Just about anyone with hearing loss will tell you that hearing aids never restore natural hearing and the only alternative, cochlear implants, have so far failed to deliver on the promise of either sound clarity or being a totally implanted device (Medical Device Daily, April 2, 2009). Both devices plague users with high-pitched tones, amplified bodily sounds and worse.

Envoy Medical (St. Paul, Minnesota) is poised to alter the hearing loss device market with a new technology. The company has just received FDA protocol clearance to submit a PMA in August for Esteem, an entirely new-concept hearing restoration device that Envoy claims rivals anything currently available.

With 278 million people worldwide who have moderate to profound hearing loss, the potential for Envoy is enormous.

"The entire audiological community will fall out of their chairs when they see the Esteem," Envoy CEO Patrick Spearman told Medical Device Daily, adding this analogy about the new device, "LASIK is to vision what Esteem will be to hearing. We've spent 14 years and $105 million to get to where we are today."

Traditional hearing aid technologies rely on microphones for amplification. Esteem uses the body's own eardrum as a natural microphone.

A totally implanted device similar to pacemaker technology, Esteem has two transducers – a sensor and a driver that extend into the middle ear from the sound processor which is implanted just behind the ear. Sound waves travel into the ear canal and set the ear drum into motion causing the bones of the middle ear to vibrate. The device senses these movements and delivers a dose of energy to the cochlea, which then transmits the signals to the brain.

A small remote control device allows users to turn the Esteem on or off at will, adjust volume if needed in different settings. Spearman said one of the biggest complaints that traditional hearing aid users have is that they can't filter out background noise like a natural ear. So if a TV is running in the background or if the person is in a noisy crowded room, it's difficult to hear a person speak even if they are very close. Esteem apparently subverts that problem.

There are two types of hearing loss: conductive, which is a problem in the outer or middle ear, and sensorineural, which typically involves a problem with the inner ear, and usually is permanent. Common causes of sensorineural hearing loss are excessive noise and aging.

Spearman said the Esteem would work for about 80%, or 24 million, of the 30 million Americans with sensorineural hearing impairment.

Of data the company will submit with the PMA, Spearman said, "Our results are so good that when we apply for FDA approval, our PMA will claim that we are superior to hearing aids."

Envoy will use data from two Phase II trials of 150 people who each received one hearing implant. Of those, only three needed to be explanted due to complications.

In addition to the clarity of sound, Spearman said another advantage is a battery that will last for up to nine years without recharging.

"Cochlear implants were the first devices used that replaced a human sense," Spearman said. "But Esteem brings people back to levels of hearing where they were before, something that cochlear implants can't do. It's really touching and this really is something that will benefit society in a big way."

In addition to the positive data to be presented from two Phase II trials, what's impressive about the company and the potential of the device to impact the market can be seen in who is backing Envoy. Spearman and his family own about one-third of the company. Among other supporters and investors:

The inventor of cochlear implants, William House, sits on Envoy's board.

Ken Dahlberg, who developed the first all-in-the-ear hearing aid, now known as the Miracle-Ear, is a key investor and sits on the board. His company, Miracle-Ear, is now owned by Amplifon Group (Milan, Italy), which claims to be the world leader in the distribution and fitting of personal hearing solutions.

Billionaire Glen Taylor, who owns the Minnesota Timberwolves basketball team, is another big investor.

Allen Lenzmeier, former vice chairman of Best Buy (Minneapolis), also has made a substantial investment.

And, Glen Nelson, MD, former vice-chairman of Medtronic (Minneapolis), owns about 1% of the company.

In addition to the heavyweight angel investors, Envoy raised $12.5 million in 2007 (MDD, April 30, 2007), closed another $12 million fundraising just last month and plans to tap the market again this summer for up to $30 million, despite current market conditions.

Spearman isn't daunted by the idea that med-tech firms saw investments fall 51% from the $972 million for 74 deals last year to $477 million for 42 deals in the most recent quarter, according to Dow Jones VentureSource.

"We have a lot of money and keep putting in money ourselves," he said. "To raise $25 million to $30 million should be a slam-dunk. We have such a high value, it makes raising money easy. We believe the company can be sold, after FDA approval of Esteem, for over $1 billion."

But Spearman has no plans to sell the company. The goal, he said, is to go public and then create a surgical franchise.

"It takes a skilled surgeon to implant the Esteem and we want to make sure they are properly trained and we want control of it all," he said. "There's a steep learning curve. Our marketing strategy will be completely different. We're not going to hospitals and doctors. We're going to launch our own surgical centers and use direct-to-consumer advertising. If you use a hospital, the cost of surgery is $30 to $40 a minute. If you have your own center, it's $6 to $10 per minute, like a plastic surgeon."

Even with that reduced facility cost, the Esteem won't be inexpensive. With an initial price tag of $25,000 for the device and surgery, Spearman said they company has no immediate intention to seek reimbursement from insurers.

"Initially, there are enough people who can afford this," he said. "We're not going to be at the beck and call of the medical community on what we can charge. When they see the success, they'll come to us. The public will sell this product. If a pacemaker is put in, how can you tell if it's working? Only the doctor can tell. With our device, the patient can tell if it works or not. This product is a public interest story and we're going to devote tens of millions to advertising."

Eventually, the volume of sales will reduce the overall cost of Esteem, he said.

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