Whither Chronic Tinnitus...

[Click on the following for Link to External Article]

As I was ambling along the western edges of the internet, I came across this post:

http://langhout.wordpress.com/

Since this is 2009, many a promising medical device company has had to wait on the sidelines because Venture Capitalists would rather react than act. This particular company called Silere Medical Technology, Inc. seems to be one of the many affected by the paucity of funding this year. However, it is always useful to dig a little deeper. So, I went digging...

The preface:

Silere seems to be in the process of developing a medical device, specifically an implantable neurostimulating prosthetic to cure chronic tinnitus. So, let's look at the dissection one by one.

What is tinnitus?

Tinnitus is a condition in which the patient experiences a ringing sensation of sound in the ears, even though a sound is not actually present. There are many types of Tinnitus - depending on sound type, body position etc. I do not wish to convert this into a pathology/epidemiology. Here is a brief, well written article on Tinnitus:

http://brneurosci.org/tinnitus.html

There are many pathological and non-pathological causes that lead to Tinnitus, and Chronic Tinnitus is the condition where the ringing can persist for long periods of time, and if untreated or if treatment is ineffective, can lead to significant problems, including cognitive decline, according to this ScienceDaily article:


http://www.sciencedaily.com/releases/2006/03/060310101636.htm

Treatments for Chronic Tinnitus

As such my research into medical devices specific to Chronic Tinnitus led me to a few interesting results:

1. This looks most promising - an agreement between Durect and Neurosystec:

http://www.newsrx.com/newsletters/Medical-Devices-and-Surgical-Technology-Week/2004-07-25/0725200433350QW.html

Durect is a publicly traded company and while Neurosystec's website is furtive about what they are working on, a patent search has revealed that as late as 2006, they had a drug delivery device for the inner ear on file.

2. The second result, is more direct at least, given that it deals with "electromagnetic stimulation of the inner ear with a weak electrical signal":

http://www.steinbeis-europa.de/index.php5?file=195&show=17546

3. This of course seems to be what is directly in line with Silere's objectives ( This is purely speculation on my part):

http://clinicaltrials.gov/ct2/show/NCT00876720

This particular clinical trial concerns itself with Transcranial Magnetic Stimulation for Tinnitus and other disease conditions. Apparently, low-frequency stimulation has been successful in the past, and based on that, the University is now turning to high-frequency stimulation. Given that this therapy is externalized, I am guessing Silere's implantable will be either a low-frequency or high-frequency stimulation device...that is, if at all, I am anywhere close to the real Kahuna.

What does competition mean?

Competition is always good, for a start-up, and all around for customers. Especially, for the start-up, it is a method to convince Venture Capitalists that this is not a hare-brain mad-scientist scheme, but a legitimate business model. It further allows the start-up to present its case and why it is better positioned to succeed and so on. This convinced me that Silere must be on the right path.

Whither the numbers?

This is the part that gets a little confusing for me. According to wrongdiagnosis.com and the NIH (slightly outdated numbers I guess), there are 13 million people suffering from Chronic Tinnitus in the United States. However, Silere states that there are over 50 million suffering from the condition, and about 13 million seek treatment.

http://www.wrongdiagnosis.com/t/tinnitus/stats-country.htm

Even if my data is outdated because it is from the '90s, it can't be that 37 million people developed Tinnitus in the median... So there is some confusion here that needs to be resolved. Still, Silere claims they are looking at a market of about 2.7 million folks. For an implanted device, that is a huge market. Even if Neurosystec, the existing drug therapies and others were to offer stiff competition, Silere, from a pure market standpoint, can hold its own.

Implantable Devices

The one fly in the ointment for me are implantable devices. Call me old fashioned, but it is not just me. I wonder if this has even a minor part to play in the reluctance of VCs. While a PMA regulatory path is always excellent for a company to stave off direct competition for a while, the pathway itself is expensive and may hold off VCs. Mixed in with the risk of recalls and such, this may be a drag on a device.

Of course, one could present some counterarguments:

1. In the most debilitating condition, (especially if you played the YouTube Videos linked on Silere's website), you would see that the noise can be hell to live with.

2. Drug delivery may not be effective and may bring with it, side effects of it's own.

3. A less invasive therapy, even surgery may not be the option for many patient populations with this disease. Surgical treatment does exist, however, the first one microvascular decompression is actually recommended for another condition and only provides add-on benefits for Tinnitus. The second procedure is specific to Meniere's Disease, and also involves the surgical injection of drugs - not spectacularly innovative.

All said and done, if Silere sticks to the implantable pathway, both FDA approval and capturing the attention of surgeons and the patient population represent a long pathway, which may deter some, if not all VCs.

On the other hand, it is quite clear that for companies such as Medtronic and St. Jude that already compete in the neurostimulation space, rather heavily, Silere may represent an attractive future acquisition target, especially in a rather lateral industry, adding to the acquirer's sales and revenue stream.

Software Sales

While reading up on Silere's strategy, I saw how they plan to allow these devices to adapt to new software to allow for modulating the stimulation program, and how they plan to sell it. I am not sure, but some VCs may see this as a digression rather than a branching sales stream. It would appear that if the software that provides stimulation were to improve, it would only make sense to make it available to all patients free of upgrade costs. Regardless of whether or not this makes for an acceptable strategy, there remains another question - how much of it's development efforts will Silere have to devote to software development and what margins of profit will it realize from this stream.

Alternative Funding?

Apart from grant applications, companies such as Silere could look into In-Q-Tel. A few days ago, there was a press release touting the fact that In-Q-Tel, a non-profit funding arm of the CIA had funded Sonitus Medical because it's products would be useful to the CIA and the military. Given how Tinnitus might have at least some of it's origins in the military, DARPA, CIA and such should only be more interested than not in what they are proposing, especially since it appears that they are able to layout how much the treatments would cost the VA system.

Conclusion

All said, I like what Silere is trying to do. There is a clear market, a well defined disease condition (unlike Fibromyalgia or PAD and other make-it-up-as-you-go diseases), a large patient population, competition and pre-existing clinical proof. They may also have to look into some of their development and sales strategy. And, yes, they seem to fall into the bracket of companies that have to struggle as the VCs wait it out.

Personally, I have felt the economy may start recovering sooner than later, and given how our doomsday conspirators are being quelled one way or another, maybe the VC market will pick up and a lot of firms can begin their process again...