Startup wants to advance minimally invasive device to resolve nasal obstruction

Replacing a complicated surgery with a minimally invasive approach is a tried and true formula in medtech. Menlo Park, California-based startup Spirox is aiming to do that with its device to treat nasal obstruction, a condition that makes it difficult to breathe through the nose.

The 40-person company boasts a $45 million Series C equity round led by private equity firm KKR, and is in commercialization mode following FDA-clearance of its Latera bioresorbable implant in July.

The most effective treatment for nasal obstruction is also the most invasive, Spirox CEO Duke Rohlen said during a phone interview.  Rhinoplasty (also known as a nose job) is performed to install grafts inside the nose. These so-called batten grafts are made of cartilage taken from a patient’s ear and prevent the nose’s lateral wall from collapsing during inhalation. However, this type of nose job does not make the nose look flattering, nor is it easy to perform or free of comorbidities, Rohlen contends.

Through the alternative Latera implant, he hopes to increase the number of lateral wall procedures by a factor of ten — 300,000 from about 30,000 or more. The device, which can be implanted minimally invasively, results in fewer side effects.

“You want to have a surgical solution that matches the symptom,” he said.

Made of polylactic acid (rather than cartilage taken from the ear), the nasal implant is installed in one or both nostrils using a delivery device that consists of a deployment plunger and pushrod, as well as a delivery cannula. (A very detailed description of the implantation procedure can be viewed here.)

The implantation procedure can be done in conjunction independently or with two other, more common procedures for nasal obstruction — septoplasty and turbinate reduction.

“Typically 80 to 85 percent of the time that patients go in for a septoplasty, they also have symptoms that are aggravated by their lateral wall. So when the doctor is in there treating the septum it makes good sense to also treat the lateral wall,” Rohlen said.

He’s aiming for a penetration rate of at least half of the 600,000 or so septoplasty procedures performed annually, which would result in 300,000 or more concurrent implantations of the Latera.

The hour-long procedure can be performed by a typical ear, nose and throat (ENT) physician, whereas its more invasive counterpart  requires specialized training.

“What we’re trying to do is standardize the treatment protocol whereby the highest volume physician, which is the general ENT, can treat nasal obstruction without having to have surgical skills required,” Rohlen said.

As proof of demand for treatments of the lateral wall, the CEO cited the strong sales of Breathe Right nasal strips. Typically worn at night, they perform a similar function to the Latera, but are worn externally.

“The 250 million of those that are sold every year indicate that there is an enormous need for people to have their nasal airway improved by treating the lateral wall,” he said.

Using its own sales force, Spirox is initially launching the Latera in seven big markets including New York City, Chicago and Los Angeles. More than 150 of the implants have been installed so far.

“Commercialization always takes longer than you think irrespective of the enthusiasm, excitement and momentum going into a launch,” Rohlen said. “We decided to take all capital risk off the table by bringing in a KKR-lead syndicate, and raising $45 million dollars (in March). We’re in very unique situation where we have over $50 million in the bank, we’re standalone company, and we’re commercializing. A lot of people say that’s crazy. I actually think it’s prudent in this environment where capital risk is very significant for many companies.”

In other words, Spirox has a lot of capital for a company with a commercialized device. With the exception of a few prominent therapeutic areas such as cardiology, there are few “blockbuster” devices, so it will be challenging for Rohlen to secure a valuation of Spirox that is many multiples of $45 million, justifying the large investment made by KKR and the other VC investors.

Not surprisingly then, he hopes to eventually grow the company beyond its single device roots.

“Our exit strategy is to grow the company and then look to acquire additional companies that could be complementary to Latera from a sales call point standpoint,” the CEO said. “I think this is a horse that can run, and I’d like to see it run and see how far team can take this technology.”

But in the short-term, the proceeds of financing will be used to “hit the accelerator” and expand the usage of the Latera aggressively in 2017.

The money will also fund R&D.

Rohlen said Spirox has “undertaken a massive clinical program that you’ll see unfold over the next two years to continue to validate the effectiveness of our Latera device, to continue to validate the safety of it, and continue to validate the economic profile and benefit to hospitals.”

And Spirox is going to soon launch a shorter version of the implant (it’s currently 24 millimeters long). It is also developing an improved material that lasts for 48 months before dissolving into the body, twice as long as the current generation device.

CORRECTION: An earlier version of the story incorrectly stated when Latera was cleared by the FDA – it was cleared in July. The device can be implanted in one or both nostrils.