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BME-IDEA October 7, 2009

Medical Device Innovation & Commercialization The Renal Solutions Story; From Concept to Exit Peter M. DeComo Prior Co-Founder, Chairman & CEO. BME-IDEA October 7, 2009. Establish trust & credibility with the audience!.

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BME-IDEA October 7, 2009

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  1. Medical Device Innovation & CommercializationThe Renal Solutions Story; From Concept to ExitPeter M. DeComoPrior Co-Founder, Chairman & CEO BME-IDEA October 7, 2009

  2. Establish trust & credibility with the audience! "They never open their mouths without subtracting from the sum of human knowledge." Thomas Brackett Reed 2

  3. Who is this guy? • Not an engineer • Not a physician or scientist of any kind • Has a dated clinical background • Has been a tinkerer/modifier of medical devices • A past purchaser & user of medical devices • Currently a serial entrepreneur, founder & CEO of both failed and successful medical device startups • Has raised over $80MM in private equity 3

  4. What I am currently involved with? Renal Solutions ALung ThermalTherapeutics ClearCount CardioRobotics 4

  5. Why do we Innovate?;Can You Do Well and Do Good? The End of the Story First: • An interest in solving a significant problem & need in a market • In late 1999 RSI was a concept • Raised $40MM in private equity • Developed a disruptive & transformational device • Cleared all regulatory hurdles • Sold for $200MM on a pre-revenue basis • The technology will make life better for hundreds of thousands of patients with CKD! 5

  6. Lucky or Good? Gold Zone! $$ Magnitude Preparedness Opportunity Time 6

  7. When should we Innovate? • A great opportunity exists for disruption of equilibrium • To solve a significant problem or need • The product/service can be differentiated resulting in a competitive advantage • The financial model illustrates that potential revenue, margin & profits are substantial • The customer is willing to pay a premium price • Sources of capital are willing to fund 7

  8. The Goal of Innovation should be: To develop & commercialize a better product or service for customers who are consuming an existing product/service that is NOT solving their specific problem or meeting their existing need. 8

  9. The Renal Solutions Vision To develop and commercialize a hemodialysis system suitable for the patients home environment. In the home setting the goal is to facilitate; • Self Administration – More Dialysis! • Improved clinical, quality of life and cost outcomes 9

  10. The Allient® System Transformational! • Required only 1 ½ gallons of tap water for an 8 hour treatment • Designed for patient self administration • Treatments anytime & anywhere • Uniquely safe & gentle blood movement system Resulting in: • Significantly better clinical & quality of life outcomes • Reduced total cost of care by 30% annually 10

  11. Allient – the Convergence of two unique technologies Unique Pulsar Blood Pump Sorbent-based toxin separation chemistry 11

  12. Renal Solutions – Disruptive Considerations! • $60 Billion Worldwide Dialysis Market • Incumbents providing an inadequate dialysis dose – 24% mortality rate in the US • Current technology is too complex and costly for the patient • Home Dialysis (more dialysis) is an underserved market with <1% at home • We have Innovative and Transformational technology • Domain Experienced Management Team • Reimbursement is Well Established 12

  13. So What Happened?? • Raised a total of $40MM in Private Equity • Completed development of the Allient® • Commenced a controlled market launch • Was acquired for $200MM in November 07’ • 5X return for investors 13

  14. “Tangible” reason’s for Renal Solutions’ Success • RSI had met the criteria for successful innovation, commercialization & value creation: • BIG market with current providers “Asleep” • Significant clinical impact with an Innovative & disruptive Technology • Potential of a HIGH franchise value • Strategic need of the current incumbents is present • Execution & implementation is meticulous • Enabling Capital was obtained • Sustainability of revenue growth & profitability was evident 14

  15. Where we really that good, was it that easy? ABSOLUTELY NOT! 15

  16. What were the Pitfalls we encountered? • We over-engineered the product with features the customer did not care about • As a result, the project took too long and cost too much • We complicated the regulatory pathway with our stated intended use 16

  17. The perspective of the customer was they didn’t need it Added 2 years and $20MM in cost If the company had only raised $20MM (not $40MM) the return multiple would have doubled from $5X to 10X Those who realized $5MM ROI would have earned $10MM Pitfall #1 - Remember the Blood Pump! 17

  18. Pitfall #2 – We complicated the regulatory pathway • We stated an intended use previously not cleared by the FDA for a substantially equivalent 510k device • Resulted in a clinical trial requirement that added 2 years and an additional $2MM in cost • Delayed our entry into the home market resulting in significant unquantifiable lost opportunity 18

  19. Key elements of success • Focus on markets with problems, needs and non-consumption • Do not over-engineer or try to significantly change use patterns, just make it easier • Do not target markets with established sustaining competitors • Segment the market appropriately • Build a business model that can support the innovation and subsequent disruption • Focus on team building; no founder, entrepreneur or innovator accomplishes success without talented people 19

  20. Keep Innovation Simple “Some say the cup is half empty, while others say it is half full. However, in my opinion both are wrong. The real problem is the cup is too big.Sometimes all we need is a new perspective on an old problem.” - From the book "Foundation design", by Donald PCoduto,. 20

  21. Pete’s “TOP TEN LIST” of Start-up Fallacies: • You have a great idea and raising money will not be a problem • You can get it done faster and cheaper than the competition • Dilution is a bad thing • You have the best talent on the street • You do not need patent protection, the trade secrets are significant • Success in the market is totally based upon technology superiority • It is a low risk and expedited regulatory pathway • Scientific founders are all wonderful and should stay forever • Management and VC Boards are strategically aligned • Venture Capitalists like risk 21

  22. The Moral of the Story for Innovators/Entrepreneurs • Believe when others Do Not • Persevere when others Would Not • Know the market, the problem and the solution; others Will Not • Take calculated risk when others say you Should Not • Be humble when others Cannot • Focus, Focus, Focus …. Competitors Forgot • Foot Note: Spend Less than 1% of your time thinking Exit!!! • Have fun, love your family, friends & employees … It’s only a job and Worry Not! 22

  23. One last thought! “Anything's possible if you've got enough nerve.”- J.K. Rowling Thank you! Peter M. DeComo pmdecomo@consolidated.net Mobile – 412.475.2262 23

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