Among EP Vantage’s analysis of venture funding in medtech in the first half of this year, one company stood out. Sensor developer Proteus Digital Health raised $120m in a G round in early June, handily outpacing every other company (Startling successes puncture the gloom in medtech venture financing, July 24, 2014). Incredibly, two months later the company was able to add a further tranche of $52m to this round.
“Investors understand that what we have is a very big idea,” the company’s president and CEO, Andrew Thompson, tells EP Vantage. “We can turn taking a medicine into a digital event where what you swallow and how your body responds will show up on a cellphone.”
Proteus’s technology almost sounds like science fiction. The company’s core system involves creating pills with integrated ingestible sensors – devices the size of a grain of sand that can monitor how the drug is metabolised and the effects it has on the body. These pills are used in tandem with a patch worn on the skin which “measures physiologic parameters like your heart rate, your respiration, your body angle, your activity, and we can derive your sleep patterns to understand how well you are,” Mr Thompson says.
This is not designed so much for the patient – though it will no doubt appeal to quantified self enthusiasts – as for their carers. The data captured by Proteus’s systems can be accessed by the patient’s family, physician or even their health plan, Mr Thompson says. “If you’re taking care of your mum, and she’s had heart failure, you’d be able to know whether she’s walking around, whether she slept properly last night, and whether she’s taking her medicine.”
Naturally the patient would choose to share this data or revoke access. Mr Thompson says privacy concerns tend only to be raised in the abstract: “Patients in difficult situations are very grateful if someone in their care network can help them.” He points out that for long-term chronic care, informal family carers outnumber healthcare professionals ten to one.
The system has already been CE marked and approved by the FDA, partly via the device regulations and partly as a drug. The company is now working towards setting a price. Mr Thompson says the cost will be heavily dependent on the situation for which the system is used, varying according to how much its use can save the healthcare system.
This value-based pricing is a canny move – and is just the sort of approach that is finding favour with payers (Vantage point – US push for bundled payments prompts pharma-medtech collaboration, July 23, 2014).
“In experiments with consumers we’ve asked people to pay £50-£100 ($84-$167) a week for someone who uses medicine daily, and who has a carer who isn’t able to be with them on a regular basis but who wants to make sure they have relevant information about how the patient is doing,” Mr Thompson says.
Simultaneously, the company is in early discussions about reimbursement with insurers, though it faces hurdles thanks to the innovative nature of the technology. Mr Thompson says that healthcare systems are focused more on treating patients rather than monitoring them to keep them healthy.
“There’s a lot of work to be done to educate [payers] about how they might approach these technologies. But their openness and their interest in the technologies is very high,” he says.
Investors have sunk a total of more than $300m into Proteus over the past decade (see table below), and sooner or later they will want a return. Mr Thompson has a history here which was surely a factor in his company’s success at parting funders from their cash. He co-founded FemRx, which floated on the Nasdaq in 1996 and was subsequently bought by Johnson & Johnson, and CardioRhythm, acquired by Medtronic in 1992.
“The key is to build a successful business, and part of that is to get investors to fund it,” he says. “At some point the company will have to create liquidity for its investors. Our hope here is that we’ll be able to do that without having to sell the business.”
The prospect of a takeover looms large over Proteus, though, not least because of the funding put up by corporate investors including Medtronic, Novartis and St Jude Medical. Mr Thompson said that while these companies are clearly interested in Proteus’s technology, it is unclear whether this interest would extend to wanting to own it.
For now, though, Proteus must work towards persuading healthcare systems in Europe and the US to deploy – and pay for – its digital medicines.
“We’re in the process of reaching agreements for deploying across a network – for example sections of the [UK] NHS. We look for work with organisations that have a structural commitment to digital platforms in healthcare,” Mr Thompson says. This will be tricky bearing in mind the unusual proposition Proteus offers.
“Digital medicines are a completely new construct,” Mr Thompson says. But all technologies were new once. Proteus must show that its devices can aid patients and also cut costs if the technology is to take off.
|Proteus Digital Health - medtech investor catnip|
|July 29, 2014||Series G (second close)||52.0||Undisclosed|
|June 2, 2014||Series G||120.0||Undisclosed (11 investors)|
|May 1, 2013||Series F||62.5||Novartis, Oracle Investment Management, Otsuka Pharmaceutical, Sino Portfolio|
|December 31, 2009||Series E||25.4||Undisclosed|
|October 15, 2008||Series D||32.0||Adams Street Partners, Carlyle Venture Partners, Essex Woodlands Health Ventures, Itochu International, Kaiser Permanente Ventures, Medtronic, Spring Ridge Ventures, St. Jude Medical|
|June 23, 2004||Series B||11.0||Adams Street Partners, Asset Management Company, Carlyle Venture Partners, Fletcher Spaght Ventures, Kaiser Permanente Ventures, Spring Ridge Ventures|
|June 23, 2004||Series A||0.6||Spring Ridge Ventures|