arthritis as well.

Murthy Simhambhatla: 33:08

So we believe there's a fairly good probability based on the science that our therapy should potentially work in psoriatic arthritis. And then from there, IBD is the next big one, Crohn's disease, ulcerative colitis. So this is all clinical development. Along the way, we have a research group that had been working on other conditions like multiple sclerosis, and we made some really astounding discoveries in preclinical models that vagus nerve stimulation can not only reduce inflammation, like disease modifying therapies for MS, but it can also dramatically accelerate the rate of remyelination. That is unusual, no drug can remyelinate today.

Murthy Simhambhatla: 33:51

They can only prevent new lesions from forming, they can't repair the damaged myelin. And we saw that. And that's a massive unmet need in MS. A lot of MS patients, even with RRMS who are stable over time, will progress to so called secondary progressive MS, leading to loss of function and potentially disability. But that's the holy grail of MS, remyelination.

Murthy Simhambhatla: 34:19

So we started a trial early this year as a research study to ask the question of whether the remyelination we're seeing in animals translates to humans. But I'd say the next target for an indication is going to be in one of the mainstays like psoriatic arthritis or IBD.

Scott Nelson: 34:36

Okay. Wow. That is wild, though. Like stimulating the vagus nerve can lead to those sorts of outcomes. Guess it speaks to this kind of burgeoning area of like, just if you want to call it like bioelectric medicine. I I don't know. It's just that it continues to kind of blow my mind because I did not expect, I wouldn't have, not expected the same thing, right? That in essence you could, by stimulating the vagus nerve, you can tell your body to sort of rebuild myelin sheath.

Murthy Simhambhatla: 35:03

I mean, think about it in healthy humans, it's actually a minor miracle that things work all the time.

Scott Nelson: 35:10

No doubt.

Murthy Simhambhatla: 35:12

If you think of how many things can go wrong, it's actually astonishing that most of us for the most part are healthy until something happens. And a lot of those control mechanisms, they're not that different than mechanical control systems or chemical control systems and chemical reactors. You have a sensor, you have a feedback loop, you have a controller, and then the controller sends a command to control everything to the right level. And that's the critical role the nervous system and the brain plays. So it's not like the immune system is just off doing its thing, disconnected from the nervous system.

Murthy Simhambhatla: 35:49

They're all interconnected. And what we're discovering is, the last hundred years have all been about new chemical entities to treat chronic conditions. I think we're increasingly seeing medical devices, neuromodulation in particular, showing the potential for tapping into those control mechanisms to treat chronic conditions. So it's a very exciting field.

Scott Nelson: 36:11

Yeah, no doubt, no doubt. And the particular form of arthritis that you've mentioned that's sort of adjacent to RA, was, it started with an S. You said it was? Yeah, psoriatic arthritis. Okay. That's interesting too that you mentioned that because I think I'm sort of stepping inside your shoes, but like you've got these other very large markets, right? MS, IBD, Crohn's, etcetera. And I think most people would be like, yes, that's the next big thing.

Scott Nelson: 36:33

And not to say that you wouldn't continue to kind of think about pursuing those markets, but sort of the adjacent one I think is interesting because maybe not as large when you think about the end state, it doesn't require maybe an entirely new sales force. It doesn't require a significant overhaul in the company's focus and relationships with certain societies, etcetera.

Scott Nelson: 36:53

It's sort of the needs right there. You know what I mean? And so I just, that too is kind of an interesting point that I think sometimes maybe could be easily glossed over in chase for the next largest markets.

Murthy Simhambhatla: 37:06

No, you're absolutely right. I mean, psoriatic arthritis can grow the number of patients that are accessible with our therapy by thirty percent compared to RA. So it's not trivial. RA for us is a $25,000,000,000 plus TAM. So adding psoriatic arthritis on top of that would be like a massively successful medical device company on its own. Yeah.

Murthy Simhambhatla: 37:30

That adjacency is very critical. At the end of the day, some of these are capital allocation decisions. Mhmm. I got a fixed amount of capital, I'm a startup. I can use it to fuel commercialization. I can use it to fuel the pipeline. I can fuel it to shore up my manufacturing, my supply chain. How do I allocate how much goes where? And, you know, that tends to be an ongoing debate as it should be and something we assess every six months or so.

Scott Nelson: 37:59

Yeah, no doubt. I wanna I'm looking at the other two topics I wanna talk about, which one of which is kind of commercialization and adoption and then kind of capital strategy. But just to kind of close the loop on all of the clinical and regulatory work that you've taken on, has there been anything that has been especially helpful in kind of sequencing a lot of those efforts, right? Because just RA alone, right? There's so much work that went into like getting those three studies published as an example, right?

Scott Nelson: 38:27

Eventually getting your PMA, getting the pass through code as well. And so that versus some of the early work you're doing in MS, etcetera, is there being anything that any advice, right? That you'd pass along to another CEO, right? That's kind of facing the same sort of same sort of, like, challenges. Right? Has there been anything that comes to mind in terms of your ability to kinda sequence that across the those efforts across the team?

Murthy Simhambhatla: 38:49

Yeah. I think having a laser focus, you know, 90% of your focus on the primary indication is critical. We're still early in a launch, so we can't take our eye off the ball. So what you cannot do is distract those who are involved with the launch with, you know, I would say walks in other directions, around new indications. It's always exciting to engage in those discussions and to work on projects or new indications, but ultimately, getting that initial launch right is critical.

Murthy Simhambhatla: 39:22

There's nothing easy about it. It needs a lot of focus. It needs a lot of learning and iteration and fine tuning of your playbook. So the way we have done it is essentially to try to minimize the distraction for the launch team as we pursue these indications. So for these new indications, it's primarily clinical, regulatory, medical affairs, but obviously some important input from both marketing and finance.

Murthy Simhambhatla: 39:51

Marketing because they play a very important role in helping us come up with the criteria to prioritize indications and to bring a business focus and not just a clinical trial focus to new indications. That's the other thing that's critical. It's easy to say, I'm going to run a clinical trial to answer a scientific question, but one should never start a clinical trial without a clear understanding of what the potential end game needs to be and could be. So we try to minimize distractions for the rest of the team. Now, one of the things that allows us to do this, Scott, we're a bit fortunate, it may not be an option for everyone, is that our selling model is relatively efficient compared to other neuromod companies.

Murthy Simhambhatla: 40:34

So we have a single quota carrying territory manager or rep who calls on the rheumatologist and the neurosurgeon. And we do not have field clinical engineers at this point. And we don't do trialing. Our reps don't program the devices. Our reps don't activate them. That is a relatively straightforward process that's undertaken by the rheumatologist office, typically a physician's assistant.

Murthy Simhambhatla: 41:01

And what that allows a commercial team to do is to focus on business development and building the market. But because you don't need to invest as much in realizing and the patient demand is extremely high. So we don't necessarily have to do television ads and radio ads, not at this stage of the company, at least. What we found to be more effective for our therapy in our way is direct to patient efforts with social media, that works very well in a clinical trial, is much more cost effective, that's probably what we'll do.

Murthy Simhambhatla: 41:35

But the upshot of all of this is that if you're investing less to derive a dollar of revenue, then it gives you a little bit more ability to think about and invest in a pipeline. And, you know, that's why we're able to do it. Otherwise, if our reps had to do the programming, if we had trialing of our devices, if we needed lots of field clinical engineers, if you had multiple specialties to call in, the other advantage we have is, they have a very concentrated call point. Rheumatologists already have these patients, they're already diagnosed by rheumatologists. And when they need their drug switched, they become eligible for our therapy. So those efficiencies allow us to do both at this stage of the company.

Scott Nelson: 42:20

Reminds me of your point earlier about probably some of the key decisions early on that laddered up to kind of some wins now, right? Would be how do we make this as easy as possible to use, right? Not just for the patient, but also for the clinical support staff, right? Which allows you to commercialize in a more efficient way, but that's a really good point. So on the note of commercialization, let's circle back to this reimbursement hub, because that's obviously important and seems like a fairly unique model, right? But it sounds like SetPoint is very integrated into that process. And so maybe maybe touch on that and how important that's been to kinda some of these this early kind of launch of the technology.

Murthy Simhambhatla: 42:59

Yeah. So I will say that many PMA track companies with novel devices have developed similar concepts and ideas over the years. So it's not a new idea that we came up with. Now a lot of startup companies work with third parties to manage the hub and the prior auth process, and we didn't want that. We're building a brand new therapy.

Murthy Simhambhatla: 43:21

We wanted very high quality touch points and experiences with SetPoint Medical. And we wanted data analytics at the next level. So think about what happens. Once a patient gets referred, if you leave a patient up to their own devices, humans are busy, stuff happens in your life. You're gonna say, I'm gonna see the surgeon and then stuff comes up, You know, things there's leakage because of real world issues.

Murthy Simhambhatla: 43:53

So shepherding the process is really a service to the patient. Now, along the way, the advantage of having our own reimbursement hub and our own backplane for analytics is you're collecting a tonne of data. How much time does it take from a rheumatologist referral to when a neurosurgeon sees the patient? Once a neurosurgeon sees the patient, how quickly has surgery been scheduled if it's a Medicare patient? If they're a commercial patient, how quickly has the claims package been processed, you know, by the hospital and been put together by the hospital?

Murthy Simhambhatla: 44:29

Then comes the prior auth process, where it's a claim by claim, and there's many levels of denials. The initial claim may get denied, and then you go to the next level, there's a review, it may get approved, or it may get denied all the way up to an administrative judge. And if that's denied, you start all over again. Now, this is in the early days before you get in policy with payers. We feel good that with that trifecta of evidence, the health economics, patient preference, and evidence, that we have a good path to getting on policy down the road.

Murthy Simhambhatla: 45:05

But for now, it's a claim by claim process. So now what is the patient experience through all of this? Let's say it's a prior auth. If you're not integrated in the process, the patient, if the claim is denied, is going to get a letter from the insurance company saying, your claim's been denied, Mr. Smith.

Murthy Simhambhatla: 45:22

And then the patient's disappointed, they're anxious, they were really looking forward to getting the surgery. So we want to avoid those situations. The moment we know there's a denial, the patient learns from us, this part of the process, don't worry, here are the next steps, got this, hospital is working on this, on the claims processing. So that hand holding, think is critical to ensuring that patients, rheumatologists, hospitals have a great experience, because we have category three codes, these are new codes. And until the familiarity with all of these improves over time, there needs to be lot of handholding.

Murthy Simhambhatla: 46:06

So we collect all these data, what percentage of claims get authorized within ninety days? You know, what percentage of claims get authorized within one hundred eighty days? Once you have all of this, you suddenly have a forecasting tool. You can now based on the patient funnel and all of the metrics you have in your hub, you can forecast what are my revenues gonna look like in the next quarter and the quarter after next. And that's a critical step, Scott, in readying yourself to go public at some point.

Murthy Simhambhatla: 46:37

You need to have that incredible forecasting ability. So there's more reasons than one for having an in house hub and having great people with great experience run the hub. It's a very specialized function, and there aren't a lot of people, you know, with that skill level to really execute well on the market access strategy.

Scott Nelson: 46:59

That's incredibly smart one. Right? Not to say that's like to your point earlier, that it's a entirely new concept. Right? But the decision, right, to build that expertise in house. When people think of branding, right? This is a, this, in my opinion, this is a great example of a brand, right? Because if you're integrated, you're actively supporting the patient through this process. That's what they're going to remember. Not the colors of your logo.

Scott Nelson: 47:23

That's going to be their perception of working with SetPoint, right? They were extremely helpful with this process. They helped me get the procedure or they were, at least at the very least they were very supportive along the way. So like that is the definition of a brand. Then also your point, which maybe arguably is even more important, the ability to collect all that data and have it inform all of the forecast considering how large of a constraint this could be as you ladder up to kind of some of those broader policy initiatives.

Scott Nelson: 47:49

Yeah, just super important, super smart. I'm looking at our clock and we don't have a ton of time left. Wish I could dig more into that, but I want to get to capital strategy, right? Because I'm looking at your list of investors on your website, again, setpointmedical.com. It's an incredible list, right?

Scott Nelson: 48:03

It's like literally like a list of who's who of investors. So that's one. Kudos to you for attracting the quality of folks on the cap table. But to your point earlier, a company like SetPoint, what you're doing, building out not only novel technology, but sort of crossing all of these hurdles, right? From clinical to health economics to eventual CPT codes, etcetera, takes a lot of investment.

Scott Nelson: 48:29

And so when you take a step back, what what's what's worked well? Right? Because you've you've raised a lot of different types of financings too from equity to debt, etcetera. What what are some of the keys to success, right, to building out a base of investors like like you have at at SetPoint?

Murthy Simhambhatla: 48:43

Look. It's a bit of an iterative process. I take investor feedback very seriously, especially the skeptical ones. Because if they're skeptical, it's one of two reasons. A, that's a good question. Mhmm. I should have thought about that. I I can see why they're skeptical. Or b, they're skeptical, but it's not based on facts. Either way, it's my issue. It means I haven't communicated the situation well enough to the investor.

Murthy Simhambhatla: 49:09

Now, oftentimes, you don't have the luxury of picking your investors, your investors pick you. But in the case of SetPoint, we've been incredibly fortunate to be partnered with extremely high quality investors who are an absolute dream to work with, because they bring a lot of value beyond the money. They've seen any number of such plays. But going back to the capital raise, early on, we get questions such as, yeah, all of this sounds great.

Murthy Simhambhatla: 49:38

But how do you know it's gonna work in a larger trial? Well, said, well, you're right. I don't I can't there's no guarantees. But based on the science and the early data, there'll be a reasonable confidence of being successful in a pivotal trial. And there'll be investors who really hone in on the science to develop that conviction.

Murthy Simhambhatla: 49:59

And then there's investors that'll call 10 rheumatologists and ask them for opinions. And it's very difficult to develop conviction just on the basis of talking to people. We really had to dig deep to develop that conviction. So we're very fortunate to have many of those investors who dug deep to get the answers. But early on, we'd get questions such as, how do you know that patients are going to opt for surgery?

Murthy Simhambhatla: 50:24

And early on, we had no idea. We just knew that these drugs were hugely invasive to the patient's quality of life, that patient satisfaction was low. That was the impetus for us going out and running a patient preference study. We said, okay, we'll do a proper discrete choice experiment like pharma does, do a proper statistically powered patient preference study. And that's what showed us that patients, as soon as they've been exposed to the first biologic would opt for a therapy like ours versus drugs.

Murthy Simhambhatla: 50:55

And by the way, that also informed our indication statement for the pivotal trial, rather than target no option patients, this therapy targets patients who've been exposed to at least one biological drug. They could have been exposed to one, two, five, ten, the disease is not well controlled or they're intolerant, they're candidates for our therapy. So I think listening to investors is key. Sometimes when they ask questions and you don't have a good answer, there's no point winging it. We just go out and get those answers. Helps you in more ways than one. It helps you not only answer their question, but I think it helps you set up a better program for the company.

Scott Nelson: 51:35

Yeah, really helpful points, because I think sometimes it's easy to get frustrated by the sheer number of conversations that you need to have and the sheer number of investors that you need to talk to, but there are some silver linings there, to your point, right? Especially if the same question keeps surfacing, right? That you don't necessarily have a great either you don't have an answer for or you don't have a great answer for at this point. If that keeps surfacing from pretty smart investors, that should maybe be a signal that we need to maybe drill into that with more rigor. I think those are really, really helpful points.

Scott Nelson: 52:05

I know we've only got a few minutes left. Want to get to the rapid fire portion of this interview, but for everyone listening, setpointmedical.com is the website just as it sounds, we'll link to it in the full write up on Medsider. And if you're new to Medsider, those full write ups try to capture a lot of the key, you know, the top, you know, four or five key lessons that our guests share, which Murthy has done and shared definitely a lot more than that. But that's what those write ups are kind of geared for and they accompany the audio version of these podcasts. So with that said, Murthy, rapid fire portion of this interview. First question on the docket is take us out to mid twenty seven. What are you most excited about at the company?

Murthy Simhambhatla: 52:36

What I'm most excited about is seeing that commercial inflection point and take off. And why am I excited about it? It's a lot of work building the infrastructure and ultimately we're doing it to get patients access to a therapy. And mid twenty twenty seven is when we expect to see that inflection point.

Scott Nelson: 52:52

Yeah. Fun to hopefully see that J curve. All right. Let's say we're in Southern California meeting finished up maybe a small talk with a group of Medtech investors. What's your billboard message for them? What's the one lesson that you wanna really make sure they understand?

Murthy Simhambhatla: 53:06

Well, things will be more difficult than you could ever imagine them to be. But it's absolutely worth it when you get to the other side, because you're addressing real patient needs. Have a great team, incredible persistence, unshakable belief in what you're doing. As I've said before, if you're truly innovating, at least 50 to 75% of people will either not believe you or think you're nuts. And most of all, raise enough capital when you can, not really need it, don't be fixated on dilution.

Murthy Simhambhatla: 53:39

20% dilution versus building 2x the value, there's no competition. So you got to think big, you got to have the conviction, and you got to raise enough capital to your next value inflection point. So you're focused on execution. You can do it well without shortcuts. Having dilution come in the way, I think, is often the wrong approach.

Scott Nelson: 54:03

Yeah, such a good point. All right. Any lessons or pieces of advice that you'd whisper in the ears of the younger version yourself if we kind of had the chance to rewind the clock?

Murthy Simhambhatla: 54:11

Yeah, you know, while I enjoyed my stints at large companies, learned a lot and had a successful career running large businesses, I've realized over time that I'm better wired for innovative startups. And I would have advised my younger self to make the leap a lot sooner the startup environment.

Scott Nelson: 54:29

Yeah, that seems to be a fairly shared sentiment, right? Across a lot of the founders and CEOs that come on the program. Yeah, really good stuff. Murthy, has been a fun discussion. You laid out so many different kind of lessons learned and really, really good advice. I hope everyone listening got as much value out of this as I did. Thanks again for carving out some time to do it.

Murthy Simhambhatla: 54:50

Thanks Scott. I enjoyed speaking with you.

Scott Nelson: 54:51

Yeah, likewise. And I'll have you hold online, but for everyone listening, you made it this far, highly encourage you to check out SetPoint Medical, the website, learn a little bit more about the company and of course the technology as well. We'll link to that in the full write up. We'll also link to Murthy's LinkedIn profile so you can check out his background in a little bit more detail as well. So appreciate your attention as always until the next episode of Medsider goes live, everyone, take care.

Narrator: 55:11

Hey. It's Scott again. One quick thing before you go. You see, I love bringing you insightful conversations with the founders and CEOs of medical device and health technology startups. But here's the thing, I'd be super grateful if you could help me reach even more ambitious doers who share our passion.

Narrator: 55:23

So if you found value in this podcast, if you found yourself nodding your head while listening, or if you simply enjoy what we're doing with Medsider, please take a moment to leave us a review. It's super easy. Just open your Apple Podcast app or the podcast app of your choice, search for our show, and scroll down to the ratings and review section. Leave your honest thoughts and hit that five star rating if you think we're worthy. Your feedback is incredibly important, it's the best way to ensure we keep bringing you awesome discussions with leading founders and CEOs. So take a moment to be a good friend and leave that review today. As always, thanks for being a part of our journey and for helping Medsider continue to grow and evolve. Your support is greatly appreciated. Alright. Enough talk about reviews. Stay tuned for another informative episode coming at you soon.