December 2018

We are frequently tapped by analysts, fund managers, investment banks, and other financial and investment professionals–from small independent funds through the largest global institutions. At the same time, our engagements are also filled by biotech, medtech, life sciences, and digital health executives, as well as provider and clinic networks, payers, hospitals, IDNs, and other healthcare services providers. Whether seeking to make an investment, or to plan and execute to increase stakeholder value, advanced wound care is among the highest potential healthcare subsectors, with no sign of that changing anytime soon. So why all the interest in advanced wound care? This is why… Demographically, this segment is poised to explode, as a plethora of projected global demographic and epidemiological trends contribute to difficult-to-heal wounds, including: aging populations cardiovascular disease (heart, arteries, veins) renal (kidney) disease diabetes and other endocrinology-related disease oncological (cancer) disease rheumatological disease dermatological issues obesity and malnutrition immobility and sedentary lifestyles immune system compromise chronic pain medication side effects hundreds of other health conditions related to infection, hereditary, environmental, psycho-social, and other factors The prevalence and projected growth of these conditions drive a large, unmet demand for advanced wound care that make for an attractive investment opportunity. Yet at this time, there are multiple areas where the deployment of capital to this space is greatly under the current and future potential. This article is primarily intended for healthcare, medtech, and related services and technology investors who seek to either explore advanced wound care opportunities, or to refine assumptions and investment theses. If you’d like to explore the concepts below further or wish to discuss a your specific investment strategy, get in touch to schedule a consultation.   What exactly is advanced wound care? The first key to successful wound care investing is to wrap your head around the core concept of, “what is advanced wound care?” Healthcare executives and investors who are not strictly focused on wound care are certainly reading this article. Many are already exposed to this space (whether they know it or not). Unfortunately, many damaging wound care due diligence and investment choices are related to a fundamental misunderstanding of what even makes up the segment. Following that initial misstep, even highly intelligent, thorough, and experienced business people have a higher chance of running into major problems that could have been avoided. Before anything else, a solid advanced wound care investment foundation depends on correctly grasping these four core concepts on at least a practical level: The phases of wound healing The difference between simple vs. advanced wounds Local vs. systemic problems with healing A working definition of advanced wound care Finally, we’ll apply that foundation by exploring common investment mistakes made by both rookie and experienced advanced wound care investors alike. So here we go…   The phases of wound healing and “simple” vs. “advanced” wounds Let us suppose a healthy person accidentally cuts his finger while cooking. Assuming the wound is not large, the knife was clean and not rusty, and no major surprises (like slicing an artery), the wound is likely to close on its own. If so, we can classify the above example as a “simple wound” because we neither anticipated nor experienced any healing complications making healing take longer than expected. On a very basic and practical level, there are four (or five) overlapping phases of wound healing: Hemostasis – a blood clot forms to stop bleeding, prevent further damage / contamination, and sends signals to trigger the next phases of the healing cascade Inflammation – increased blood flow; removal of debris and neutralization of bacteria that may have entered the wound Proliferation – (often categorized as two separate phases, granulation and epithelialization), where the wound bed and skin fill in; When this is complete, most clinicians (including for clinical trial endpoints) refer to a wound as “healed,” even though there is technically one more phase… Remodeling – (also referred to as maturation), where the underlying cells continue to restructure and strengthen over time (months or years). This phase not only impacts the cosmetic appearance, but also range of motion and propensity for reinjury or recurrence of the wound, due to factors such as the type, quality, and location of scarring / collagen formation. Each of these phases actually consists of  dozens–even hundreds–of complex chemical, biological, and physiological processes. A video animation + explanation with more detail can be viewed here, and although there are often new discoveries at the microscopic level, there is no shortage of academic discussion discussing each phase in detail, as well as factors affecting wound healing. The key takeaway for business and investment professionals looking at this space is that for a wound to heal properly, it must pass through and complete all phases in the above order (though as stated, there is overlap). When the above process does not-or is not expected to–occur within four weeks, we can refer to it as an “advanced wound.” Some use that term at five, six, or eight weeks…there is no consensus on the precise timing, nor is the precise timing crucial to this discussion. If there are no problems with the healing phases, the wound will follow its natural trajectory, which is to heal. However, there are literally hundreds of reasons wounds might take (or be expected to take) longer than normal to heal. More often than not, multiple factors contribute in parallel. Nonetheless, once again for the purpose of keeping this article simple and focused on investors (not scientists), we might categorize the factors into two broad types: Local – Examples: The wound is deep, in a region susceptible to dirt and bacteria, on an area of pressure / friction / shear / reinjury, and other factors. Systemic – Examples: The patient is elderly, malnourished, underweight / overweight, taking medications with side effects or has one or more conditions affecting their ability to heal (cardiovascular disease, kidney disease, diabetes, cancer, or anything else that might possibly affect the body’s natural processes). So even a very