Funding Ophthalmology Innovation: The Focus of Science and Capital

Ophthalmology is a growing, but challenging, market. Innovation is abounding in its research stages and some people in the know foresee more positive development in breakthrough technologies by 2020, while delivering drugs to the back of the eye is up front in the minds and agendas of investors and innovators.

Market data and dialogue indicate the investment community, as well as the innovation sector, appear to have acknowledged the value and significance of the ophthalmology market and are tailoring their agendas to accommodate the post-recession development of innovation into market products and technologies.

Jim Mazzo, retired head of AMO and newly appointed operating partner at Versant Ventures, believes there are particular spaces of interest in ophthalmology that have unmet needs for emerging technologies that scream to be funded.

“When you look at the severity of ocular urgency, it is in the retina. We are still facing debilitating loss of vision issues with retinitis pigmentosa, macular degeneration and such. So what’s critical is whether we can provide technologies today that will be able to address those needs. And I’m talking about everything, from slowing down the progression of vision loss to an eventual cure”.

“Retina is a big area, and what’s interesting is that it’s going to have the unique combination of pharmacological and device therapy to get to the back of the eye on a sustained basis. So, I love retina,” Mazzo said.

Mazzo also said laser technologies are a well-liked investor area, but cited glaucoma and ocular dry eye as other disease spaces in which he has particular interest. He said there are tremendous pharmacological therapies on the market for glaucoma, but the side effects present opportunity for device innovation, while dry eye is prevalent, yet largely undiagnosed.

“Glaucoma is still the second-leading cause of blindness and now we’re looking at new technologies for glaucoma that place devices in the eye to help with the drainage system. So that is an area for continued interest,” Mazzo said.

“What people sometimes don’t understand about dry eye is that it not only has limited visual outcomes, but it can lead to other critical conditions such as corneal ulcers. It’s a very undiagnosed area because most people don’t know they have it, thinking it’s tied to other factors such as the environment or drugs they take for other diseases. It is treated in many ways, but the outcomes are very low”..

Eugene de Juan, M.D. founder of ForSight Labs space and distinguished Chair of Ophthalmology, UC, San Francisco, considers the most active indications for investment through the rest of the decade to be glaucoma and retinal diseases.

“The most active development areas that are likely to show benefits in the next five to six years are minimally invasive glaucoma technologies from leaders such as Transcend Medical”.

“Secondarily, getting drugs to the posterior segment to treat diseases such as diabetic retinopathy and macular degeneration is an important area. There are many entrants in that area, but not a lot of advancement yet. One company gaining traction is ForSight Vision4, which has a strategic relationship with Genentech to deliver placentas. I look for developmental advancement in that area – but also in drug delivery to the front part of the eye”.

“There are several efforts going on there, including Ocular Therapeutics, and another company, Mati, which was spun out of QLT, as well as ForSight Vision5, that are likely to show positive results in the next two to three years and are already beginning to show some,” de Juan said.

Unmet ophthalmology medical needs represent an undeniable opportunity for clinical research, business development and venture investments. However, the opportunities to develop uniquely effective ophthalmic products are attended by, arguably, healthcare’s most compelling challenges: a population aging in record numbers; burgeoning prevalence in diabetes affliction, as well as an increasing incidence in several eye disease categories; and clinical trial problems that continue to confound research efforts.

At the top of the list of key challenges might be the conundrum of overcoming issues of stability, accuracy and more, in delivering drugs to the back of the eye.

Mastering that challenge would greatly advance science in the sector and significantly increase its market value. But developing a reliable med-tech device solution – other than the needle – continues to be an elusive endeavor.

Mark S. Blumenkranz M.D., Professor and Chairman, Department of Ophthalmology, Stanford University Medical Center and director, Byers Eye Institute at Stanford doesn’t see a shortage of effort in addressing the problem, but does acknowledge the complexity of solving the relative issues.

“A number of companies are coming up with ways to deliver drugs to the back of the eye. This includes those trying to facilitate movement using an entry after topical application, including either facilitated transport through the ocular coat, mechanical pumps, or in-vivo secretion. All of these have relative advantages and disadvantages,” Blumenkranz said.

“One of the major issues will be distinguishing between those molecules which have the inherent stability to be able to be kept in a reservoir for a period of time without undergoing conformational change or enzymatic degradation and those that need to be delivered soon after manufacture or at least stored at temperatures that do not adversely affect the drug’s stability. The bio-availability or pharmaco-kinetic challenge is one of the great opportunities available today, if it can be satisfactorily solved”.

Gilbert Kliman, M.D, Managing Director at InterWest Partners is impressed with the diversity of avant-garde technologies and believes some related ophthalmic technologies currently in research, and even some recently approved ones, could develop into ground-breaking technologies that would revolutionize healthcare in this decade.

“I am most excited about new categories of treatment that will completely change our approach to eye care. Gene therapy from companies like AGTC and the U Penn group appears to be a new modality that can treat or even cure blinding eye diseases such as inherited retinopathies and perhaps even macular degeneration.”

“Neuromodulation by electrical stimulation to different parts of the eye may produce entirely new treatments for everything from retinal disease (Second Sight) to dry eye (Oculieve).

“Microdevices such as the recently approved iStent from Glaukos may make device treatment of glaucoma a standard of care by the end of the decade. And by the end of the decade presbyopia may finally be minimally invasively treated without intraocular surgery, most likely by corneal inlays such as the Raindrop from ReVision Optics”.

Such progressive viewpoints appear to be corroborated by positive data from one report. A combination of dynamics, including an increased prevalence of several eye diseases, as well as innovation successes, are poised to drive the ophthalmology market to an all-time high value of $48 billion by 2017, according to data in the “Ophthalmology Capital Markets” report by Healthios Capital Markets, LLC.

The report data depicts an ongoing growth trend that began in 2011 with a $36 billion ophthalmology market that is projected to grow at a 5.12% CAGR to 2017, appearing to be funded by an investment model comprising more targeted ventures that would utilize larger individual investments made in fewer technology platforms.

Capital flow data in the report doesn’t show a market quite at the top of its game, but one that is mounting a healthy trend of scientific and commercial momentum.

The number of ophthalmic market funding transactions between 2008 and 2012 declined from 33 to 19 and the total value of transactions decreased from $597 million to $347 million. However, the number of transactions valued more than $50 million during that five-year period increased when compared to prior years, representing a more risk-averse mindset among investors, but still a disposition to fund highly auspicious innovation.