Having worked as an executive in well-known drug companies for twenty years, Greg Mayes was surprised to find how difficult it was to convince venture capital firms and private investors to fund his new medical start-up.

Mayes’s company is promising a new form of treatment for epilepsy. Having seen his son suffer through the condition, Mayes realised that none of the very few options of medication that stop seizures from happening, were ideal. They either took too long to work, make the user drowsy and unable to continue with their day, or the administration is embarrassing and logistically complicated.

The treatment is called Staccato alprazolam, which combines two already-approved products. The first is the generic type of benzodiazepine and the second is an inhaler approved in 2012, that delivers antipsychotic medication.

Staccato, Mayes’ epilepsy inhaler to prevent seizures. Photo credit: Engage Therapeutics
Staccato, Mayes’ epilepsy inhaler to prevent seizures. Photo credit: Engage Therapeutics

The difficulty of penetrating the medical market as a start-up

Yet despite his inside knowledge of the trade, personal motivation, full commitment (he has left his job to focus on the start-up) and a study that proves the efficacy of the medication, Mayes still needs more to convince investors. He needs $21 million to take his project through the second stage of clinical trials to gain FDA approval.

Concerns from investors range from worry that the drug will aggravate respiratory problems to apprehension about the risks involved in the complicated logistics of further trials.

This sort of rejection is common.

Thomas Goetz, founder of Iodine, a website offering medical information to help consumers find the best price for their medication, faced similar disappointment. Despite riding the wave of medical technology start-ups that hoped to revolutionise the healthcare industry in 2013, return on investment was dismal at best.

“It's highly regulated, which makes rapid transformation difficult,” Goetz explains. “The incumbents are massive enterprises with multiple services, so challenging them is nearly impossible. It isn't a market-driven industry that responds to better, cheaper, faster. You can't price-shop. The government is the biggest customer. All the incentives are misaligned.”

So why is failing good in this industry:

Mark Findeis co-launched a biotech called Satori Pharmaceuticals Inc. in 2002 in Cambridge, Massachusetts. The company raised $47 million before closing in 2013. Photo credit: Amy Nordrum/International Business Times.
Mark Findeis co-launched a biotech called Satori Pharmaceuticals Inc. in 2002 in Cambridge, Massachusetts. The company raised $47 million before closing in 2013. Photo credit: Amy Nordrum/International Business Times.

Goetz was lucky that although his start-up did not become the game-changing, industry-defining company he dreamt it would be, the company did not fold and is still in business today. For Mark Findeis, this was not the case.

Findeis was the head of research for eight years, for Satori, a company that sought to develop an Alzheimer’s treatment based on a plant extract, that lowers the level of the brain's beta amyloid peptide. The build-up of this peptide is thought to cause Alzheimer’s. Unfortunately, during trials, monkeys who took the drug suffered from impaired function of their adrenal glands.

However, in the industry, failure is simply seen as a step closer to success.

“I think the essential part of failure is, it is part of this creative destruction process that is alive and very thriving in this industry,” Bernard Munos, a biotech analyst and consultant at InnoThink Research for Biomedical Innovation said. “It basically helps redeploy resources, whether it's financial resources or assets or people from failed attempts, to more promising opportunities.”

“If they do good science, there's no stigma,” Munos elaborates. “In fact, they'll probably attract sympathy because they went out on a limb, and they pursued a really interesting idea. It didn’t work out in the lab but at least they had the guts to do it.”

Indeed for Mayes there is still hope. Having swayed a major investor, he now has two big venture capital firms, three smaller ones and about 12 high-net individuals backing him. He now has only $4 million to raise.

The start-up scene in Asia

The past decade has seen the world of medical and biotechnological startups in Asia bloom. As Dr Carl Firth, the Chief Executive Officer and Founder of Aslan Pharma explains, “the Asia Pacific is a dynamic region with growing opportunities for business.”

“Specific to the healthcare sector, demographic trends such as ageing populations, a rise in chronic illnesses and a growing incidence of non-communicable diseases, along with greater pressure and demand for better value- based healthcare outcomes, have given rise to the need for better innovations.” he said.

In conjuncture with this, last year, Malaysia stepped up its obligation to medical start-ups and committed USD23 million in loans for growth projects. In other countries, there are a number of companies that provide online consultations or appointment bookings in Asia such as OurHealthMate in Singapore and MeetDoctor in Indonesia.

Other interesting and revolutionary new companies are also on the rise, such as EndoMaster in Singapore, which created a robotic-assisted surgical system, and Clearbridge Biomedics, which develops medical devices that improve cancer diagnosis. MIMS

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