The MX Q&A: Skip Goode, Pathfinder Therapeutics

Thirteen years in sales management at Sofamor Danek taught Skip Goode the value of making sure that employees understand how their individual skills contribute to the end product and ultimately to benefiting patients. Goode brings that lesson in big-picture thinking to his position as the new president and CEO of Pathfinder Therapeutics, a Nashville-based start-up that makes image-guided surgery systems for treating liver cancer.

Understanding this overall vision is essential for a “venture-backed medical device business,” says Goode. It helps “keep everyone motivated and with spirits high, because as you’re slogging through developing this product, sometimes you don’t see what the end-use will be. So we try to stress that you may be working on this piece of software, but these few lines of code are going to help a surgeon and his patient, and here’s how it’s going to manifest itself down the road.”

Pathfinder emerged in 2004 out of research conducted by cofounders Jim Stefansic, Michael Miga, and others at Vanderbilt University. The company has since become the first to receive FDA approval for intraoperative soft tissue tracking, and Pathfinder is looking to further develop the software and hardware technology for renal and pancreatic treatments. Hatteras Venture Partners helped to transfer the technology to the commercial realm with $5 million in Series A funding in 2008.

Recent rounds of IC investment have followed, including a Series B round of $4 million in 2010.Physicians at the University of Pittsburgh Medical Center, Memorial Sloan Kettering Cancer Center, and Washington University are using the technology, described by Pathfinder as a “surgical GPS” system for the abdomen, as Pathfinder begins commercialization efforts.

An extensive recruitment effort by the board of directors led to Goode, a 20-year veteran of the device industry with a strong commercial background in surgical oncology products. He started at Pathfinder in March 2009. Goode previously held sales management positions at Sofamor Danek, Medtronic, Accuray, and EndoGastric Solutions. He was vice president of sales for Medtronic’s surgical navigation division after Medtronic acquired Sofamor. During his four years at Accuray, Goode developed the sales plan for the CyberKnife system for guided radiosurgery.

Among the topics Goode discusses with MX are the rigors of FDA’s approval process, his first impression of university-based tech transfer, and his hope that hospitals continue to invest in new technologies under the Affordable Care Act.

MX: You were recruited because of your successful sales and company development background as well as experience with surgical oncology products. What’s your assessment of Pathfinder’s progress since you joined the company?

Skip Goode: I’d probably give us a 6.5 on a scale of 1 to 10. Over the past 2½ years we’ve received 3 510(k) clearances, completed 2 clinical trials and have 2 additional trials near completion. We filed our submission for our laparoscopic product and began commercialization of our Explorer navigation system for open liver procedures. We’re making progress. We’ve got a lot to do, but we’re moving in the right direction.

I appreciate your candid assessment. What convinced you to accept the CEO position when you were approached?

They came looking for someone with my commercialization background. I’ve been blessed over my career to work for some excellent medical companies—Sofamore Danek, Medtronic, Accuray, EndoGastric Solutions. They all have developed products that help people—that help patients who have one disease or another. And after meeting with the team from Pathfinder Therapeutics I saw that, hey, this company offers the same opportunity that those companies did, so let’s give it a shot.

You’re familiar, I’m sure, with the results of the CDRH and IOM reports that recommended eliminating 510(k) premarket review and basically starting over. Do you have any reaction to the study results and FDA’s response to them?

It’s certainly a thorough study and report, to say the least. I’ve come to the conclusion that product clearances or approvals could be improved; there’s no question about that. Developing and implementing a process that accomplishes that [goal] would be welcomed by the industry and be good for Pathfinder. However, change can be challenging. There have been instances where you change to improve a process, and it doesn’t necessarily improve that process.

I think there will be apprehension, and I’m going to hold my judgment till we see exactly what the new process will be.

I’ve spoken with a number of your counterparts at other companies who said the FDA approval process can be quite burdensome, especially compared with the regulatory scheme in Europe. Do you have any thoughts on that? Would youagree with that assessment?

There’s no question the process can be onerous. Each of the three 510(k) approvals we’ve received over the past 2½ years has come at the end of that process. There are times that FDA talks about the least burdensome approach, and sometimes that seems awfully burdensome. And frankly some of the questions we were asked seemed illogical. I found that tensions get high within our organization and nerves are wrought and the pressure on the team really mounts. I’ve also found, having gone through this a few times, once you take a deep breath and actually speak to our reviewer and his or her team you realize they’re human beings trying to do the best they can to protect patients. We always gain a better understanding of what’s necessary to provide them in order to ensure in their minds that our product is safe and effective.

Is the process onerous? Yes. But then again, I think it should be somewhat onerous because what we’re asking for is a pretty big deal.

Do you think we could learn something from the European approach?

I myself have not been through the European approach. We’ve not gotten a product cleared for sale in Europe, so I’m not familiar with the steps there.

On a positive note, Pathfinder received a National Cancer Institute grant for $3.1 million to enhance guided liver surgery. Given the economic picture, do you find that grants such as these are generally available? Does it depend on the application?

Certainly, coming from the National Cancer Institute, cancer is a huge issue, and we’ve seen that those grants are still readily available. The competition for them is stronger, and the critique they put companies through or the grants that we write applications for are maybe even more difficult now. But the money’s certainly there, and the program’s there. We got to a point ourselves where we don’t qualify for many of the SBIR grants just because of the ownership of the company.

You just mentioned that Pathfinder has completed two clinical trials, with two more ongoing. Are you satisfied with the outcomes, and how would you describe the progress of the ongoing trials?

Yes, we’re very satisfied with the trials that we’ve completed, and we’re really excited about the two trials that are near completion. The trial has about two more patients in it. The other has 8 or 10 patients in it. Our completed trials have assisted us with the 510(k) approvals that we’ve received and the ongoing trials as part of our current FDA submissions. We’re fortunate we’ve got a staff that does a great job here, and the physicians and facilities that are involved in the studies do a great job with good communication. We’ve been very pleased with our efforts there.

About a year ago when Pathfinder received Series B funding of $4 million you were quoted as saying the investment made the company “cash-flow positive.” When Jim Stefansic was trying to launch the company Hatteras Ventures put in $5.1 million of ground-floor or angel money early on. Can you elaborate a little bit about the funding process and the availability of venture funding for a start-up like Pathfinder?

Hatteras certainly came in on the white horse. It was a little before my time. Up until that time there was Vanderbilt University and there were the angel investors, as you mentioned. Hatteras was the first venture company that really put money into Pathfinder. We had a few join us since then as well.

The process, the opportunity, and the money are out there; it’s available. There was a time over the last couple of years when venture was money was not as available, but that’s changing now. The important thing is you have to have a good business plan. You have to have a good plan going forward, and if there’s a market there and the venture companies believe in the leadership of the company and the plan you have in place, there’s certainly money to be had.

If there’s any one thing you bring to the company, what would that be? Your sales experience? Your ability to commercialize a company such as Pathfinder?

That’s correct. My background has been 20-plus years in medical sales from spinal implants to the image-guided surgery products for cranial, spine, and ENT, to, of course, the CyberKnife, Accuray, et cetera. That’s what they were looking for. Number one, my background is in the image-guidance products, which I did with Medtronic for the cranial, spine, and ENT [products] with their navigation division. And then transferring that to image-guided products for soft tissues.

Speaking of Vanderbilt, have you had any experience with university-based product development?

This was my first opportunity to get involved at that level. So I’m a marketing survey of one, so to speak.

What’s your impression so far?

My impression is that it’s great to work with Vanderbilt. Of course, they’re right down the street. Several of their brightest and best have come through their program and have graduated from that university. From a tech-transfer opportunity, which is what we did with the Explorer navigation system, they’re easy to work with, very professional, and have been nothing but supportive throughout.

Given that this is your first go-round with university-based tech transfer, do you think there’s an ideal plan for taking a device from the university setting to the OR in the case of Pathfinder? Is there anything so far that strikes you, since you’re coming fresh to this scenario?

That’s probably a level or two above my pay grade at this point. But I think the challenge is what’s ideal for the university and what’s ideal for the company and what’s ideal for FDA and the hospital and the patient are all different. The important thing is if you have a good relationship, good communications, and dedicated people working diligently to get a technology from that stage to the commercialization to the OR where it’s helping patients. As long you’re all working together, eventually it’s going to get there.

You moved to Nashville from…?

From Boulder, Colorado.

Would it be correct to say that Nashville doesn’t have the reputation that some cities or regions have for medical device development? How have you found the city’s entrepreneurial foundation or talent level for what you need to do to move Pathfinder forward?

It’s kind of a win-win around here. While the device industry may be in the beginning stage compared with some other cities, it’s certainly growing. Of course, healthcare here is a big business. It [generates] $30 billion a year and [has] 200,000 employees just locally. And with the Vanderbilts and the Belmonts and the Lipscomb colleges and the University of Tennessee and so on there’s a lot of talent out there for us to pull from.

And the nice thing is when we need to go outside the city—and I speak about this personally since I came from outside the city—relocation’s not a big issue once you spend a little time in Nashville. It’s a great city. You’ve got the Predators, you’ve got the Titans, you’ve got Triple A baseball, you’ve got all the live music. We moved here from Boulder 2½ years ago, and we love it. Lack of talent is really not an issue.

In October Pathfinder announced a collaboration with Hitachi Aloka Medical for the Shadow intraoperative ultrasound device. What’s the status of development of Pathfinder’s image guided laser systems in general?

We’re moving along. From our standpoint we break it down to open liver surgery and then laparoscopic and then percutaneous. The open liver surgery products are cleared and commercialized and out in the field and helping patients.
Working with Hitachi Aloka was great. That project was born out of being in the OR and surgeons saying, “This is nice, but it would really be nice if….” So we worked together with the Aloka team. Hitachi has been great to work with. We developed a product, got it out in the field, and it’s really helping [patients].

Scout is the 3-D planning software and Explorer is the hardware. As you know, software can be notoriously “glitchy,” and you’re talking about a major medical procedure. How careful does a device company have to be in order to ensure sound software programming and implementation in coordination with hardware? Is that an issue when both have to work in concert?

Oh, absolutely. It’s a big issue; it’s very important. Some of those onerous steps we talked about earlier with FDA and ISO and CE marks, they have a lot of steps and safeguards in place that help walk you through that process. We have a lot of testing in-house to make sure everything’s working together before we release to the field. Even though we’re a Class II, nonsignificant-risk device, we still employ high-quality standards to ensure that there’s sound software programming and implementation.

What’s the status of future development that I’ve seen on the Pathfinder Web site in treatment planning software for renal and pancreatic applications? Any timelines?

Our focus right now is the liver, of course, but we definitely have projects in place for pancreatic and renal. While a lot will depend on how the clinical studies go, our goal right now is to submit for 510(k) at the end of 2012 and having clearance to start commercializing in 2013.

You talked earlier about ISO 13485 certification. In Pathfinder’s case, as a start-up was it a simple matter or a complicated one?

It’s not so much complicated to me as there are a lot of steps you have to go through. It is a relatively long process. But once again, I feel it’s important for a company to go through those steps or those processes. I think most companies do that anyway. Certainly, we would do that regardless, but one thing I like about ISO and the CE mark is that they continue to come in on an annual basis and make sure that everything’s in place. Once they see your process they say, “Here are a couple of changes you can make,” and they give you time to make those changes. It’s a good communication and a good relationship, but it’s definitely a process that takes some time and takes some effort.

Do you have any tips on successfully managing a venture-backed device company? Anything you bring from your experience that might help a new device company that’s just getting going?

Some things that I want to do are: Hire the best people; very talented people. You want to give them as clear a direction as you can in what needs to be done, and then from my standpoint you get out of the way and let them do that. They have the expertise, not me. As long as we’re staying on task and on target, I want to stay as much out of the way as possible.

Another key thing when you’re in a venture-backed medical device business is to keep everyone motivated and with spirits high. Because as you’re slogging through developing this product, sometimes you don’t see what the end-use will be. So we try to stress that you may be working on this piece of software, but these few lines of code are going to help a surgeon and his patient, and here’s how it’s going to manifest itself down the road.

The product that you develop has to have value in the OR. It has to have value for the surgeon and for the patient, and if it doesn’t then you need to go do something else.

What you’re describing is motivating the staff with the big picture so when they’re slogging along, as you put it, they can look beyond it to the end result.

Absolutely. For example, when I was with Sofamore Danek, our manufacturing facility was out in Indiana and the offices were in Memphis, Tennessee, and the guy running the machine that cut the threads on a piece of metal never even saw the finished product as far as the final screw that’s going to help a patient. So we would go in and make presentations on a quarterly basis and have patient testimonials about how our product has helped a man who couldn’t pick up a carton of milk now hold his children again.

The cost of healthcare looms large in the healthcare debate.  How does cost factor into the Pathfinder system? Do you have to find a way to make it work within certain budgets for hospitals?

From a manufacturing standpoint we’re always looking at ways to optimize the cost and keep the cost as low as possible but also deliver a product that has value. And from a hospital standpoint in my 20 years I’ve never sold a product where the price of the product wasn’t an issue.

I was just wondering whether that factor was more of an issue these days than it was a few years back. On that note, as the CEO of a developing device company what would be your hope for resolution of some of the issues surrounding the Affordable Care Act? In your hiring announcement you mentioned “significant economic benefits for healthcare” from the Pathfinder system.

As far as the Affordable Care Act itself, I hope it certainly allows hospitals to continue to invest in new technologies that will further the treatment for patients, that patients will be treated in a shorter period of time, that they will be treated more minimally invasively down the road for this type of disease, and that they will be able to go back to work sooner with a higher quality of life.

There’s no question that any hospital—and there are hospitals I’m sure going through this decision today or will be next week—wants about four things, and it’s got enough money for [only] two of them. Which two are the most important to you? I’ve always found that if your product has value the hospital will find a way to purchase the product. But that’s the key. You have to have a strong value statement that says you are not only bringing quality of medicine or quality of care to the patient or the hospital or the surgeon but also being cost-effective for the hospital itself.