July 17, 2007 »»» The Picture of Success: HydroCision Inc. Doug Daniels, CEO of fluidjet technology company HydroCision Inc., likes roller coasters ... corporate ones, that is. “Sometimes I think I need a seatbelt,” laughs Daniels. “Like most companies, there are days when we get great news in the morning and disappointing news in the afternoon. We may hear that we’ve just converted a major account and then perhaps there’s trouble with a vendor and we can’t get enough products to market. Instead of panicking, one must listen and analyze the challenge. What I’ve learned of entrepreneurial life is that there are ups and downs, so the leader must be steady.” Now the levelheaded leader of this burgeoning company, Doug Daniels reflects on HydroCision’s early days. “Incorporated in 1994, HydroCision was a true garage development project. Several individuals, including Tim Moutafis and Kevin Staid, who were searching for a better way to do surgery, founded the company. They determined that there was a significant need for a new modality but they didn’t know exactly what that technology would be. They explored lasers and cryosurgery and settled on fluidjets because of its uniqueness and precision. It was already apparent that the technology had certain capabilities in other industries, including cutting stone, steel or frozen foods with great precision. They began to work on a general concept of how it could be made practical for an OR. They shrunk the console and created a segregated chamber to pump sterile fluids, and thus established a platform from which to work.” Before diving into the spine arena, the company leaders first developed products for wound care and sports medicine. Says Daniels, “The initial commercialized product was geared for use in arthroscopy. We did a thorough exploration into the medical device market and found that the technology was best suited for the needs and opportunity in the spine market. It was obvious that there were a couple of very challenging areas in spine surgery. One was prepping a disc during a fusion procedure quickly and effectively. In TLIF [transforaminal lumbar interbody fusion], PLIF [posterior lumbar interbody fusion], and MIS [minimally invasive surgery] fusion preparation, it can be challenging for the surgeon to reach the contralateral area of the disc because of the anatomy and surgical approach. We designed a product to effectively reach the most challenging areas and reduce the time of the procedure. Doctors coming through the back or side to do fusion needed the ability to clean out the space completely to maximize the effectiveness of the fusion or use of BMP [bone morphogenetic protein]. It was difficult for traditional instruments to reach across the field and do a proper cleaning. We figured out a way to go into the disc space, clean it out more thoroughly, and leave the space with less damage to the plates themselves. That goes for any posterior or transforaminal/MIS approaches.” And they backed up their work with hard numbers. “Spine surgeons from the Portsmouth Naval Hospital, University of California, San Diego, University of California, Los Angeles, and the Texas Back Institute conducted studies on how traditional instruments were being used and how our instruments compared to the quality of disc preparation for fusion. After they completed their initial clinical work we had some doctors who recommended that we explore the discectomy market because of the benefits they saw in the technology and the room for improvement in the current technique. The tradeoff has been that if you removed too much of the nucleus material, you may accelerate the rate of degeneration or instability, and if you put a big hole in the annulus, it may cause an open area for a reherniation. These surgeons figured out that it was necessary to remove enough tissue to relieve the pressure on the nerve. And, by creating a smaller hole you could minimize the chance of reherniation. The entry point we create is the size of two hypodermic needles. You remove only a small section of tissue and leave the annulus so that it’s just dilated, as opposed to cutting out a section of the annulus.” Continues Daniels, “The initial research indicates that with patients followed as long as 18 months, the surgeon involved could reduce the rate of reherniation with hydrodiscectomy vs. a group of patients given traditional microdiscectomy. The study also showed that there is less recurrence of back and leg pain, which the researcher believes may be a function of the surgeon no longer manipulating the nerve. The hydrodiscectomy procedure requires a minimum of manipulation to the nerve. A surgeon can deliver a nerve protecting cannula next to the nerve, do the discectomy, and may have less scarring at the nerve because they have minimized the manipulation of the nerve. The initial results seem to indicate that a smaller annulotomy may result in less reherniation and less manipulation of the nerve may result in less scarring at the nerve site. A group of key spine surgeons have recently completed the protocol for a randomized controlled trial with multiple sites, both in the U.S. and abroad. The study will consist of a series of randomized patients where the surgeons will compare the discectomy performed with fluid jets with traditional microdiscectomy over a three-year period. It will be a long-term study with benchmarks at 6 months, 12 months, 2 years, and 3 years. The goal of the study is to clinically test the new procedure to insure the results can be verified through a controlled randomized study.” Digging deeper into the specifics, Daniels explains, “Fluidjet technology does things that other technologies can’t. It can differentiate between different types of tissue, meaning that if the surgeon only wants to remove the nucleus and leave the annulus intact, he or she can remove just the targeted tissue. He or she can do that in their procedure by changing the speed of the fluidjet or the configuration of the tip. The unique design of the tip allows for the collection of the debris via an attached evacuation tube. Also, it is the ideal MI tool because of the smaller opening. It can be used in robotics or many types of MI surgery. The technology acts like a smart scalpel that never gets dull. Because the surgeon cuts at the cellular level and the tissue is removed at a cellular level, healing may actually be accelerated as we have seen in studies in the wound care field. Additionally, our product doesn’t do any collateral damage. Whenever you’re using a heat or energy source, you will likely damage the tissue nearby. With our technology, there is only damage to the tissue it touches, something particularly important when you’re working around vital structures like the spine.” As with any new technology, however, rarely does one have the advantage of preaching to the choir. Says Daniels, “Although we are growing rapidly, it’s been a challenge to get our message across on a consistent basis because of a relatively small and geographically focused sales force. This is a new technology and it’s an area where most people have been using mechanical instrumentation for many years. The word is getting out about our clinical and economic studies, however, and we are starting to see an uptick in major markets and leading accounts. Once the product is introduced into a hospital, multiple physicians in that institution frequently adopt it. We are seeing consistency in sales performance and in growth patterns, and in fact hit 30% per quarter over the past year. But it’s not only our medico-economic work that is moving us forward. Building HydroCision to a successful company is truly a team effort. Our manufacturing team has to keep up with constantly growing demand curves while improving the quality of our products. R&D engineers have been in the field working with the sales force and our key customers on a regular basis gaining valuable feedback on improvements and new ways to use the products in multiple spine procedures. There is a significant amount of cross pollination within the departments here with most people wearing multiple hats.” But none of those hats is a lampshade. “People at HydroCision enjoy one another, but we get down to business. Our work environment stresses leadership, action and results. Everyone knows what she or he has to do and does it. No one is sitting back and managing a process. For example, our COO John Miller spends days out with key vendors putting new processes into place in order to reduce costs and improve the quality. The director of R&D, Joe Richard, designs and develops the new products and gets them tested in the field. Ultimately, the responsibility lies with the individual. In the end, they deserve the acclaim for the success of the company.” Receiving accolades for helping fund the novel work of HydroCision are a number of investors. “In 2002 we did a Series F round where Jeff Barnes of Oxford BioScience Partners was the lead investor. Last December we brought in $12.7 million in a Series G round where Dennis Costello of Triathlon Medical Ventures was the lead investor, along with Oxford, Newbury Ventures, and Zero Stage Capital. This round is being used for sales force expansion and hiring a group of clinical specialists to support the revenue growth in the individual accounts. The key challenge now is to find great people to fill those roles.” With 26 issued patents and over 40 pending, HydroCision is hitting its marks. “I would say that we are establishing our sustainable competitive advantages. We are in the spine market and starting to expand our fusion and discectomy products. Going forward we will expand our initiatives in the nuclear replacement arena and continue to grow our existing platform. We will work to increase our revenue short term and eventually be at the point where we have the option of an IPO or being acquired by a strategic player. This will happen when the clinical value and revenue are recognized.” As for Doug Daniels, he is easily recognized by many in the world of entrepreneurship. “By nature I am an instructor. After graduating from college I was a teacher/coach and since then have spent time lecturing on the joys and pitfalls of entrepreneurism. I’ve given talks at a number of universities, including the Worcester Polytechnic Institute and MIT, where I warn people that they need to know how to run all aspects of a business and must be comfortable with the venture world. The biggest problem for most entrepreneurs is that they think they can do it all. The challenge is to a build strong enough team so you’re not juggling everything yourself. Once an entrepreneur fully understands that concept, they have to build the finances to support the team. I tell entrepreneurs to be prepared: it takes roughly $35 – 75 million to start and run a medical device business.” Away from the world of discs and high finance, Doug Daniels roams the backwoods of New Hampshire with his wife Annie. “Although the children are now grown, we sometimes get together for skiing, fishing, and hiking. Doug Jr. is an engineer, Tim is in college, and Meaghan is a teacher. I am proud of all they have accomplished in their own fields of endeavors.” A corporate man at heart, Daniels has a final, key message. “Fluidjet technology is becoming a major player in the medical device area. The biggest challenge for this technology is to have sufficient resources to make products cost effective enough to expand into those markets where it can help the most. This includes cosmetics, spine, plastic surgery, and cardiology. There are already some products in many of these areas. For example, imagine that a surgeon can remove a brain tumor and leave the surrounding tissue intact with no damage. Now that is medical progress.” HydroCision Inc ... minimally invasive, maximally inventive. Back to NEWS HEADLINES