In a concerted effort to capitalize on the red-hot global opportunity for neuromodulation therapy, used to treat patients with chronic pain and other debilitating conditions, Action Potential Venture Capital (APVC) Ltd., a new $50 million strategic venture capital fund from pharmaceutical giant GlaxoSmithKline PLC (GSK), has chosen as its first investment neuromodulation device company SetPoint Medical Corp. of Valencia, CA, which will receive $5 million from the APVC fund.

The investment is unique in that it brings a major pharmaceutical market player into the neuromodulation device field, and it illustrates the growing importance of device-mediated therapies for a wide range of common, chronic conditions. (See also Also see "Neuromodulation Market: Innovation Brings High-Growth Rewards" - Medtech Insight, 27 March, 2013..) However, GSK is not the first drug company to recognize the potential of the neurostim device space. Merck & Co. Inc.’s Global Health Innovation Fund recently participated in a $40 million Series A funding round for electroCore LLC, a New Jersey-based start-up developing a noninvasive, patient-administered vagus nerve stimulation (VNS) device for the treatment of cluster headaches and migraines as well as other chronic conditions. (See Also see "Emerging Peripheral Nerve Technologies Draw New Competitors To Neuromodulation Market" - Medtech Insight, 26 April, 2013..) Merck, which invested $12.5 million in electroCore, has a large presence in the migraine medication market with its migraine drug Maxalt (rizatriptan), but the company also is well aware of the fact that up to 40% of migraine sufferers do not obtain adequate relief from drug therapy. Like APVC, Merck’s Global Health Innovation Fund is specifically focused on “technology-enabled care,” the fund’s managing director, Bill Taranto, told “The Gray Sheet” recently. (See Also see "ElectroCore Aims To Bring Neurostimulation To The Masses, Beginning With Headache" - Medtech Insight, 16 September, 2013..)

A Less Costly, Safer Alternative To Drugs?

VNS also is the basis of SetPoint’s technology, but the company differs from electroCore in that it is developing a novel, implantable VNS product platform with a unique focus on the treatment of inflammation-mediated autoimmune diseases such as rheumatoid arthritis and Crohn’s disease, another clinical area with which drug companies are already intimately familiar. SetPoint is the first to clinically investigate the use of VNS for the treatment of autoimmune diseases, currently one of the largest markets for biologic medicines, with annual sales of immune-mediating drugs totaling in the multibillions of dollars. The problem with many of these drugs, however, is that they are associated with serious side effects, including severe immunosuppression, and newer, more effective biologic agents are costly.

SetPoint is the first to clinically investigate the use of VNS for the treatment of autoimmune diseases, currently one of the largest markets for biologic medicines, with annual sales of immune-mediating drugs totaling in the multibillions of dollars.

SetPoint’s unique approach is based on a new understanding of the link between the nervous system and the body’s natural inflammatory response and it represents a new treatment paradigm for this disease category. According to SetPoint, VNS provides a more convenient and potentially safer alternative to drugs and could decrease the cost of treating common chronic autoimmune conditions. In a press release announcing the launch of the APVC fund, GSK called SetPoint’s technology a “potentially transformative approach” to the treatment of inflammatory diseases that may provide a “more precise” treatment option.

APVC, which is based in Cambridge, MA, complements GSK’s Bioelectronics Research and Development unit, which was created in 2012. GSK noted in the press release that miniaturized devices in the neurostimulation space hold “great promise” for a range of common disorders, including inflammatory bowel disease, rheumatoid arthritis, respiratory diseases such as asthma and chronic obstructive pulmonary disease, and metabolic diseases such as type 2 diabetes.

The fact that SetPoint Medical garnered the first investment from the new fund is certainly an important validation of that company’s potential, along with an acknowledgement of the unmet need and potential for growth in the autoimmune disorder space. But the $5 million from APVC is only part of SetPoint’s total $27 million Series C round that closed in early August. Five other entities also contributed to the round: $10 million from original investors Morgenthaler Ventures, Foundation Medical Partners, and Topspin Partners LLC; and undisclosed amounts from Boston Scientific Corp. and Covidien Ventures/Medtronic Minimally Invasive Therapies.

This latest funding round brings SetPoint’s total financing to date to roughly $45 million. The company is planning no further fundraising for the near term. “We are very excited about GSK’s new fund contributing to our enterprise,” SetPoint’s CEO, Anthony Arnold, told Medtech Insight. “Not only does it represent a major pharmaceutical firm investing in a device company, but GSK itself is excited about our therapy. Like us, GSK views our technology as potentially game changing in how we might treat inflammatory mediated diseases. GSK understands the science, the potential of the science, and what this can lead to. It is gratifying to have a scientific advocate on board in this brand-new area of bioelectronics and inflammatory medicine. GSK’s investment helps reinforce the evidence SetPoint has spent so much time developing.”

US Regulatory Clearance Still Four To Six Years Out

SetPoint has yet to designate a commercial name for its inflammatory reflex therapy, “which has the ability to treat out-of-control inflammatory states with our microregulator system,” Arnold says. And US regulatory clearance is still four to six years out, “assuming there are no major issues.” However, European CE mark approval is expected early in 2015.

SetPoint has already evaluated a cohort of patients with early-stage rheumatoid arthritis. “This group did very well with our therapy,” Arnold says. An extension of that study for late-stage disease was approved last December in Europe for 10 patients who have failed at least two biologic agents and methotrexate (a dated cancer drug). “This is a fairly desperate patient group, with no available alternative therapies,” he explains. Seven of these patients have already been implanted with the device and several have completed the 90-day study. “More than half of the patients received positive, objective response to the therapy,” says Arnold. “The results absolutely exceed our expectations. If you were to ask academic rheumatologists about doing a study in this patient population, most would advise against it because everything up until now has failed.”

The only side effect from the device in this study group has been slight postoperative hoarseness in a few patients, since the procedure involves operating around the larynx.

The next step is to expand the therapy to inflammatory bowel disease (IBD). “We have intellectual property in IBD,” Arnold notes, and “have conducted a tremendous amount of preclinical work in IBD.” The first human trial is scheduled to begin late this year. “There are a host of other diseases including osteoporosis and diabetes that we will evaluate for their suitability for our therapy,” he continues.

According to Arnold, SetPoint’s inflammatory reflex therapy can dramatically lower health care costs, both in the US and abroad. “With the high price of biologic therapies, we should be able to reduce the cost of treating patients by 60% to 70% over the life of the patient,” he says. “We expect our technology to be simple to adopt into clinical practice by rheumatologists. It is not a challenging device to use because the SetPoint team has spent immense time making the software intuitive.”

GSK Fund Plans Further Investments

The new GSK fund, APVC, will emphasize investments in three areas: start-up companies in bioelectric medicines, existing companies that interact with the peripheral nervous system through devices that can stimulate or block electrical impulses, and companies with platforms that support these treatment modalities.

APVC’s mandate is to invest in companies that are pioneering disease treatments or cures that target the peripheral nervous system.

In follow-up comments to Medtech Insight, Imran Eba, the APVC fund’s first partner, noted that the fund does not have a mandate to invest in device companies, per se. Rather, the fund’s mandate is to invest in companies that are pioneering disease treatments or cures that target the peripheral nervous system. GSK, he explains, believes that the technologies “best placed to accomplish this goal” will be miniaturized devices that could be designed to interface between the peripheral nervous system and specific organs to read, change, or generate electronic impulses, with the aim of correcting or treating irregular or altered patterns of these impulses that may be associated with a range of diseases.

Eba also said that the fund plans to deploy capital over an investment period of five years, culminating in a portfolio of five to seven active companies, with investments at the seed/start-up stage on the order of $500,000 to $1 million, and with follow-up investments in maturing companies of up to $5 million to $7 million. GSK’s ultimate goal is to “have the first medicine that speaks the electrical language of our body ready for approval by the end of this decade.”

GSK Venture Fund Selects Neurostim Device Maker SetPoint Medical As First Investment

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