A Pioneer in Hearing Health with Brent Lucas, CEO, Envoy Medical

Frank Jaskulke  01:18

Good morning, good afternoon and good evening to everyone out there in Medical Alley. This is Frank Jaskulke, your host on the Medical Alley Podcast. Thank you for joining us again. Today we have a really interesting company and I'm really glad you're gonna get to hear their story. I'm joined by Brent Lucas, who's the CEO of Envoy Medical and he'll tell you a bit more about what they're up to. But fascinating technology, important market. This is one I've really been looking forward to. So Brent, thank you so much for being on here. Maybe to tell us just a little bit, what is Envoy Medical?

 Brent Lucas  01:52

Sure. Thanks for having us. It's a pleasure to come. It's been something I've been wanting to do. Big listener of the podcast, so it's, it'll be fun to be on it. Envoy Medical is a hearing health company. It's a hearing solutions company. We focus on hearing implants. So we're not a hearing aid company. We don't have bone conduction devices. So we are a hearing implant business. We have two devices. The first device is the Esteem, which is an active middle ear implant, fully implanted. Still remains the only FDA approved fully implanted hearing device on the market. Actually, the only fully implanted hearing device that's commercially available on the planet right now as far as I'm aware of. And then we have the Acclaim, which is a fully implanted cochlear implant. And that is currently an investigational device that's in an early feasibility study at Mayo Clinic. So big Minnesota connection with Envoy Medical. A lot of our investors are from the region. Our employees are here, we're based in White Bear Lake. So we we really like the Minnesota, Medical Alley connection and try to use it as much as we can.

 Frank Jaskulke  03:01

Right on. And maybe for our listeners' benefit, can you tell us, what's the difference between a cochlear and fully implanted hearing implant?

 Brent Lucas  03:10

Sure. So the cochlear implant is different from other technologies in that it electrically stimulates your hearing nerve via the cochlea. So essentially, a cochlear implant is used when hearing aids and other hearing devices are no longer going to do enough for you. So at a certain point in your hearing loss journey, you cross a threshold where hearing aids and other things can't benefit you because there's enough damage to your cochlea. And until they can regrow hair cells and other things like that, you need to do what's next and that is electrically stimulating the cochlea. So our cochlear implant, the Acclaim, will be the first fully implanted cochlear implant that also uses a piezoelectric sensor. So one of the big differences in our both of our technologies is that we use the natural ear to pick up sound. So we don't use a microphone like like you and I are talking into now. We don't use a microphone like a hearing aid. We use the actual eardrum, which vibrates and then there's these three bones behind, it the ossicles. We pick up the vibrations off of those ossicles and use that to interpret sound. So we get the benefit of actually using your pinna and your ear canal. And the other cool thing especially for people like me, big Air Pod user, people can use things in their ears with our devices, which you could not do with a traditional cochlear implant or even some some hearing aids.

 Frank Jaskulke  04:43

Oh, wow. So it sounds like a better quality of life for the patient and effective hearing.

 Brent Lucas  04:49

That's what we're hoping for. So the efficacy with cochlear implants across the other manufacturers, and there are three main players right now, they're all international companies, we actually, and I know we're going to talk about this later, but we're actually the first or the only publicly listed hearing implant company right now in the US. So we're pretty excited about that. But the difference between efficacy for all the cochlear implants that are currently out there is really not different. So the trajectory of the industry is quality of life, usability, things of that nature. So the fully implanted is really a great option. And if you think about another company, I always like to bring up, especially again, the Minnesota connection is Inspire Medical, right? So it's another example of having an a non surgical CPAPs, right, a non surgical alternative. And then you find a quality of life benefit from having it fully implanted. You also have Medtronic with the, you know, glucose monitoring, and insulin pumps and all those kinds of things. So we think fully implanted is sort of the way hearing is going to go and we're, we're happy to be at the front of that.

 Frank Jaskulke  06:02

Very exciting. And you know, it seems like there have been a lot of barriers to development of new technologies in hearing health, like, for as large of a health issue and quality of life issue, at least in my experience, I don't see as much innovation and investment like we see in other parts of med tech. What are some of those barriers? Why do you think that's been, you know, you guys and not a bunch of others that have really been pushing this forward?

 Brent Lucas  06:31

It's a great question. And I think about that a lot. Yeah. I would say, I think part of it initially was the FDA, just people in the industry not really understanding how to make an implant, right? So hearing aids are class one, class two devices, typically. And fully implanted devices are class three. So there's a different level of regulatory hurdles. I will say, and Medical Alley is one of the reasons why, but the FDA, in my experience has been easy to work with. They kind of set the bar right, you know what they're — you know where the guardrails are. So that part wasn't challenging. What became very challenging and remains incredibly challenging is the insurance piece of the equation.

 Frank Jaskulke  07:19

Yeah, talk about that. The reimbursement side has been a challenge.

 Brent Lucas  07:22

Right. So for us, for our first device, the Esteem, it is a fully implanted, active middle ear implant, which is a mouthful, I know, but it is not a hearing aid. But CMS, in its infinite wisdom, calls us a hearing aid. They are the only entity that I'm aware of that calls us a hearing aid. And because they do that there's a statutory exclusion of hearing aids in Medicare, so you can't be a coverable benefit. And unfortunately, a lot of private insurers then just follow what Medicare does, right? So you wear eyeglasses. So eyeglasses and hearing devices are not covered under Medicare, at least currently. And so that has been a significant barrier for us, for commercial adoption. But also when you think about investment for startup companies, right, people that are going to put their money into these technologies, they want to know they're going to get that money out right, eventually. And so if there's not a reimbursement pathway, it really makes it hard for investors. And I think that's a big problem. And we've been working closely with Medical Alley and the Minnesota delegation to try to change that where Envoy Medical's devices are not classified as a hearing aid. And it's a challenge. But I think it's something that I hope we can do. We've been trying to educate parties at CMS, but they're they're kind of dug in on the matter, frankly.

 Frank Jaskulke  08:47

It's a slow grind with CMS on even the easiest of things. 

 Brent Lucas  08:51

Right, right. Yeah. And I get their challenge. I mean, they have a lot of things to worry about. And there are probably people that are looking to get things covered that maybe shouldn't be but here you have a breakthrough technology, right, an absolute unique technology that a lot of people could benefit from. And we think in that regard, it should be covered. And you know, to dovetail into the the breakthrough device designation conversation, which, you know, we're very supportive of the breakthrough device. Our second device is classified as a breakthrough device. And the esteem was actually called a breakthrough technology by the FDA in 2009 and 10, during our PMA process, but the mechanism was not there for coverage. And we really were excited about TCID or MCID or I always forget the acronyms but we were very excited about the mechanism that was going to be put in place where breakthrough technologies could get some coverage, at least for a period of time to prove themselves right. And I really hope that the politicians will push for that, because I think it was a great idea. And it would have really helped companies like like Envoy Medical and other startups out there. 

 Frank Jaskulke  10:06

Yeah. And for the listeners, you should know, yeah, originally, I think MCIT, Medicare Coverage of Innovative Technologies, where it would have if your device got breakthrough designation from FDA, you would have got a period of coverage from Medicare, which would then allow breakthrough technologies to generate data, drive adoption, and ultimately go back and if the data was good, secure a final coverage decision. If the data comes back bad, right, none of us want products like that. I have always found it such an interesting thing, that hearing and vision, which I think any person in the world would go Yep, those are central to our health, are treated so differently under healthcare, under health insurance from everything else, right? Even if you think of your individual employee health benefits, usually have a medical benefit. And then your employer might add a vision benefit, sometimes a hearing benefit. But those are parts of our bodies central to our health, how could they not be part of it?

 Brent Lucas  11:16

And there's more and more data coming out. There's a gentleman named Frank Lin from Johns Hopkins, who's kind of making his name talking about this. There is more and more data associated with untreated hearing loss, or as I like to say, undertreated hearing loss and early cognitive decline. There's not a causation connection, so much right now is more of a correlation connection. But social isolation as well, all of these problems, when you can't hear, I mean, think about why, you know, Grandpa sits in the corner at a holiday event.

 Frank Jaskulke  11:49

Right ,we've all had a family member who has that issue. It's, they're there, but they're not

 Brent Lucas  11:55

Right. And it it starts to impact their life in a way that really is costing all of us money. And in a way you would think it would be cheaper for the government to cover hearing devices or vision devices than cover the other things that happen from not doing that. You know, another example is untreated or undertreated hearing loss, people are three times more likely to fall and require a hospital stay. So when you think about the elderly, and how often that could happen, and the costs associated with keeping somebody overnight at a hospital, they're much more than paying for a set of hearing aids, for example.

 Frank Jaskulke  12:35

Oh, interesting. I mean, we know this, all these things are connected. But getting the systems that are in place to that point, is work. And that I mean, I think this is one of the reasons why we have to have a community, right? We need an industry like the companies here that go out and build relationships with their elected officials, educate them on the real work that is being done to improve public health and keep that positive pressure on and I appreciate your advocacy and appreciate you engaging us in that advocacy. More work to be done.

 Brent Lucas  13:12

For sure. It is an interesting observation that I have kind of from going public as well. The knowledge in general in the US market about hearing loss is shockingly low. When you talk to some of the other analysts and other countries, Australia, for example, I know there's a good working relationship with Medical Alley in Australia, but our sort of biggest competitors in Australia, Cochlear Corporation. And so when I talk to them, well educated on hearing loss, well educated on the differences between, you know, the technologies and why hearing loss is important. Same with the European countries when I talk to them, because there's a, Denmark, of all places has a lot of hearing technologies. But when you get to the US and I talk to investors here, or I talk to some of the politicians here, they they sort of think hearing loss is just one in the same, right? Like it's just one big category of grandpas who need that sort of old beige hearing aid. And that's not what it is. And it has come so far. And there are so many different people that are really working on it that it is a very exciting area.

 Frank Jaskulke  14:23

I mean, that is a good segue into talking about you guys going public. I suppose that's partly that's your opportunity to be able to educate the market, develop the market. It's also a challenge and a lot of work that right, unlike other sectors, say of med tech, you may not have that tailwind always there. So can you tell our listeners a bit about what's it been like going public as a small medical device company?

 Brent Lucas  14:48

Yes, it's been an it's been an interesting road. So Envoy actually was founded in 1995. So it is almost a 30 year old startup company, if you will, and we went public last fall through what's known as a SPAC or Special Purpose Acquisition Corporation. Another way to think of it is a reverse merger, which is sort of more common in people's vocabularies. So we decided to do that because we thought the public markets were a really good place for a company like Envoy Medical. Everybody knows hearing loss, everybody is connected to hearing loss in some way. And we think that more people, the more people that are educated on this, the more people that become aware of our technologies and why they're different, more and more people are going to want to sort of get on the train, if you will. And then they with the public company and liquidity, they can get off at certain points. They can, you know, they can be engaged with the company, but they don't have to sort of put their life savings in and then hope for Medtronic to come and buy them or something like that. So we thought the public markets were a very interesting opportunity for us and a way to get other and investment vehicles as well. So I think it was a good choice. It has had its ups and downs. The ticker symbol is COCH and I unfortunately watch it more than I should so you start to see on a daily basis, you're like, well, nothing happened today. Why is somebody negative on us? Or, why even if somebody's positive on us? And so that part's been an interesting, interesting challenge. And dealing with the SEC has been another sort of learning experience. But I would say all in all, very positive experience. I would also touch on that my father, and I was one of the first people involved with R&D Systems, which then became Techne, now Bio-Techne. They went public through a reverse merger really many, many years ago.  Yeah. And so I grew up around sort of knowing that this was a possibility, and knowing that it can be done, there's bumps in the road, you don't necessarily have — not every company can do a traditional clean IPO. Right? Not every company has the Tesla story that people are just gonna love. So some of us have to get in the trenches and kind of make our own way. And that's what we're doing. And I'm, I'm very excited about the future of the company. I think the more people that find out about us, the more people are going to be interested and it all should take care of itself. 

 Frank Jaskulke  16:54

I did not know that. Interesting. I have been fascinated over really probably the last 10 years, but especially the last five years at how the financing of startup health and medical technology companies has really shifted from where we we used to think about an approach of you know, venture capital and then get bought, go IPO. And then you started to see grant money coming in more significantly, public markets in different ways, including foreign exchanges, a number of local companies that have used the Australian Securities Exchange. The SPACs of the last couple of years, which, you know, as we're recording this, folks, there's a another member that hopefully it went well for them and they should be completing there's like, right now they're doing the vote, I think. So the creativity to find different ways of financing and developing these advanced technologies, it's just, it's something else to see. And it's been really fun. And that's great to know about Techne. I didn't know that's how they got public originally.

 Brent Lucas  18:35

I really hope I told that story correctly. I'm pretty sure it was reverse merger into a public shell. But yeah, no, I actually started thinking about going public when I was at a medtech conference. And there was a group of business development folks from the big companies talking. And one of them said, you know, it used to be we were just competing against each other. But now we are competing against companies going public. This was about three years ago, when it was real popular to go public. And I thought, you know, that is a very interesting observation. Because if you're in a small industry like Envoy was, you know, there's three sort of big players. And if one, if you can't get one of them to bite, you need to figure out what you're going to do and get liquidity for your shareholders and going public was the way to go. And I think, frankly, that some of those companies might regret not, you know, buying us when we were smaller because just like Inspire, which again, I like to point to, you know, there are now huge compared to what they were. So I think it's a really interesting opportunity for companies that might not be in sort of the cardiology space, or some of the sort of more traditional spaces that the bigger players are in. Yeah, and if you're in that white space, why not go public? 

 Frank Jaskulke  19:57

That's a really good framing.

 Brent Lucas  19:59

And sort of make the world recognize you and then see —

 Frank Jaskulke  20:03

And create optionality so that you're not kind of stuck on one path to be able to generate the return. 

 Brent Lucas  20:10

Right. Exactly. We'll see. Hopefully it works. 

 Frank Jaskulke  20:13

Yeah, right. We're pulling for you. 

 Brent Lucas  20:16

Yeah. I appreciate it. 

 Frank Jaskulke  20:17

Yeah. Well, last question. I always like to ask, like how people got into this. How'd you end up in med tech?

 Brent Lucas  20:23

Sure. So I mentioned my father, my father, after his Techne days started investing in local companies here in Minnesota, and he invested in a company called St. Croix Medical, which was our first name before Envoy Medical. I went to law school, here at Hamline, which is now Mitchell Hamline, and started interning at the company, Just trying to fill my summers. I knew I didn't want to be a lawyer. So I was just trying to fill my summers. But I got really interested in the technology, and really, very interested in the patient connections that we were starting to see. Because we're in the midst of a clinical trial at that point, starting to get some testimonials back and understanding, you know, you go to work every day, and you're changing somebody's life. That's a pretty special thing to do. 

 Frank Jaskulke  21:14

It's the best. 

 Brent Lucas  21:15

And there's a lot of other things that people do where they don't get that connection, they don't get that sort of non financial reward. And then the closer I got to the company, I fell in love with it, and wanted to help it sort of see the light of day. And right now it's all I think about and hopefully, you know, part of it's med device and I really also love the challenge of medical advice. I think it, I mean, we're biased, obviously, but I think it's probably the most challenging, intellectually challenging industry out there, right? Because you're constantly dealing with a variety of regulations, hurdles, you've got to figure out finances, there's long timelines, you have to make a lot of decisions work with a lot of different cross functional groups. So I just fell in love with all of it. And I just really want to see it through and want to see Envoy become a success. Because I think the small medical device community especially needs some more success stories. And then when you get a couple more success stories, you're going to start to see more investment come back into medical device. Goldman Sachs just launched a very large medical device fund, I believe, last week or two weeks ago. So I think you're gonna see more money coming back into the medical device space and hearing healthcare or not just hearing healthcare, but healthcare space. But we need some we need some W's on the board before too many people are gonna pay attention. 

 Frank Jaskulke  22:45

Yeah, nothing wins like winning. Oh, fantastic. Well, thank you. I really appreciate you sharing that and in sharing the story of the company and what you guys are are trying to build. Thank you. 

 Brent Lucas  22:56

Absolutely. No, and we thank you. I think the first — I was thinking this morning. I think the first time we met was probably 2010 or '11 at a coffee shop. So thank you for everything you do. Medical Alley's very important. I really appreciate the support a small business especially. So everything you guys do, just keep doing it.

 Frank Jaskulke  23:17

Right on. Fair enough. Well, thank you. We appreciate you being on and listeners, thank you for listening. This has been another episode of the Medical Alley Podcast. If you're not already a subscriber, make sure you head over to medicalalleypodcast.org. You can find us on Apple, Spotify or also on our YouTube channel, just search for Medical Alley. And hey, would you do me a favor? Would you share this episode with just one other person? If everyone listening did that we'd help spread this story and so many other great stories coming out of the Medical Alley community further. I'd really appreciate it. Until next time, have a great day.