May 1, 2022 | Venture capital professionals helping to build the bioelectronic medicine industry shared their insights on the investments climate at the 2022 Bioelectronic Medicine Forum held in New York City earlier this month. A panel discussion with three venture capital professionals active in the space brought out some valuable insights for startups established firms alike.
The session was moderated by Neurotech Reports contributing editor Jennifer French. Panelists included Imran Eba, partner at Action Potential Venture Capital, Brian Meshkin, managing partner at Profound Ventures, and Tony Natale, managing partner at Aperture Venture Partners.
We offer highlights from the session here.
Jennifer French: I’m going to ask each of you to introduce yourself and your firm.
Imran Eba: I’m one of the two partners at a fund called Action Potential Venture Capital. We are a decade old. The fund is backed by GlaxoSmithKline in their efforts within bioelectronic medicine. I’m Boston-based; my partner is in California. We invest in seed and series A companies.
Brian Meshkin: I’m a partner in Profound Ventures. We’re a social impact investment group in Southern California. We invest in different technologies, in companies that we feel are making a big social impact, one of which a company called Neuraura Biotech. They’re developing a next generation sensor and data platform with brain mapping–both sensing and stimulation—for a brain computer interface.
Between 2017 and 2020 I was an entrepreneur in residence with the Society for Brain Mapping and Therapeutics and the Brain Mapping Foundation. Previously I was a founder and CEO of Proove Biosciences, where we were the largest player in the precision medicine space in the field of chronic pain.
I actually developed my passion for this stuff about 30 years ago when I was a teenager, following the death of a friend who was hit by a car while riding a bicycle over to my home. I led an effort to enact the very first bicycle helmet law in the U.S. And then I helped the inception of what is now called Safe Kids Worldwide, a worldwide nonprofit organization that enacted over 300 similar laws across the U.S.
So you could say that the bicycle helmet was the first health related device that I helped become a standard of care.
Tony Natale: I’m one of the two managing partners at Aperture Venture Partners in the New York area. We’re a health care-focused venture firm. We’ve been around almost 20 years now, investing primarily in medical devices, everything from seed, Series A and up through growth equity. We really do all different stages and therapeutic areas within medtech. Neuromodulation has become a very strong area of interest of ours. We’ve got six neuromod companies currently in our portfolio. Axonics and Inspire are the two firms people have probably heard of. We also have four other much earlier-stage private companies. By way of background, I’m an ENT surgeon but have been in the venture business for 20 years now.
Jennifer French: Let’s talk a little bit about the investment climate for bioelectronic medicine. We saw a lot of large funding rounds last year. What do you think the climate is today for bioelectronic medicine?
Tony Natale: Over the last three or four years, we’ve seen a lot of activity on the investment front in all things neuro, but particularly neuromodulation and bioelectronic medicine. And I think that’s really just driven by the successes that we’ve seen in the space. Investors are fairly simple creatures to understand. So when we see an area that has been taking off–several companies that have had tremendous amounts of success—that naturally generates more interest in the field. Clearly, there’s been an explosion in research and the amount of technology and new programs underway all the way back to the very beginnings, research coming out of universities through startup and earlier stage companies. So I think it’s an area that’s become fairly well-established. When you hear medtech focused investors talking about categories in the field that they look at, neuromodulation is kind of becoming its own category, like orthopedics or structural heart. It’s become a defined field that attracts a certain amount of attention from most investors in the space.
When we first made an investment in this area, ten plus years ago, it was speculative. It was one of those areas that nobody was really sure where it would go. Some of our investors didn’t understand it. You had to do a lot of education to justify why you would invest in the space. Whereas today, that’s all in the past. I mean, it’s a very established field. There’s been a lot of commercial success—companies that have gone public, been acquired. And so at this point, it’s become an established area. There’s dedicated allocations within various investment funds and I think that makes it much easier. You don’t have to get people over that hump of, “why should I invest in this space” or “does it make sense” and it really is more about the specific technology and frankly, the way that any startup or early stage company is evaluated.
Do you have a good market opportunity? Who’s the competition? Are you better? What’s reimbursement look like? FDA? All these things. But you don’t really have to convince people to pay attention to the field anymore. Now you just have to convince them to pay attention to you. And I think that’s a much better place for everyone.
Imran Eba: Just to build off or what Tony was saying there are two classes of neuromod, bioelectronic medicine firms. One class is companies that Tony was mentioning, like Inspire and Axonics, in established neuromod markets, with reimbursement. From an investor perspective, I think that makes a lot of sense.
We were established in 2013 and at the time we had sort of laid out the vision of what a bioelectronic medicine would be and quite honestly, we had sort of filed it away because we felt it was such a dream. The idea of a miniaturized device implanted deep in the body on a nerve that would be able to read signals and single action potentials and potentially use that signal as well so as to cure disease. That idea felt so far away. But just within the last week, I’ve spoken to a few companies who have done exactly that. Neuonoff’s idea of easily injectable devices deep in the body. There’s another company that’s reading signals off the vagus nerve and then very selectively treating a particular disease. These are examples of the second class.
What I get really excited about is the groundswell of ideas that we were thinking were science fiction 10 years ago but today are reality. So I think that those sort of ideas as they continue to mature and show how they can be competitive, I think will be a really exciting step.
Tony Natale: Building on Imran’s point, I think that some of the other segments that have been peripheral to neuromodulation are going to start influencing the field. Instead of just repurposing fundamental platforms I think we’re going to start seeing some real category improvements with electrodes, with sensors, with virtual care technologies.
Jennifer French: So each of you have mentioned the evolution of technology and how we get really excited about some of the new technology and how it can change therapeutic effect. But what are some of those indications that you see have the greatest opportunities right now?
Imran Eba: When we first looked at bioelectronic medicine, it was the cardiac indications, it was epilepsy, Parkinson’s, deep brain stimulation, spinal cord stimulation. But what has always excited us about the potential of bioelectronic medicine was its ability to go after classic drug markets.
Moving devices up the care continuum is important, but also addressing shortfalls that drugs just fundamentally have not been able to address. So for us the basic question is, where is the greatest unmet need? And that’s irrespective of how you treat that disease.
When you look at mental health, when you look at Alzheimer’s, dementia, when you look at certain cancers—those areas have huge potential. Inflammation, is another area. You can see the limitations of drugs there. We think those are the areas where you can really go after indications with non-drug solutions.
Brian Meshkin: I think there’s going to be a migration pathway because some of these indications have very well-established regulatory pathways and reimbursement pathways, like epilepsy and others. What becomes a challenge for investors, in epilepsy for example, is making it exciting from a business standpoint.
And so building the bridge from where the market is to where you want it to get to—to go from those indications where there is reimbursement now, to where you ultimately want those indications to be, becomes the inherent challenge. Maybe it’s going to be through an off label strategy that establishes some clinical utility.
My background is more as an entrepreneur and executive than as an investor over the past 30 years. So thinking through the implementation is critical. The first two steps may not be as sexy as the third or fourth step but we really need to build that bridge.
To Imran’s point about gaps with pharmaceuticals, in much the same way we’ve had companion diagnostics emerge. Peter Staats talked about being able to understand the molecular level of cancer, for example, where we don’t define cancer any more to the extent we used to as locations in the body, like pancreatic cancer or, breast cancer. We’re getting to the point where we’re able to understand the disease at the molecular level. I think we’ll get to the same point in many of the conditions that are treated with bioelectronic medicine so that we’re not just thinking of stimulation of the vagus nerve, per se, but where that can ultimately impact and some of the associated pathways.
I also think there’s going to be two main companion devices with pharmaceuticals as well. Not just companion diagnostics, where there may be a gap in the way a certain pharmaceutical is used. And so you use the pharmaceutical with a particular device to get a better outcome. I think we’re going to start seeing that emerge as well.
Tony Natale: Yeah, I think we’re moving gradually up the complexity curve in terms of mechanism of action and moving more towards biology instead of physics. I mean, we started off with stimulate a motor nerve, move a muscle. Fairly easy to understand. And now we’re talking about inflammation and metabolic disease.
How does stimulation impact biology in the way that a drug might? That’s inherently more complicated and riskier, requiring longer development pathways and more dollars. But given the past successes in the space we’re seeing more appetite to bite off those kinds of problems. And we’re also seeing the concept of neurostimulation or bioelectronic medicine expand a bit beyond just the very narrow definition of putting an electrode on a nerve and zapping it and moving to things like tumor treating fields that are implanted in the body, which maybe blur the line a bit.
Is that bio electronic medicine? Define it how you want. But I think we’re going to start to see more broad uses of something electrical placed inside the body to accomplish therapy in a way that’s not just directly stimulating one nerve. And that’s what lies ahead of us in this new frontier.
Jennifer French: What’s your take on the appetite of pharma or other medtech strategics to come in and do some further investment or even M&A activity?
Brian Meshkin: I know we’re seeing pharma interested in this. A recent case would be Biogen’s new Alzheimer’s drug. It got accelerated approval and then was going to need some ongoing surveillance and additional randomized clinical trials to be able to show the clinical benefit. Pharmaceutical companies traditionally want their drug prescribed, whatever the drug is, to anybody and everybody. Sixty percent of the time it maybe works, but they want to prescribe because whether it works or not, they still get paid. With some of the more advanced therapeutics pharmas may need bioelectronic medicine to actually measure the outcome, not just in the trial, but in ongoing surveillance on an accelerated approval path.
It may be a marriage of necessity rather than desire, but I think that’s definitely going to happen with some of these conditions.
Imran Eba: I’m always struck by how willing Pharma is to invest in complicated therapies. Yet when they look at a device, they don’t quite know what to do with it. And to be honest, I think that that trend will probably continue for a little while. Although pharma such as GSK will dabble in the space, I don’t see a rush in that right now.
But meanwhile, with the medtech strategics, there’s been a great period of time without a lot of acquisitions. The IPO window, if not completely closed, is certainly smaller than it was last couple of years. And so you see medtechs now with a significant pool of capital, a need to go into a market that will be more acquisitive. They probably will start trending upwards in terms of their M&A activities. But pharma, while they will remain interested, to me it remains sort of a longer game.
Tony Natale: Yeah, I think this is very much a medtech space for the time being. People like to think that the big pharma money will show up at some point, but realistically you need to think like a device company to be successful today. If you try to operate like a biotech, that’s generally not going to fly.
One of the interesting divides that’s starting to develop is between implantable and wearables devices. Most of the large medtech strategics pursue implantables. They look like other medical devices. A surgeon does a procedure. They put something in your body. It’s medtech through and through. As we start to see more of these wearable approaches, it’s less clear how that’s going to shake out.
That starts to look more like a drug in a lot of ways. It just gets prescribed. There’s no procedure. You don’t need a surgeon. You can try it; if it doesn’t work, you stop using it. There’s no commitment on the part of the patient in the way there is with a surgical approach.
As we see more and more of these wearables marching through the R&D pipeline, it’s less clear to me how that area is going to shake out. How does reimbursement play out? Does that end up being medtech? And are those acquired by medtech companies? I think we’re going to see more and more of those as the years go by.
Jennifer French: I’m going to close out this discussion with one last question. As we begin to emerge from this global pandemic, what are some of the trends or expected changes you see emerging in this space?
Brian Meshkin: We mentioned remote and virtual care earlier. I think that one of the societal changes that’s going to come out of this pandemic, at least in the short term, is the idea that when people are sick, they don’t want to be around other sick people. We’ve had that as a notion of health for a very long time, whether it’s hospitals, whether it’s the medical tent on a battlefield, or wherever.
And so the opportunity, as Tony was mentioning, is with some of the wearables, some of those devices that may not necessarily require hospitalization, but can be remotely monitored from the home. We’re seeing a lot of the big strategics tying in apps to their devices to collect data back to the clinician.
It’s something we’re very bullish on, and I’m taking some pretty concrete steps in that direction because we think that’s where a lot of health care is going to go.
Imran Eba: I actually think the toughest challenge we experienced during the peak of COVID was with the execution of clinical trials. Ultimately the care delivery may still need to be implantable and may still need to be in a hospital setting for some of these therapies. But if you can minimize the number of visits a patient is making to hospital, that makes sense.
