Ophthalmology Leaders Speak to Strength of Sector

A Wall Street Journal analysis of venture capital commitments showed ophthalmology remained the strongest sector within healthcare.

According to the Wall Street Journal, privately held ophthalmology start-ups drew $442.7 million in capital over the first six months of this year, putting it on pace to surpass the $848.9 million raised in 2013.

With the baby boomer population surging globally and successful IPOs and acquisitions of companies like Aerie Pharmaceuticals and Wavetec Vision Systems, the steadfast venture capital commitment to ophthalmology shouldn’t come as a surprise.

In our recent OIS Podcast Series, ophthalmology leaders addressed the still surging interest in the sector.

Bill Link, Managing Director at Versant Ventures, told OIS Podcast listeners that his firm’s fifth fund – reported to be close to $300 million – would be invested heavily in ophthalmology. “Over the years, through funds 1 through 4, we’ve invested nearly 20% of our capital in the ophthalmic sector. It’s clearly our largest area of focus. And what’s a bit exciting for me is that while it was mostly medtech in funds one through three, in funds three and four, and now I believe in five, we’re going to be diversifying our ophthalmic focus beyond medtech to include biotech and biopharma as well.”

Jim Mazzo, Operating Partner at Versant Ventures, notes in his recent podcast the ophthalmology hits upon all patient demographics. The aged are coping with the ravages of cataracts, and baby boomers are dealing with presbyopia and other conditions, while Generation X and Y members are pursuing new ways of correcting their vision.

If you talk to your friends, you talk to the family, when you talk about conditions that they’re affected by, the one that tends to resonate the most and is the most concerning for them are their eyes,” Mazzo says. “It’s not to say that cancer and heart disease are not at top of mind, but when you talk to people, the eye is just a special organ. And people will really do everything possible to ensure they don’t cut corners on the treatment of the eyes.”

Exacerbating these concerns, the most serious conditions – glaucoma, dry eye and presbyopia – don’t have a real cure to keep them in check.

In his podcast, Emmett Cunningham Jr., MD, Partner of Clarus Ventures, says age-related macular degeneration, glaucoma and neuroprotection remain enormous opportunities for start-ups and large companies alike. Many companies are reporting progress including Genentech, Aerie and Opthotech, but more investment is necessary. “The unmet need tends to be large, so I think there’s a lot of exciting stuff out there, and it’s great that so many private companies are interested.”

Gil Kliman, MD, Managing Director at InterWest Partners, and others report that interactions with the FDA are improving. Additionally ophthalmology continues to enable VCs to innovate in another challenging arena – reimbursement.

“One of the great things about ophthalmology is it’s really pioneered the cash pay model of innovation: getting people to pay out of pocket for innovations that have real value,” he says. “And that has become a lot of our investment strategy at InterWest, to seek out across all medical fields, drugs and devices that might be enabled by a cash pay part.”

Ophthalmic surgeon Eric Donnenfeld, MD, says ophthalmologists will continue to do their part to develop better treatments. “Ophthalmologists tend to like innovating, it’s part of our DNA,” he says. “We like to see new technology, and we’re now seeing the opportunity for ophthalmologists who have good ideas to partner with angel investors or venture capitalists, and take their ideas to the point where they’re ready to either be FDA approved, or being able to be sold to larger companies who will take it the rest of the way. And I’m seeing more and more ophthalmologists who are adopting this philosophy, and again, that’s good for innovation because it’s a partnership in innovation.”

Dick Lindstrom, MD, another surgeon with a history in start-ups, says innovation and investment in ophthalmology must continue if future demand is to be met.” The only thing that’s allowed us to provide the visual rehabilitation we do for the patient burdened with cataract today is through extraordinary innovation,” Lindstrom says. “And so I think it’s going to be the same for all the other challenges we face going forward, whether it be glaucoma or age-related retinal disease, the only thing that’s going to allow us to manage the challenge is going to be innovation.”