Joel Weinstein is the real deal—a true medical device serial entrepreneur. He’ll be presenting at Medical Device Playbook 2016 in Toronto on March 14. I had the pleasure of speaking with him about his experience creating Hologic and am pleased to share it with our readers. Here’s our conversation:
How did Hologic start?
The original idea of the company was to develop a 5th generation CT (computed tomography) scanner. Our technical founder, Dr. Jay Stein, and his partner, Dave Ellenbogen, had been involved with AS&E (American Science & Engineering) and had developed a 4th generation CT with stationary rings and rotating detector at that company. The 5th generation would be a 3D, holographic CT.
Unfortunately, a quick business plan confirmed that the capital requirements for this project were too high for venture financing. Analogic (an OEM provider of CT components) was approached about a joint venture (that’s where the company name came from – Holographic tomography and joint venture with Analogic = Hologic). But the deal didn’t come together.
Instead, while walking around the Radiological Society of North America (RSNA®) annual meeting of 1984, we observed some interesting trends: the country was becoming aware of the bone thinning disease osteoporosis, everyone was calcium crazy (drink milk, Citrus Hill orange juice, eat Tums, etc.) and the emergence of dual-photon radionuclide densitometers that were being used to measure bone density. Jay came up with the idea of using an X-ray source for densitometry which offered many performance advantages. That led to April 1 1986 when the first 8 employees came to work that day. After a year we were up to 16 and the rest is history.
The company was financed with venture capital, which was beginning to emerge in the 80’s as a capital source for med-tech. As I look back, one of the most amazing facts – and a reflection of how much things have changed – Hologic was financed through product launch and early marketing on only $3.5M of venture capital. We went public in 1990. The valuation at that time was about $70M. The great thing about Hologic is people often talk about the American Dream. At least in my opinion, Hologic became the American Dream. We had a great company, great people and great product. Everybody, including customers, employees and investors, came out looking good.
Tell me about your first big sale?
My first sale was to a radiologist named Jim Passalaqua in Akron, Ohio who’d heard about the product through our first ad. I went there to Akron and visited with Dr. Passalaqua and his Administrator to discuss details of the bone densitometer. After the meeting, we went to a nice restaurant on the top floor of a hotel with jazz playing in the background. Dr. Passalaqua asked whether I liked jazz music. It turned out the customer was famous guitarist Joe Pass’ brother. I invited him to Boston to see the factory and we had such a fun evening with Joe Pass who happened to be playing a show in town. For many years I had a copy of that first deposit cheque on my office wall.
What was the biggest challenge you faced?
As is the case with many start-ups, we came in for a big surprise. Our reception at RSNA 1987 was incredible. Up to this point bone density was being done in nuclear medicine departments. Now we had a radiology product that did not require an isotope. For 5 days we were 4 deep in the booth. We won an innovation award, and came away with over 1000 leads. I was convinced we would be swimming in sales. But we didn’t appreciate a sea change in the air.
In the “good old days” Radiologists had been able to buy whatever breakthrough equipment that they wanted, but those days were over. Administrators were asking about Current Procedural Terminology (CPT®) codes. The answer was there wasn’t one. It became very clear, unfortunately, that no CPT code meant no sales and we had to do a quick pivot. We realized drugs for osteoporosis would ultimately drive the market. Because of the enormity of the osteoporosis problem, at least 30 companies were launching new osteoporosis drug trials and would need equipment for their trial sites We had to redefine the initial customers to be the pharma companies and their investigators. Luckily, Merck hit it big with their drug Fosamax® and put a ton of money behind that product’s launch to insure that enough patients were tested who could be prescribed Fosamax.
What are you proudest of?
It’s very rewarding to take a company from a blank sheet to 30-40% growth and sustain it for ten years or so. I served as Hologic’s VP marketing and sales. I absolutely loved being a part of that team and that growth. It was the closest thing to not having a real job (almost as good as a venture capitalist).
Which was harder, getting it launched or building it out? And Why?
Getting Hologic built out was by far the much harder part. Because of our pharma focus, we quickly transformed to an international company. As soon as that happens, you have a whole host of new challenges to face including different business practices and distribution channels in different countries. Also you have to be able to produce and service at scale. Fortunately, that first product was the equivalent of a Maytag washing machine in terms of its reliability.
How important was the Boston medtech community to the success?
As it turns out, the Boston location was critical. We tried not to invest in redundancy. We built a manufacturing facility but didn’t make our own circuit boards or metal work. Outsourced all the cable assembly. We did final assembly and test, and made 2 key components: a proprietary high voltage X-ray power source and a bone equivalent phantom used for QC of the instrument. Those both required special expertise.
The Boston infrastructure is terrific. There is a tremendous talent pool to draw on including institutions for clinical testing, technical and scientific people, and marketing help. You need this when you are growing at 20% or 30% a year. Any disciplines you may need, you can find here. Being in Boston certainly gave us an edge.
Knowing what you know now would you do it again?
Actually I did it again. I have done 4 start-ups since then with varying degrees of success. After that I semi-retired 4 years ago. I realized that – particularly in this age – trying to get a product developed and adopted in the market is hard work that requires unstoppable drive and energy – it’s not for the faint of heart. It’s really for the young guys. I’ve now been around the med-tech or 35 years. If I took my jacket off, you’d see I have plenty of scars.
Tell me about your new incubator initiative.
The med device space has been very good for me and my family for many years and I believe it is a duty to give something back. I’m currently involved with Partners Health Care in Boston which helps young physicians, engineers and scientists to develop products and incubate new medical device companies. I also serve on 3 Boards of early stage companies. It feels really good.
Scott Phillips is President at StarFish Medical. His passions are being a Dad, solving design problems, outdoors adventures, and helping companies be successful.