The Client: MediBot
MediBot was founded by a team of doctors and AI engineers with a bold vision: to use artificial intelligence to help radiologists detect early signs of cancer from medical scans with greater accuracy. Their proprietary algorithm showed immense promise in early tests, but the path from a promising technology to a commercially viable and regulatory-approved medical device is fraught with challenges, particularly in the HealthTech space.
The Challenge: The Twin Hurdles of Regulatory Approval and Commercial Viability
MediBot faced two monumental challenges that were deeply intertwined. First, they needed to navigate the rigorous and expensive process of securing regulatory clearance from bodies like the US Food and Drug Administration (FDA) and India's Central Drugs Standard Control Organisation (CDSCO). Second, they needed to prove to investors that they had a viable business model that could justify the high costs and long timelines associated with HealthTech innovation.
Key Challenges:
- Complex Regulatory Pathway: The founders were experts in medicine and AI, but not in regulatory affairs. They lacked a clear strategy for their compliance submissions, a process that can take years and cost millions.
- Uncertain Financial Projections: Without knowing the timeline or cost of regulatory approval, creating a financial model was nearly impossible. This made it difficult to plan their budget, manage their burn rate, or have credible conversations with investors.
- R&D Capital Management: A significant portion of their seed funding was being spent on R&D. They needed a way to track these expenses for R&D tax credits and to justify the spend to their board.
- Investor Skepticism: HealthTech investors are wary of the long development cycles. MediBot needed to present a financial plan that showed a clear, albeit distant, path to profitability.
The Solution: An Integrated Finance and Compliance Strategy
MediBot engaged Nexa Consultancy for a unique blend of our Virtual CFO and Regulatory Compliance services. Our approach was to build an integrated strategy where the financial plan and the regulatory roadmap informed each other.
Phase 1: Mapping the Journey (Months 1-4)
We began by creating a detailed, milestone-driven plan that covered both regulatory and financial tracks.
- Regulatory Pathway Assessment: Our compliance experts worked with MediBot to determine the correct classification for their AI software (Software as a Medical Device - SaMD). We then mapped out the entire submission process, identifying key milestones, required clinical data, and estimated timelines and costs for both FDA and CDSCO clearance.
- Project-Based Financial Modeling: Armed with the regulatory map, our finance team built a sophisticated, milestone-based financial model. Instead of a simple time-based forecast, the model was built around key project phases: pre-clinical validation, clinical trials, regulatory submission, and commercial launch. This allowed us to forecast cash needs based on the achievement of specific regulatory and R&D milestones.
- R&D Expense Tracking System: We implemented a system for meticulously tracking all R&D-related expenses, ensuring they were properly categorized to maximize future tax credit claims and provide clear reporting to investors.
Phase 2: Disciplined Execution and Reporting (Months 5-18)
With a clear plan, the next phase was about disciplined execution and transparent communication.
- Virtual CFO Oversight: We managed MediBot's day-to-day finances, including bookkeeping, payroll, and monthly reporting. Our monthly reports included a "Budget vs. Actuals" analysis specifically for the R&D and regulatory milestones, giving the board full visibility into how their capital was being deployed.
- Compliance Management: Our team managed the preparation and submission of the regulatory filings, working closely with MediBot's technical team to compile the necessary documentation. This freed the founders to focus on product development and clinical validation.
- Investor and Board Reporting: We developed a new reporting package for the board that went beyond standard financial statements. It included a dashboard tracking progress against the regulatory timeline, burn rate against milestones, and updates to the overall path to commercialization. This proactive communication maintained investor confidence during the long development cycle.
Phase 3: Commercialization and Profitability (Months 19-24)
Upon receiving regulatory clearance, we shifted focus to commercial launch and financial sustainability.
- Revenue Recognition Strategy: We helped MediBot develop a compliant revenue recognition policy for their SaaS-based pricing model, a complex area in healthcare.
- Pricing and Go-to-Market Support: We provided financial analysis to support their pricing strategy, helping them model out different scenarios for hospital contracts and per-scan fees.
- Path to Profitability: As revenue started coming in, our financial models were updated to focus on the path to profitability. We helped them identify the key revenue and cost levers to optimize, enabling them to reach breakeven much faster than originally anticipated.