Episode: 204 - Brian Webster on Steady Leadership through Turbulent Times

Brian Webster, President and CEO of Kestra Medical Technologies (Nasdaq: KMTS), joins Medtech Talk to discuss his 30-year career in cardiac defibrillation and the road to founding Kestra. With host Swaril Mathur, Webster unpacks learnings from leading through decades of repeated acquisitions, divestitures, and restructurings — and keeping the team motivated through it all. Their conversation explores what it takes to commercialize a rental fleet model with outsourced manufacturing, revenue cycle management, and payer contracts, as well as closing with the decision to IPO and staying steady in volatile markets by focusing on execution fundamentals. Subscribe, share this with a MedTech operator who’s scaling something hard, and leave a rating or review with the leadership lesson that hit you most. 

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Transcript

Welcome And Guest Introduction

Swaril Mathur 0:02

Welcome to MedTech Talk. I'm your host, Squarel Mather, and I'm pleased to be joined today by Brian Webster, founder and CEO of Kestra Medical Technologies. Brian has spent over 30 years in MedTech, much of which has been in the cardiac fibrillation space. And so I look forward to diving in with you, Brian, into your career arc as well as the journey of Kestra. Welcome to the podcast.

SPEAKER_03 0:24

Well, thank you, uh Smarl. I'm really uh pleased to be here. And um, it'd be fun to kind of share some some of the journey over the last uh few decades, believe it or not. Uh so I'm happy to be here.

Swaril Mathur 0:36

Wonderful, awesome. Well, I always like to start whenever I'm speaking with a leader in our industry right from the beginning of kind of your career arc and understand how did you get into med tech and what has your journey been like throughout your career arc within med tech to get to where you are today?

Brian’s Winding MedTech Start

SPEAKER_03 0:51

Yeah, it's a it's a little bit of a winding road, but by origins in medtech were at a at a company called Physio Control Corporation, which Physio for many years has been the world leader in external defibrillation space. I joined the company in 1992. At that time, physio was an operating division of Eli Lilly and company. And Physio, among some other med tech companies, were kind of the device division within Eli Lilly. That was when they had a medical device division. And I joined the company. I was actually in the supply chain area, was my field of expertise at that time, and joined the company in, as I mentioned, in 1992. And then after a couple of years, Eli Lilly decided to divest the company along with their other medical device companies, and we were sold to Bain Capital, which was a private equity company. That was in about 1994, I think. And Bain Capital ran the company as a standalone private company for a couple of years, took it public in probably about 96, and then in 1998, the company was acquired by Medtronic. So that was that was turnover. Yeah, lots of lots of turnover, but also lots of lots of opportunities to learn around, you know, because as a company within Eli Lilly, we had to really reconstitute ourselves as a standalone private company. Some of the some of the infrastructure and all the things, you know, outside the US, we had to rebuild. And then once we to get to the the the private uh to public uh transition. And then, you know, once we got acquired by Medtronic in '98, then it sort of went the other direction again. And uh, you know, we we integrated into Medtronic to to some degree, mostly outside the US. And my career track was sort of I was at that point moving from the supply chain area up into running the manufacturing facility at Physio. And and we were a part of Medtronic for about 12 years, 2098 until 2012, I guess. So I guess that's a little over 12 years. And my my career track went from the supply chain area to running the manufacturing plant. Then we were beginning to launch our AD business, uh, which was really a whole new category at that time where you know, instead of selling to hospitals and clinics, you were selling to the general public and public institutions and things like that. And so that was a whole different ballgame. And I was I was moved into the general management role of that AED business and did that for a number of years. I was that was kind of a, I would say, a pretty pivotal change for me in my career, moving from you know operations into now doing the sales and marketing and and that general management role.

Swaril Mathur 4:12

And if we had rewound the clock and spoken to the version of Brian that started at physio control back in 1992, was that your ambition at the time? Like what what did you what career path did you think you were on at that point?

Learning To Thrive In Change

SPEAKER_03 4:26

I think the the honest truth is I I didn't know what uh what path I was gonna take. I I just I trusted, you know, at that stage of my career, I trusted that if I, whatever job I was in, if I did a great job at it, then you know, other opportunities would present themselves and I would continue to grow. And I kind of told myself, I'm gonna stay as long as I'm growing, and as long as I feel like I'm, you know, I'm learning and I'm excited to get up and go to work every day, and I'm working for a company that has a meaningful mission and purpose. And that was my I there was no big roadmap. Uh, you know, I I always joke, I I sometimes I interview candidates and you know, people younger in their careers, and and I always ask them, you know, if you open the inside of your medicine cabinet, you know, is there a is there a roadmap of your career on the inside of that? And I I I just never I just never went that way. I just kind of just kind of went from one opportunity to another and you know kind of kept growing.

Swaril Mathur 5:28

Yeah, yeah. It's it's funny you say that because I was absolutely the type of individual that had a roadmap at some point or you know, a decade ago, right? And and maybe that's just a habit that gets built, you know, when you're when you're in school, it's like you have to build your four-year plan of which courses you're gonna take. And things things can be very linear and pre-planned, and then and then coming out into the workforce, I thought that's how career project progression was gonna work too. And and companies, you know, have things like career ladders and things like that that that some sometimes make you feel like that is kind of how things will work. But I I had to learn the thing you just articulated, which is you know, letting go of letting go of this like predefined career arc and instead just chasing, where am I learning? Where do I feel like I have an impact? What leaders do I want to work with that are mentoring me and coaching me, turned out to be a more fruitful, rewarding, and and you know, exciting career path. But but that was not something I set out to do. It was I was in the opposite boat. I I fell into that.

SPEAKER_03 6:28

I think I was definitely influenced heavily by the organizational changes that went on with the company being spun out, being bought by a taken public, you know, acquired by another big company. And and that kind of pattern repeated itself again later. But but the the common theme throughout all that is change, you know. So and what you know, what I found is that the the the leaders who were maybe younger in their careers, but going through all that change, the ones who adapted to that change and sort of leaned into it the best and saw the opportunity and change, those are the ones that really, you know, were successful.

Swaril Mathur 7:09

Yeah, yeah. Can you unpack that a little bit more? Like what what were some of the differences between leaders who were able to adapt to the change successfully versus leaders who maybe didn't and therefore either exited the organization either of their own will or not of their own will or just had a harder time?

SPEAKER_03 7:24

Well, in in my example, you know, you we kind of went from, you know, this sort of when we were a standalone after the spin-up from Eli Lilly, we were, you know, we were a medium-sized company, small to medium-sized company, and we had the culture around that, right? And and you know, a little more fast moving and everything else. Well, when you get acquired by a big company at that time by Medtronic, things start to change and you get you get sort of folded into their culture and everything. And and I think whether it was the cultural part of it, you know, being able to let go of some of the the cultural norms, the way you, you know, certain things uh happen, being able to let go of that or not is is really important. But it's also just it's also being willing to say, hey, there's different ways of doing things. And just because we've done it a certain way here doesn't mean that we shouldn't, you know, be open to the idea that maybe these processes that we've been used to can be done, you know, in a different way. And a lot of people, uh as you know, I mean, a lot of people are just really resistant to that because maybe they participated in developing the process and so they have some real ownership over it and they feel challenged when somebody else comes in. There's just a lot of that kind of stuff that goes on. And I I just always found you you have to be able to react to that and you have to be able to adapt to it. And those who adapt the fastest are the ones who win.

Swaril Mathur 8:54

Yeah, yeah. Well, it's it's really helpful to hear, and I think you know, it it's a lesson that probably applies to every leader in our industry, whether they're at a small company or a big company, because it goes both ways in the acquisition, that both parties have to, you know, be able to adapt across the aisle. And and even for folks who are at small companies and stay with a small company, a small company changes a lot as it grows. Right. And and there's always this notion of, you know, a phrase I find myself using a lot is like everyone is doing the thing they think is best at that point in time, right? And everyone has that belief for a reason. It doesn't mean that's the only right way to do it, right? But that can be a very difficult, it can it can feel very, you know, very personal to each individual because they they are doing things that way for a reason. And seeing someone try to convince them to do it differently can be really hard. Yeah. What what kept you at the company through all of this turnover? Did was there ever a moment where you thought about leaving and doing something else? And I keep saying turnover, but I really just mean these different stages of the company getting acquired, going public, etc.

Career Growth Without A Roadmap

SPEAKER_03 10:01

Yeah, the the the main thing that kept me there, uh oddly enough, was change. Um, because I I kept you know ch taking all these different new jobs over the over the course of my time. You know, I went from supply chain to heading up operations to doing the the general manager role to doing global marketing and eventually into the president of the company role. And so, you know, I was I was getting to see the company from every angle. And it it really was a great training ground for me because I was always being tested on how how do I learn this new part of the company that you know I haven't done before. And so I was growing all the time. And I think when you're doing that and you're moving every couple of years uh and you're growing like that, then you're not really thinking about leaving because why would I leave? I'm growing, I'm learning, and you know, obviously you have to be, you have to like the environment and the people you're working with and all that kind of stuff. But for me, it was just a a really, a really nice opportunity to grow as a as a leader, to grow as a professional. And and I had lots of people that I could sort of see and and you know, see how they handled situations and and really strong leaders that that helped to shape the way I, you know, ultimately ended up being in my leadership tool toolkit.

Swaril Mathur 11:30

Mm-hmm. Mm-hmm. And and you mentioned a moment ago you kind of evolved from supply chain, obviously, into a broader operations role and then more into the marketing commercial side of the house before ultimately becoming president of the organization. What was the company at that point that you became president? Was it out of out outside of Medtronic?

FDA Shutdown And Consent Decree

SPEAKER_03 11:49

Yeah. So so uh we were a part of in a pretty steady state for about 10 years or so as an operating division of Medtronic. And we had you know our own factory and everything. So we hadn't integrated any of the factory operations and and things like that, or quality systems and things like that into Medtronic. So it was kind of a physio control, it was a standalone division for the most part, except outside the US. And so I progressed into that general manager role. Then we had a new president come in and and instead of being kind of commercially structured, he wanted to be more functionally structured. So I moved into so there was no more GM of the AED business, it was just a head of sales and ahead of marketing. So I moved into the head of marketing role, and then and then in 2006, that uh that president left the company to go to a different division within Medtronic. And so then they moved me into the president of Physio, but but a part of the Medtronic family. And so I was in that, and and about 30 days later, we we ran into a big problem with the FDA and and basically got shut down by the FDA for quality system issues, and eventually ended up entering into a consent decree with the agency. So uh yeah, you talk about uh formative experiences. Um having to take that on right after I just come out of the marketing function and and try and figure out how to how to navigate through a really complicated, really difficult situation. That that was that was really tough. And at the same time that that was happening, Medtronic had decided and publicly announced that they were going to divest of physio control. So it was sequence was they said we're gonna we've decided to you know to divest the company and and then within 30 days FDA came in and and wow shut the company down. And so Medtronic had to pull up and say, okay, we're gonna we've got to hold on to them for a bit to get through this thing. And you know, three years later that we finally got through that.

Swaril Mathur 14:06

Oh my gosh. Well, what did it look like to get through that? Because I think most you know, most of us would probably assume that is the end of the story right there.

SPEAKER_03 14:16

Yeah, it was those were some those were some soul searching days, I have to, I have to admit. Because we were, you know, we we were number one in our industry. We were globally and and you know, as a global company, and and to all of a sudden not be able to ship your product is really difficult. So we had to negotiate with the FDA to find some terms that we could, you know, that we could we could get to with them that would allow us to not kill the company, but at the same time, they wanted to they wanted to have complete control of their enforcement action against the company. So so we had a you know, obviously a lot of work to do to basically redo all of the quality systems, a lot of a lot of things around how the company approached quality in that in that environment. We, you know, we had to do a a pretty big layoff because we had we had a big factory of people that we didn't, you know, they didn't have anything to build anymore. So we had to do that. And that was uh, you know, that was something that I'll you know you never forget when you have to lay off, you know, a few hundred people all at one time. So, you know, the the leadership lessons around that kind of thing and how to navigate through that, I think uh uh definitely shaped the way I think about leadership uh in the over the years. And then, you know, we we eventually got through it and came out the other side of it and brought a lot of the people back into the company and and ended up so that was about 2010, and then after we operated the company sort of post sanctions for about a year, then Medtronic came back and said, Okay, we're we're gonna follow through on you know the spin out of the company and kind of put the company up for sale. And in in uh early 2012, Bain Capital came back and bought the company again. So that was that was really interesting. And and they came back, bought the company, and we and I was the CEO of the company now is a private company again under Bain Capital again, and we we ran the company for I guess four years, and then in 2016 we sold the company to Stryker. So it's a really really interesting journey in, you know, before we sold the company to Stryker, we carved out an RD project that we were in the early stages of. That was to develop a wearable defibrillator. And that we carved that out of the striker deal because it was just too early stage, we weren't gonna get any value for it. And we negotiated with the Bain team so that after we closed the striker transaction, that they would then finance what's now Kestra. So that's uh that's how we started up Kestra. Oh my goodness.

Keeping Morale Through The Grind

Swaril Mathur 17:17

The spin out, the sales lived multiple lifetimes of MA just in your in three decades of med tech. That is wild. I I want to just go back and ask one final question about the about the physio control days, you know, during that kind of FDA consent decree period. Three years is a long time to grind through something that, you know, feels like a a massive setback. How did you keep morale up in the company? Because it's one of these interesting things where it's the the moment the company is going through a real struggle is also the moment where it needs top talent the most. So, how did you retain people? What kept people there when I'm, you know, I'm sure any person who is talented had other opportunities to go join a rocket ship. How did you keep morale up and and talent?

SPEAKER_03 18:05

I I think I think just uh a a couple of basic principles. One one is that really transparent communication. You know, we we had a lot of I spent a lot of time up in front of the team telling them exactly what's going on. Like, here's what we're doing next week, you know, and and why we're doing it. And, you know, I I think that I think that was really core to the whole thing because people didn't have to sort of hang around the water cooler and and make up stuff, you know, here's what's going on, and we're we're worried about this or that, because we just told them, you know, and told them the truth. And you know, so I think I think that was really important and and just a consistency in the communication, transparency in the communication. And and I think the other thing is just, you know, it was personal. Like we were eyeball to eyeball with people. We were talking to people a lot, you know, and just trying to make sure people could see that look, there is a there is a a future here, you know. Yeah, uh, we're gonna have to stick together and grind through this. It's tough. We'll never forget it, but but there is a future here. And if we all kind of work together as a team, we we we tried to paint the picture of what that future could look like. And and so I I think just a lot of that kind of communication. And you know, when you do that consistently enough, then people, it's amazing how loyal people are because they they come to count on that and they know you're gonna straight shoot them and they know you're gonna you're gonna share the truth, and no matter how hard it is to talk about.

Swaril Mathur 19:45

Yeah, yeah. No, I think those are, I mean, those are incredible lessons to have learned early on. And and again, truly, I think for any different leadership team, it that could very well have been the end of the journey. But to be able to not just turn it around, but then have another successful stint as a private company and then another successful exit is is really something to be proud of.

SPEAKER_03 20:07

I think one of the, you know, Sora, one of the other big lessons from that unfortunate situation was that when we had to lay people off, we had to we had to lay, think it if my recollection is it was it was several hundred people. And one of the things that we did is we we said that, you know, this is not HR's job to do this layoff. This is I'm gonna be sitting in there, and every one of them with the functional manager and the HR person, and we're all gonna look this person in the eye and have a one-on-one you know, three conversation with him and explain what's going on and why and everything. And you know, that was that was a really emotional process to go through for me and and really difficult. But I really, really felt strongly that our leadership team needed to needed to remember what that felt like and needed to remember the kind of commitment that we have to make to our team to to never be back in that position again. You know, never never put them at risk again. And and we I really wanted it to be, I wanted it to hurt, right? And it did. And and I think that I think part of that really kind of helped to fortify the leadership team as a team.

Swaril Mathur 21:26

Yeah, yeah. You know, what what I love about that, I'm so grateful that you shared that, is I think sometimes, you know, so I went to graduate school in the Bay Area where there's a lot of talk about young people wanting to be startup CEOs. And I think a thing that doesn't get talked about enough in those conversations is that, you know, becoming a CEO of a company or deciding to even start a company is not just about a company and a product. It is deciding to be accountable for people's livelihoods. And that's that's the weight of the responsibility that I think gets overlooked sometimes. And obviously, you know, you had the opposite approach of focusing on that very intentionally and taking that responsibility extremely seriously from the beginning in the early days of your career. And so wow.

SPEAKER_03 22:13

Well, it's in it's interesting, even right now, you know, as we're we're running Kestra and we're you know we're going through like our normal annual planning process and everything. And you know, that's always like a big horse trading activity, gives you know. And and we even now we have conversations about, hey, let's let's don't get too heavy on the team build-out. And don't let's don't get ahead of ourselves so much that we're gonna be put in a position down the road where we have to go back and have those conversations again and we have to trim the the team. Well, you know, that's our responsibility as a leadership team, and I I just feel incredibly strongly about that. And every time a company does a a layoff, I always view it as a failure in leadership, period. And I just think it's that that whole thought process really was has sort of stuck with me through uh over the years because it's it's it's one that I still think about a lot.

Swaril Mathur 23:18

Mm-hmm. Mm-hmm. Absolutely. And I can see why. It's a pretty formative one.

SPEAKER_03 23:23

Yep.

Swaril Mathur 23:24

Shifting gears a little bit to Kestra. So you mentioned a moment ago physio control was ultimately sold as Stryker, but there was this little RD initiative that was carved out separately. So d tell me more about that. Why why was this RD initiative carved out separately? What was the thinking back then? And then structurally, what did that mean?

SPEAKER_03 23:46

Yeah, it was uh it was a pretty creative uh approach. And basically, when as soon as we were spun out from Medtronic and Bane Capital bought us, this is uh early 2012. We we had been watching our competitor, a company called Zole Medical. They were a competitor to physio all over the globe. We were sort of number one, they were number two, and they had acquired the assets of a company called Life Corps, which had developed a product called the Life Vest, which is the was the first wearable defibrillator. And and so we had seen them starting to make progress with that and market development, and they're growing that business and everything. And it's it's essentially taking the technology in an AD and building it into a wearable platform. It's a very, very difficult product from a design perspective. But we had seen them making progress. So we had, as soon as the the new partners at Bane Capital came in, we we went to them like within a couple of months and we said, hey, we think we can do that, and we think we can do it better than they can. And we want to kick off a project to do it. And they were they were really supportive. They said, okay, let's go take a look at it. So we so we spent about two years doing doing some of the early work to, you know, feasibility work to make sure that we knew what we were doing. Then we also had to to you know just be mindful of of just the overall project and how much time and money it was gonna take and really really form up the framework for it. And we got a couple of years into it, we realized we we can do it, we have the know-how to do it, we're gonna have to learn a lot and along the way, but we can do it. It's gonna take a lot of time and a lot of money. And so we we sort of said, okay, that's gonna be a challenge for the for the physio PL because we're trying to rebuild this business after all this big shock to the to that company. And so we we had this idea that, hey, why don't we why don't we carve it out from a legal and financial perspective and take some of the investment from our partners at Bane Capital, at Bain Capital, and invest it into this carve out. And we we basically structured it as a you might think of it as a skokeworks, maybe a term that people might you know be familiar with. So we left it embedded within the company at Physio and had access to all the labs and all the manufacturing and supplier partners and quality system and people to support it, but it was its own entity. And and so we basically at that point had two different companies, physio, and then now this other we called it the Physio Control Development Corp. And so we we did that and just ran it as an RD project for a couple more years, then the then the striker acquisition occurred. We were early enough on in the project where we just weren't gonna get what we thought the real value of what's now Kestra would be. And so we negotiated as part of the striker package that we would leave, we would keep it out of the deal. All the people that were embedded within Stryker working on the project, we would enter into a services agreement with Stryker whereby for the next couple of years they would stay embedded within the physio now striker environment. And and so basically they were they were striker employees at that point in time, but we were paying for them on the project 100%. Yeah. So that gave us the benefit of you know developing the product in in a in a highly regulated environment, you know, with suppliers and manufacturing capability and a newly a newly improved quality system and and design control capability, all that kind of stuff. So it was a it was a mature product, you know, from that perspective. And that was I think that was one of the reasons why we have such a really outstanding product now, is because it was designed in a in a really mature quality system.

Swaril Mathur 28:11

I mean, it sounds, it sounds like such an idyllic structure, right? In so many ways, you get to have your cake and eat it too. It was it was separate, so you got to capture the value of it separately, which is obviously playing out in the Kestra story today, but it was embedded enough that you got to leverage the existing talent and leverage all of the resources of both physiocontrol and then ultimately striker. What is there anything that was a downside or a risk? Were there any kind of risks to structuring it that way in the early days of development?

SPEAKER_03 28:40

Well, the big the biggest risk was was the people side of it because the the transition services agreement was only designed to last through the end of 2018. So it was a little less than two years. And at that point in time, we had a you know, we had about I think 36 people that were that we were paying for, you know, that were on the striker payroll. And we had to figure out, okay, the the agreement's over, they're kicking us out. I don't mean that in a negative way, I mean that was the agreement. We would leave the premises at that point. And so what are we gonna do? And because they were striker employees, so we agreed with striker that we would offer those 36 people the option of either they stay striker employee and look for other projects to work on, or they would come with Kestra. And 35 of the 36 came with Kestra.

Swaril Mathur 29:39

Yeah. And and why were your incentives and strikers aligned at that point? Because again, it's it's so hard for me to imagine any other situation where those incentives would would be aligned. You have this group of talent, Stryker paid for the acquisition, they they paid to acquire that talent. Why would they say yes to sure, Brian, go ahead and and try to poach 36 of these people?

SPEAKER_03 30:01

I I think the the alignment, if you will, on incentives between us and striker at that point, uh, they were influenced by the fact that many of the of the team members that we had embedded within Stryker were actually we hired them specifically for the the WCD project. And so they didn't really have other projects to go to. And and so it made sense from that perspective. And I think the striker, there was also a desire by the striker team, to their credit, to to just do the right thing by people and give them choice and not force them down one path or another. And so, you know, we we came to an agreement on that and ultimately ended up treating the people right and giving them the choice, and and they made the choice, and and most of them came over, and 35 out of 36 came over and and joined Kestra. And and then from then on, we had to sort of build up everything ourselves. So now we had to build a quality system and we had to build, you know, we had to get facilities and we had to do all that stuff. So it it was a really interesting journey, but it allowed us to do the the hardcore early RD within that environment. And then once we got out of that environment, we were far enough along on the project that we, you know, we were we could see the end of it, and we could see, okay, we're on our path towards, you know, doing clinical trials and things like that. So the timing worked out great, but it was it was not your normal pathway. The one other thing I would just say is that all along that path, we had just, you know, incredible financial support and sponsorship from one financial sponsor, and that was Bain Capital.

Why Bain Backed The Bet

Swaril Mathur 31:43

Mm-hmm. Mm-hmm. And it's funny, you know, I I was gonna mention this at some point in our story that that Bain has come up over and over in the life cycle of physio control and now Kestra. And I'm just curious if you can speak a little bit to the importance of having the right financial partner at the table. And what what made Bain the right financial partner? How did you, and the, you know, Bain is obviously the organization, but there are, I'm sure, just a couple of people that you were always working with, right?

SPEAKER_02 32:10

Yeah.

Swaril Mathur 32:10

How did you build that mutual trust and and what was that dynamic like that made this so productive?

SPEAKER_03 32:16

It's just one of those stories that probably should be a HBR uh article, uh, you know, at some point. But back in the in the you know, mid-90s, when when Bain bought uh Physio from Eli Lilly, they had a great exit, you know, when they when they took the company public and eventually sold to Medtronic. So they had a really, really attractive exit. And and so when it when physio came back on the on the market again, you know, uh when Medtronic decided to spin it out, the Bain folks said, Hey, we really like that business and we want to go take another look at it. And it was some of the same people, you know, 12 or 13 years later, and and they came in, they saw the another really nice opportunity, and they really just always loved the the the company, the brand, the mission, you know, just the people. And and so they then with the striker exit, they had another great exit. And so then at that point in time, I think it came down to more betting on the people. Yeah, they they said, Hey, these, you know, these guys just delivered a really nice exit for us, and we liked working with them, so why don't we bet on them to go build a company from scratch?

SPEAKER_02 33:29

Yeah.

SPEAKER_03 33:30

And this what was really interesting about it was it was predominantly in the ear those early years, it was the private equity side of Bain. You know, it wasn't the the venture side, it was it was the pure private equity side. And Chris Gordon and the and the team on the private equity side, they they just they believed in what we were doing, and they we had some you know tumultuous times trying to get the product developed, and they stuck with us through the whole thing and you know believed in what we were doing. And that that was I think the ability to not have to go out and do the you know, the all the series A, series B, series C, all that stuff constantly not having to do that allowed us to really focus on trying to build a great company. And we had the benefit of of that just consistent partnership.

Swaril Mathur 34:20

Wow. Wow. It's such a great case study of that. And there are there are so few examples of that in our industry, right? There are so few examples of a company that had a big bolus of the right amount of cash from the right partner without having to every 18 months figure out okay, what's the milestone that we've hit so that we could justify a higher valuation and go find some more people to join the cap table. And it's hard to underestimate the, you know, or understate the the level of distraction that that can cause for a business. But it's it's also hard to understand how much of an impact it would have on a company because there's not that many of the counterfactual examples and Kestra is one of one of very few.

SPEAKER_03 34:58

Well, I think when you, you know, when you when you have the normal environment where there's there is that, you know, every 18 month or whatever, every time somebody else comes into the mix, you're you're having to make some compromise for them. You know, and whether it's the the timeline or the amount amount of investment and the in into the plan or whatever it is, there's always some compromise that happens. And we had the the very good fortune of being able to just have somebody consistently there who saw what we you know what our plan was and and bought into it and then just was a hundred percent focused on supporting us through it.

Subscribe And Share Topic Ideas

SPEAKER_01 35:36

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Clinical Timeline And FDA Approval

Swaril Mathur 35:55

And and tell us about the timeline of the company at that point. So from from when it spun out of, you know, as a result of a striker acquisition to when you got FDA approval, what how long was that roughly?

SPEAKER_03 36:06

So we we spun out from well, we so we sold the physio to the striker in 2016. And we I guess we started our clinical trials, our first of two clinical trials in 2019. Okay. And we did our first trial, which is a detection trial, and then our second trial was our therapy trial, which we were in the middle of when COVID hit. So that created a whole nother challenge. And then we we ended up getting the FDA approval in uh late summer of 2021.

Swaril Mathur 36:42

Okay. So there was still some there was still some real development work and and early clinical work being done at the time that you were you were starting a company. Um and and so I I have some questions about kind of the product development process. I mean, one of the things that's really unique about Kestris product, and actually, before we even before I even ask the question, for listeners who might not know, can you just articulate what Kestrus product is?

SPEAKER_03 37:06

Absolutely. So our first product, which is the a sure wearable cardioover defibrillator, WCD. The the purpose of the of a defibrillator in today's world is is really to act as a bridge. It it truly is a wearable. So think of it if you're if you're a female patient, you're wearing a sports bra with embedded ECG electrodes that are that are then connected to a miniaturized AED. Those electrodes monitor your heart rhythm. And if you go into a ventricular arrhythmia, and the the device will detect that, make a autonomous decision to deliver therapy via electronic shock and convert that arrhythmia. So patients generally wear it for about 90 days. They're either gonna go on to get an implanted ICD or they're going to just get better with drugs, drug treatments. And so our devices really act as a bridge to either a long-term chronic therapy or a just getting better with the drug. So the the wearable space is really interesting because it's an ambulatory patient. The patient's home, they're living in their work normal environment, and you have to be able to develop a product that has the sensitivity to you know understand what rhythms are going on, has to deal with electronic noise in a in an ambulatory environment, and then be able to deliver uh really uh nail the shock at the right time. That's really difficult to do. So we built three platforms. We built a WCD platform, the actual wearable itself platform, and then a digital platform that kind of surrounds it all. So those are the pieces to the to the pie.

What A Wearable Defibrillator Does

Swaril Mathur 38:59

Yeah, yeah. No, thank you for sharing that. And it's a I mean, a really interesting technology to fill such an important need. I mean, you describe it as a bridge, but it's a truly life-saving bridge, right? It is, it is that metaphor really holds. And so what I was gonna ask is what's unique about this product is that it straddles this line between kind of consumer-facing technology and and really hardcore med tech, right? There are there are devices that are, you know, hardcore med tech devices that sit in operating rooms that a patient never has to interact with, but might very well save their life. But then there's consumer technology that we all wear all the time, all day long. And those, there's usually completely different constraints for those two different environments. And Kestra had to manage both sets of constraints. So, how did that how did that show up in your product development process?

SPEAKER_03 39:47

Yeah, I think it's a it's a really good observation. The the you know, what we had to do because we knew that the competitive device, one of the reasons that it had challenges was patient compliance. And so you have to you have to think about okay, the your typical cardiac patient, average age about 65 years old, they have each patient has at least two or three other comorbidities. So they're sick people generally. Um so you have to design a product that is really easy to use, that in in a an emergency environment, like when the device is telling them it's about to shock them, the patient needs to know how to interface with the device. And it has to be comfortable enough where the patient will wear it, because if they're not wearing it, it's not going to help them. And so the way we did that was we we were just meticulous about getting user feedback. We just did round after round of prototyping, user studies, user groups, and just continued to get feedback. You know, one of the early areas of feedback, you you'll probably laugh at this, but was you know, our first iteration of the product was a a unisex product. And we had our all of our female engineers, which we have a lot of, they put the product on and they came back and they just said, This is unacceptable. You know, we need a we need a woman's version of this. And so so we ended up saying, yeah, that makes sense. So we ended up designing two different ones. Well, and you know, but we didn't know anything about sewing, we didn't know anything about garment technologies or you know, any of that stuff. So we went out and found people. We, you know, we just found experts out in in the field and and just kept learning. But I think the iterative design was the key. Yeah, you know, just keep building prototypes, keep learning, testing them with user groups, come back, do another one, do another one. And the team just did a great job with that. And, you know, over time we just kept dialing it in, you know, um, and finally got there.

Swaril Mathur 41:53

Yeah. You know, I I love that that example of of one of the insights. And I I love that the company decided to actually act on that insight as well. And I think every every company that sets out to develop a technology does some form of user research or thinks it does, right? But what I see a lot of variability in is the the level of depth of that research and the the level of intensity of it. And I I understand why there's attention, right? That's a lot of time and a lot of money spent reacting to feedback from a handful or maybe several handfuls of people. And so how did you know, how did you know where to draw the line, right? How did you know once enough was enough and you had gotten enough user feedback to be confident you were building the right it?

SPEAKER_03 42:37

Yeah, that is a really that's a really good question. It the the truth is that there's tension all along the way, you know, because you can you can just kind of keep iterating and iterating and iterating and you never get there. And and so, you know, what you we had to really be really good at defining what the specs were, you know, what we were trying to accomplish and why, and then making sure that we could measure how those iterations were were stacking up against those, you know, the performance against those specs. And and so, you know, it would be things like we have an alert button on our device where it's right at kind of right over the clavicle where if a patient wants to interact with the device, uh all they do is got a little haptic motor in it, and it they just push a button and the device will start to record. Yeah, or if the device is saying it's preparing to shock you and you don't need a shock, you can divert the shock by pushing that button. But we had to, you know, an example is we had to go, we had to have people wear the device and go to like rock concerts and go to be on a train and all that, all different kinds of things to see if they could hear it and see if they could still interact with it. You know, we had people up skiing on the mountain, coming down the mountain, trying to figure out if they could push the button. So just a lot of that, a lot of that kind of thing. And I think I think that was just it was just a really strong commitment by our clinical and engineering teams to get it right. And the user the user feedback was really essential.

Swaril Mathur 44:14

Yeah, yeah. I'm so glad you mentioned those examples because I think when people hear user feedback, it means something different to everybody. And often when we hear user groups, we're picturing you take 10, 65-year-olds and you invite them into your office and they sit in your conference room and they try it on and you observe how they try it on, and then you ask them a bunch of questions that, of course, you don't mean for them to be leading questions, but they might accidentally be, right? And that's that's the kind of user feedback that I think many companies are engaging in. But this this makes it very clear the the level of you know real-world utilization and true user design research that you all engaged in that ultimately resulted in what you know what is clearly a highly innovative and highly effective product.

SPEAKER_03 44:59

Yeah, another another just quick example of that, which I think is neat, is is we have voice prompts in the device. So if you're if a patient you know goes into cardiac arrest and the device is preparing to shock them, it will it will tell, it will give voice prompts saying, do not touch the patient, because it's going to deliver a bunch of energy into it. And so we had to make sure that the voice prompts could be followed in a in a chaotic environment by the family or you know, people that were with the patient. But we also had to make sure that, well, what if what if EMS showed up and the paramedics come rolling in there? Do we really want them to just cut the thing off or do we want to let the device do its job? And so we had to have voice prompts that were tailored to that. So we had user groups of paramedics and user groups of you know, typical kind of family people. And uh, we just did a lot of that. And and that's how we that's how we iterated our way to a really effective product.

Swaril Mathur 45:59

Wow. Wow, what a unique set of circumstances to have to innovate within. I mean, uh, truly thinking through, you know, so many different scenarios, so many different types of people, so many different stages of life and and kind of usage scenarios. Wow. So after commercialization, you know, the next big chapter of the company obviously was going public. And and maybe you want to talk us through a little bit of what was the early commercialization journey for Kestra? What were some of the highs and some of the learnings from that? And then I want to talk a little bit about the decision to become a public company and what that transition has looked like.

Commercial Launch Supply And Payers

SPEAKER_03 46:35

Yeah. So once we once we got the FDA approval in late uh 2021, we you know, we started to ramp up our uh supply chain. We we made decisions early on in the project to have an outsourced uh supply chain. So we used contract manufacturings. We didn't we didn't believe there was anything in the electronics manufacturing that was magic. So we could we could partner with people who could do it at scale. And so we had to ramp up the supply chain to start to build up the fleet of devices. This is a rental model, so you have to have a a fleet because the devices come back when they're done. We refurb them and then they go back out to the next the next patient. So we started to do that and then and started to hire our first you know handful of reps. I think we hired nine sales reps and kind of got them all ramped up, got them product, got going, and then all of a sudden we had a we had a component problem, a supply problem with one of our components that right as we were starting to launch the product, it it just stopped us in our tracks. And uh that that lasted for about I think about three or four months. So it was a little bit of a reset, and we had to we had to overcome that, you know, and we did. Uh and and then so now we got to about August of 22, and that's where we said, okay, now we're ready to go. We've got the fleet going, we've got, you know, 25 or 30 reps at that point, and we're ready to now go. So then we we really started to the full commercial launch and started on that on that journey that we're still on. And, you know, really started to pick up momentum. We started to figure out the business model. Uh, we started to figure out, you know, because this is a complicated product. It's we use a DME code for it. And so we're a provider ourselves. So we're billing the insurance companies, we're billing the patient, and we're billing Medicare. And so we had to we had to develop all those revenue cycle management capabilities, all of those things. We had to build alongside the commercial team and the supply chain ramp up. So all those things were key drivers for us.

Swaril Mathur 48:52

Um and even though you had spent your entire career in the defibrillation space, all of those elements were new to this product, right? Yeah.

SPEAKER_03 49:02

Yeah. There's a lot of learning that went on for sure. We're still learning. But uh, you know, the other the other piece uh that in that sort of that that the four legs of that stool, you have the supply chain ramp, you have the commercial team build out, you have the RCM revenue cycle management build-out. But the fourth was we had to get the payer contracts. And, you know, that's that's where a lot of ed tech companies go to die is on that journey because it's really, really hard. It takes a long time, and you're doing nothing but burning cash. And because you're you're basically you have to take these patients, many of which, most of which you don't have a a payer contract for. So you're out of network, and if you're lucky enough to get any payment for it, it's going to be a low payment. And so that's that's just a huge investment that is really tough. And we had to navigate that as well. So that that sort of brought us all the way up to, I guess, the summer of 2024. We we had kind of gotten to a point where we got enough of the payer contracts done and all these pieces started to come together. So then we went and did a in uh I think it was July or August, we did a crossover round, brought in some some new investors. It was really the first time we brought in a a true syndicate of investors in alongside Bain Capital.

Swaril Mathur 50:30

And your cap table became more than two lines.

SPEAKER_03 50:33

Yeah, it was it got a little more complicated. But so that was a you know, let's say August or September, I guess, of uh 2024, or then and then you know, uh six months later, we were doing an IPO. So it was like it was really quick.

Swaril Mathur 50:50

Yeah, well, I guess I a couple questions before we dig into the IPO. One is what was happening in the commercial org as you were figuring out the you know, the the kind of early days of growing through building your Rev Cycle team and establishing pair contracts. Did you just keep the commercial team relatively small so that you were giving yourself time or was commercial team ramping significantly during that stage?

SPEAKER_03 51:16

Yeah, that I think we kept it purposely small because we were trying to manage our cash until we got to a point where we weren't simply operating as a as a large nonprofit because of the payer contract stuff. You know, so we we kind of kept, you know, from the original nine reps that we hired, we kept it to maybe 30 reps or 32 or something like that, and and just kind of kept it there until until these other pieces came together. They came together, we did the crossover round, so now we have a big slug of you know capital, and and then we start going. And we we went pretty quickly from you know 32 to 48. I think at the IPO, we had about 70 sales reps. So that happened pretty rapidly. And you know, as I'm sure you can appreciate it's hard for a small company to consume that many people and get them trained and supported and all the surrounding infrastructure around them and everything else. So that was that was quite a busy time for us.

Swaril Mathur 52:22

Yeah, what were what were some of the learnings from that that experience?

SPEAKER_03 52:26

Well, what I think one of the biggest learnings was we had to dial in on what the real profile of these of these territory managers was going to be. You know, we the call point is general cardiology, electrophysiology, but you also have a lot of other people in the ecosystem in a in a cardiology clinic that that are prescribing a WCD. And so you have to call on a bunch of different people. And so finding finding the right background and the right type of uh personality, that was probably the most significant thing we had to figure out. Yeah, you know, and and we, you know, we we we missed on some people and and got some great people that are still with us that are just like the core of our company. But we learned a lot through that process. We also learned that we needed to, you know, probably invest even more heavily in training, sales training and onboarding and all those kind of activities. We we had process for all that, but I think we probably didn't invest as as much in it, certainly not as much as we are now.

Swaril Mathur 53:33

Mm-hmm. Mm-hmm. No, that that absolutely resonates. That absolutely resonates. And it's you know, it's the reason I ask is because it's it's one thing for folks from the outside looking in to see large revenue growth or large growth in terms of size of the team, but operationalize like each individual is a human that needs to that needs to fit properly in the organization. And then the culture is changing as the size of the team is changing and processes are changing. It is it is so much more complex than it ever appears to be from the outside.

SPEAKER_03 54:03

Well, I think one of the one of the things that you have in this particular business, you have to overlay it over on top of all of that normal complexity is the fact that we had to we had to figure out this whole business model of how we get paid. We had to figure that out on the fly. And so it was constant process change, policy change as we learned. And that really created some challenges, you know, because it's not just like a known, hey, this is it's just buy sell, and you know, you get an invoice and 30 days later and uh it's in backlog and you ship it. We had to deliver a service model where we get a prescription today, we have to get the patient out the door by two o'clock tomorrow. And we had to do that at scale, and so that's what we've been building. And it's it's settled down more now. We we have a little bit more clue of what we're doing, but we're still learning.

IPO Decision And Public Company Life

Swaril Mathur 55:03

Yeah, absolutely, absolutely. And that's the right mentality. So, so talk to us about the IPO. What was, I mean, uh going public is obviously a massive milestone for a company. It uh opens up a lot of opportunities, but also exposes the company to new types of risks. So, what was some of the decision making around why to IPO in the first place and then when the right timing was for the company?

SPEAKER_03 55:25

I think what we the the big drivers behind the decision, you know, we had we'd gotten enough traction commercially where we we really had high conviction that number one, there's a really big TAM, a really big market opportunity out there for us, and that we have a clearly superior product. And so the the only remaining thing is can we build a commercial engine, you know, to go after that? And that's where the capital comes into play. And we knew that getting access to capital in a in a public arena was going to be a healthier way to rapidly grow the company than to try and do additional private rounds because we knew it really was going to need investment. And the business model itself is one that is maybe takes a little bit longer to get to, you know, get to the real profitability. But once you get to that stage, it's a really nice business model and will deliver really nice profitability. So so it really came down to we had to we had to check the boxes that we felt like we were mature enough in in those four legs of the table, you know, the the payer contracting and all the other things, where we had confidence that we could be consistently delivering as a public company because nobody wants to go public and then and then start missing your numbers. So we had to have enough confidence that we were at that point, and then and then we just knew that the capital that we could get access to was gonna help you know turn us into the fastest med tech, uh fastest growing med tech company in the in the country. Yeah. And we that's where we think we're gonna be for the for the foreseeable future.

Swaril Mathur 57:15

Yeah, yeah. And and clearly you've had a a really successful and effective, you know, stint as a public company so far. What what felt to you like the biggest changes, both for yourself as the CEO, going from CEO of a privately held PE backed company to CEO of a public company, and then for kind of the rest of the Kestra team and for the organization as a whole?

SPEAKER_03 57:36

Well, I think the I think there's a lot of governance, compliance, those kind of things that you, of course, you have to layer in. We had made decisions several years earlier, before we ever went public, that we were going to lay some of the construction that would would get us ready for that. So we started, we started using, you know, auditors that that were going to audit us to the for the most part to the public standards of of accounting. We put in compliance programs once we started building a commercial team. We put in appropriate, you know, sort of ABMED kind of compliance programs. And you know, so I I think I think a lot of that was was just maybe tightening those up a little bit. It wasn't a full reconstruct when it came to those. I I for me the biggest change has been the two things. One is just working with the board now is just more complex. You know, we have more more board members and there's just more process to it. You know, it used to be if there was a decision to be made, I I could pick up the phone and call my one of my colleagues at Bain and say, This is the idea. What do you think? Yeah, love it. Okay, we're going. And now we've got a committee that has to, you know, talk about it. And and it it's it's all to the good, but it's just it just takes more time and it's it's more process oriented and more governance oriented. So I I think that that part of it is has been just a change. It's not a, you know, for for the worse for sure. It's it's it's a good change. The other is just I spend more time now, you know, with investors. Um so that that is just that means that you know our leadership team has all had to kind of step up and assume broader responsibilities because I'm you know, I'm spending a good chunk of my time now doing roachos and things like that and interacting with you know the the buy side and the sell side uh to talk about Kestra.

Swaril Mathur 59:44

Yep, yep, absolutely. And this is your first time being the CEO of a public company. I mean, in all the evolutions of the companies, you've you've been president of an organization within a big organization, you've been CEO of a standalone, but this is the your first kind of public company CEO experience. And and just to you know, put it bluntly for what things are, the the markets are a little volatile these days, and you're you're living through the day-to-day of that as a small cap, you know, company. How do you handle the volatility of that? How do you, you know, how do you handle the the the stress, the burden, what whatever it feels like to you of of having to exist in in these sorts of uncontrollable circumstances?

SPEAKER_03 1:00:28

Well, I I think um our our mindset has been, you know, let's really focus on fundamentals. You know, we had an opportunity in in December on the heels of our our large post-approval study being presented at AHA. We had the opportunity to go out and do a secondary offering. And you know, we didn't we didn't really on our balance sheet needed at that point in time, but we said, you know, this is this is news that we we think we can sell into. We think it would be a good idea to really fortify the balance sheet. And now, you know, frankly, a few months later with kind of a crazy global, you know, political geopolitical environment, we're pretty glad we did that. We went and did that. So the fundamental there was, you know, whenever you can fortify and strengthen your balance sheet, take advantage of that and do that. I think the other fundamental is we really, really have focused on execution, you know, and our team has done a great job of of really nailing the the key indicators for this business and just executing quarter over quarter, month over month. It's a run rate business. Every day we get new patients, and so every day we can kind of see how we're tracking, and and you have to be just really strong execution-wise. So so those two things, and then the third thing is just uh, you know, I feel like if we do our job and we execute and and we become really predictably a great execution story, then that allows us to go out and just keep telling our story. And that's what we've been doing a lot of, you know, we've been just out there talking to investors, reinforcing the simplicity of the story and why why the story keeps getting better as we get more experience out of the market. And I think I think it's those three things, you know, get the balance sheet fortified, execute really consistently, and then keep telling your story.

Swaril Mathur 1:02:32

Yeah, yeah. Simple as that, huh? Simple or as complex.

SPEAKER_03 1:02:37

Well, we can't control the other things.

Pride In People And What’s Next

Swaril Mathur 1:02:41

So yeah, yep, absolutely, absolutely. Well, thank you so much, Brian, for sharing all of that about kind of your career history, the the Kestra story. As as we start to wrap up, you know, I'm thinking through everything that you've shared and and just the and I'm struck by a couple of things, right? One is it's one thing to be a leader during times of success. It's one thing to be at the helm when, you know, when you get to celebrate a big exit or a successful fundraiser, a successful product launch, but it's something else entirely to be able to lead a team through massive setbacks and come out on the other side. And it's really, it's really, you know, profound to hear how that has shaped your leadership experience and and obviously has helped you get to the success you're at today. You know, some other, some other elements of of your journey that stick out to me is your your proactive willingness to acknowledge and adapt to changing environments. You have you have led through a lot of different changing environments. And I think there's, you know, that's that's again probably the reason you were in the successful seat you were in today is because you've done that well. That's not an easy thing to do. And then, you know, your commitment to always kind of doing right by people and putting those first. So really appreciated you kind of sharing all of all of these details about your story. As we close out, I would love to ask, looking back, what are you most proud of in your career history? Whether, whether that's part of the Kestra story or just more broadly. And then looking ahead, what are you most excited about?

SPEAKER_03 1:04:08

I think looking back, you know, I think I I would say I'm I'm the most proud about the the individual decisions all along the way that we made around people. You know, whether it was treating them right during a tough time or just the the things that happen every day, we we always tried to, you know, we always tried to make the decision, the default is on the on the people side. And we really believe in our team. I I this is not a story about me. This is a story about a great team that I was fortunate enough to be a part of building, but but I think that's the biggest thing. It's just as I think back and think about all the decisions that have had to happen over the years that had to do with people and their careers or or whatever was going on, we always try to do the right thing by the people. And I I will always, you know, anchor myself in that. I think in in terms of looking forward, I couldn't be more excited about where we're where we're at today. You know, we we have we have an incredible group of people that are that are uniformly passionate about the mission that we have. And every every person that we hire that comes into the company, I I'm the final interview on every single person. I get to see that the the thing that draws people to our company is the fact that we're impacting people, we're impacting patients and their families, and we're saving lives. And and these are all purpose driven people, and and the market opportunity looks even better today than it did 12 months ago. The product, you know, strategy that we have looks better today than it did 12 months ago. We're putting some amazing territory managers out there that are just absolutely ripping it. And And we just have a a really great team that I think is gonna do some uh some really cool things. And but at the heart of that is the fact that every single day in my inbox I get new reports of real people that have been saved by our product.

SPEAKER_01 1:06:15

Wow.

SPEAKER_03 1:06:15

And I get 'em every day. It shows up and and it says exactly what the situation was and and it's just a constant reminder that, you know, we're doing some good out there. And I'm really proud of the Kestra team. It's a it's a really good group of people, and we're surrounded by financial sponsors and all the the whole all the people in our ecosystem are fit to be a part of this journey, and and we're very lucky for that.

Swaril Mathur 1:06:43

Yeah, yeah. Wow. Well, Brian, congratulations on all the success today. Thank you for taking the time to come share your story, and I will look forward to watching Kestra and the entire team continue to uh continue to thrive and change and save lives. Thank you so much for being on Med Tech Talk.

SPEAKER_03 1:06:58

Thank you for having me. Take good care.