Interview by JIM STOMMEN

BB&T Contributing Editor

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Manny Villafana is one of America's best-known medical entrepreneurs. He has founded six publicly held medical device companies and is chairman and CEO of his most recent endeavor, Kips Bay Medical (Plymouth, Minnesota), which is developing a mesh stent to support the veins used in heart bypass grafts. Every year, 250,000 Americans receive life-saving medical devices developed by companies founded by Villafana.

A South Bronx native who became Medtronic's first international sales administrator, Villafana founded Cardiac Pacemakers, St. Jude Medical, GV Medical, ATS Medical, CABG Medical and Kips Bay Medical. The latter company's vein-supporting nitinol mesh tube, called eSVS Mesh, was approved by European regulators in May 2010.

Kips Bay Medical went public in February of this year, raising $16.5 million in listing on the Nasdaq Global Market. It will use proceeds from the offering to pursue U.S. regulatory approval of eSVS Mesh, as well as to investigate other potential indications for the technology.

BB&T: There are lots of folks who think a pen-and-ink drawing of you should be in the dictionary alongside the phrase “serial entrepreneur.“ Did you know even when you started in this business working first for Picker International and then for Medtronic that what you really wanted to do was strike out on your own?

Villafana: No, I did not; I did not have that feeling initially. That whole idea of striking out of your own came when I went to South America for Medtronic – I did two years in Argentina for them. It was at that point that I realized I was starting a business from scratch, needing all the things that an entrepreneur needs, with the exception of money, because Medtronic would supply the money we needed to set up our business in Latin America. That then was coupled with the idea of making a better pacemaker, which was a later part of the story. But no, the idea of being an entrepreneur did not start back in my earliest days.

BB&T: Some of the companies you have founded – Cardiac Pacemakers (CPI) and St. Jude Medical come particularly to mind – have done spectacularly well, while others – CABG Medical as an example – haven't survived as going concerns. Are there some common threads that run through the successes, and conversely through those that didn't make it?

Villafana: The most common thread that runs through all of them is the pursuit of things that haven't been done that other people say can't be done. Looking at products that might be needed – that's a very common thread that runs through all of them. What separates the successes from the failure is difficult to find, because as you pursue these things obviously you feel that you're going to be successful and are trying to be successful in everything that you do. I would say that the common thread on the ones that were not successful is that the technology did not prove to be able to work in the hostile environment of the body.

BB&T: And as I've heard you say, in some cases you were just too early.

Villafana: There was one case, for example, when we did GV Medical, when we were trying to do laser and angioplasty at the same time. We were too early because there weren't any stents available to hold the vessel open after we had treated the vessel with laser energy as well as expanding it with a balloon. We had another example of failure when we did CABG Medical – we discovered that the product worked fairly well in animals, but it would not work in a human being because the human being would be standing up. Without going into details, it was difficult for our device to work in a patient who was standing up. These are things that you discover as you do your animal studies and as you do your clinical studies, but the common thread in all of them, both successful and failure, is that we always had the idea of pursuing as best we could things that were needed for the better health of the patient.

BB&T: I was surprised at the outcome for CABG Medical. We followed that pretty closely, and it looked like when you did your animal studies that it was going to be a winner.

Villafana: What we found was that when we did the animal studies, the animal walked on all fours and the heart was sort of horizontal and on the same plane as the floor, but when a human being stood up, the weight of the graft on the connection system was very difficult and it wouldn't work. So we had to abandon that and we returned the money back to the shareholders.

BB&T: Some people seem amazed by the fact that you have been able to achieve what you have in life without having attended college, but I have long believed life is what you make of it. You parlayed learning about electronics at the RCA Institute in New York into a storied career that has taken you to places that may have been unimaginable growing up in the South Bronx. What is your take on the whole “life experience“ question?

Villafana: One of the biggest inducements in pursuing these things is the bill collector at the door. People tend to forget that, but those of us who are entrepreneurs have had one thing in common, and that is that we still had families and had to pay our bills. What I learned at RCA was helpful, but my real education was at the University of Medtronic. When I joined the company, Earl Bakken, who was the founder of Medtronic, was a real stickler on making sure that everyone, especially in the sales department, knew in great detail the technical aspects of the product. And he also went to great lengths to bring in good advisors and doctors who would train us in the anatomy and physiology of the body, particularly of the heart. So we were educated as well as we would have been at any college that was out there. Even better was that the education was free, and we were even paid to get that education. So I was able to get into Medtronic, and it was like getting into college, something that I could not afford as I grew up during the days before we had student loans.

BB&T: That whole University of Medtronic thing is interesting. There are thousands of, in effect, graduates of that “university.“

Villafana: That's right, and we also had the same thing happen when we did Cardiac Pacemakers later on. We had “graduates“ from there who went on to develop some of the 450 medical device companies that we now have in the Minneapolis area.

BB&T: Along the line of life experience, isn't there a good “life's lessons“ story behind the name of your latest venture, Kips Bay Medical?

Villafana: Kips Bay is a Boys Club that I grew up in. I was born and raised in the South Bronx, in a very poor area with a lot of crime and a lot of drugs, all of that stuff. Fortunately I was able to join a Boys Club, which took me off the street, kicked me in the tail and kept my nose clean. So I have named the company Kips Bay Medical in honor of the Kips Bay Boys Club. In fact, one of the machines that helps us make the device that we're working on right now is named “Archie,“ named after a man who was almost like my surrogate father, Archie Mangini, who was at the Boys Club when I was growing up.

BB&T: As with many great business ideas, it seems that your focus with Kips Bay Medical – commercializing a mesh to wrap around the saphenous veins used in cardiac bypass surgery to help keep them from collapsing – is an amazingly simple concept. What are the key hurdles that you'll be jumping over as you move forward?

Villafana: We've been working on this now for 2-1/2 years. We have learned how to make it, we have learned how to implant it, we have received CE-mark approval overseas. We have over 200 patients now walking around with this device in their bodies. We are pleased with how it's going, but our biggest hurdles are going to be the regulatory hurdles in the U.S. and the reimbursement hurdles both overseas and in the United States. So we still have a lot of hurdles to clear to be able to commercialize this, but every day we learn more and more about how well the device is working in our patients and we're very excited about it; now we have to get down to the nasty business of reimbursement and regulations.

BB&T: Isn't it interesting how much more important it is today to pay attention to reimbursement issues as you're developing your product than it was when you first started in this business, when it was kind of an afterthought?

Villafana: It is. More and more countries are strapped for money, and the way they save money is to make the hurdles higher and higher to get a product approved and accepted in the individual countries that we have to work with.

BB&T: While it's one thing to make the decision to go to Europe for your trials and your initial commercialization, a lot of people lose sight of the fact that getting reimbursement in Europe is no walk in the park because you have so many regions that you have to qualify for.

Villafana: That is absolutely correct. We're fortunate in that we have already started in two major countries, Switzerland and Italy, and our next target is Germany. I'm getting on a plane this weekend to go to Germany to work with the doctors and get started there.

BB&T: It's interesting, after all that you've done in developing very sophisticated products like pacemakers and heart valves, that you're now focusing on a product that, as one story on the company put it, “seems elementary by comparison.“ Does that serve to make the business case even more compelling?

Villafana: What makes this very, very compelling is that people do not do the math. In the world today, 500,000 to 600,000 pacemakers are implanted every year; there are about 250,000 to 300,000 heart valves; there are about 750,000 to 1 million stents. But when you do the math on this particular product, you know that there are more than a million bypass procedures done each year. Each patient that gets a bypass has about 3.3 grafts put on his heart. One of those grafts is the internal mammary artery that doesn't need any attention. But the other 2.3 grafts typically are saphenous veins, which need the mesh put on them. So that means that our potential market is 2.3 million meshes per year, as compared to let's say 600,000 pacemakers. It's actually a bigger market in units than all of the items I mentioned – pacemakers, heart valves, and stents. So it is an enormous market that people don't understand, and that's why we're pursuing it.

BB&T: I think that people who don't understand this potential market, those who are talking about the decline in bypass surgery since the advent of stents, seem to be missing the concerns being expressed by cardiologists as to the longer-term efficacy of stents.

Villafana: We have seen in talking to our physicians that the slope has now turned around. For the last 10 years, the slope on bypass surgery was turning down because of the use of stents, but now the slope has turned upward one again due to the concerns about stents. One heart surgeon said to me, “We love stents.“ I said, “Why do you love stents?“ and he said, “That's our bank account; every time you put in a stent, we know that sooner or later we're going to get a patient.“

BB&T: Your first clinical trials are being done in international markets, a path seemingly being taken by more and more U.S. companies. That leads to the larger question about whether the twin problems of regulatory uncertainty and tightness of financing are particularly impacting medical innovation in the U.S. How do you see that playing out?

Villafana: Let's talk about the financing thing first. Our country and the world have gone through some very difficult times over the last three or four years, maybe even the last five years, as the financial world has crunched down. It's difficult to raise capital – extremely difficult. I have been fortunate in my previous six companies to be able to raise capital. Not easy, but we were able to do it. Here at Kips Bay, it has been extremely difficult to raise capital because the markets were so bad. Then one person said to me, “Well Manny, I've lost all my money but I'm going to give you what's left, because you usually make money for me.“ And that's how we were able to raise our capital. We recently did an IPO in which we raised $16.5 million that will give us the funds we need to continue our activity.

The other challenge is of course the regulatory challenge. It is extremely difficult to get devices through the regulatory hurdles here in our country, so much so that virtually all device companies now go overseas to begin the process first. You have to show something, and the overseas path makes a lot of sense, both from a regulatory point of view and from a business point of view: let's get started, let's show our potential investors that this device works, and then it's easier to raise money. Something has to be done and I don't know the answer. That's all I can say at this time about the regulatory path that we have to go through.

While I have never used venture capital in any of my companies, the VCs I talk with say they have pulled away from medical technology because of the uncertainty of dealing with the FDA, so it's very difficult to raise money these days.

BB&T: “Retirement“ doesn't seem to be a word that is part of your vocabulary. Have there been times with any of your ventures where you may have thought, “Well, this is the last one. I'll take it through to commercialization and then go do something more leisurely.“

Villafana: Let me tell you a short story. One day I was asked by someone, “Manny, why don't you just go play golf?“ So I told him that I was in Spain and I had never seen a heart transplant and I was invited to see one. At 2 o'clock in the morning I was in my hotel and received a phone call that the procedure was taking place, so I rushed over to the hospital and as I walked into the OR, the chest was open and they were just about to take the old heart out. They took it out and placed it on an instrument table. Just at that moment someone walked through the door with the new heart. While they began to implant the new heart, the old heart was still beating on the table, although more slowly. Finally, as they connected the new heart, connecting all the vessels to it, it started to beat. At the very moment it started to beat, the old heart stopped beating – it was like life jumped across the table from the old heart into the new heart. So I told the guy who asked me about playing golf, “When golf is as interesting as that, maybe I'll take up golf.“

BB&T: Is there a question you wish I had asked but haven't?

Villafana: The key to any success is that I keep my family involved, because the strain of running a company, the travel, the time it takes, the late dinners, being away from home for long periods of time are strains on your family. But if they know and understand what is happening, they will support you. The second thing is recognizing that God is in your life, and not being afraid to seek his help as you go forward. Those two things are keys to having success, because without either one of them you're doomed to failure.

I also say to keep your eye on the goal. You're going to have a lot of temptation, of people trying to pull you away from doing what you want to do. You know, “Charlie, why don't you come back and work for us? We've got paid vacations, we've got a pension, we'll give you a nice office and we'll pay you lots of money.“ These things are really tempting when you're struggling, trying to find money, you don't have a nice office – you sometimes have an apple crate as your desk and stuff like that. So I tell people you've got to keep an eye on your goal.

And lastly, I always tell everybody, “Tear open your shirt and see if you have a big red 'S' there.“ You've got to believe that you're Superman or Superwoman to get these things done. You can't be the average Joe or the average Jane to try to get these things done. Being an entrepreneur, being on your own, is very, very difficult. Those are the four things that I believe in that are the keys to success.