Date: Jul 23, 2012 Author: Chuck Soder Source: (
click here to go to the source)
Shock waves are starting to flow through Northeast Ohio's neuro-stimulation community, which is attracting significant interest from investors and deep-pocketed medical device companies.
The region since 2005 has created or attracted at least six companies focused on neurostimulation, two of which have been sold for a combined $120 million. Two more startups are in the works at Case Western Reserve University, and others are bound to follow, according to several people in the region's neurostimulation field.
They say the neurostimulation business -- which is based on the idea of using electricity to treat medical conditions ranging from paralysis to pain to depression -- is primed for expansion. They also believe Northeast Ohio has what it takes to capitalize on that expected growth because of the research and talent flowing out of CWRU and the large number of neurostimulation procedures conducted at local hospitals.
A few big, out-of-state companies have established footholds in the business, which could make it hard for a local neurostimulation startup to become a Fortune 500 company. Even so, there are relatively few neurostimulation products on the market today, said Geoff Thrope, CEO of NDI Medical LLC, a Highland Hills company that plays a big role in the business locally.
Thus, there's an opportunity for Northeast Ohio to create products and startups to sell to those bigger companies, said Mr. Thrope, who believes there's room for more stand-alone companies, too.
"The opportunity at large is enormous, and it's untapped," he said.
NDI hit it big in 2008 when the company sold a spinout called MedStim to medical device giant Medtronic Inc. of Minneapolis for $42 million. MedStim was created to commercialize NDI's first product, an electrical stimulator designed to help people who have trouble controlling their bladders.
Since then, NDI has created two other startups and sees itself as a vehicle for launching more. NDI even formed a venture capital fund to invest in those businesses and other neurostimulation startups.
Another local company, Intelect Medical Inc. of Cleveland, had a big payday, too. The Cleveland Clinic spinout, which developed software and leads for neurostimulation pro-cedures, in early 2011 was acquired by Boston Scientific Corp. of Natick, Mass., for $60 million, or $78 million if you count Boston Scientific's previous stake in the company.
Intelect had benefited from a $7.5 million grant the Clinic received from the Ohio Third Frontier economic development program, but the company moved to Boston just before the acquisition was announced. However, the deal did generate wealth for the Clinic and other shareholders, though some have left the region.
Plenty to go around
Other local neurostimulation companies have logged successes.
Last week, Neuros Medical Inc. of Willoughby closed on a $3.5 million investment led by Boston Scientific, a strategic investor, and Glengary LLC of Beachwood. Neuros Medical CEO Jon Snyder wouldn't say how the Boston Scientific partnership might affect his company, which is testing and developing an electrical stimulation system designed to treat chronic pain.
Synapse Biomedical Inc. of Oberlin last fall received approval from federal regulators to start marketing its main product, which stimulates the diaphragm to help patients breathe, for use in people with Lou Gehrig's disease, a degenerative muscle condition that technically is called amyotrophic lateral sclerosis, or ALS. Synapse last month received a 50%, seven-year job creation tax credit from the state that's intended to help the company eventually add 60 people.
Nervomatrix, an Israeli company that has developed a system designed to pinpoint the source of lower back pain and treat it with electricity, last fall announced that it had raised $3.5 million in venture capital from Everett Partners Ltd. of Akron. Since then, the company has hired a manager in Akron tasked with helping the company establish a U.S. presence.
On the Case
Nervomatrix grew out of an Israeli incubator financed in part by the city of Akron, Summit County and several private investors. However, most local neurostimulation companies -- including Neuros Medical, Synapse Biomedical, NDI and its spinoffs -- in some way are tied to technologies or ideas created at Case Western Reserve University and local hospitals.
A lot of the region's successes in neurostimulation can be traced back to the university, Neuros Medical's Mr. Snyder said.
"There's really a key point where all this leads to, and that's Case Western," he said.
The university has been studying the practice of neurostimulation for several decades and has built a national reputation in the field, according to Nancy Garcia, public education and website manager for the International Neuromodulation Society in San Francisco. Many of the society's leaders spent parts of their early careers in Cleveland or collaborated with researchers in the region, she said.
In the 1960s, a University Hospitals neurosurgeon working with CWRU researchers became the first doctor to implant an electrode into a patient that stimulated the spine to treat pain. Those researchers -- who used to run tests by implanting electrodes into their own bodies -- later would develop a system that allowed paralyzed people to regain some control of their hands.
That technology became the foundation for NeuroControl Corp. Founded in the early 1990s, the company in Valley View went on to raise more than $30 million in venture capital, but eventually failed. NDI's Mr. Thrope, who held several positions at NeuroControl, said the company's target market -- patients with spinal injuries -- was too small.
The technology was "too far ahead of its time," said Hunter Peckham, a biomedical engineering professor at CWRU who in 1991 helped start the Cleveland Functional Electrical Stimulation Center, a research collaboration that consists of CWRU, the Cleveland VA Medical Center and the MetroHealth System.
Even so, Dr. Peckham doesn't consider NeuroControl a failure. For instance, Mr. Thrope isn't the only former NeuroControl employee who went on to lead a local neuro-stimulation company. Other NeuroControl alumni are Synapse Biomedical CEO Anthony Ignagni and Maria Bennett, who is CEO of SPR Therapeutics LLC, an NDI spinoff developing an implantable stimulator designed to relieve pain.
"There are five or six businesses that have evolved in its wake," Dr. Peckham said.
Branching out
Dr. Peckham said there is a "huge explosion" of neurostimulation products under development now, partly because of better medical device hardware and because scientists are figuring out where they should apply electricity to treat various problems.
Demand is a big driver, too, Dr. Peckham said, noting that neuro-stimulation products are under development to treat migraines, obesity and other conditions that aren't easy to treat with drugs and other traditional means.
"These are large problems that are unresolved by any existing technique," he said.
Besides the established players in the field, such as Medtronic, Boston Scientific and St. Jude Medical Inc. of St. Paul, Minn., other big companies are looking for ways to break into the business as well, Dr. Peckham said.
As a result, it will be hard to establish a neurostimulation company of that magnitude in Northeast Ohio, said Joe Jankowski, who is associate vice president of technology management at CWRU. However, the region can build and sell companies to the bigger participants, and there is room to build smaller, stand-alone businesses that might employ a few hundred people, said Dr. Jankowski, who noted that the university is in the process of forming two more neuro-stimulation companies.
Dr. Peckham agreed. He added there's always the chance a large corporation could buy a local company and use it to create a larger presence in the region.
"I believe it's going to be desirable for ... one of these players to set down some roots, because there's so much activity going on," he said.
