Dr. Kassell: In a short time, your investment in Insightec has spawned the first focused ultrasound unicorn. In other words, a privately held company with a valuation of over a billion. How do you feel about that achievement?
Mr. Koch: Well, first of all, we’re just very proud to be selected as a preferred partner by Insightec, that they wanted to partner up with us and really make a go of this, and make a meaningful impact to the world. We feel great about the significant investment that we’ve made.
I would tell you, Neal, I’m also very proud that it was our first investment. And I think it’s great that it’s in Israel. I’ve spent quite a bit of time now over in Israel – it’s a wonderful entrepreneurial culture that we feel like is very aligned with Koch. So, getting into Israel with an investment with people and the culture that Insightec has, we feel really great about that.
And looking at the progress we’ve seen since that first investment, I’ll share a few data points on why we’re so excited to continue the investment with Insightec, and that is just the number of procedures. Since we made the initial investment in January of 2018, they’ve doubled the amount of procedures every year. They’ve treated now close to 3,000 essential tremor and Parkinson’s tremor-dominant patients in just those two years. They’ve expanded their talent and capabilities immensely. There’s exploding interest for their technology from hospitals, from universities, and they’re now commercial in 22 countries with an R&D pipeline that has tremendous potential, as you know.
Dr. Kassell: Can you be very specific and tell us how Insightec fits in the vision of Koch Disruptive Technologies?
Mr. Koch: I’d love to Neal, and I appreciate the question. There are a lot of folks in the marketplace that ask us, “This does not seem like a Koch Industries kind of obvious choice in terms of investment. How did that fit your vision?” And we tell people it is actually right in the heart of our sweet spot of the type of company we’re looking for.
Let me take a minute to articulate why Insightec is such a good fit. We screen companies and opportunities across four things: 1) principled entrepreneurship, 2) disruptiveness in the marketplace, 3) how high of potential does it have? and 4) is there mutual benefit between Koch and that company? So let me just articulate “why Insightec?” across that filter.
On principled entrepreneurship, this is the very first filter we look at. We believe it’s very important that there’s true leadership at the top – great principled entrepreneurs that have a track record of growing companies and they’re going to do it in the right way, with a management team to support that leader. We think that’s critical in launching and growing any technology business. I would say Insightec specifically has shown extreme foresight in how they hire, how they promote, and how they grow their leaders to make sure that they’ve got the best team in the market and we’re all in on this process with them.
We go back to the founder Kobi Vortman and his vision for creating this technology in the first place back in the late ’90s. And then Maurice Ferré who is currently the CEO of the company. He’s had a great track record, he’s a cofounder of Mako Surgical, and oversaw very successful growth of that company. So we had seen that he had done it before. And what he’s done to build a truly awesome leadership team. We have such a good feeling about the culture of what he’s building and the team that he’s got to support him, and how entrepreneurial this team is. We feel really good about the future. And so that’s the first one, principled entrepreneurship. They really demonstrated that; we saw that right out of the gates.
The second one is disruptiveness, and we want to see that a technology or a business model is highly disruptive versus the current alternatives in the market. I think the technology speaks for itself. It’s driving better outcomes at a lower cost, enabling doctors to conduct incisionless surgery, which is amazing, right? Getting a doctor, helping them go from a scalpel to sound waves, to be able to do this in a way that’s noninvasive, and from a quality of life standpoint, highly disruptive to the existing alternatives in transforming people’s lives. We’re very, very excited about both the value to the patient, and also the cost to the patient as well – it’s disruptive on both ends of that.
The third one, high potential. We always ask the question, “Can it be a platform?” This is a guiding principle that we look for in value creation regardless of the sector. It’s the diversity and capability that a true platform technology can deliver, and in Insightec we see and have now validated the true benefit that a closed loop technology platform can offer both to patients and physicians. They’ve got extremely efficient learning curves, and the diversity of the shots on goal they have with the various indications, and then the growth of adoption across the world for both commercial and research applications, all really support this thesis that Insightec is already a platform.
And then the fourth piece is around mutual benefit. Can Koch help a company like Insightec beyond just writing a check? The capital is important but what’s more important is to be able to help them with their strategy, help them with manufacturing. Our Molex company in the electronic space helps them think about how they manage their supply chain, and how they design their manufacturing capabilities.
And from a regulatory standpoint as well, our public sector team helps them get in front of the right decision makers and the FDA to demonstrate their technology and how it can transform millions of lives and create that awareness within the right regulatory bodies. I think it’s been important to Insightec’s growth and success.
So we saw that mutual benefit opportunity where we can help them beyond the capital. That was kind of the last test and we said, “All four of these line up, this is in the sweet spot of the type of company that we’re looking for, and that’s why we’re excited about continuing to grow with them.”
Dr. Kassell: What plans do you have for future investment in the focused ultrasound field in addition to Insightec, if any?
Mr. Koch: We’re always evaluating opportunities that can transform people’s lives. So we’re very open-minded to continue investing in the space. But I think the latest Insightec investment, the Series F that we just led, shows our passion and support for focused ultrasound broadly and that has significantly increased our position in Insightec and our commitment to the space.
Dr. Kassell: Is Koch Disruptive Technologies interested in investing in other health sciences, businesses, biotech, med tech, medical research, and so on?
Mr. Koch: The short answer is, yes. We’re constantly looking for highly disruptive innovations and principled entrepreneurs that run these companies in all industries. But we are interested in healthcare specifically. And I think this space is very interesting for KDT.
I mean one is what we’re living right now, right? This recent pandemic that’s exposing weaknesses to our healthcare system and shows how much opportunity there is to improve it. And we want to be a part of that solution, and also the fact that it’s roughly 20 percent of our GDP in this country alone, and it’s just a critical industry to help remove barriers and improve millions of lives.
I’ll just tell you what our current exposure to the industry is across Koch Industries – and some of these are from KDT – of course, Insightec is one of the largest commitments that we’ve made both in capital and capability that we’re bringing to the table. In 2018 we made an investment, and then we just made another significant investment in March.
We made an investment in November of last year in a company called Vayyar as well. This was started by a founder named Raviv Melamed using radio frequency technology that started in early detection of breast cancer. Now they’re applying this technology across multiple industries. So I encourage you to check that out online – Vayyar is the name of the company. We’re very excited about the potential. And then we have a few early stage companies in the pipeline right now.
But clearly, we want more that can be game changers like Insightec – like Vayyar. We’re looking across the space and across this theme in the medical space. But we also recognize, Neal, that this area takes patience and it takes significant capital. But we feel like that’s a comparative advantage that KDT has, because we have both of those. We’re here to help unlock that value across this industry, and we’re very excited about the future.
Additional Resources
Listen to the Full 40-minute Conversation on YouTube
Read the Transcript
Overview of the Focused Ultrasound Foundation
Learn More about KDT
Neal F. Kassell, MD, is the founder and chairman of the Focused Ultrasound Foundation.
Chase Koch is the President of Koch Disruptive Technologies.