Too often we define the Medtech sector by the number of dollars raised, IPOs helped or companies sold. But the focus neglects the very foundation of the sector: the people. Join the Medtech Talk Podcast each month to hear from entrepreneurs, investors and executives who spend their days developing the tools that make sick people well and health care more efficient.
From consulting to working at large companies to taking a risk with start-ups to becoming Silk Road Medical’s CEO, Chas McKhann has experienced almost everything in his long and illustrious career. In a discussion with Medtech Talk host Geoff Pardo, McKhann shares all the lessons learned from his jump to small private companies, handling a cultural rebirth as a newcomer CEO under the public eye, and taking on his role at Silk Road. He also talks about the “what if’s” of his journey and tips on surviving in the industry, as well as witnessing the market shift from only caring about revenue to wanting to see the path to capital break even.
GUEST BIO
Chas McKhann, CEO, Silk Road Medical
Chas McKhann is an accomplished Med Tech executive with more than 25 years of experience in the life sciences industry, including Board and C-suite positions leading turnaround and transformational growth at multiple medical technology companies. Most recently, Mr. McKhann served as CEO of Silk Road Medical, and prior to that, CEO of Apollo Endosurgery, both publicly-traded companies that were acquired by Boston Scientific.
Previously, Mr. McKhann Chief Commercial Officer of Torax Medical, Inc., a medical device company acquired by Johnson & Johnson and Intersect ENT, Inc. Prior to these roles, Mr McKhann held marketing leadership roles at Boston Scientific and Cordis, a Johnson and Johnson company. Mr. McKhann started his career as a strategy consultant at McKinsey & Company.
Mr. McKhann received a B.A. in political sciences and an M.B.A. from Stanford University.
TRANSCRIPT
Geoff Pardo:Welcome to the MedTech Talk podcast. This is your host, Geoff Pardo, and today it's my pleasure to welcome Chas McKhann to the podcast. Chas has had quite a run over the last several years, with turnarounds of Apollo Endosystems and Silk Road Medical, both of which resulted in the sale of the respective companies to Boston Scientific. We're going to explore both of those experiences, as well as some of the other formative the Boston Scientific. We're going to explore both of those experiences, as well as some of the other formative experiences in Chas's career. Chas, welcome to the podcast.
Chas McKhann:Geoff, thank you so much for inviting me.
Geoff Pardo:Well, there's a lot to cover, and one thing I like to do is to start with kind of everybody's backstory, and yours is a particularly interesting one, so maybe we start there. And what I'd love to hear is you know kind of what your early years were like, what your early interests were like, early influencers, what you know what careers you were thinking about as a kid growing up, just anything you're willing to share on that front, sure.
Chas McKhann:So I grew up in a medical family. My grandfather was a physician, my dad, my uncle, my grandmother was a physician, so a lot of physicians in the family. In some ways I'm the black sheep who went the business route. But you know, especially my grandfather and my dad also had very interesting careers and backgrounds and I think I learned some of that almost by osmosis growing up. My grandfather was a pediatric physician and infectious disease. He was a professor of pediatrics at both Harvard and Michigan, but he also at one point was head of R&D for Park Davis, the pharmaceutical company, and he was an inventor. He's on the original patent for the iron lung for patients who need a respiratory support. So obviously he got involved in a ton of different things and just was a great person to learn from, and late in his life he actually lived with us in Baltimore and I was able to spend time with him and just learn from him. Person to learn from, and late in his life he actually lived with us in Baltimore and I was able to spend time with him and just learn from him, which was awesome. And then my dad was a big influence as well.
Chas McKhann:Dad was the founding chairman of neurology at Johns Hopkins. So it's pretty amazing to think about that in as recently as 1969, there was no department of neurology at Johns Hopkins. It was just kind of part of the Department of Medicine, when you think about how big the neurology field is now. And dad was hired at the age of 37 to go build that department, and so even within a state institution like Johns Hopkins, he had a very kind of entrepreneurial role and he built the department and recruited incredible talent and was able to build what turned out to be one of the leading neurology departments, in fact, the number one ranked neurology department in the world for many, many years. And so, again, a great person to learn from sitting around the table.
Geoff Pardo:Yeah, did you feel like you were going to go into medicine just growing up with those influences?
Chas McKhann:I did. I did Certainly as I was going through high school and even into college. I certainly thought about going pre-med and I worked at Johns Hopkins over the summers growing up a few times. But I mentioned my older brother. He's a neurosurgeon at Columbia now and he's old enough. He's six years older than I am, so he was far enough along to be going through med school and then rotations as I was going through my decisions of where which way to head, and he loved it, absolutely loved it, and loved the patient care part of it, whereas I always gravitated more to some business things.
Chas McKhann:I had some sales roles when I was an undergrad. I had some just other things that I got involved with that I liked the business side but eventually was really happy when I could kind of combine that and go full circle into healthcare and sort of stay within the family business, as it were, but come from a different perspective.
Geoff Pardo:Yeah, and I imagine, just given that your grandfather did end up, you know, working for a company, you know a company, and that it wasn't like, you're totally going to the dark side of business.
Chas McKhann:Certainly from his vantage point. That's true, my dad was a pretty academic physician and you know, certainly at Hopkins. But it has been really interesting as his career progressed. Many of the people that he trained eventually went into leadership roles, especially in pharmaceuticals, and so you know big jobs at places like Merck and AstraZeneca. As my career was progressing in med tech and then he got more involved in working with some of those companies relatively late in his career and so it was interesting to kind of compare notes as he got more involved in industry and as I was learning about working in industry. So that was kind of fun.
Geoff Pardo:Yeah, I bet Interesting and particularly in you know must have been really, I mean, to the extent you really were in tune with it to just watch your dad in neurology back in those days. I mean, I feel like cardiovascular was so much of the forefront in the 80s, 90s and early 2000s and we're just beginning to like, at least from a device perspective, start to understand different things we can do in the brain, whether it's neuromodulation or other forms of therapy. I mean, what was it like watching your father back in those days, really probably be one of the pioneers in this space.
Chas McKhann:Yeah, no, it's a great question and it's amazing to think about In the 70s, as I was young, but I remember seeing him come home from the office and his diagnostic equipment was a reflex hammer. I mean, that's, that's what they had, I mean, and so brain imaging was the, the, the big development. I think he would have said in sort of the, the bulk of his career was imaging. And so.
Chas McKhann:MRI and CT scans and being able to the brain and you're right, subsequent to that, you know. Then what do you do about it in terms of therapies, both drugs and devices? It still feels like in many ways, we're pretty early, such a yeah, such an art to it in those early days. And the people he hired but he, he really did have amazing people who you know worked in neuroimaging and neurovirology, in epilepsy, in ms, which is one of the areas he focused on and just the things that they did over that period to really kind of build the foundation are pretty incredible yeah, so you mentioned you had some early sales experience in college.
Geoff Pardo:I'm curious what that was actually. What were some of the things you were selling in your undergrad?
Chas McKhann:Yeah. So like a lot of kids in that college period, I sold Cutco knives. You know, the summer after my freshman year in college and I came home and didn't have a job very different than kids these days where it feels like they're lining up. You know internships at big firms from an early days. You know it was different back then and so I came home and needed a job. I did some landscaping that I'd done in high school as well, but you know, started selling Cutco knives and turned out I was pretty good at it. And, you know, started selling Cutco knives and turned out I was pretty good at it.
Chas McKhann:And you know you learn a lot when you have to essentially cold call your parents' friends and sit down with them and learn how. And I was lucky that some of my very first interactions were very willing people willing to hear me out. I was so nervous and just hear me kind of go through my pitch and listen and learn and how to pick up on the nuances of what they were really looking for. And to this day it's a great product. We still have friends, kids, now approaching us about Cutco and it's kind of fun to put them through their pit.
Geoff Pardo:You know it's interesting, I didn't know that and that's one of your early experiences. But you know, I always feel like learning how to sell something, no matter what it is, but going through that process of convincing someone else to part with their dollars to buy something that you're holding on to. I mean, I think it is like the core thing that is lost a bit today is kids stack their resumes with different things but they actually never, you know, really engage in that core selling element.
Chas McKhann:I think, yeah, I think it's a good insight. You're right, because you learn a lot. You learn a lot about yourself and about how you interact with people, and I was a pretty introverted kid actually, and so to get out of my comfort zone and have those conversations later in life gave me a lot of confidence.
Geoff Pardo:Yeah, yeah Interesting. So then you finish undergrad, and so what was the next step at that point?
Chas McKhann:Yeah. So out of undergrad I decided I wasn't ready to, you know, become a pre-med and become a physician, but I didn't know a lot about what I wanted to enter into. So I started working for a small consulting firm that was based in Los Angeles and we did a lot of performance measurement and management type of work.
Chas McKhann:So working with companies about what are you measuring? What kind of scorecards do you use? How do you tie that to compensation? And we did it across industries and it was a great way to get almost a like formative business 101 experience, because we were working often at a board level and, you know, with senior management teams. You know automotive industry at one point, some medical stuff, some industrials, a whole range of things. And then I got really fortunate because I was asked to go to London and open a new office, and so it was one partner and me as like a 25-year-old, in London building a brand new office, and by the time I left and went to business school, I think we had 10 of us and we had a nice multi-million dollar practice that we had built, and so that was. That was a fun early stage. You know, we didn't know. What we didn't know in terms of entering the UK market Probably broke some unwritten rules, but it ended up working out for us and we were pretty successful.
Chas McKhann:Yeah, and that was in the area of performance management through through the transition to London, exactly so similar approaches. Some of the things that were being incorporated pretty commonly in US companies at that point weren't being done as extensively in European companies and so just getting more rigorous about moving beyond just the financial measurement and how do you incorporate non-financial measures into your day-to-day management. You know, of course, today it's much more sophisticated with, you know, various AI-related scorecards and things, but back then it was even just getting a good grounding of what should we be measuring and tracking, and putting the right systems in place was a lot of fun work and great work to do.
Geoff Pardo:Yeah, yeah, no, I can see that for sure. And then, coming out of business school, you joined McKinsey, is that right?
Chas McKhann:Yeah. So again, having been a consultant and during business school, and having been a consultant that worked across industries but sort of functionally specific, I kind of knew that I wanted to sort of flip that on its head and now, really, over that period, decided I wanted to be in health care. Over that period, decided I wanted to be in health care. I spent actually a summer at Pfizer during business school and then you, know, focused in and was able at.
Chas McKhann:McKinsey to work in the pharmaceutical and medical products practice and really do kind of commercial strategy, kinds of engagements. So you know, product launches and portfolio management, a couple of acquisitions, some licensing deals. Launches and portfolio management, a couple of acquisitions, some licensing deals, but was able to stay pretty focused within that wheelhouse because, of course, consulting firms work across a whole range of things. I was able to keep it pretty focused on the commercial side of things, which is what I really like to do.
Geoff Pardo:Yeah, and one of the you know, and having started out my career as well in consulting, you know, one of the things I often heard, as I was, you know, sort of embarking on that career, is, you know, don't stay too long in consulting, because you're you, you, you are, you are an advisor but you're not really there for sort of the final, you know product or the sort of the after effects, I guess, of the consulting engagement. That that may or may not be totally true, but but I wonder what, what you were feeling like during those days. Did you feel like you needed to ultimately, because you ended up, you know, obviously in industry, was there a pull to be in industry where you were more executing on some of the things that you were advising on, or what was that? You know? What were you feeling like back then?
Chas McKhann:Yeah, that's exactly the kind of evolution of my thoughts while I was at McKinsey. I was there for about five years, I think, and as I progressed and you reach that point, you know about four or five years in where you really have the fork in the road of do I truly want to be a partner in a consulting firm down that path? Or, you know, look at what the other options are which you know could be. Investing could be a range of things. But as I progressed I really enjoy the operating side of things and exactly what you're saying.
Chas McKhann:I'm an action-oriented guy. I love seeing the cause and effect of decisions you make, actions you take, and see how they play out for good or for bad and being able to do that. And so, as I progressed in consulting, sometimes you get a chance to do that, but again, consultants are not inexpensive and so often their roles very much are tailored to designing a solution for a particular problem, but not necessarily implementing that solution. And the good ones figure out how to have something that can be implemented and then coaching the team on what needs to do it and then handing it off effectively. But you're still not doing that yourself, and so that then led me into working with larger companies, both j and j and boston scientific, you know. But even then in some of the bigger companies being able to see cause and effect sometimes can be harder, and that eventually led me to even more smaller and more entrepreneurial companies, and so that was kind of the arc or evolution.
Geoff Pardo:Yeah, exactly we're talking about and what you know, coming from a consulting background what, what are the things that prepared you to do well? And maybe we jump into cordis now, because I think that's where you transition to what were the things that prepared you to do well and what were the things that you you know you weren't well prepared to do? How would you describe that?
Chas McKhann:yeah, no, I, I think in the consulting environment I was able to see a lot of different situations. I had worked with Johnson Johnson pretty extensively, working out of the New York and New Jersey offices, so I had a pretty good feel for the organization. But I hadn't actually worked that much closely with the Cordis team and that was when Cordis was obviously still part of J&J. But I, you know, having the ability to kind of diagnose a situation and get a pretty good feel of taking in a lot of information and trying to figure out then what are the priorities. I think I learned a lot of that in consulting and still apply it in my work today. But again, as we just touched on truly understanding the how do you then act across the organization to get things done was something I had a feel for, but I didn't know firsthand, and so bringing that more closely to home.
Chas McKhann:So when I joined Cordis, I joined in a marketing role as we were launching the Cypher stent, the very first drug- eluting stent, which was an incredibly exciting time, and I had things that I was working on.
Chas McKhann:But I, you know I had to that point, had not worked very closely with sales teams in the med device world and, as you know, on the commercial side the sales team is critical, and and so I knew very early on that I had to spend a lot of time out in the field learning with our best reps, in cases hearing from them directly If we were developing marketing programs or initiatives. Me sitting in Miami Lakes, Florida, and just trying to figure out on my own wasn't going to work, and so I made a big point of that and it's honestly something that I've really emphasized throughout my career as I've moved into leadership positions of really getting close coordination between marketing and sales and sales training and the reimbursement teams, like all the different parts of a commercial function working together. But I had to go learn that firsthand, like in my first real job, as it were.
Geoff Pardo:Yeah, and I was going to say you didn't just sort of step into the medical device industry in some ho-hum project. You stepped in with probably the launch of one of the biggest innovations of that era. For sure I would think, yeah, that must have been a bit of a pressure cooker, I'd imagine.
Chas McKhann:It was. I mean, that was my. That's why I took the job right to be part of that environment. So you know, this Cypher stent was the very first drug-eluting coronary stent. It was one of the very first combination products at the FDA and I'll come back to that in a minute. And you know, bare metal stents had already really captured the angioplasty market.
Chas McKhann:The issue of restenosis was real. We needed something to fix it. There had been attempts at brachytherapy that had been with very mixed success, but drug-related scents were revolutionary and because of that man it attracted an incredible team of people. I was recruited by Rick Anderson, who eventually became a company group chairman at J&J and now runs Revival Healthcare. And then I was thinking about it the other day, I think of us on that team who've since gone on to be CEOs of you know medical device companies, successful medical devices, including everything from you know, bernard Zobinyan at Edwards and Tyler Binney at Relievant right. So all different sizes but really successful med tech leaders and just talented people. And so it was a true honor to work with that kind of a team. Yeah, I mean just talented people, and so it was a true honor to work with that kind of a team.
Geoff Pardo:Yeah, Now, as you think back on kind of Cordis being J&J, Cordis being the first mover in drug-coded stents, you know, ultimately they weren't able to hold on to that position. What, in your view, was kind of the postmortem on that. Why weren't they able to really maintain that leadership position?
Chas McKhann:Yeah, no, I think there probably are case studies written about this. There certainly should be. And there, ultimately, with Cypher, were three kind of fatal flaws that all came together. The first one and I kind of mentioned it was the regulatory side. So we were the very first combination product and very late in our approval cycle the drug side of the agency looked at the elution curves for Cypher and you know the testing and there's variability because it is an expandable stent, it's not a tablet or a capsule, and they didn't like that variability.
Chas McKhann:It made them nervous and the net result of all of that is, instead of having 12-month dating or even 18-month dating, which we thought we were going to have, we had three-month dating on the product and this is a product that we had already committed to customers that we were going to consign the product, which was the standard and still is the standard in a lot of categories within interventional cardiology. The clock started actually midway through the production process. So we were getting stents with, you know, six weeks of dating or less. Long story short, it wreaked havoc to our supply chain and you know we back in those days there was a phone number you called as a sales rep to find out, you know, which stents we had available on any given day. And so customers who are having this huge anticipation for this product line, um, we're really frustrated and understandably so, um, and we got better at managing it.
Chas McKhann:We, you know we're willing to eat a lot of inventory, which we had to. We set up localized delivery systems. I learned a ton about managing supply chains and complex supply chains, which ended up serving me well during COVID, to be honest, um, but uh, you know it's a. It's a set of learnings we didn't expect to have and we managed through it. But that was one and that set the table for boston scientific and the taxes step when they came in, because they had learned from that, they had a better regulatory approval process and didn't have that same issue and they overbuilt inventory. I mean, I talked to jim tobin subsequently to it. You know they were ready to sort of be completely different and and and played that strength and they did, and all credit to them, yeah. The second one was new product development. We knew we had to get a better stent, uh, better delivery system, and for a variety of reasons, our r&d team just struggled with that and eventually they did. But it was slow, um, and by the time that was happening, eventually you had other Olemos products. So we had the Turalumus stent, you had others coming out from Abbott and others in Medtronic. And then the third is actually a bit of the history to it but also a good learning for anybody developing technologies today. So I mentioned brachytherapy. J&j placed its bets in brachytherapy.
Chas McKhann:Drug-eluting stents was almost a skunkworks project initially, and it was, you know, four or five guys in Warren, new Jersey, who you know realized this was the better way but didn't have a whole lot of support.
Chas McKhann:So they had to go out and essentially license everything you know. They licensed a stent, they licensed the coating from Sermonix, they licensed the drug and all of that and they just kind of pieced it together. But the result of that is that we had a cost structure on Cypher that was unsustainable. So when prices and drug looting stent prices, when you prices, the list price when we launched was something about $3,000 per stent. Needless to say, that's not what the prices are these days, right, I mean, they're only a fraction of that. And so, as the cost structure in that whole category changed, cordis did not have a financially viable product and that's why you know, through the iterations of Cordis as a company, they have not kept a drug-looting stent because it just was not financially viable. So all of that combined is a, you know, interesting moment in time, but you know why. Such a big product line was not sustainable for the long term.
Geoff Pardo:Yeah, you know it's so funny in our business, it's. You know, it doesn't always pay to be the first to market. You know, for exactly the reason you're talking about, I mean it's. It's a tough business we're in and there's often a lot of like uh, hurdles or or or trials and tribulations that the first to market has to endure and the and the folks that are trailing behind can learn from that and improve from that. And on the flip side, there's certain cases you know, where the first to market you take, like an Edwards with their heart valve, you know percutaneous heart valve, or Boston Scientific with Watchman, or you know I think we can probably call out many where they are first to market and successfully iterate on that. Do you have a sense, just coming off of that experience and all the other experiences you had, of why you know that discrepancy sometimes exists?
Chas McKhann:I think people, I think a lot of people, learn from Cordis. You know, cordis, frankly had to happen twice. If you look at their history before I was there and bare metal stands, they gave up that lead as well. Um, and you mentioned edwards, there are, there were, a number of, you know, former cortis people at edwards and as well as the leadership there, absent of cortis, and I think they were very conscious when they were developing the taver market, of building, you know, building real moats commercially and they've done that in terms of how well they train and how well they support their customers and then staying ahead of it of the R&D side and the innovation side. It's so critical and you know, again, I think there are elements to. We knew about it at Cordis and what needed to happen, but some of the things just didn't ultimately click. And it's a competitive marketplace and right behind us were Guidant and Habit and Medtronic and Boston Scientific, obviously ready to pounce and they did.
Geoff Pardo:Yeah, you know. The next thing I want to get into, because you have just, in a twist of fate, you had a very interesting seat in the guidance uh, I guess bidding process and then, you know, end up to maybe talk about that and where you ended up going, because this to me is a fascinating uh story it is.
Chas McKhann:It is an interesting twist. So in that kind of 2006 timeframe, many listeners will be familiar with what would have been the J&J Guidant Acquisition. We were based in Miami Lakes, florida. The Guidant team on the vascular side, the guidance team on the vascular side, which are now part of Abbott, were based out in the Bay Area and we would meet up in typically the hotels in the middle, basically Chicago or Dallas, and spent hours planning. We pushed about as far as you can with third-party consultants of getting ready for what this would be and, Geoff, we got so far that we have a I still have it somewhere sitting here a pen that says Guidant AJ&J Company. We had swag, we were ready to go and then, you know, there was a well-publicized series of safety issues that were reported in the New York Times about the credit with the management business that impacted guidance stock and then, long story short, that all resulted in the bidding war that became Boston Scientific acquiring guidance. But it was a fascinating time.
Geoff Pardo:And then you know, then you go to Boston Scientific and you end up actually very much involved in that whole acquisition, right.
Chas McKhann:I did. I did so initially. I was planning to go just to a kind of smaller business where I, you know, having been in the sort of big behemoth business where I could just go learn in a smaller, growing business and that was the old cardiac surgery division of what had been guidance and they had an excellent team leading it. Maria Sainz had been leading it and then Lisa Earnhardt, who now runs devices for Abbott, hired me. I was going to be a general manager for a portion of that business. So it was a great opportunity to kind of expand my role and responsibility in a smaller business no-transcript Gettinga and McCain Cardiovascular and we all sort of dispersed a bit. A few people went with the deal but a lot of us did other things and I was recruited by the leadership at Boston Scientific at that point, jim Tobin and Paula Violette, to come to CRM. So you know we just talked about that.
Chas McKhann:A lot had happened with the CRM business.
Chas McKhann:There had been a huge internal effort to sort of revamp the quality systems and we essentially had to kind of relaunch cardiac rhythm management as a company, as a division within Boston Scientific.
Chas McKhann:You know the EP community did not know Boston Scientific at all, weren't familiar with the company and so it was really just kind of starting over in some ways of launching an organization, launching a company and building confidence in the quality of our products. And we were able to do that and that was fun work, again also with a phenomenal team. Guyton hired really really well and great people and many of them you know, and I also played a role a little bit of Switzerland, because I was neither Guyton nor Boston Scientific, and it's, you know, been pretty well documented that there were some cultural clashes in that acquisition and I could sort of, you know, navigate both sides a little bit and help kind of keep things on a good track and we were able to do that and turn that and it was a big shift, turn that shift in a positive direction over a period of three or four years while I was there.
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Geoff Pardo:The next part of your career really fascinates me because you've been now with two of really the biggest and most successful device companies in our industry. I'm sure there's a very good path that lay ahead of you, and you know it's to me a big leap to start thinking about going to the startup world and, you know, getting involved in things that are just at a much, you know, lesser scale than what you're dealing with. Obviously, the risk quotient is much higher. So maybe talk about this next stage and kind of your decision process as you thought about, you know, I imagine, whether to keep going at Boston or to strike out in more of a smaller setting.
Chas McKhann:Yeah, no, it was. I appreciate the question. It was a fascinating time. This was in the kind of 2010 time period and it was a difficult time for Boss Scientific as a corporation broadly. That period between you know, jim and Paul, as they wound down and before Mike Mahoney got there a few years after I joined the company, had a number of challenges and I think that reverberated through the organization and so that that played into it.
Chas McKhann:Being perfectly honest, but I also I'm a Stanford guy by background and both undergrad and business school, I think I always wanted to go do something more entrepreneurial. I probably underestimated the risk profile part that you mentioned. I learned it firsthand. I think there's a, you know, the arrogance of youth kind of thing that comes into that and you know was approached and had a dialogue about a really exciting opportunity and that was a little company called Apnex Medical. That was a clinical stage at that point, developing a new hypoglossal nerve stimulation therapy for sleep apnea.
Chas McKhann:For those of you who know Inspire Medical, we were kind of neck and neck very similar technology at almost exactly the same stage and Mike Berman, who you know is very well known in the device industry, was both the co-founder and the chair of Apnex, mike, has continued to be just a great friend and mentor to me through the years, but he was the chairman as I was coming on as CEO. We had a very good investor syndicate, so there were a lot of things that were appealing if I was going to jump into a CEO role, which I did. And we got a lot of things right, especially operationally. We completed a feasibility study, we developed a next-gen product, we got our ID going, we enrolled subjects ahead of speed, but in one of those woulda coulda shouldas of my life, we ended up not being successful in our pivotal trial with a product that is again almost identical, a phenomenal job in developing that business and and treating patients.
Chas McKhann:It's a great therapy. Um, but you know, implantable neurostimulator trial, they're small trials and and we had a randomized trial and so small choices impacting numbers on either direction can absolutely impact the success of the trial and we ultimately had an unsuccessful one and that was that was disappointing, to say the least.
Geoff Pardo:Yeah for sure. And and it's, it's, it's the, you know, the those experiences. I think that you know, at least I've had those and they keep me up at night Like what could I have done differently, what should I have done differently? And I'm curious, as you look back on that, what are the things you could identify that, yeah, if we had perfect, if hindsight really, you know, had perfect hindsight, what would you have done differently in that situation?
Chas McKhann:Yeah, it's a hard question because, yes, with the benefit of hindsight. So we were working with you know, real experts in the field of sleep medicine. You know, both on the respiratory sleep medicine side as well as the surgeon side. We had a great group of investigators working with us. We had long drawn out debates about study design and whether to you know, things like inclusion criteria and certain elements to it, and we thought we were taking the right approach in the decisions we were making and the level of even conservatism and in what you know specific decisions we were making. But again, now, with the benefit of hindsight, if there were, you know, given that this study was so small, there are a couple things we would have done differently and I think you know the lesson to extrapolate is you know, give yourself every chance of success, of having a positive study. Yeah.
Chas McKhann:Even if it means down the line you need to do another study to expand your indication or broaden some things out right, get the indication first.
Chas McKhann:And I think we knew that at the time, but I know it even more now. Right, and it's just on the margin, it made a difference, and so that was, you know, that was a big learning and one that we all shared collectively. But I own it, right, I was running things um, and then, you know, then the broader learning for me was then just on a personal level, because that was the first time in my career that I was, you know, directly responsible in leading something that, objectively, was, was a failure, right, was unsuccessful and ultimately the company was unsuccessful and that was, um, that was humbling, to say the, to say the least.
Chas McKhann:But also, at that point, you know, had to then think carefully about. You know this path that I had started on and you mentioned it on the entrepreneurial side and the risk profile, and you know how I felt about something that was going to have a lot more ups and downs than working in a J&J or Boston Scientific and the financial implications of that and the sort of personal mental health implications of that. And you know I ultimately recommitted to it and I've become increasingly comfortable with it. But now, as I like to, you know, coach and mentor, you know people who are at the stage of their career making similar decisions and I often try to at least help them appreciate some of those true risks and what it means on a personal level so they can go in eyes wide open and just be conscious of it.
Geoff Pardo:It's one of the things you stressed to me just in the lead up to this podcast is just the ability to survive. The ups and downs of this business is one of the biggest, you know, lessons coming out of that? And I wonder, because that is something that I think you know is critically important but probably hard to hard to do. So what, what, what are the some of the things that you do to survive kind of just the challenges of this business? Because I think we've all had them and it's not easy, right, it's not easy to persist in this business.
Chas McKhann:No, it's hard right. I mean, we all know and I'm sure the people listening to this podcast are well aware that changing behavior in medicine is hard right. There are a lot of things that need to go right and so Partly it's understanding and appreciating that and giving yourself some grace if things don't go well.
Chas McKhann:And then, you know I mentioned before, I've been very fortunate to have some outstanding networks of people I've worked with and it's especially in those kinds of times when, calling on them right on whether it's in figuring out what to do next or getting their coaching and advice on certain things I've been very, you know, happy to maintain many of those networks and stay close to people, and they've been tremendous amount of support, along with, you know, a really good group of family and friends right.
Chas McKhann:My wife has been incredibly supportive, even at times when, you know, middle of my career I didn't have a job right. My wife has been incredibly supportive even at times when, you know, middle of my career I didn't have a job right, as I'm figuring out what's next right, and we both had good confidence that it would. Things would work out. But in the moment you have your doubts. And so it's really good to have a good support network around you.
Geoff Pardo:Yeah, so and we were talking before the podcast your career to me has had like many different phases, you know, from consulting to. You know, being involved in some of the biggest product launches and biggest you know moments in our device history to get going into, you know, the smaller private company. In this next phase you went from being CEO to the chief commercial officer and I'm wondering take us through sort of the intentionality of that, because I'm sure you had the chance at that point to either go back to a big company, be CEO of another company. What were you thinking of at that point in time?
Chas McKhann:Back to a big company. But I'd already gotten the bug of liking the environment, of being in an entrepreneurial environment, and that, to me, was pretty important. And so then, and I did think about do I go back and try to get another CEO role? But I had a much greater appreciation just for how hard it was and all credit to the CEOs out there who are battling away and having success and I also realized that there was plenty that I could still learn to become better prepared over time. So I still had that, I think, as an ultimate objective. But I also had a bit of self-awareness that, having stumbled frankly in my first role that maybe I wasn't a sure thing bet either for certainly a top bet, you know, ceo opportunity. And so you know what's the old Groucho Marx line of I don't want to be a member of a club that would have someone like me as a member. Right, you know, like I, just I realized that I would be better served to go. You know, really still exciting opportunity, but go get some more experience, which I did. And so I joined Intersect ENT.
Chas McKhann:I mentioned Lisa Earnhardt previously. She at that point was the CEO of Intersect. We were just going public. Her job was changing dramatically intersect we were just going public. Her job was changing dramatically and so I was brought in as chief commercial officer to help continue and lead the growth. We had a really good team there as well. Rob Binney was leading sales there. Rob now has become a very successful CEO as well, susan Stimson in marketing. So again, a great team. We were about a little over 30 million. We grew it to about 80 million while I was there and eventually the company was bought by Medtronic and then for some personal reasons, I switched to Torax Medical. That was based here in the Twin Cities where I live Another interesting story.
Chas McKhann:It's one of those that and there are many like Torax that get approval but aren't ready truly to commercialize or struggle with commercializing because we still need more long-term data, we still need help on reimbursement. But by the time I got there some of those pieces were falling into place and we were able to really kind of put things on a nice growth trajectory. And you know I mentioned before kind of aligning sales and marketing and our reimbursement efforts and building a commercial model that worked. And we took sales from, I think, less than $10 million when I got there to about a $30 million run rate, and then J&J bought Torax for a little over $300 million, so it was as high as how come? It came faster than I expected, but I learned a lot in both of those roles. That served me well when I then went full circle and came back into a CEO role at Apollo Endos urgery.
Geoff Pardo:Yeah, and tell us about that because you know your next, the next two that we'll talk about Apollo and then Silk Road. Those were it wasn't like you're stepping into things that were firing on all cylinders, Right, they each had their own set of challenges. So maybe, starting with Apollo, what did you see there that kind of made you think you could make something happen here? Tell us a little bit about that process.
Chas McKhann:Sure, but a broader editorial comment. You're absolutely right, Geoff. I've learned that when you get approached by a recruiter about a CEO job, there's probably a pretty good reason why they're looking for someone. And you know, apollo was one of those situations. I had known about the company for a long time, I mean fascinating company founded by Dennis McWilliams and a team of really entrepreneurial GIs early 2000s, right when they started working on this, and they were the pioneers of notes, procedures or natural orifice surgery, and probably ahead of their time, frankly. And then they certainly ran into issues on the regulatory front about how quickly they were going to be able to develop various products and indications, and so the company had a bumpy road, to be honest. And so, and then they went down the path of they did an acquisition that didn't work out very well. Dennis left and a new CEO came in and to his credit, he kept the company alive, but kind of barely, and it had been a public company but the revenues were declining and it hadn't gone public from a position of strength. It had been kind of a reverse merger in the public markets just to almost stay alive. And so I had a healthy dose of skepticism when I was first approached, to say the least, but I started looking into it and I realized that, despite all of that, there were some great assets that the company had Out of that initial work. The overstitch suturing device allows endoscopic suturing um, it was a fantastic product. We were about to launch a new product called x-tac, which is another suturing device. We had a presence in 75 countries around the world, which I never would try to build myself, but we had acquired it through the acquisition I mentioned, um, and that gave us a bit of a portfolio effect, which is a nice thing as a public company, of different markets and how you're growing different markets. And then we were in the very early stages of developing an endoscopic procedure for weight loss using the overstitch device and working on a pivotal trial that ultimately was published in the Lancet. And working on a pivotal trial that ultimately was published in the Lancet.
Chas McKhann:But that work was starting and I was, you know, familiar enough with it and did my homework on it, where I'm like wait, there are ingredients here, right, if we're able to get the right people and team in place, there's some really cool things we could do. And so I joined and I also got a little lucky. I mean, some of our R&D team had weathered a lot of down years but we're still there and are incredibly talented. Some of our best sales reps had stuck around because they loved OverStitch and loved the customer base, so there were pockets of some really good, talented people. But then I also brought in a new head of sales, a new head of marketing, a new CFO, a new head of reimbursement. So it was a lot of mixing old and new to help turn Apollo around and we were able to do that and that was a lot of fun kind of building that culture and working on it together.
Geoff Pardo:And actually I wanted to touch on the culture piece of it and sort of because, as we're sort of tying things together here, I mean this business is tough, the company had been through I mean this business is tough, the company had been through you know sort of the vicissitudes of our world and I imagine that there must have been some fatigue there. You know what is going to be the end game for everybody. You know, I'm sure there are a lot of high hopes that it just over time, you know, started to, you know, become a little more tempered. So I wonder, coming into that situation, how do you handle sort of a cultural rebirth Do you have? I imagine it's not like a lot of Newt Rockne speeches, but maybe talk a little bit about how you approach that as a newly incoming CEO.
Chas McKhann:Yeah, I thought a lot about that coming in because, both internally and in the public markets, the company needed a real refresh. But, as I mentioned, I really felt like the building blocks were there and before I joined, actually I reached out to Chris Simon. Chris is the CEO of Humanetics.
Chas McKhann:And he's also, chris was one of the first partners I worked with at McKinsey. So this is again keeping those contacts alive. And Chris had done a phenomenal job when he took over his CEO role of laying out kind of his vision for the company over a period of very classic McKinsey sort of three phases of growth short term, but doing it in a way that was credible. Now Chris had the benefit of having had a McKinsey team work on this for, I think you know, months before he joined. But I didn't have that benefit but I still had a feel for actions I thought we could take to really get things kind of on the right track near term. And then, if some of the chips fell on some of the things I mentioned with you know the weight loss procedure I mentioned in the clinical study. So I started laying those out and I was really conscious and thoughtful about how much to put out there. So I didn't get ahead of my skis but give people enough of a vision of there's a lot here to get excited about Working on that with some of the members of the team.
Chas McKhann:And then I had the benefit of bringing in a few other people who I'd worked with on the sales and marketing side. They'd worked with me at Torex and we kind of crafted that together and then hired Jeff Black, our CFO, who was outstanding and was able to sort of lay that out, and then it became okay. The vision's been laid out. Our analysts started playing it back to us, which was awesome. That was perfect right. So it's starting to resonate. I used it in our internal meetings, kind of this whole framework, and then it was so important to hit the early milestones, to build confidence, and we were able to do that right. I mentioned we had a new product launch and it did well out of the gates.
Chas McKhann:Actually, yeah, but we were very intentional on making sure it did well out of the gates and build momentum and then sort of the pieces fell together and that helped get people on a different foot. And then obviously the market started to react to that as well. When I joined, when I started my discussions, we were less than a dollar a share, I think. In that mid-period we were up to like $5 or $6 a share, and so people could see progress. But then ultimately, when we did engage with Boston Scientific, we ultimately sold the company for $10 a share. So, it was a nice progression.
Geoff Pardo:You know the degree of difficulty of what you did. I mean you know it is hard enough to come into a company that is not public and execute that sort of turnaround, but to do it under the public spotlight, I mean, is when you have these quarterly pressures, I mean how did you deal with that?
Chas McKhann:Because that to me is an order of magnitude more difficult than not having that scrutiny. I guess, yeah, it is. You feel the pressure because it is that quarterly piece. I actually reached out to a friend of mine who does investor relations in the tech industry and got a lot of advice from her about sort of managing the street, managing investors. Um, like I said, I hired one of the best hires in my life of a really good, experienced public company, cfo jeff had worked at alpha tech spine as they went through, you know, tremendous growth in the public markets and then just being very intentional about how we told the story right, how we communicated about it, how much we disclosed, how much we did not disclose sometimes, and then we were fortunate that we were able to deliver on that and build some confidence. And so in doing that we did do a fundraise about nine months after I got there and it truly in some ways was the IPO for the company because I mentioned it hadn't truly gone public before. So we raised $75 million and brought in really good new med tech investors you know big names that are in the other kind of big companies in our space. We brought in new analyst coverage. When we did that, Callan and Stiefel joined us, which was great and really good analysts from there as well, as you know, others that have been supporting us for years.
Chas McKhann:So I enjoyed that challenge, but it is. It's a lot of work and it definitely you feel the. You feel the pressure of it, no question. I'd reached out to a friend of mine who had been a tech CEO and I was like how long were you in the role? He said 23 quarters. I knew exactly Is that sort of your life?
Geoff Pardo:Yeah Well, you must have enjoyed it because you execute that sale and not too long after that, silk Road comes. And maybe I'll ask the same question what did you see? I mean, that was a company that had been a very high flyer in the last public wave. I think Erica Rogers did a great job sort of leading it through that period, but it had come upon some more difficult times. I'm curious. You know what intrigued you about that story.
Chas McKhann:I'm curious what intrigued you about that story? Yeah, so this was the summer after we closed the sale of Apollo. I was approached about Silk Road and you're absolutely right, all credit to Erica and her team that did an incredible job of building the TCAR procedure this is for carotid artery disease and successfully building a company with, I think I think, about $180 million in sales that year, um, which is no mean feat in our business, um, but at the time that I was joining, the company was or at least interviewing for the job even the company was facing a series of challenges. There was some, there was some. Some aspect of growth had been slowing. You know, it had been kind of that 30% plus growth and, as you mentioned, the high flyers and there were a few quarters that didn't hit that and in some ways, almost more importantly, didn't hit Wall Street expectations and Wall Street doesn't like that. There was a new CMS ruling that was going to favor traditional carotid stenting more than in the past. That, frankly, the market's completely overreacted to and in the past, that, frankly, the market's completely overreacted to, and that's probably what almost drew me in, because I knew enough having I mean, the crowded stenting world started when I was at Cordis, however, many years before, and we were working on some of the early trials to develop it back then and, frankly, it hadn't developed much as a market for a whole host of reasons, with reimbursement only being one piece of it. But the market had overreacted, so a stock price that had been at like $60 a share or more was down to like $6 a share. So it just felt like a disconnect in the marketplace as well as a really good company it was.
Chas McKhann:You know, apollo was a turnaround. It was an operational turnaround that needed to happen, happen quickly. Silk Road was not that. It was a good company that was doing a lot of things right.
Chas McKhann:Now, if we're going to stay standalone which we were working on we're going to have to evolve right, because we were still essentially a single procedure, multi-products, but one procedure in one market, that being the US, and I learned from my time at Intersect, that's a tough place to be in the public markets. The US and I learned from my time at Intersect, that's a tough place to be in the public markets. So, and again, the team was already working on much of this, but we had to get very clear on some of our international plans. We had to get very clear on priority. Seeing some of our R&D work, we were looking at things that we might acquire, and so all of that would have, you know, taken us down a different growth path than the company had been on for the next three to five years. And we were working on all of that. But then you know the conversation also with Boston Scientific, and it's a good fit. It's a really good fit within their peripheral vascular business and they're able to work.
Geoff Pardo:What was your major challenge as you stepped into the role at Silk Road, given that there was a good team of calm both internally and in the markets again, right.
Chas McKhann:I remember JP Morgan that year very clearly of just having the benefit of being an outsider coming in and kind of reiterating the benefits of the procedure and the customer base and where it fit and room to still grow, and and just and all the rationale as to why we understood the change that was happening within the reimbursement environment but didn't feel that it was going to be anywhere near as big of an impact as was being feared, right. So so providing a sense of clarity and calm was really really important, as important for the team as well. You know, being in a public company, people of course pay attention to the stock price, and they are. You know it impacts their personal net worth and even just almost the scorecard of how the company is doing right. And so I think, being able to do that, and then, you know, we reset expectations for the year, you know. And then you know, we reset expectations for the year, you know, and then we're able to start embarking on a path of, you know, making very clear that we're going to hit and exceed those new expectations and kind of pull our way out from a confidence standpoint. Confidence in the public markets is so important and we kind of lost that we needed to regain it.
Chas McKhann:Execution with the sales force we had a very good sales team, but executing and making sure we were clear on how we're going to continue to sustain growth and, even if it wasn't 30% growth, how we're going to reliably sustain growth in the 15 to 20% range, while then working on some of these other areas I talked about for growth, but those were just kind of getting going as we then entered into the acquisition discussions. We also had to rebalance the cost structure of the company as well. I mean, silk Road was funded and was spending money as kind of the go-go grow at all costs version of the environment that we lived in in the sort of 2021, 2022 area. It's not that anymore, right. So we needed we were getting close to profitability and so we didn't drastically cut, but we were starting to make cuts to get much closer into turning cashflow positive and had I stayed longer, that would have had to have been a big piece of it as well, because we needed to get more fiscally disciplined as well.
Geoff Pardo:Yeah, yeah. It's incredible how the market's really shifted right To only caring about revenue, to suddenly, you know, really wanting to see what the path to cashflow break even was and having to adjust to that.
Chas McKhann:I remember the quarter it happened. It was when I was at Apollo. I mean, I remember the different set of conversations and it was right when, when interest rates started to spike and and you know, especially like hedge fund kind of folks who had never many of them quite young had never operated in interest rates that again, by historical standards aren't that high, but felt a lot different than you know, two and 3% rates, right, and we're suddenly saying, all right, capital is expensive, what are you doing about it?
Geoff Pardo:Yeah, yeah, interesting. So now, what's next? What's next for you? You have, I imagine, a lot of flexibility in terms of what you want to do. What are you thinking of?
Chas McKhann:Yeah, no, I appreciate it. I've been thinking a lot of I've had time to think about it and it's fun to now think about kind of filling in a portfolio of kind of board roles and other similar activities. I recently took on a new board role with a diagnostics company called Exogen. That's a publicly traded company. We've got a very innovative test for lupus and some really exciting pipeline products for autoimmune disease and kidney disease and I'm a senior advisor at McKinsey, so a little bit of going full circle and working there.
Chas McKhann:My wife is from Singapore and so I'm doing some things with the Singaporean government and then you know, in conversations with a handful of other companies and my conversations, my learning and talking to others who've made that similar changes is to be careful not to overcommit.
Chas McKhann:So I'm trying to be very, very careful to find a really, you know, I'd rather do a smaller number of things where I truly can get involved and have an impact on the types of companies I like to work with right Things, typically commercial stage ones that truly can impact patients' lives.
Chas McKhann:You know, I do still hear my dad's voice in my head, you know, as I think about what I'm doing and what companies I might want to work on. And then you know, it sounds simple but ultimately it's also about the people you work with and, at this stage of my career, being able to do that and work with good people and have some fun doing it. So we'll see how that goes right. I don't know how that's going to feel on a personal level. I know what being in the corner office of a public company feels like and I enjoyed it. But I also, you know, I'm working real hard now to get myself in better shape and not travel as much and all those pieces as well. So you know, but I'm committed to sort of give this portfolio approach at least a few years and see how it goes, and then I'll probably reevaluate it.
Geoff Pardo:Yeah Well, I'm sure you're going to be great at it. I mean it is. I imagine it is a transition. You know you've now been carrying the ball for you know many years, and now going back to influencing the ball carrier, as we like to say, is different, but you have so much experience in doing that already, I'm sure you're going to be fantastic. So I can't thank you enough for taking the time and, as always in these discussions.
Chas McKhann:It's great because I learn a lot and I've really enjoyed the discussion. Geoff, thank you so much for having me.
Geoff Pardo:It's been a real pleasure. Great Thanks, Chas.
