Evolution of M&A and Strategic Partnerships | LSI USA '24

Kristi Nakayama  0:05  
I'm thrilled to have all four of you on the stage. Some of you I've worked with for many years and some part of med tech women for many years and sponsors. But I'd love for you all to introduce yourselves. I'm Kristi    Nakayama is Senior Vice President of Global Business Development for Vera Nexus, CRO and consulting services. Devin to my left, would you like to go next?

Devon Bream  0:27  
Good afternoon. My name is Devon    Bream. I'm the president and GM for GE HealthCare, our invasive cardiology division. And I'm excited to be here for this panel. Thank you.

Virginia Giddings  0:38  
And I'm Virginia Giddings. I am vice president of exploration with Edwards life science. Nice to be here today.

Eric Schantz  0:47  
Good afternoon, everyone. Eric Schantz, I'm at Medtronic, Vice President and corporate development been incorporated element for about 12 years covered most of our businesses the last four years. On the cardiology side.

Doug Solomon  1:01  
Doug    Solomon from JP Morgan, I lead our medical technology practice within our healthcare Investment Banking Group. I'm

Kristi Nakayama  1:07  
so glad to see this turnout for this topic, because 2023 and leading into 2024. It hasn't been an easy time for M&A and strategic partnerships and raising funds. With that said, there are some I was actually just at an FDA conference last week, MDMA up in Palo Alto. And there was a big portion of the conference dedicated to the importance of clinical evidence. And I know that it has often been a major milestone for companies and partnerships and our large strategics and investors and you know, when in the right time to invest in companies, so Virginia to you first, in terms of de risking acquisitions or potential partnerships, how does how does Edwards way clinical as a major milestone to to take the leap with a partnership or an acquisition? Yeah,

Virginia Giddings  2:04  
so clinical evidence is a is a biggie for me, I feel like it is in medtech. And particularly with, you know, with class three medical devices. But with Edwards is sort of always been a big area for us, for those of you not familiar with Edwards for we play in the structural heart space, we're a valve company, and and focused in the in that space. You know, when you think about I think the question is more about investing in how you think about clinical evidence in the context of investing. And there's probably a lot of people from startup companies here who are sort of wondering, like, at what point what milestone should they hit to be invested in by different kinds of investors. And I will say this, that that one of the things that's really critical for Edwards is that we want to lead in in shaping new the new fields and shaping structural heart and to be able to do that, we're willing to go in very early. So when you go in early on investments, you don't necessarily you wouldn't expect there to be clinical evidence, we love to see clinical data at the end of the day, like clinical data is what proves and demonstrates your technology. So being able to see that is really helpful. That said, sometimes we will, if we think it technology is really promising we'll go in much earlier, we spend a lot of time really digging into the clinical evidence. And I'll say like, every patient when you're in an early stage with a new technology that's unproven. Every patient is really precious and being able to get all of the information that you can to really understand those individual patients. So even if you have a series of 10 patients that can be quite quite helpful. You know, one of the the theme of this is what's like sort of changed or what's new. And I don't know that I think clinical evidence is always been important, but probably in this, you know, sort of more constrained investing environment and with regulatory bars and reimbursement bars going up that it's, it's more important than ever. Just a few things to think about for the companies here is like really thinking through, you know, what is the need that you're addressing with your technology. And then have you structured your clinical studies, the population the outcomes to really address that, that need

Kristi Nakayama  4:47  
Thank you. You know, speaking of it's always been important, but the changing landscape Devon in AI and ML, I know with GE Even FDA is learning as we go or as they go on what data requirements are needed and what what the level of datasets and then how do you include diversity. I mean, there's a whole, that's a whole nother conversation. But for GE what is important when you're looking at companies and the data collection, and in order to really vet where they are and what is needed? Yeah, it's changed.

Devon Bream  5:25  
Christie. So I think I was sitting in this audience two years ago, with a very innovative technology that's still on its journey to be successful, more successful. And the definition of AI, the qualifications of AI, has changed dramatically over the last couple of years. And so from a GE perspective, we're very fortunate, we're proud to say that we have the largest AI portfolio in the medical device industry, which is exciting. So we have a lot of experience, we've built out an unbelievable AI team, specifically because of the portfolio. And so one of the key things that I'd recommend to startups is that they really, really understand who owns the data on the back end of the AI, because data rights is critical to your value. And I think two years ago, three years ago, when lots of companies were thinking about adding AI functionality, they didn't really understand that the value of the AI was in the data that they were analyzing. So my encouragement would be to really understand who owns that data, and what piece of your algorithm is running off with the data that you own, which then will return value to your opportunity.

Kristi Nakayama  6:38  
Something else I was brought up by FDA last week was it's important to have your data collection for your submission, your market submission, but it's also they see the value and importance of having your data for being able to provide your you know, your future customers with what they need your vac committees, your market access plan. And they even said, tell us the whole story, not just your what you're collecting for regulatory don't be afraid to share that with us. Is that also important for you to see that full story in a company's data collection plan, not just for market submission? Yeah,

Devon Bream  7:14  
really good question on that, too. And I think it's important to work with quality companies, such as Varun x, it's my shameless plug, thank you, that can really help guide startup companies to understand how to put that whole picture together for the strategics. And really be specific on what you're trying to deliver to the strategics. Work early with the FDA as early as you can and afford, because they will give great guidance, which will then translate to real good value when you start working with the strategics.

Kristi Nakayama  7:48  
Thinking about, you know that next step beyond just your market application, Eric, to you, when we worked at Medtronic a long time ago, MDD was sort of, you know, the, the easier CE mark MDD was the first path for a lot of companies, and then, you know, their future expansion to the US market. And I know, back then Medtronic was really prioritizing, you know, clinical data outcomes. Is your is your study powered, effectively. How has that changed? Maybe since the five years we've worked together? And is market access, and plan a bit more important these days as well? Sure.

Eric Schantz  8:28  
Yeah, that's interesting question, I'll first I'll say, still, the clinical package is core to the thesis, we're never going to look beyond that. We, we spent a lot of time and effort looking at that during due diligence. And I would, you know, a plug on the on the venture side. You know, if we're in your cap table, we bring a lot to the table when it comes to planning for clinical trials running the right clinical trials. So we're great at that that remains on the forefront. What I'll say from the M&A chair, though, is that's become table stakes. So we don't even look unless there's a really good clinical package, the things I spend more time on and across the company, we spend more resources probably in the due diligence side, looking at things like market development. So it is very some of our most difficult deals had been the ones where we had developed new markets. So a we need to pay the reimbursement. That helps. Absolutely. It is very, very difficult to change physician behavior, prescribing behaviors, it is very difficult to untie unseat an entrenched competitor that knows you're coming. And that's where I spend so much more of my time as a diligence team by far. It's how do we crack that code? The data could be great, but what are we going to do to change the physician behavior? And our data tell you what the deals that we've done that have dragged the most are the ones where it took a year Longer took two years longer at some point, you know, people get tired, you start D prioritizing and so that really clean story on how you entrench your competitors, how you're going to change physician behavior. that's core to my thesis. Now, when I started looking at M&A deals,

Kristi Nakayama  10:20  
there's a lot of detail that you can get into on that, how much detail on how early Are you looking for that?

Eric Schantz  10:27  
Yeah, so I guess another plug on on the on the venture side, I mean, what I would say is, people in the audience looking to raise money, you know, coming to Medtronic, I would say find the right people in the organization that are going to be the champions. Meet with them often. And when you meet with them, have, show them what you told who told them you were going to do so you met with them six months ago, you said, you're gonna do this, when you come back six months, you better have done that. That builds a lot of credibility, it allows you to have that dialogue early on, because we do have a lot of resources within the company. So the earlier we can gauge on topics like that course correct, give you guidance on whatever that market research might be or that feature you might have to add or another stakeholder you might have to include along the way. That's really important feedback. So engagement early is what we're looking for, because it makes our story so much easier. I

Kristi Nakayama  11:26  
think it's the right balance of showing how organized and how well your company can execute, but also being able to execute on that plan if you're showing some aggressive timelines. Yeah. So on that dialogue, you know, it takes so much effort to get a meeting to get, you know, to a potential term sheet, what are some of the biggest pitfalls that you've seen? When companies get in front of you, you have a serious discussion, and then something false during the diligence? Yeah,

Doug Solomon  11:57  
I mean, I think, obviously, the, you know, the panelists to my right, are the clinical, you know, a company specialist. So generally, when I'm getting involved in something, it's sort of downstream of we've got terrific data, we've had conversations with Virginia, or Devon or Eric. And generally speaking, companies have spent a lot of time with their logical counterparts before they're ever getting to me. And I would say, you know, one thing that we've seen, and I would say, it's particularly true today, and obviously, I welcome my panelists comment, because ultimately, they're the companies that acquire these businesses is that you really have to have every box check, there's no shortcuts, you got to be properly funded. You know, invariably, there's, you know, lots of companies that are sort of either over capitalized or capitalized themselves. So it's thinking thoughtfully about how you capitalize your business and the timeframe and how you spend your money. You sort of can't rush to an exit, you're just, you know, been doing this for a really long time, generally have a pretty good sense of the alchemy of how transactions occur. And you really need to have the right clinical and commercial champions inside of companies. And if you don't, nothing will happen, regardless of how great your data and your advisor is, if you're on the right champions internally at these companies, you're going to be in a difficult spot. And

Kristi Nakayama  13:12  
I'm asking honestly, not a plug for Vera next, but do having the right partners count on that? Or do you really look for companies a little further along that have built the internal teams?

Doug Solomon  13:21  
Ah, you know, listen, I think it varies widely. I mean, we have a very big business, and it's very global and right. So if I'm working with an Israeli client, they might use a lot of external support in terms of, you know, commercialization efforts. In particular, if I'm thinking about that country, right? Then you've got other companies, I mean, we're super fortunate, we're just involved with the exotics transaction as an example that has, you know, soup to nuts, phenomenal team, you know, end to end clinical regulatory quality, you know, really thoughtful operational outsourcing commercial infrastructure, you know, kind of end to end built the vertically integrated business, other than manufacturing, which was largely outsourced, although they brought some of that back end. So it kind of depends, you know, depending on the company, how well it's been funded, the size of the market opportunity. And I think all of those, all of those variables kind of go into the, you know, into the equation when thinking about how it gets funded, and who their partners ultimately are. But I do think, you know, in particular, certain regions of the world, I won't say which ones, you know, tend to be, you know, they, they want to rush to an exit without really having kind of, you know, tier one, whatever the right description, you want to use clinical data that will withstand the scrutiny of professional companies like this, and I tell them all the time, if it doesn't meet my meter, it certainly won't meet, you know, one of our clients meters, you know, if you're looking to get real capital.

Kristi Nakayama  14:42  
So, in other words, what I'm hearing is you really have to have all your poop in a group all around, but are there any significant areas or specific areas that you think maybe companies have fallen short or that they should focus on and in particular,

Doug Solomon  14:59  
you know, I get it I think it's somewhat going to be variable depending on the company in the sector. You know, and variable I think to Eric's point, which I think is a really critical one, I think, my experience and again, I welcome the panelists comments is that most of the big companies don't like doing their own market development that actually my experience has been, they'd actually prefer that a startup sort of builds a little bit of a market demonstrates that the product can be commercialized, and they're happy to come in and say, Okay, I've got a huge commercial infrastructure, I can now put that through my channel, but you've proven to me that this market exists. And now I'm willing to jump on it. And market development takes a lot of time and a lot of energy and on inside of big companies, you know, whatever, in the case of Medtronic $32 billion in sales, you know, the rather, my experience is that they generally speaking would prefer to see you sort of develop the market a little bit, and then they can come in, but again, I welcome that

Kristi Nakayama  15:51  
question to the rest of you.

Eric Schantz  15:52  
Yeah, I'll throw out a couple of observations that I've seen were recent deals have fallen apart, you mentioned a couple of them, I'll just dive in the size of the opportunity. A lot of times, that is a function of market development. There's a lot of stake stakeholders that need to be aligned for your technology to be successful, you need the patient that want it, you need the physician to want to eat the hospital, be willing to pay for it. And then you need all those people to work together. If one of those falls apart, the size, your opportunity, while it looks great, that's great. Tam, the reality is, it's a lot smaller than that. And we struggle with that, that's a lot of times where our deals just fall apart. It's just not big enough for us market development, always a problem, I shouldn't have to say, but I will intellectual property, always kind of first on the list. That's that's table stakes as well. So a couple other areas where I've seen deals go far, and then we just can't get there because we're just not comfortable enough with the opportunity, or it's gonna take too long. Not to say we say no, there's instances, there's times we've come back and said, look, take some more of our money. You know, there's gonna be some strings attached like a call option or something on the back, but you guys do some more of the heavy lifting, let this market evolve, you guys will be better at it. And then we'll come on later on. So those are all things that yeah, the

Doug Solomon  17:07  
only the only one we didn't mention, which I thought of as you were just talking about that as reimbursement, you know, demonstrating that you can actually get paid for your product. And particularly if it's even better, really profitable for whether it's an ASC or a hospital system. You know, it's a little bit of a dirty word to say that people like to make money. But the reality is, you got to be able to get paid for the product. And I would say that is a mistake, I see often where they don't think early enough on how I'm actually going to get reimbursed and paid for this product.

Devon Bream  17:36  
I would add on to that. I think reimbursement is key we use have used third party companies such as Teranex to help us analyze opportunities to make sure that the pathway to reimbursements possible so for all of you that don't have reimbursement plans yet. It's okay, have a pathway work with good qualified partners like Varun X to help verify that pathway. So that when we go into due diligence, it's all lined up. It's logical. And it makes sense, because that is absolutely critical. It's good point.

Virginia Giddings  18:08  
Yeah, I guess, what was the original question that we're answering here?

Eric Schantz  18:13  
About, like, how deals fall apart?

Virginia Giddings  18:16  
How it deals? Oh, yes. And market development. So I was gonna, I was gonna speak to that, because Edwards is maybe a little bit different. Because we're so deep in one area, we tend to like to go in very early within the structural heart space and really shape that market. So you know, we built the tavern bar, so we're not we're not we that might be even like our preferred sort of getting in early and shaping the field. And so then from that perspective, what we're more concerned about is sort of missteps by a company early on in the reimbursement or the price a or those kinds of areas, regulatory space, where we feel like that strategy would not be consistent with how we would think about it. So that's where we like to get in early and for us to, like, make sure everything moves along smoothly to a transaction, which of course, it doesn't, always, but we really like to get in there and build relationships with startup companies very early on. And, you know, with the companies that come to me, and usually when companies are reaching out to strategics, it's to say, like, hey, we want to investment so they come to us for our money, right. But I think and you know, I'm not going to diminish the impact of money because money is absolutely important when you're sitting there trying to fund a company. But I will say this that many times that the startups walk away from us with with strategic input that's a lot more valuable in the long run, than the money and too, you know, for those of you in the audience who are, you know, frustrated in like, Hey, you're raising and you come and you talk to us and, and like you don't like the sort of discussion goes on and on and on, like, let's have a follow up and, you know, meeting and maybe we don't invest in that round, I'd say I've seen this play out many times where these relationships are built over a year, over many years, and then ultimately can result in it and an exit to a strategic. So it's sort of like, be patient. It's usually the answers may it's not not No, it's not, not now. And to the question of where I've seen them, but this fall apart is another aspect that's really important is just the like, listen, we're all in med tech, and we don't know the answer. And so there's risks there, like things will go wrong. And in fact, when I talk to startups, in the end, I asked them that, so what's gone wrong? And how do you solve and they say, oh, nothing's gone wrong, then I'm really, really, really suspicious. So I think a key aspect of when I've seen things fall through, and it's like relationships not progressing. Usually, it's not, it's often not about the technology, it comes down to the humility of the the team that you're you're working with. So being able to be humble and transparent. And, you know, and be able to speak to what you know, what you don't know. And when there are challenges just being very upfront about that. That

Kristi Nakayama  21:34  
brings up an interesting question, too, of timing, like in dating before you get married. And for you in that partnership, how important is timing with how often strategic priorities change leadership changes, you know? How much does just right time right place, being at the right spot in your development? play into it? I guess everyone.

Devon Bream  22:01  
Absolutely critical. No question. Timing is everything just like dating. And so this is speed dating, and and the more often you do it, the better you get at it. And so I think the recommendation is to engage with the strategic that aligns with what you're solving, don't try to go to somebody that's in a urology business, and you have a neurosurgery product, even though it has some of the same words, it's not going to work. So you really have to understand what that strategic company is and what their vision is, and what their leadership to Christy, your point, if they come in knew what their three to five year plan is, because as example, when GE HealthCare spun off, there was a wonderful opportunity, from GE going from this huge conglomerate, to a very specific focused healthcare mission. And and it's been a fantastic ride over the last 12 months. But that's very different than who GE was two years ago. And so our focus and our priorities have changed dramatically. And so for the startups that have been engaged in dating GE for a while, get to know who the new leaders are, and really what our focus is for the next three to five years.

Eric Schantz  23:14  
Yeah, see from Medtronic perspective, I'd like to not save for Medtronic for the right asset. Timing, at least within Medtronic is is typically not a problem. The reality is we've got 20 ish businesses, you know, billion ish plus per business. There's a lot of mouths to feed, and not enough dollars to go around and do all the deals that everybody wants to do. So there is a timing element. That it's just it's just the reality of it. There's also in you know, we've got a budget cycle. And sometimes, you know, you're the team you want to sell to, they're working on their budget, they're working on a strategic plan. So there are elements like that just to be cognizant of. But yes, I mean, get build those relationships with his operating units, understand what they're going through what their challenges are, as best you can time what it is you need to get done, to coincide when you think you're gonna get their most of their attention.

Kristi Nakayama  24:10  
Eric, when I hear that I think having all of your affairs in order is even more important, because if the timing strikes is strategic priority shifts, and you're going to then engage in diligence and accompany we often see as a consulting business companies say we're going to worry about reimbursement later, we're going to worry about our quality management system. We don't have our design history files in place. We'll worry about design control later. And it's often an uphill battle for us to educate companies, especially looking to potentially get acquired, or have a strategic partner like those of you on stage. It's always like we'll worry about it later. Regulatory is the most important thing. So isn't timing being so crucial kind of more of importance to have all of those affairs in order?

Devon Bream  24:59  
I'll speak for My experiences on the on the startup side, on the one successful transaction in particular, there were many nights we spent all nighters getting our QMS system in place before due diligence. And that's not the right way to do it. So to your point,

Kristi Nakayama  25:15  
but it's so it's so that's what happened. Reality. Yes.

Devon Bream  25:17  
So to your point, work with quality partners, third party companies, such as Varun AX that can help you get your ducks in a row so that when it is time, you've done all this wonderful work focused on a great product, you're solving a really important problem. But a large strategic is not going to be interested in a risk, because your QMS system isn't in place. So I think that's really important. I'll

Virginia Giddings  25:44  
see. Yeah, I mean, I think like just the logistics of it being like, sort of data room ready, if you if you if you are looking for a strategic investment, or for an accent, you know, just having all your, your ducks in order is critical to put them I mean, the it's, we probably all asked for just about the same thing. And if you're under design control, it's like, where are you in the process? And what what documents support it. But for for AdWords, you know, the timing piece? On our side? That that isn't super clear. I mean, you need to we're the we're sort of more of a middle mid sized company in comparison to Medtronic. But you know, so it's like, how could we absorb an acquisition? So we have to, we have to consider that. But if it's an early stage investment, the the most critical thing is, is it isn't on strategy for us. So that's where having the dialogue with us and understand, you know, what your technology is, and we can pretty quickly get to do we think it could be on strategy. And if it's, and if it's close, that it's getting down and knowing like the particulars of okay, what's your clinical plan, the population you're serving and all of that.

Eric Schantz  27:02  
Yeah, I just added to that, because it's interesting that you mentioned due diligence, maybe Medtronic due diligence list isn't the right one. But I think you should really take advantage of the authority parties, like, third parties, like very next, understand what that due diligence list is coming your way and have a plan for every one of those tabs, and there's multiple of them, but have a plan for them. And then use your board's, and use your successful peers that have gone through that to understand the best plan of attack. But don't wait until you've talked to Doug and say, Alright, now what I need to go figure out that's it's probably too late. So, you know, use use third parties that again, the due diligence lists are thorough, but they're out there, and you know, at least what you need to plan for.

Doug Solomon  27:48  
Yeah, that's it. I mean, just on the topic of timing, obviously, is an interesting one. I mean, I think it's sort of like trying to time the stock market, it's close to impossible, right. And so I think, you know, I think all the panelists made some really good points, but it you have a lot, you need to have credibility, you have to have consistency, right? And I'd say very few deals happen overnight, and they don't happen in a vacuum, right? And so you really have to have a lot of credibility. And so to Eric's point, you know, the, you know, I'll ask clients, hey, can you send me the last deck, you sent this client two years ago? And I'll look at what the numbers look like now. And if they're dramatically different, I'll ask, When did you last present these and then I know we're gonna have a problem if the numbers are dramatically off relative to where they were right. And so it's little things like that, that actually matter. A great deal also applies to clinical and other areas, right. And so, to me, timing is a consequence of so many factors where a company is strategically where they are financially, etc. But if it's on the strategic roadmap that will eventually get to you, if it makes sense. But you have to have credibility along the way. And it's important to not sort of pretend that you're something that you're not, you're better off just being humble, I think was the word revenues, about where you actually are and when you intend to be. Because I think when you come back a year later, or two years later, because these things take tend to take time, you know, do have just demonstrated, hey, we've hit all the milestones that we told you, you're gonna hit.

Virginia Giddings  29:09  
Yeah, and I'd like to build on this because that's something absolutely we look at. And we tend to remember it, even if we don't pull up the old deck, we tend to remember what's been told us in terms of timeline and, and all the numbers. But another aspect of that is that will often have very specific questions, you know, how are you planning to address this population or, or whatever. And we really want to see that when companies come back to us and three, six months, that they've heard our question, and they come back with an answer to it or plan for how they would answer it in the future. And that's sort of interesting to see how they how companies react and we it really is much more impressive when a company comes back and said, Hey, you asked me about this. So last time, we Matt, and I followed up. And this is the research. I had a company that did this to me a couple of weeks ago where I was asking about the aspects of the market assessment. And they came back and they went through like they've gone out and gotten a lot of consumer data to specifically address the question I posed, like it was probably almost a year ago, and that, you know, that makes an impression that really shows follow through.

Kristi Nakayama  30:29  
And the start of a partnership, really, I'm gonna serve partnership. Yeah.

Virginia Giddings  30:32  
And, you know, we're all in this journey of how we bring better products to patients were in that together, and things like that, where you pose a question, like, I didn't know the answer to it. But when she went off and looked into it, and came back to me with the answer, like we're learning together, right, and we're learning together with this purpose of how can we bring bread better products out to the patient? So they start asking

Kristi Nakayama  31:04  
to right to catch that? And yeah, with their pants down? Yeah. Terrible analogy. But with the time that we have left, I just kind of want to ask each of you, what is your outlook on M&A and strategic partnerships for this coming year? Interest rates are still high. You know, there's reports looking at certain markets that may be hotter for M&A. What What are your thoughts?

Devon Bream  31:27  
Yeah, so I have a good friend in our BD department that likes to say, you know, Devin, cash and courage are powerful. And so right now, the strategics probably are a little bit more cash heavy than than some of the private equity folks that are trying to make safer bets. So I think we looking from a GE standpoint, are in a very positive outlook, we definitely believe in a good balance between inorganic and organic growth. So we're very excited about the future, especially since the spin off has really allowed us to focus specifically on healthcare. So just

Kristi Nakayama  32:04  
to double tap on that. So you're looking to expand your current revenue streams to also open to new bringing in new revenue streams. Yes, yeah. Okay, there you go. Even seven this week?

Devon Bream  32:17  
Yeah. I don't have the checkbook. But I'm happy to meet with you.

Virginia Giddings  32:23  
I think it's always fun, like the end of the year or the beginning of the next year to look at the numbers and see, like, what really happened, what does it look like and but I think there's sort of an inevitability of it too, like to maintain the kind of growth that we have across these companies, that it's gotta be a combination of organic and inorganic. And so if you're gonna get there in organically, then you have to have there have to be acquisitions along the way. So I'm pretty positive. In my crystal ball,

Kristi Nakayama  32:56  
we have to have for Eric, are you gonna bring down the Yeah, look, I

Eric Schantz  33:01  
like to be as positive as you two. But when I talked to people, I just I think, I think there's a ton of opportunity. When I think about this, you know, last year was just a bit of a mess, right? You had, which should have been pretty easy demand, because you're coming out of COVID. But then you hit supply chain issues that probably dampen that demand, and then you had inflation, that made your margins go haywire. And then you had higher interest rates that made your EPS go crazy. So I think there's a lot of consolidators, in our industry that are just trying to write size and ship for 2024. They need to share the street today could grow and they can grow profitably. So you need they need to show some leverage. If you need show leverage, then are you gonna do a lot of super diluted deals? Not to say you're not gonna do deals I think you're probably then going to be looking at, alright, how do we kick the can down the road further. And in some of the environment for the companies, that's it's probably not a bad idea, right? It's a little bit less dilutive financing. There's some strings attached. But there's an opportunity for you to get through an exit. On the flip side of that, if you've got revenue, and you've got a really clean path to profitability, I think all day long, those companies are interesting. So I think there's opportunities there, I think if you got the right asset in the right segment, that could go very early. Those opportunities are there, there's just not quite as many of those. But beyond that, I mean, the cash is available, I just think I think there's going to be a balance between showing the street that ay ay for Medtronic, and, you know, in particular, we've got a great pipeline. But every dollar that we, we want to spend, we've got to either trade it for an M&A deal, or invest it, you know, in structural heart or in the robot or something else. So there's a very difficult conversation. We're making this trade off. So I think that's going to balance, at least from our perspective, kind of how the deals materialize either be there but they're not going to be maybe as straightforward So we're in the past, I think

Kristi Nakayama  35:01  
what a lot of companies would love to hear too is, you know, your channels being something that they're looking for, and maybe a strategic partnership, but you're saying revenue is important to show. So when companies are looking to an exit a little bit sooner and don't have their own channels, you know, that's something that a strategic partnership would be ideal. In terms of, you know, M&A activity versus partnerships, is there any advice that you could give, you know, the startups in the room as to how much they should be preparing for driving their own revenue or coming to Medtronic for your channels?

Eric Schantz  35:37  
It just depends. We have a great channel, and we're very happy to use that in the right instance. Yeah. And we've done that we've, we've shown that we've talked about it. So in some instances, it's a win win, right? I know, the companies would like to see an earlier exit, if it's gonna raise, you know, $100 million, and develop a channel, or take less from us use our channel. But, you know, maybe you're not getting that 10x return you're hoping for I think that's a potentially win win for everyone. But it's, it's very much deal dependent. We'll stretch, it just depends on what it is. But I do want to hear Yeah, Doug, correct. This all?

Doug Solomon  36:15  
Listen, I'll start macro. And then I'll go macro, right. The macro is. And I've been doing this a lot of years, you know, the macro is none of us probably in this entire room have lived through a high interest rate, high inflation cycle in the United States in our adult careers. Okay. So let's start with that as a basic premise. And I think it's probably a bold but fair statement. Right. And so I think the last couple of years, you know, people have gotten addicted to interest rates, and all you have to do is look at the housing market and how it's kind of stopped, because nobody wants to trade out of a 3% mortgage to a 7% mortgage. Well, if you applied that to a corporate mindset, you know, companies that a few years ago, money was free, literally, and actually holding cash cost you money because you couldn't earn any money on it. Now cash you can earn 5% into your treasuries and you know, your cost of capital, the race car, you know, money a few years ago for any of the companies next to me might have been to 3% is now five to 7%, depending on the deal. So cost of capital has become a real issue. But obviously now interest rates are at least somewhat coming down. We'll see what happens when short term rates, the Fed keeps kicking the can down the road. So so the we're in the right direction. Yeah. And I would say, you know, the question I get a lot from companies, particularly earlier stage companies, hey, there's been no IPO market, how can more companies aren't getting acquired, and I, especially with large corporates, who are awash in capital and have a lot of money to spend, that corporate balance sheets are in phenomenal shape. So you've got all the right makings for activity, but I would say, you know, a lot of things that Eric mentioned, and I'd say other companies are very particular, right? I mean, they want what they want. You know, Mike's, again, recent experience has been they're willing to pay more for the things that they really want that are accretive to growth. And as companies get bigger, and, you know, ever since the smallest company probably has what an $80 billion market cap now or there abouts. You know, these are big companies, right. And so they need big ideas and large things that can move the needle inside of a large revenue base. Right. And so, you know, I found over the last couple of years, we've been very particular about what they want. And they'd rather, you know, again, in many cases, rather, maybe with the exception, I think, Virginia made earlier, which is a good one, you know, about sort of like, we're a little bit more of a market developing company, which is very obviously a fair statement. You know, they want to see revenue generating companies, ideally, companies that actually generate profits, which I know is relatively novel for earlier stage companies in our industry. And, you know, so I think the alchemy is all there. But I and I think there's a ton of appetite. We're very busy on a lot of different things. But it's just been exceedingly difficult to get transactions done for a zillion idiosyncratic reasons which I would bore the entire audience with. But I do think there's, there's a lot of things going on underneath the covers that hasn't necessarily made the headlines yet.

Kristi Nakayama  39:07  
With the heavy lift of EMDR, any thoughts on like fire sales in Europe or divestiture, or divesting of products that companies just don't want to do the heavy lift?

Doug Solomon  39:20  
I haven't seen that.

Eric Schantz  39:23  
No, I'd see it knocks valuation down a little bit if that's an important revenue stream, and it's also for us, it was an opportunity to get a little bit you know, companies in the past we get to see Mark, they get a couple 100 patients, it just gives you more confidence in the clinical. You don't get that now. It's probably going to impact valuation is my gut.

Kristi Nakayama  39:44  
Well, I see we have a blinking red light here. We're out of time. But thank you so much to you know, it's so nice to be on stage with some friends and new friends and I hope everyone enjoyed this panel. Thank you.