Analysis: Rationale and challenges to Novartis-Proteus

January 19, 2010

03:23 am

Proteus Biomedical's "smart pill" According to a report in the Economist, pharmaceuticals company Novartis' $24 million investment in intelligent medicine startup Proteus Biomedical may be just as important in the long run as Novartis' $50 billion takeover of eye-care firm, Alcon. Proteus Biomedical's venture capital round actually brought in $25.4 million, which makes us wonder if the difference came from an additional pharmaceuticals company investor. In April we noted that two major drug companies were set to trial Proteus Biomedical's technology.

(While note precisely related to the Proteus-Novartis deal, the Economist report also includes a metric from research from Kalorama, which predicts that sales of wireless health services will leap from $4.3 billion last year to $9.6 billion by 2012.)

Reasons for the deal:

Proteus' technology points to "a promising new strategy" for a "troubled" industry.
Patents on many lucrative drugs are set to expire soon and most pharma companies have not discovered enough treatments to replace them.
With an eye toward maintaining fiscal stability, some drugmakers are tinkering with the idea of selling ancillary services tied to their offerings -- like Proteus' advanced medication adherence.
Medication adherence is a huge problem: One study pinpoints the costs of medication adherence-related, needless hospitalizations at costing $100 billion each year in the U.S.
Leslie Saxon, chief of cardiology at the University of Southern California, thinks patients will clamor for more data about their own health.
Governments, including the U.S., are beginning require drugmakers to first prove the efficacy of expensive new pills in practice as well as in theory, which might drive more of them to use technology like Proteus'.

Proteus' competition:

Dutch electronics company Philips recently established a commercial group to promote its intelligent pill technology, which aims to deliver drugs at precisely the right location in the digestive tract.
Bedford, MA-based MicroCHIPS, which has been taking in venture capital recently, has created implantable microchips that have reservoirs for drugs or tiny monitoring devices that can be triggered remotely. Like Proteus, MicroCHIPS claims to be working with a big pharmaceuticals company. It also plans to be in the market within three to five years.
Vitality's GlowCaps connect to wireless networks when patient fail to take their pills and call their mobile, their caregiver and/or their physician. It can also reorder meds from the pharmacy automatically.

Challenges for Proteus and wireless health in general:

Medtronic's Stephen Oesterle told the Economist it is too "Big Brother" for drugmakers to keep tabs on their customers.
Bain's Tim van Biesen thinks patients will need some kind of financial incentive to use intelligent medicine technology like Proteus'.

Be sure to read the full article over at The Economist