From Concept to Commercialization | Don Pierce’s Medical Device Ventures

Michael Burcham: Welcome to Microcap Moments, a podcast from Shore Capital Partners that highlights the stories of founders, investors, and leaders who have taken on the challenge of transforming ideas and small companies into high growth organizations.​

The journey of building and scaling a business takes one down many unexpected pathways. It’s a journey where we learn from our mistakes, fall down often, but have the entrepreneurial grit to pick ourselves up and persevere. Within this series, we will share these stories of success and failure, of the challenges and the rewards faced by those who dare to dream big, and through their lessons learned, we hope to inspire others who are on a similar journey of becoming, growing, and leading.​

Investing in and growing a medical device company requires a combination of innovative thinking and entrepreneurial grit. Many of the new products are born in the mind of a surgeon or other medical practitioner. But getting the product from idea to reality requires a deep understanding of the regulatory requirements of any given country.​

Having success also requires knowledge of the industry’s supply chain, prototyping, identifying early adopter customers, and securing contractual relationships with key players in the industry. In this episode, I have a conversation with Don Pierce, a Partner at Shore Capital and Anderson Williams, Vice President of Talent Development at Shore.​

Don joined Shore in 2013 and is primarily responsible for the sourcing and evaluation of investment opportunities and hiring operating executives in the medical devices field. Under Don’s leadership, Shore has led three investments through growth and successful exit: Innovia Medical, IZI Medical, and Argentum Medical.​

Today, Don maintains lead responsibility for AA Medical and C2DX, where he actively works with management to identify and implement new growth initiatives. Prior to joining Shore Capital, Don served as a senior manager with Baxter International from 2009 to 2013. Prior to Baxter, Don was with Roundtable Healthcare Partners.​

Outside the office, Don is actively involved with the mission of Our Lady of the Angels, Big Shoulders Fund, and serves on the board of the Notre Dame Club of Chicago. Don received his bachelor’s degree in finance with a concentration in international business from the University of Notre Dame.​

Anderson Williams: Welcome Don, and thanks for joining us today. To get us started, will you just introduce yourself and say what you do here at Shore?​

Don Pierce: Sure. Don Pierce, been a Partner here at Shore for about 10 years now, almost exactly 10 years actually, and I lead our medical device strategy.​

Michael Burcham: And Don, you’ve done quite a bit investing in the medical device space. What got you interested in that sector as an investment opportunity in the first place?​

Don Pierce: I’ve had an interest in medicine probably dating back to high school. I had the chance to observe surgery and I always thought it was very interesting in seeing some of the products and seeing a surgeon go to work and help someone. I think that was also fostered with my first job out of investment banking was at a healthcare focused firm.​

I think that continued my interest. They worked in devices and pharma and then when I worked at Baxter HealthCare, you know, global medical technology company, one of the things I thought was great, our mission there was helping save and sustain lives. So really thinking about innovations and where you can help people with their health care needs.​

Anderson Williams: So, Don, from an investment perspective, how is the medical device sector different, say from healthcare services or tech enabled services?​

Don Pierce: Sure, I think while you have the same types of regulatory focus within healthcare, on the device side, we’re obviously making and manufacturing the product. So, you’ve got different types of things that you’re focused on when you’re manufacturing businesses as opposed to serving customers on a daily basis from a physician practice perspective, obviously.​

And while we might not have some of the same growth dynamics that you’ve seen on the services side or on the tech enabled services side, we have seen increased focus on device businesses on cashflow on maybe without that same level of growth, but still profitable businesses and cashflow businesses, especially in this current environment.

Michael Burcham: In this first segment, Don speaks to the dynamics of medical device investing, especially as it relates to supply chain and the types of entrepreneurs with whom he partners, from the idea, through manufacturing, and ultimately delivery of the product into the healthcare ecosystem.​

So, Don, one of the aspects of medical device investing is really an appreciation and understanding of the supply chain. You’re often working with the inventor, creator, manufacturer as your partner and you got a variety of players that device product has to move through to end up in the hands of a healthcare organization or a practitioner. Talk to us about how you think about that as you’re looking to make an investment in med device.​

Don Pierce: Well, one of the things that I really like about the device space is that we have the opportunity to work with entrepreneurial doctors and they’re the ones that are on the front-line serving patients every day. And we help take something that’s maybe an idea and then create a product out of that. So, when you think about all the things that have to go into that, right?​

You have to design the product. You have to then obviously manufacturing the product in a regulatory driven environment and then supply chain when you think about what happened in the world the last couple of years when people weren’t able to get medical devices. So, I think that’s really changed how you think about where you manufacture, how you manufacture.​

And then importantly, it’s not just here, but you’re trying to think about your supply chain and how do you move everywhere around the world.​

Michael Burcham: You’ve had the opportunity to work with your companies, not only in the US but in other countries. And I’m thinking about particularly out of the UK and Germany and some of the markets you’ve worked in.​

How is the work and investing and the partnership feel different in those other countries as compared to the US where you’re doing primary investing?​

Don Pierce: Well, it’s innate in the medical device industry that you need to be not just regional or national, but really global in your reach. And with my personal portfolio of companies here, you know, anywhere from 25 to nearly 50 percent of the revenue is based outside of the US.​

So having to work hand in hand with individuals all over the world, I think it’s been a great experience for me personally and professionally. I think any chance that you have to learn more about another person’s culture. It’s been a great opportunity, and I also think it has presented challenges. The regulatory environment might be different in Europe or in Asia than it is here in the United States, and having to constantly react to that, I think, is a key part of being able to be successful in the business.​

I’ve also formed friendships with people in the UK, in Germany, in Asia, and it’s been kind of personally rewarding for me. When I think about the differences or what that can create from an operational perspective, it can be tougher to manage something on another continent. I think that said, if you’re mission driven and you have good leadership and especially good communication, you can be successful in a global environment as well.

Michael Burcham: So many businesses were negatively impacted or even stopped production during the 2020 pandemic. Don and his team at Innovia chose a different path and did a mass entrepreneurial pivot to provide equipment for healthcare workers who are putting their own safety on the line to help others. In this next segment of our discussion, Don talks about that experience with the Innovia team.​

Anderson Williams: Is there an example, Don, that you can think of that captures sort of that opportunity of doing this kind of international work? But also maybe on the other side, the challenges of working across, just from a real-world perspective, because I imagine both from the sourcing process, right through supporting sort of once a partnership has happened, there are both some opportunities and challenges to that global kind of perspective. Are there some examples you can share related to that?​

Don Pierce: Sure. One example that comes to mind during COVID, obviously, device volumes materially impacted everywhere around the globe. One of my businesses, Innovia Medical, actually had really great idea in terms of pivoting and helping to make face shields for people, not just here, but then, interestingly, we had a contract with the NHS in the UK.​

And so, it really helped us when regular surgical volumes were off 30, 40, 50 percent, to be able to backfill that volume from an operational manufacturing perspective. But importantly provide PPE for those people that were on the front lines helping to serve patients every day. Now we had to find out, how do you make it?​

How do you source it? How do you get the supply chain logistics correct to be able to move that product around? And not just in the United States, but in the UK, broadly in the continent in Europe. So that was really a great experience. I think an example of the ingenuity of a team creating a great outcome out of something that was really a terrible situation in time in the world.​

Michael Burcham: I love that particular story, but the backstory behind it honestly is the speed between the idea of making the face shield and literally getting it off the assembly line and out to the customer in just a matter of a few weeks. That really speaks to not only the creative ingenuity of the team, but how absolutely responsive it was of the company and the partnership with Shore to pivot and make such an adjustment so quickly for such a powerful impact.​

Can you talk a little bit about that decision process? What that was like? Cause that’s a substantive change from an investment thesis of making a medical supplier device to making a face shield.​

Don Pierce: I’ll tell you, it’s one of the things I’m most proud of so far in my career here at Shore.​

From mid-March, really when the world shut down, the team there led by Terry Meredith and then on the ground with Kevin McIntosh in Minnesota, first with his R&D team looked at, you know, how are these being manufactured and then immediately jumped on the sourcing side of it and worked with his team there. And then one of the things I think that was really impressive was everybody, every day, down to people that were customer service, that were not just the manufacturing people, but salespeople, everyone really jumped on this and helped manufacture and assemble these.​

We were actually in market by the end of April, so you think in kind of six weeks’ time, we’re already shipping and had contracts both here in the US and in the UK. You know, one of the pictures that’s kind of burned in my mind was we would ship out a truckload and before the truckload would go out, you would have people writing messages to the frontline providers saying, thank you for all of your efforts.​

And, you know, I’ve got those pictures. That was really something special. It’s still something I think about today.

Michael Burcham: The medical device space, like many other aspects of the healthcare industry, has been rapidly consolidating around a few large players. In the following segment, I asked Don to speak to that consolidation and the impact it has had on where and how he chooses to invest.​

There’s been more and more consolidation in the medical device space over the last few years. How are things different now than when you started and how do you think about that consolidation and picking your spots and areas where you want to invest?​

Don Pierce: Well, there’s fewer companies, large companies.​

Certainly, there are today than when I started. I think when you look at some of those larger consolidations, whether it’s BD and Bard and Carefusion or Medtronic and Covidien, that consolidation, I believe will continue. When you look at when I started investing in the business 20 years ago, I think that some things have changed, obviously fewer companies, but I think if you continue to build good businesses in growing end markets, that it really presents an opportunity for you to be acquired by some of those larger strategics.​

I think that when I started in the business. One of the things that I really like about Shore’s microcap thesis is I think you continue to have people being focused on larger assets. And so, if you can start smaller and build a great company, I think you’re going to have a great outcome for your investors.​

As we’ve seen three times with some of my portfolio companies in the last 12 months.​

Anderson Williams: And how has that impacted your thinking about the investments you’re making? How has the change in the market, the consolidation in the market changed your approach, if at all?​

Don Pierce: I think there will be a continued focus for me on some of the themes where we’ve had success in the past.​

I think some of the themes when you think about minimally invasive surgery, smaller incisions, less trauma to the patient, lower risk of infection, I think those things will continue. Unfortunately, you know, oncology as an example, you know, we’ve had some success investing in that field.​

That is unfortunately a market that will continue to grow. I do think when you think about consolidation specifically and how that changes our investment thesis, we’ve done a series of carve out opportunities. When you think about some of the larger combinations, there are things that maybe don’t fit anymore with their strategy or become non-core that are still great businesses but are maybe under invested in and become corporate orphans.​

We’ve had some great success investing in those. When you look at our outcome at IZI, as an example.

Michael Burcham: In the following segment, Don shares some of his insights regarding the types of healthcare entrepreneurs he works with.​

He describes the success of those who are able to get an idea out of their head and then design the product not just for themselves, but for the larger market. He also speaks to how this compares to the other sectors within which Shore Capital invests.​

In working with these, what I would call, creative entrepreneur clinicians who saw an opportunity, thought a process could be better, had an idea, then you’re partnering with organizations to turn that idea into something real.​

Talk to me a little bit about the dynamic that happens there because there are many surgeons or physicians with an idea that never leave their brain. And you’ve been quite successful in your career at helping bridge that idea into a workable product. So, tell me a little bit about how you approach and think about that marketplace a bit.​

Don Pierce: I think that’s an interesting way of thinking about it. We’ve had the good fortune of partnering with some great physician, entrepreneurial physicians over the years. The ones that make a product not just for themselves, but for the broader market are the ones that are the most successful. We have to think about not just how I like something, but how is it going to work for the broader segment in the broader market?​

And how is this really not just a one-person product, but a commercial product that works in the broader segment?​

Michael Burcham: Yeah, I see that a lot in entrepreneurial circles. Not just in med device, but more broadly is quite often the entrepreneur may start with a product designed from themselves and the way they see it, but the minute they start customer discovery, they recognize that I can’t be the only customer here.​

I probably have to sharpen my lens a bit and provide something the market actually wants. Once you identify a partner like that, what is the task at hand then of getting it, the product created into market?​

Don Pierce: The test begins with working with the engineering team and designing the product, but that’s an iterative process.​

You’ll go through a prototyping phase, you’ll get maybe a few of those manufactured, you’ll get them tried. Then you might have a, almost like a beta testing where you go to a small group of KOL physicians. KOLs are Key Opinion Leaders. We generally employ that around our portfolio companies. So, you have a way to be able to test the product before you go to the broader market.​

You can make some changes to it. But importantly, along the way, you’re aligning with the broader regulatory agencies in terms of how do we market a product that’s not just going to be effective, but also safe for the patient.​

Anderson Williams: So, Don, clearly your investments are more innovation and invention driven than our healthcare services investments, which really follow a playbook and are really about replication.​

Can you talk a little bit about how your investments fit into the Shore playbook?​

Don Pierce: I think there’s a lot of similarities in that we look to partner with owner founders and entrepreneurs. Where I think it’s different with respect to innovation is we are looking to launch new products and really capitalize on new opportunities.​

When I think of specifically our IZI business, we wanted to get into the kyphoplasty market. We looked from an M&A perspective, were we able to do that? We ultimately decided to go with the build approach as opposed to buy approach and we leveraged our Physician KOL board to be able to help advise us on what the product characteristics that we really wanted and that were really going to be valuable to those physician partners of ours ultimately when we designed that product and successfully launched it.​

And it was something that I think showing that capability as a small company to be able to bring a product to market was something that was ultimately, you know, attractive to our acquirer.

Michael Burcham: In this next portion of our conversation, Don describes the regulatory environment within which he and the entrepreneurial partners he works with bring new products to market. He speaks to the reality of longer lead times, which often creates the opportunity for him to partner with creative healthcare inventors and entrepreneurs.​

Don, I would guess that the regulatory environment has continued to be more and more rigorous over time. Can you speak to our listeners a little bit about how you think about the regulatory environment and overall approval once something is created to actually get it into the marketplace for use?​

Don Pierce: That’s a great question. So anytime we’re looking at developing a new product, you talked about changes that have happened over the last 20 years. It has absolutely gotten more difficult in really every geography to be able to launch a new product. And that is from the FDA, from the EU MDR. So, we really have to think about longer lead times.​

And I think you have to think about in your mind, what is the investment really going to take in the amount of time? And we say, look, it’s always going to cost more and take longer than you think it will. And so, you really have to be more discerning in the places where you are going to make those investments and really push toward new innovation, because I think the bar has gotten higher with respect to the regulatory environment and it has gotten more challenging.​

I also think that that presents an opportunity though, when you think of smaller companies that maybe in the past, we’re able to develop and get to market on their own. That’s becoming more and more difficult. And I think that’s going to continue to see consolidation because some of these companies just really can’t get there on their own.​

And that can be resources from a capital perspective, but that can also just be resources from an infrastructure perspective. And how do you add the R and D talent and the regulatory know how to be able to launch those products effectively, and to be able to operate in that environment without having even longer lead times, because you didn’t know how to file the correct documentation and launch the product in the right way.​

Michael Burcham: So Don, as I reflect on what you’ve shared with us from the idea from the physician partner to the entrepreneurial partner who will help you create and design a product, the back and forth prototyping and testing, getting it through a regulatory gauntlet and getting into the market, that must be incredibly rewarding to see an idea turn into something real that improves the health and lives of people all over the world.​

Don Pierce: Well, not just that, but also, I’ve been able to be in the surgical suite and see a product that we’ve developed physically used on a patient. That’s kind of the ultimate satisfaction of going through that whole process that you just mentioned.

Michael Burcham: To close out our discussion, Anderson asked Don about his journey with Shore.​

From being the first team member to invest in the medical device space to now having a team building a meaningful part of Shore’s overall holdings. Don shares some of his thoughts on that growth and his personal journey.​

Anderson Williams: So, Don, you started as sort of a lone wolf doing med device investments. Now, 10 years later, you’ve got a team, you’ve had some successful exits, Shore’s continuing to grow.​

Will you just talk a little bit about that partner journey and maybe any lessons learned?​

Don Pierce: It’s been a fantastic journey. When I think about being employee number eight here, and now having more than 150 of us around, I think about in particular, my team, I was kind of a lone wolf in the beginning in the device sector and had to spend a ton of time educating my partners and those around Shore on why these are good spaces to invest in.​

And really from a team perspective, I’ve just, I’ve been the beneficiary of some really great junior talent, starting with Rory and Mickey, moving through to our current group of VPs, and now getting the chance to work with AJ and a new crop of junior team members. Having that level of resources, I think, is something that’s really helped create a really nice niche for us here.​

And we’ve seen that play out with, you know, now in the last year, three investments returning four to six times. Really a track record that we can lean on. And now, I think we’re really just in the early innings of having that network effect. Our last platform, AA Medical, came to us through another board member that had seen what we did with one of our earlier device investments and said, look, and similarly with a business that we’re looking to close here shortly, a new platform we’re really excited about that also came via another board member that said, I’ve seen how you guys operate and this company could use your help and could benefit from it.​

And I think it’d be a great opportunity for you and for Shore.​

Michael Burcham: Don, thank you for joining Anderson and myself today. It’s been fascinating to learn about the evolutionary journey of investing in med device here at Shore, your own experiences. I love what you shared about the pivot during COVID to really do something meaningful with the mask.​

Got to be incredibly proud of what’s happened. Thanks for being here.​

Don Pierce: Thank you. It’s great to be with you guys this morning.​

Michael Burcham: If you enjoyed this conversation, please check out our other episodes at https://www.shorecp.university/podcasts. There you’ll find other Microcap Moments episodes, including conversations with three of our founding partners, Ryan Kelley, Mike Cooper, and John Hennigan.​

This podcast was produced by Shore Capital Partners, with story and narration by Michael Burcham. Recording and editing by Andrew Malone. Editing by Reel Audiobooks. Sound design, mixing, and mastering by Mark Galup of Reel Audiobooks.​

Special thanks to Don Pierce and Anderson Williams, who shared in the interview with me.​

This podcast is the property of Shore Capital Partners LLC. None of the content herein is investment advice, an offer of investment advisory services, nor a recommendation or offer relating to any security. See the Terms of Use page on the Shore Capital website for other important information.