Case Studies

CASE STUDIES

WHAT WE DO

Appian Partners have added significant value to companies by successfully pioneering, launching, and growing pharmaceutical brands, medical devices, diagnostic technologies, and mHealth apps to improve disease detection and management.

Technology Pivot Transforms Company From $4MM to $250MM Valuation in 2.5 Years

BACKGROUND

Publicly traded ‘penny stock’ on the Australian Securities Exchange (ASX:ISN)
Unique, patent-protected, acoustic respiratory monitoring technology for asthma detection
Three diagnostic and monitoring products had been commercialized for use in the clinic setting or for consumer home use with physician’s prescription in US, EU and select parts of Asia
Initial product sales were not sustained

CHALLENGES

In mid-2011, company was down to 3 months of cash
Monthly cash burn >$500,000 per month
Existing corporate structure had personnel and offices on three continents: 30 employees in Israel, 6 in Southern CA, 4 in Australia
Burned through $60 million invested capital over past 8 years
No sustainable sales revenue
Insufficient sales support and technical support functions to provide training and demand creation in target physician markets
Clinical research demonstrated accuracy of the technology but was unable to provide teaching data set or definitive equivalence to the reference standard
Lack of data demonstrating improved patient outcomes
Lack of asthma key opinion leader engagement around wheeze monitoring
Insufficient resources to conduct the clinical trials or marketing initiatives necessary to drive change
Investors were jaded and disillusioned, affecting ability to raise more cash

SOLUTIONS

Reduced headcount and monthly cash burn
Hired new executive team
Upgraded Board of Directors
Designed first effective DTC asthma monitoring device
Created AsthmaSense® series of asthma monitoring apps
Designed and produced AirSonea™ handheld wheeze monitoring device with Bluetooth® link to smartphone app
Devised neural network software to factor in environment and behavioral triggers
Conducted customized primary market research with target consumers and Australian physicians
Secured celebrity spokesperson and media physician for awareness/promotion
Soft launch to consumers and primary care physicians in Australia via social media, YouTube, and media PR

IMPACT

Raised >$25 million in total investment through ASX over 2.5 years
Secured high net worth individual as cornerstone investor
Increased stock price by 11 fold in 6 months
Increased market valuation from $4MM to $250MM over 2.5 year period
Achieved first OTC FDA 510(k) clearance for wheeze monitor for asthma

Altered the Way Sleep Medicine is Practiced in the U.S.

BACKGROUND

Venture-capital-backed medical device manufacturer
$28MM raised in previous 10 years
Founded in Palo Alto, CA; 35 employees
Medical device manufacturer providing in-home, patient self-administered diagnostic sleep study services for patients suspected of having Obstructive Sleep Apnea (OSA). The company also provided OSA disease management services via short and long term therapy adherence monitoring.

CHALLENGES

High monthly cash burn
High CEO turnover (5 CEOs during previous 8 years)
Lacked reimbursement strategy:
- Medicare and payors did not reimburse for company’s services
Initial sales/marketing strategy failed:
- Ineffective sales team/effort

SOLUTIONS

Raised over $50MM from venture capital firms
Successfully lobbied the Centers for Medicare and Medicaid Services to issue a positive National Coverage Determination for the diagnosis of OSA via in-home sleep apnea testing services
Successfully lobbied national Blue Cross and Blue Shield Association to support in-home sleep apnea diagnostic testing as an alternative to in-lab (polysomnography) testing
Convinced most major, national Managed Care Organizations (MCO) to allow coverage of Company’s NovaSom device
Closed contracts with national and regional MCOs resulting in reimbursement access to over 150MM covered lives for Company services/products
Recruited best-in-class executive team to execute rapid, national launch of Company’s business plan and capitalize on the Company’s first-mover advantage
Headcount expanded from 6 to 110 over 18 month period
Achieved Joint Commission Accreditation becoming the first accredited national in-home diagnostic sleep testing provider
Introduced the industry’s first commercially viable, integrated disease management program
Successfully rolled out disease management program to the VA and several large, publicly traded trucking firms
Established Company as the largest provider of OSA diagnostic services to the VA health system
Re-positioned Company from a one-product medical device manufacturer into a multi-product/service provider with high margin recurring revenue
Established Company as industry’s first national brand for in-home sleep apnea diagnostic testing
Increased productivity by shortening inventory turns from 21 days to 14 days
Implemented customer service follow-up calls to expedite inventory turns
Rapidly expanded product line by implementing new, complimentary services
Built a national brand in a highly fragmented, emerging growth industry within two years

IMPACT

Grew revenues from $100k in 2001 to $12MM in 2009 while growing gross profit margins to >65%
Achieved revenue run rate ~ $20MM
Achieved YTD 2009 revenue 27% over forecast
Maintained 0% turnover among executive staff
Convinced large benefit management providers to work with payors to steer sleep study referrals away from sleep labs and towards home sleep study service providers, resulting in hundreds of millions of dollars of reduced costs to the US healthcare system

Merger and Acquisition Strategy Leads to Successful Exit

BACKGROUND

Healthcare services provider
Owner and operator of over 80 sleep medicine diagnostic testing laboratories with approximately 200 employees in 12 states
Currently a subsidiary of GE Medical (NYSE:GE), this previously venture-backed healthcare company provides sleep disorder diagnostic services to over 50 million covered lives through MCO, Medicare, and Fortune 500 employer contracts. With 81 sleep lab facilities, a clinical call center, field personnel, and Board-certified sleep medicine specialists, the Company conducts over 35,000 sleep studies annually in 12 states.

CHALLENGES

Lacked sufficient scale: managed 5 hospital-based and one freestanding diagnostic sleep disorder labs
Lacked sufficient competitive barrier to entry: management contracts with hospitals contained 30-day termination clauses
Lacked sufficient margins to expand business: price per unit of service generated gross profit margins <40%
Lacked clear and compelling customer value proposition: investors wanted to expand service area/geographic footprint, improve gross profit margins, raise additional capital, and increase revenue

SOLUTIONS

Raised institutional financing of $5.0MM
Increased post-money valuation from $5MM in October 1997 to $20MM in June 2000
Designed and implemented M&A “roll-up” strategy of sleep labs completing 12 acquisitions of approximately 70 facilities within 4 years
Shortened the sales cycle from 12 months to 8 months for M&A targets
Hired and trained sales management and marketing team
Built the first national sales force in the industry
Developed and implemented robust, three month sales training program
Achieved 80% retention rate among sales staff
Recruited VP of Operations/COO and CFO

IMPACT

In June 2000, current division of GE Medical, Vital Signs, Inc. (NASDAQ:VITL), bought NST
Exceeded revenue, gross profit and same-store sales growth forecasts for 4 consecutive years
Ramped revenues from $700,000 in 1997 to $20MM in 2001, generating same-store sales growth of 15% to 31% (2x to 3x industry average) for 4 consecutive years
Orchestrated an increase in EBITDA of $3.5MM during first 12 months of VITL ownership (led to increase in VITL market value from $225MM in June 2000 to $630MM in June 2001)
NST enabled VITL to significantly exceed First Call’s consensus estimates by $0.03 or 7.3%.
Elevated gross profit margins from 40% in 1997 to 55% in 2001
Reduced sales and marketing expenses from 18% of revenue to 6% of revenue
Exceeded revenue and profit expectations which enabled VITL to exceed First Call’s consensus estimates for 4 consecutive quarters

From Concept to $80MM IPO in 2 Years

BACKGROUND

One of the first “pure-play” disease management companies
VC-backed
Interactive Voice Recognition (IVR) technology
Call center services focused on improving patient outcomes by modifying behavior
This specialty disease management company was built on a sophisticated IT and telecom platform that provided management, technology and clinical services to employers, Managed Care Organizations, government agencies, and pharmaceutical firms.

CHALLENGES

Lacked clear growth strategy: new concept and undefined (emerging) market
Lacked sufficient scale: only closed one client (large pharmaceutical firm) for a small project generating $150,000 in revenue
Lacked appropriate organizational structure to enable growth: No sales team or established sales effort

SOLUTIONS

Worked with operations staff and developers to expand company’s suite of services
Refocused sales efforts to include health plans and self-funded employers
Raised $5.5MM in Series C funding from Pappajohn Ventures and angel investors
Integrated marketing, sales, R&D, and operations from development of raw technology to implementation and closure of marketable products/services
Designed cross-functional teams to deliver complete customer solution
Consummated a partnership with a large third-party administrator with 60 major clients and over 1MM covered lives

IMPACT

Achieved IPO in 1996 (NASDAQ:PATI)
Generated 1,000% increase in company’s customer base during first 12 months
Increased post-money valuation from $3MM in November 1995 to $100MM in June 1997
IPO: 80x return for original investors 2 years after company formation
Raised $15MM in IPO with a market capitalization of $80M