Medical device startup company proves fundraising dollars are out there
The prevailing wisdom seems to be that fundraising dollars for medical device startup companies are scarce in 2011. Yet, disposable insulin pump maker Valeritas recently raised $150MM in a series C financing round – the biggest equity financing transaction this year to date. Not every company wants to raise such a large amount of capital, but what sets Valeritas apart?
To be honest, I know very little about Valeritas. Their website provides limited information. All I know is that over the last year Valeritas has gained 510(k) clearance and CE Mark certification for the V-Go, the first simple, fully disposable device designed to deliver basal insulin therapy for adults with diabetes. The V-Go delivers a continuous preset basal rate of insulin and is a once-daily transdermal insulin delivery device.
So, what can we guess makes Valeritas so valuable before commercialization?
Large market: Type 2 Diabetes, which afflicts about 27 percent of U.S. residents that are 65 or older. Almost 2 million adult Americans are diagnosed with Type 2 diabetes each year.
Unmet clinical need: potentially, 80 percent of Type 2 diabetics could avoid any medication or insulin bolus therapy and maintain much better blood glucose control if they only received a continuous infusion of small and steady amounts of insulin.
Business model: Daily disposable delivery device that simplifies continuous insulin therapy and lowers the barriers for Type 2 diabetics that are the larger segment of the market and don’t currently use pump therapy (i.e. insurance companies don’t have to shell out $5,000 upfront for a sophisticated pump).
Regulator certainty: insulin pumps have followed the less burdensome 510(k) pathway, which the V-Go has already cleared.
Big Device Companies in space: Both Medtronic Mini-med and J&J Anemas play in the insulin pump space, but concentrate on Type 1 diabetics. Both companies are obvious acquirers.
Intellectual Property: Six issued U.S. patents on the technology and product embodiments.
Seasoned management team
Having a wife that is diabetic and seeing the work that goes into setting up and managing her insulin pump, I can imagine that very few elderly diabetics are eager to program an electronic device and then insert a needle in their abdomen every few days. Never mind priming the infusion tubing.
The V-Go has a preset basal rate (four versions to choose from), is disposed of every 24 hours, and seems to have very little setup. If Valeritas can demonstrate that Type 2 diabetics can maintain better control of their blood glucose with a continuous basal rate, avoiding the many diabetes-related complications, the V-Go has tremendous potential.
That said, the V-Go is not amazing new technology. I am sure talented engineers worked diligently to make the V-Go reliable and as low-cost as possible to allow it to be a disposable product. But, at its core, it’s really just another fluid pump.
So, what’s the lesson for clinician innovators? Your ideas do not have to be cutting-edge technology. It’s all about solving unmet clinical needs in large markets. You know your patient population and their limitations better than anyone. What would make your patients’ outcomes and quality of life better?