Neurotechnology: the next frontier

With global revenues of $110 billion last year, the nascent "neurotechnology" market appears poised for huge growth.

Take brainy scientists researching new diagnostics and treatments for the brain. Add to that the millions of aging baby boomers worldwide who may one day suffer from Alzheimer's disease, hearing loss, pain, depression or stroke. Then mix in venture capitalists and other investors seeking new growth markets. What you get is the nascent "neurotechnology" market, which appears poised for huge growth.

Neurotech products, also known as central nervous system products, already generated global revenues of $110 billion in 2005, up 10 per cent over the year before, according to a recent report by NeuroInsights LLC, a San Francisco research and consulting company. Of that, neuropharmaceutical revenues were $93 billion, up 7 per cent over the prior year; neurodevices were $3.4 billion, up 21 per cent; and neurodiagnostics were $13.5 billion, up 11 per cent.

Neurological and psychiatric illnesses represent the largest and fastest growing unmet medical market, according to NeuroInsights. More than 1.5 billion people worldwide are affected by them.

"This is poised to be the next hot area," said Casey Crawford Lynch, analyst and co-founder of NeuroInsights. Lynch added that neurotechnology on the whole still is at the nascent stage, like genetic engineering was 10 years ago. "Even incremental improvements [in treatments] can bring in a lot of revenue. This is an underserved market area."

European neurotech companies 'underappreciated'

While recent mergers and acquisitions activity has turned venture capitalists' eyes toward the neurotech market in the United States, Lynch said neurotech companies in Europe are still underappreciated and undervalued. That has led at least one neuroscience company, Amarin Corporation of London, to target European companies for in-licensing a potential treatment, Lynch said.  

Amarin recently acquired global rights to a novel oral formulation of apomorphine, which is used to treat "off" episodes in patients with advanced Parkinson's disease.  Such episodes develop in patients who, despite taking their medication, lose their ability to move as often as four times a day and can feel associated symptoms such as muscle pain, anxiety and panic. The condition is experienced by more than 100,000 late-stage Parkinson's disease patients in Europe and a similar number in the United States.

Amarin acquired the rights to the drug from its own vice president of clinical development, Anthony Clarke, who invented the formulation and filed the related patent before joining Amarin. The novel formulation already has gone through a proof-of-concept study in human volunteers. Amarin will conduct additional formulation work and plans to commence final-stage clinical trials next year.

"This transaction broadens Amarin's development pipeline and represents a further step in Amarin's acquisition and in-licensing growth strategy," Rick Stewart, CEO of Amarin, said in a statement when the new formulation was acquired. "We intend to follow the acquisition ... with other transactions later this year as we build on our franchise in central nervous system disorders, specifically in the movement disorders area." The deal comprises a small upfront payment, success milestones as the drug moves to regulatory approval and royalties upon commercialisation.

The NeuroInsights report, which covers 450 public and private neurotech companies, also ranks neurotech activity by regions. The San Francisco Bay area held the top spot, followed by the Greater Boston area, the San Diego, California area and the London–Cambridge, UK area. Stockholm, Sweden and Shanghai, China are listed among the emerging markets, and Munich, Germany, along with Singapore and Tokyo, Japan, are nascent markets.

Among the factors driving innovation in the London–Cambridge market are the nearby universities, including Oxford University, University College London, Cambridge University and Imperial College, London; the concentration of nearly 20 neurotech companies; and its rapidly emerging neurotech-focused venture community, which includes SV Life Sciences.

The report also cites a research collaboration between GlaxoSmithKline (GSK) and Imperial College, London, that involves establishing a medical imaging centre next to Hammersmith Hospital in West London and conducting research on cancer, stroke and neurological diseases. GSK is funding the ongoing research and new Clinical Imaging Centre with a £76 million grant.

Other activities in the London–Cambridge area include the University College London's neuroesthetics research to understand the neurobiology of creativity and its cognitive science leadership focused on understanding emotions. Those two areas of research are not found in competing neurotech clusters, NeuroInsights said in its report. Other engines of intellectual property creation include the Wellcome Laboratory for Molecular Pharmacology, which is studying neurotransmitter receptors and ion channels, and the Windeyer Institute of Medical Sciences, which is focused on studying molecular psychiatry.

M&A, investment attract VC community

Several key events have attracted the venture capital community to neurotech start-ups over the past two years, notably heavy merger and acquisition activity and substantial investment, especially in specialty pharmaceuticals and neurodevices. Those two areas will continue to be key drivers for the neurotech market, NeuroInsights managing director Zack Lynch said.

The M&A activity includes the June 2004 acquisition of Advanced Bionics Corp., Sylmar, Calif., which makes neurostimulation devices for treating deafness and chronic pain, by Boston Scientific Corp., Natick, Mass., for $740 million plus earn-out payments tied to future performance milestones.

In addition, Advanced Neuromodulation Systems Inc., a chronic pain company based in Plano, Texas, did well on the public markets and was acquired in late 2005 by St. Jude Medical of St Paul, Minnesota., for $1.3 billion.

Now a division of St Jude, Advanced Neuromodulation received European CE Mark clearance for its EON Rechargeable Neurostimulation System for managing chronic, intractable pain in early May 2006, and announced the first European patient implant. The product uses low-intensity electrical impulses to selectively stimulate nerve fibres along the spinal cord, which researchers believe helps diminish or block the pain message being transmitted to the brain from limbs and the lower body. The feeling of pain is replaced by one of tingling.

"The patient has responded well to the targeted pain relief this neurostimulation therapy offers," neurosurgeon Athanasios Koulousakis said in a statement after he performed the implant at the University Hospital in Cologne, Germany.