2014: Rise in global obesity and diabetes makes institutional investors hungry for startups and IPOs

Rise in global obesity and diabetes makes institutional investors hungry for start-ups and IPOs

SAN FRANCISCO  Feb 15, 2014- Startups focused on treatments for obesity and metabolic disorders - one of the key contributing factors in diabetes and heart disease- have raised significant sums of venture capital in recent months.

Obesity, Diabetes and Heart Disease cost over $800 B annually. There are several companies in the diabetes diagnostic and insulin therapy and saturated cardiovascular market. Obesity is the new unmet need. The new start ups are focused on consuming less food, controlling the calories and about focusing on the metabolic action that regulate how the body uses food. These technologies are supposed to treat the root cause of diabetes and heart disease.

At the 2014, JPMorgan Health Care Conference in San Francisco, Orexigen presented its information that excited the investors on the drug side. Boston-based Rhythm Pharmaceuticals, have a drug to pursue in the obesity space. MPM Capital and New Enterprise Associates have invested in these technologies. Vivus and Arena have an approved drug on the market and capturing market share on the drug side.

Medical device are hot because they can deliver significant long term weight loss in obese patients without the risk of surgery or the adverse effect of drugs.  Today the only devices in the market that are approved by the FDA are the lap-band and J&J’s Realize band. This year, there was buzz about a new entrant Onciomed which is working on the next generation device to treat obesity and diabetes. Onciomed based in Irvine, California, presented at the Cleveland Clinic Medical Innovation Summit and looked very promising according to MedCity News. Onciomed name is derived from Latin word for unit of measure “Ounce”. The company is quite about it progress and conducting clinical activities for its medical device outside US to be ready for EU and rest of the world market. The company is supported by undisclosed investors. 

"Obesity investment have been greatly ignored in the past because some companies failed to meet FDA milestones or the regulatory constraints in the past, now after a decade of unprecedented obesity rates in emerging countries, American Medical Association (AMA) and FDA has changed their outlook on obesity and this sector is inevitably in super demand, we are looking at some new technologies because we think the large strategic players want to dominate this space or enter this space, this opens the opportunity for imminent success for young medical device entrants either by M&A or IPO. Medical device sector was ignored by Wall Street for the last few years, now investors realize that the drug and biologic products take longer to get to market and regulatory pathway is not well defined for many new drug or biologic therapies. Suddenly, the device sector looks more lucrative and makes more sense” said an investor who did not want to be named as he was exploring new obesity technologies to invest. “Since obesity and diabetes together are such dire unmet needs and have room for new technologies. We are very bullish on this sector. Given the high and growing global incidence of obesity, it's no surprise that startups developing new treatments are seeing interest from private and institutional investors. The medical device investing is evolving , getting in early is important, nobody is going to wait or follow a lead investor, those days are gone, we will see if the deal makes sense to us and we will invest”

GROSS STATISTICS ON GLOBESITY

The World Health Organization projects that by 2015, about 2.3 billion adults will be overweight and more than 700 million will be obese. As of 2005, the WHO estimated that at least 400 million adults worldwide were obese, defined as having a body mass index (BMI) of more than 30. (BMI equals weight in kilograms divided by the square of height in meters.)

2008-12 saw a “weeding out process” in the obesity sector. Medical technologies that did not make sense to the clinical community were weeded out. 2013-14 showcased the emergence of most promising medical device technologies in clinical evaluation: Gi Dynamics “endo barrier” in clinical trials, Enteromedics (ETRM) vagal stimulation device is awaiting FDA approval, Reshape Medical’s Duo balloon technology completed enrollment in the US, Obalon’s balloon technology initiated commercialization in UK for its temporary balloon implant, Onciomed’s GVS system is starting clinical studies to evaluate it long term implant which is a minimally invasive device to imitate gastric surgery without cutting any portions of the stomach or intestines, Baronova’s shuttle technology raised capital last year to evaluate its shuttle technology and Valentx endoluminal technology is working  on its temoporary endoluminal device.  Amongst all the above technologies Enteromedics and Onciomed are the only companies that have a long term implant to treat obesity and targeting bariatric surgeon as a user base.  Reshape, Obalon, Gi Dynamics, Vallentx and Baranova boast safe, short term medical implants which require removal in 6-9 months and rely on the Gastroenterologist or GI doctors Vs bariatric surgeons to perform the procedures more effectively. Bariatric surgeons are general surgeons who are specially trained to perform small incision laparoscopic gastric surgery to treat obesity. Bariatric surgeons are the doctors who see obese patients first and based on their BMI decide whether the patient goes to GI doctors or get a laparoscopic surgery. Lap Band and Realize band are popular long term devices that are implanted by bariatric surgeons worldwide using laparoscopic technique.

US has 70 million individuals who are obese, 15 million individuals are super obese or need to lose 50lb or more often close to 100lb and suffer from one or more co-morbidities, these patients are qualified to get surgery immediatly. UK has 1.3 million individuals in line for treatment for obesity. Countries like India and China are seeing obesity in epidemic proportions. India has 64million diabetic patients another 70 million obese and 12 million super obese that need immediate treatment. The medical device market for obesity is expected to exceed $139.5 Billion by 2017 according to MDDI (Medical Device & Diagnostic Industry).

Gi Dynamics, based in Lexington, Massachusetts, is listed on Australian Stock exchange. The company backers which include Advanced Technology Ventures, Johnson & Johnson Development Corp., Domain Associates, Medtronic Inc., Polaris Venture Partners, Catalyst Health and Technology Partners and Technology Partners and Cutlass Capital. Gi Dynamics has created a trend for international IPOs. Australia is becoming a breeding ground for young medical device companies wanting to list the companies on the Australian stock exchange.