CV Ingenuity (A): How to Evaluate the Commercial Viability of New Health Care Technologies

Duke Rohlen (HBS MBA ’01) hoped to win over a prominent venture capital investor for Series B financing of his firm CVI that was creating a drug-eluting balloon (DES) to treat peripheral arterial disease. As a second-mover, Duke felt he was more likely to acquire funding because his primary competitors had already received FDA approval to conduct a trial and he had learned a great deal about how to improve the DES from the problems the first mover encountered.

But Duke’s strategy ran counter to many business guru injunctions. Would these bar the investment?

His second mover strategy was unconventional because many medical technology marketers believed that being the first technology to be adopted by clinicians was critical to future success. But Duke had spent no money on marketing. Instead, he spent his limited funds on R and D that would correct the problems experienced with other DESs. Then too, he had allowed a likely exit, Covidien, to invest early in CVI and used their balloon. Would Covidien’s relationships bar other bidders and lower the price CVI would receive? And instead of using a CRO, Duke performed his own clinical trial of the DES. Did he have sufficient expertise to pass through the FDA’s stringent regulatory hurdles?