BB&T Contributing Editor

One of the largest healthcare markets, and one that clearly is growing by leaps and bounds, is bariatrics/obesity. There is absolutely no pun intended in saying that the sector offers a plus-sized opportunity for device solutions, especially in the near term.

Evidence of the high level of interest in the sector could be seen in a Bariatric/Obesity Innovation session held as part of an afternoon-long Device Specialty Day during the 9th annual MedTech Investing Conference, held in Minneapolis in the latter part of May. That session drew an appropriately oversized crowd to participate in a discussion of what many believe could be one of med-tech's best market opportunities going forward.

The session, chaired by David Milne, managing partner of SV Life Sciences, (Boston), featured VCs and potential corporate partners, physician experts in the obesity field and CEOs of existing firms in the space. Setting the stage for the discussion, Milne referred to what he termed “the obesity epidemic“ in the U.S., citing statistics such as 124 million Americans being considered overweight and fully 11 million fitting the clinical description of “morbidly obese.“

Globally, 1.2 billion adults are said to be overweight and more than 400 million are obese, with those figures projected to increase by 2015 to 2.3 billion and 700 million, respectively. The Trust for America's Health said in a 2009 report that obesity now accounts for more than 25% of all healthcare costs in the U.S.

Those statistics – and the belief that the space is big and getting bigger – are bolstered by the new BioWorld & Medical Device Daily Obesity Report, published by those sister publications of Biomedical Business & Technology. As an opening analysis in that report notes, the total value of the global weight management market, which includes the “kitchen sink“ estimate of everything from hypnotism to diet soda to partial stomach excision, is an astonishing $550 billion.

And as that report also notes, medical technology solutions clearly hold the present-day lead over prescription drugs as a treatment, primarily because of the effectiveness of surgeries and other less-invasive device options in effecting real weight loss. “The med-tech industry is exploiting the lack of approved drugs to quadruple its growth rate for its most popular products and services,“ says the report.

With the pharmaceutical industry, and especially the biotech industry, aggressively trying to steer new therapeutics through the clinic and into use, the report says the bariatric surgery market will see “a slowing of growth, but not a reversal, as the severely obese patient group will remain securely reliant on the surgery sector for its most viable option in fighting morbid obesity with the quickest results.“

As the BioWorld & Medical Device Daily Obesity Report further says, “Although patients want the magic pill solution, they still want results fast, and the bariatric surgeries, as well as certain other procedures, offer unparalleled . . . reliable weight loss in the most extreme cases.“ It adds: “Medical technology is the premiere option in treatment of obesity.“

At the Bariatric/Obesity Innovation session in Minneapolis, Milne noted that developments in the obesity space are emphasizing a shift from invasive surgical procedures to less-invasive options, with the popular Lap-Band procedure earning a 44% share of the 210,000 to 220,000 procedures performed annually in the U.S. and Canada.

“There are tremendous opportunities in this space,“ he said, including significant interest by corporate titans such as Abbott (Abbott Park, Illinois), Allergan (Irvine, California), C.R. Bard (Murray Hill, New Jersey); Covidien (Mansfield, Massachusetts) and Johnson & Johnson (New Brunswick, New Jersey).

Those opportunities deal not only with weight loss, but also the laundry list of health issues largely fueled by excessive weight. As the BioWorld & Medical Device Daily Obesity Report notes, besides bariatric surgery, “there are many devices that address the symptoms of not only obesity, but diseases such as diabetes and heart disease that wind up requiring replacement body parts or apparatus that mimic, or assist, body functions. Examples include heart valves, diabetes pumps and even wheelchairs.“

VCs see need for clinical results

Jan Garfinkle, founder and managing director of Arboretum Ventures (Ann Arbor, Michigan), moderated a panel that included Milne; Mike Carusi, general partner in Advanced Technology Ventures; (Palo Alto, California); Evan Norton, director of Abbott Ventures (Lake Forest, Illinois); and John Onopchenko, managing director of Synergy Life Science Partners (Portola Valley, California).

Onopchenko said obesity is a “patient-driven“ space, with patient choice being “a big influencer of the market.“ What he is looking for as a potential investor in the space is “a dramatically safer procedure.“

Norton said, “There are a lot of great ideas out there, but they're navigating in some murky waters,“ Norton said, adding that obesity/bariatrics is definitely a “white space“ type of investment. “We're going to have to see more cards turned over,“ he said, adding that companies will have tall hurdles to scale in order to get what he referred to as “that big check.“

In making investment decisions in the obesity space, said Milne, “You have to dig deep into the data – there isn't any 10-year data yet.“ He said that while less-invasive clearly is the direction the space is going, “surgical is where reimbursement is right now.“

For Carusi, it's clear that technologies will drive the space. The question, he said, is “How do we get to market soon with the FDA and reimbursement challenges that companies face?“ Noting that his firm has made “multiple bets because we didn't know where it [the obesity sector] was going,“ he added that “we're now starting to see clinical data in this space.“

Onopchenko said that “[gastric] restriction works – it's tough to beat that. The bets we place are on how long the technique works.“

Milne agreed. “Permanence is a question. [Investors are] struggling with the question of how does the FDA view it?“ He added that VCs are spending more on their investments in the space because there isn't anything out there in the way of proven solutions to build on.

He said his guess is that “clinical data will be the driver“ in terms of new technologies gaining traction against the entrenched surgical companies. “If you're a surgical company, you have some substantial business to defend there.“

Milne said he thinks it will be another two to three years before any of the newer, less-invasive technologies will make any substantial gains in the space. “You need to see what element of obesity you're trying to solve.“ He emphasized that he does see the space as a market to be dominated by devices, not drugs.

Carusi said, “You're going to have to do multiple studies – expect a lot of smaller studies to be done.“ Onopchenko concurred, saying that the challenge for companies is, “in order to get a big check written, you're going to have to show some darned good data.“ But, he said a good transoral technology with good clinical results could be a “game-changing“ event.

Docs see growth potential in space

Mitchell Roslin, MD, chief of bariatric surgery at Lenox Hill Hospital, (New York), and Aurora Pryor, MD, of the Duke Center for Metabolic and Weight Loss Surgery (Durham, North Carolina), outlined the current status of efforts to combat obesity.

Saying that surgical intervention “is the only thing that works for the morbidly obese,“ Pryor mirrored Milne's take on the space offering “significant growth potential.“

She said the longtime standby, Roux-en-Y gastric bypass, an invasive procedure that involves the stapling of the stomach, “is declining as a percentage of the total,“ with gastric bands and sleeves having moved to the forefront.

Pryor said the goals of new approaches such as gastric restriction, malabsorption, and combined modes of action have goals of minimizing risk, offering a cosmetic benefit over invasive surgeries, having a cost benefit and improving results. She said those goals are more or less met for all but improving results, where “not yet“ is the applicable phrase.

Companies developing such products need to focus on the “results“ part of the equation, she said. “To improve adoption [of any specific technology], prove the benefits.“

Saying that surgeons are willing to accept less weight loss via a given procedure if patient safety is improved, Pryor added: “We're going to see a lot more bariatric surgeries being done, and . . . new devices that may reduce risk and increase clinical effectiveness“ will be the ones that find acceptance by such surgeons.

Roslin offered a simplified view of the work of bariatric surgeons: “We do procedures that make people less hungry.“ The challenge for companies seeking to innovate in the space, he said, “is to come up with a sustainable business model,“ especially given that “no randomized trial in obesity has yet hit its endpoint.“

So the question facing companies and those who invest in them is, “What is the value proposition?“ Roslin, who is a consultant to several companies working on bariatric technology, said “it's important that start-up companies work together.“ Citing the existence of “many new ideas“ in the obesity space, he ran through a variety of approaches, including space-occupying technologies, duodenal blockers, stents, pacing and endoscopic suturing.

For the latter, Roslin cited the TOGA System from Satiety (Palo Alto, California), terming it “an engineering tour de force,“ but one that “isn't going to be cheap.“ The transoral gastroplasty (hence TOGA) procedure has a price tag of $7,500, but that hasn't kept what he said were some 20,000 persons who sought information on becoming part of the company's 10-center clinical trial for the device.

Noting that early data have shown sustained weight loss, Roslin said one major concern involves reimbursement. “Until there is reimbursement,“ he said, “where is the market going to be?“

He also cited the dual-balloon approach from ReShape Medical (San Clemente, California), with overseas data indicating weight loss of 40 to 60 pounds at six months and U.S. clinicals now getting under way.

With all space-occupying technologies, Roslin said the biggest concern practitioners have is that “when you withdraw the device, you withdraw the effect.“

He also touched on USGI Medical's (San Clemente, California) Shapelock Incisionless Operating Platform, a laparoscopic suturing procedure to make the stomach smaller, as well as GI Dynamics' duodonel bypass technology, the EndoBarrier technology, saying of the latter, “The question is, how long can we keep an endobarrier in place?“

Roslin had a similar question for Valentx's (Wilson, Wyoming) stent graft technology, which he said has had “absolutely amazing results.“ Noting that patients had exhibited “impressive“ weight loss, he said the “How long can this stay in place?“ question applies to the Valentx technology as well.

He hailed vertical sleeve gastrectomy, saying that it was showing “excellent results“ and adding, “The data is really compelling on a two-year basis, with weight loss better than the Lap-Band. We're going to see this become the most popular procedure over the next several years.“

The sleeve gastrectomy process initially served as a bridge to surgery – part one of a two-part process – but now often is regarded as a stand-alone procedure. It can be done endoluminally and thus is popular with patients, and is easy to do, though it can be a tedious procedure to perform.

Overall, Roslin said, because “people want treatment, there is a role even for short-term treatments,“ with endoscopic treatments being particularly attractive for prospective patients.

The key to successful clinical trials, he said, is to find “reasonable“ endpoints.

As for bariatric surgeons, Roslin said they “need to embrace new technology if it is proven effective,“ lest other physician groups take their patients with other forms of treatment.

CEOs say demand spells opportunity

A final session featured Stuart Randle, president/CEO of GI Dynamics, (Lexington, Massachusetts); William Murray, president/CEO of ReShape Medical, and Mitch Dann, chairman of Valentx, in a discussion of their companies' efforts to date in the sector.

Dann, for one, was effusive in expressing his enthusiasm for the sector. “The obesity space is the most incredible opportunity I have ever been involved with. It may be of the most strategic importance of any medical device space.“

Murray called it an opportunity that is “compelling because of the demand – people want a solution.“

Randle noted that as part of the evolution of approaches within the space, his company has steered away from a “weight loss“ indication to one of improving the outlook for diabetics, in no small part because of being more successful in gaining reimbursement for such an indication.

Dann said Valentx's focus is on being “less-invasive, but with an efficacy similar to bariatric surgery.“

Addressing the question of failed trials, which are commonplace within the obesity space, Murray said that those failed trials have helped investors understand that their companies need to slow down and take all the steps necessary to do it right.

Randle chimed in: “The issue . . . is the quality of the data and the people who gather it.“

With moderator Mike Carusi steering the discussion toward what VCs are looking for from companies in the obesity space, Dann said, “It's a question of how do you deal with the FDA and get paid via reimbursement.“ And the answer, he said, “is that it's a longer process than in other fields.“

Randle said, “There are a lot of large venture investors who have been watching the space for several years and are looking to get in. The question is, 'When?' I do think there are venture dollars out there for this space.

And, while reimbursement is pretty much the Holy Grail for VCs and firms in the space, there also is substantial thought that the obesity space can at least in part mimic the aesthetic space. “We have done some market research that indicates there are a lot of people out there who are willing to self-pay for a solution,“ said Murray.

Randle added: “The marketers say there is zero connection between income and willingness to pay for aesthetic procedures,“ which could be true at least to an extent for device-based obesity solutions.

As for the likelihood that such solutions will be clinically proven to work, Murray noted that “this is one of the most heavily invested research spaces by the National Institutes of Health, so there's plenty of science being developed.“