Introduction

A start-up company, in any field, starts with an idea, an idea whose innovator thinks will be successful (make money, be needed and wanted) in the market place. For neuromodulation, these ideas usually are birthed by biomedical engineers with either a good eye and ear for business or a businessman with a good eye and ear for biomedical engineering. In any case, as we shall see in this chapter, many good ideas never come to commercialization and they don’t for many reasons. The successful “birth to end” business progresses to a successful “end game,” and the process must meet and beat certain stepping stones (the reasons) to win the adjective “successful.” According to Maria Bennett, CEO of SPR Therapeutics, the stepping stones to a successful start-up, as agreed upon generally by our other start-up CEOs, are:

• 1.
  

  The process starts with an idea for a technology, product, or therapy.

  
  
• 2.
  

  There must be a scientific foundation for the technology, product, or therapy.

  
  
• 3.
  

  This technology, product, or therapy must meet an unmet clinical need in a sizable and sustainable, validated market place.

  
  
• 4.
  

  The idea (intellectual property, IP) for this technology, product, or therapy must be protected through legal means, with a freedom to operate.

  
  
• 5.
  

  Establishing a sound financial base for furthering the process to commercialization

  
  
• 6.
  

  Once protection and a sound financial base has been established, clinical data, establishing a proof of principle, safety, and efficacy of the technology, product, or therapy, must be gathered.

  
  
• 7.
  

  Success or failure often rests on designing well–thought out regulatory strategies,

  
  
• 8.
  

  Compelling financials have to be established that not only include raising of funds adequate for the whole process, but also assuring reimbursement.

  
  
• 9.
  

  Finally, success often means building the right team to accomplish the foundations.

Each of the following perspectives are unique to the individuals discussing them; however, there are, as we shall see, commonalities to them all.

My Perspectives on Starting a New Start-Up in Neuromodulation

Jon J. Snyder

Neuros Medical, Inc.

With more than 25 years of sales, marketing, and operations experience in the medical device arena, my perspective on bringing new technologies to market is truly rooted in the training I received while at STERIS Corporation in Cleveland, Ohio, throughout the 1990s. STERIS was at the time a pioneering medical device company (developing a novel liquid chemical sterilization system to support the rise in heat-sensitive, minimally invasive, surgical devices) with a spirit of “how we can do things” versus “why we can’t.” This dedication to the mission has stuck with me throughout my career.

STERIS grew from $14 million in revenue when I joined to over $1 billion in the 8 years that I was with them; quite phenomenal growth, both organic, but also through acquisition. In 2000, I left the marketing of capital and consumable medical devices at STERIS to join Cyberonics, entering the world of an implantable, prescribed neuromodulation therapy—quite a difference, but similar in many ways.

While at Cyberonics, in various customer-facing roles, such as national account management, regional sales management, and director of regional marketing, I like to tell folks that I “cut my teeth on neuromodulation and the effect it could have on patients, family members and caregivers.” Their Vagus Nerve Stimulation (VNS) Therapy for patients had a profound effect. Seeing before and after images of patients who seemed medicated, lost, and displaying the effects of drop-attack seizures, to smiling, bright-eyed, engaged people, truly showed me the positive results of the therapy. Many patients had a significant decrease in the number of seizures, and also a real decrease in antiepileptic medication use, which greatly improved their quality of life (QOL). Being engaged in the commercialization process via marketing, sales, and national account management provided for me an in-depth exposure of creating awareness for the therapy, through prescribing physicians, clinical support staff, patient support groups, and national/regional symposia, as very effective strategies to grow the acceptance of the therapy. As a result, the VNS business at Cyberonics grew to over $300 million annual revenue, based only on one indication. I felt that neurostimulation presented strong opportunities and applications based on my experiences at Cyberonics.

After I left Cyberonics, I was the marketing lead at several other companies, both large and small, however, I felt that the timing was right to lead my own endeavor. I had moved to Chicago to join a large medical device company, when a discussion with a former colleague of mine pointed me to my hometown of Cleveland, Ohio, and BioEnterprise, a business formation, recruitment, and acceleration initiative, designed to grow healthcare companies and commercialize bioscience technologies, who was adding their first CEO in Residence. The opportunity aligned perfectly.

I joined BioEnterprise in 2008. My role as CEO in Residence was to scout, evaluate, and perform due diligence on technology in the neurostimulation space, establish the vision for the business, form the Company, and lead the initiative. What better time to put a prerevenue neurostimulation company together than 2008 during the Great Recession!

I reviewed two dozen neurostimulation technologies, some in the Cleveland area at institutions such as Case Western Reserve University (CWRU), the Cleveland Clinic, and other research institutions throughout the world. The clinical applications that I reviewed ranged widely as well, from chronic pain, sleep apnea, and wound therapy, to stroke rehabilitation and epilepsy. I conducted a thorough due diligence effort during this time, looking at the technologies, relevant markets, competition, intellectual property, inventors, and funding requirements for each technology reviewed, producing a stack ranking. The more I learned, the more the ranking was adjusted. Finally, after an exhaustive effort, I was ready to put a stake in the ground and move forward with the technology that would become Neuros—high frequency, electrical nerve block.

The inventors of high frequency electrical nerve block, Drs. Kevin Kilgore and Niloy Bhadra of CWRU, had performed solid preclinical research, confirming the effect of the technology and discerning the mechanisms of how they were able to block nerve action potentials. Their initial focus was on motor applications such as spasticity, however when we reviewed the technology, we thought it had the potential of blocking pain.

Again, keep in mind that this was 2008/2009, the time of the Great Recession. Not many companies were getting off the ground and the potential for funding new entrepreneurial projects was very challenging. Fortunately, in Ohio, we have the Ohio Third Frontier, a state government initiative that supports organizations such as BioEnterprise and also regional funders, including JumpStart, and organized funds/angel funds in the State of Ohio. As a result, we were able to raise nearly $2 million in 2009 from Ohio-based investors through determination, persistence, and belief in the opportunity that our technology presented. This funding enabled us to establish our company, hire our CSO, Dr. Zi-Ping Fang (actually bring him back to balmy Cleveland, Ohio, from Silicon Valley!), and move forward to execute our feasibility study.

We also saw strong alignment with the Department of Defense (DOD) and military applications of our technology, due to our initial clinical focus of postamputation pain (phantom limb, stump pain). We augmented the $2 million in 2009 with additional grant funding from the DOD and the US Army to support our efforts in the following years.

Neuros’ initial targeted market, postamputation pain, is very much underserved. 2 million amputees present in the United States, with nearly 200,000 amputees added annually. Due to the rise in diabetes mellitus (DM) and peripheral vascular disease (PVD), these numbers will continue to grow. The projected US market of patients that suffer from chronic postamputation pain who are refractory to current treatments is nearly 1 million in the US. This number, ironically, is very similar to the market size estimates for VNS therapy for epilepsy. The therapy has potential use for other chronic pain applications such as chronic postsurgical pain, occipital neuralgia/migraine, to name a few with additional study, as well. The therapy also utilizes a very simple, well accepted and clean screening tool of lidocaine injection. If a patient responds to the lidocaine with significant pain reduction, theoretically, they should be a responder to our Altius High Frequency Nerve Block. See Figs. 140.1–140.3 .

Altius High Frequency Nerve Block.

Altius High Frequency Nerve Block.

Altius High Frequency Nerve Block.

However, being first to market, developing the market, and validating the market is not only an opportunity, but a challenge. Spinal Cord Stimulation (SCS), for example, a $1.6 billion US annual revenue market with approximately 10% market penetration, is easy to compare to. The first SCS system, however, most likely met with the same market challenges of presenting the market opportunity, as I would expect VNS, Deep Brain Stimulation (DBS), and Obstructive Sleep Apnea applications did as well.

When we commenced our initial activities as Neuros, we wanted to get into first-in-man, as soon as possible, which is a bit contrary to other neurostimulation therapies. Many hire several engineers and develop an elegant device without any clinical activity. We felt that we couldn’t move forward to that step until we confirmed that the therapy was safe, would work in reducing patient’s pain, and was tolerable to the patient (proof of principle). We also needed to understand when the device should be used for the planned indication. Executing an elegant implantable device, prior to doing so, would have greatly reduced our trajectory. Fortunately, the first-in-man provided these understandings.

In 2011, upon the completion of the first-generation device, we completed our first-in-man study of five patients, the first time that the therapy had been applied in humans. What we found was significant and promising in the short term. Four of the five patients had significant pain reduction. The therapy was also very tolerable and didn’t require the device to be on 24 h a day, unlike conventional/traditional SCS devices. These key learned understandings were very important and foundational for electrical nerve block therapy and would then translate into the product development of our go-to-market device, Altius. It was also very impactful for us to see the pain reduction of the therapy in our patients, first hand.

We executed our first-in-man study at the Ohio Pain Clinic, under Dr. Amol Soin’s direction, in Dayton, Ohio. Dayton is the hometown of the Wright Brothers, and seeing the significant impact of our therapy in reducing the patient’s pain level and their anecdotal feedback of “being able to sleep throughout the night; first time since my amputation” made us feel that we were witnessing something monumental such as the Wright Brother’s first flight at Kitty Hawk, North Carolina.

The completely implanted system, Altius, was developed in parallel to our long-term pilot study, performed under Investigational Device Exemption ¹

1 “An investigational device exemption (IDE) allows an investigational device (i.e., a device that is the subject of a clinical study) to be used in order to collect safety and effectiveness data, required to support a premarket approval (PMA) application or a premarket notification [510(k)] submission to the US Food and Drug Administration (FDA).” Taken from the Internet: https://www.google.com/#q=what+is+an+investigational+device+exemption& ∗.

After the first round of funding in 2009, we raised additional funds in the following years. Being a prerevenue, neurostimulation/medical device company, you are always fundraising to support clinical, research, and development efforts. The funding environment continues to be challenging, with many venture capital firms unable to raise new funds due to a lack of their portfolio companies being acquired by larger companies. When their portfolio companies are acquired, they usually produce returns on investment for the venture capitalists. Without the returns, it is difficult to raise new funds for investors to invest into, and so the pool of available capital is reduced.

The venture capital industry’s prediction that there would be significant reduction in venture capital was correct, with now only one quarter of all VCs investing in medical devices. The lack of exits or IPOs is largely due to heavier governmental regulation in offering IPOs prior to having revenue, but also the fact that strategic partners are waiting longer to acquire new technologies. The days of executing a 10 patient, one-week study, and then exiting or selling to a strategic partner are long gone, as the development and commercialization risks still present themselves. Larger organizations, such as industry leaders, are now looking for technologies to be nearly completely derisked so that they can plug the therapy into their own sales and marketing organizations, as soon as possible, in order to show growth with the new therapy or technology.

This challenging environment has resulted in needing to raise more funds for small start-up companies than originally planned, and as a result, has lengthened the process of crossing the goal line, the “end game.” The key for all is to remember that good therapies that continue to show efficacy and safety will still be good investment opportunities.

We continue to develop and execute our clinical plan, with the initiation of our pivotal study, consisting of 100 patients at 15 centers. At the time of this writing, we have successfully completed the initial interim analysis of the first 20 patients. We have the drive to complete the journey, to get the therapy over the goal line, so that we can obtain US Food and Drug Administraion (FDA) approval and be able to see this therapy in the hands of more and more patients suffering from chronic pain.