The MX Q&A: ImThera’s Marcelo Lima

Lima is CEO and cofounder of ImThera, a San Diego-based start-up offering a potential breakthrough in treating obstructive sleep apnea (OSA), a potentially fatal health problem that affects millions. The device uses a technique called “targeted hypoglossal neurostimulation” (THN) as an alternative method of sleep therapy for patients who have trouble responding to the traditional treatment, continuous positive airway pressure (CPAP). Many OSA sufferers find CPAP, which is covered under medical insurance plans, cumbersome and uncomfortable, especially when trying to use the machine for an entire night.

THN is designed to gently stimulate the hypoglossal nerve affecting the tongue muscles that relax during sleep, preventing the tongue from slipping backwards into the throat and obstructing a sleeper’s airway, the company says. Treating the patient involves making an incision in the upper neck and placing an electrode around the hypoglossal nerve. A small pulse generator attached to the electrode is implanted in the upper chest wall.

A 25-year veteran of the medical device industry, Lima has held a variety of positions in engineering, marketing, business development, and executive management. Before colaunching privately funded ImThera, Lima was president of Visage Imaging. He is also the former CEO of Opsion Medical and vice president and general manager of Kodak’s health imaging business for its worldwide laser business. In addition, he has held management positions at Hewlett Packard’s medical products group and Siemens Medical. Lima began his career at Johnson & Johnson as a medical device software engineer.

Lima received an MS in biomedical engineering from Boston University and a BS in electrical engineering from Gama Filho University in Brazil. He also holds an MBA from the University of Chicago. In this interview, Lima discusses what triggered his interest in sleep apnea treatment, the company’s initial funding push, the investment climate for start-ups, and the genesis of the technology. He also touches on his transition from engineer to executive and shares some tips for budding entrepreneurs. 

MX: How old is your “early-stage” company? And what prompted you to move from established firms to start a new company? 

Marcelo Lima: ImThera was formed as a California corporation in mid-2004, and it became a Delaware corporation in early 2007 when the company started a fund-raising effort. As a co-founder of ImThera, I held a board seat until February of 2009 when I joined the company full- time as president and CEO.

What triggered my interest was that a family member has sleep apnea and can't comply with the standard of care CPAP therapy. My brother-in-law is in very serious condition. He developed serious comorbidities including congestive heart failure and diabetes type 2. His life is currently at risk. So I wanted to be part of something that really helps patients in need. 

How much initial capital did you need to launch? Where did the funding come from?

Initial capital to get the first patents going was $200,000. ImThera closed on its Series A investment in February 2008 for $4.1 million, all from private investors who are high-net-worth individuals. Recently, ImThera closed on $1.5 million of Series B financing, which is still open for the remaining $2.5 million.

How would you describe the investment climate for start-up device companies at the moment? How much does the investor interest depend on the type of device and the market segment for the “right” device?
I'd say the climate is extremely difficult. However, we've been able with the right plan, product, and market focus to attract enough funds to develop and validate the product clinically. I agree that the type of device and target market makes a difference in matching to the private investors profile and interest or appetite.

What impact has the discussion over healthcare reform had on ImThera’s development?

Very little so far. Indeed, we expect reimbursements to come down across the board and most likely affect the CPAP market. However, our target population is noncompliant CPAP patients with moderate or severe obstructive sleep apnea, and these people are dying from the very serious consequences and have few viable options for treatment. Additionally, the more than 1.5 million noncompliant patients in the U.S. are costing the healthcare system an estimated $20 billion annually due to the development of the comorbidities.

How did you come up with the concept of “targeted hypoglossal neurostimulation,” and how did you then develop the technology?

The idea evolved from a number of aspects. First, the earlier publication of Dr. Schwartz and his neurostimulation human experiments at Johns Hopkins gave us a foundation for the feasibility of hypoglossal neurostimulation in general. However, it only stimulated the genioglossus muscle and had difficulty with sensors and equipment in the closed-loop system.

Second, we believed that a broader approach to multiple muscles of the tongue, targeting the ones responsible for protrusion and flattening would stand a better chance of success in upper airway patency. Third, we never thought the sensors of closed-loop systems would be advantageous. [We thought they’d] rather pose an additional unnecessary risk and longer surgical procedures without added benefits, since we already know the patient has OSA and needs a solution for his entire sleep period—whether that sleep period is in bed at night, on the beach during vacation, or on an airplane flying. Our belief was that closed-loop systems would add processing electronics, IPG size, complex sensors, cost, surgical time, and more risk of trauma and still could potentially leave the patient with a few seconds of hipoxia.

So, THN was created as an open-loop, continuous stimulation during sleep, with a multicontact electrode placed proximally on the nerve so we can recruit multiple muscles of the tongue and target the ones we need during titration of the system.

How much will the THN surgical procedure cost? I assume there’ll be ongoing costs associated with doctor visits as well. How do you work out the price points when developing the technology to fit the targeted segment?

The device itself will be priced between $14,000 and $16,000. We today know that the surgery will take approximately 60 minutes, so we estimate a cost of $9,000 for surgery. The price point was developed based on two parallel models: The estimated total cost of ownership of CPAP over 10 years, which is $5,000 to $7,000 and the annual average cost of the non-compliant CPAP patient to the healthcare system, which is $25,000 to $30,000.

How did your previous executive experience at Visage Imaging, Opsion Medical, and Kodak help you start ImThera?

I think it helped in many ways. I understand the various phases of the development and commercialization process, I have experience with both small and large organizations, I have done many deals and have evolved strategically, and I know how to manage our funds very tightly, which is paramount for a start-up company.

What are the benefits and drawbacks, if any, of transferring an extensive scientific background to the executive suite? Are there any challenges for developing the needed business acumen?
I evolved from engineering into business back in the late-80s at Siemens when I completed my MBA at the University of Chicago. I believe it took at least a decade by the time I felt comfortable with many of the facts of business management. I think it is fair to say that we are always learning and evolving, and I am happy to learn.

I’ve read that some sleep experts are taking a wait-and-see approach concerning THN because anatomical causes of sleep apnea are not well understood.

Yes, that is true, and if I were in the sleep expert field I would also take a wait and see approach. Indeed the disease is very complex and requires attention and understanding of the specific patient situation. However, we know what we've got, and we believe very strongly that by delivering muscle tone to key tongue muscles during sleep we will avoid the largest problem and OSA, the tongue collapsing into the upper airway. By doing so we will be helping the vast majority of patients, those who have tongue-based OSA.

The description of how THN works seems to indicate that the physician would need some training in order to program it for each patient. If that were the case, how much instruction would be required?

There are two physicians involved. First, the ENT surgeon who will implant the device, that training is fairly straightforward. Second, the pulmonologist or sleep physician who will adjust or titrate the device. We have very straightforward instructions and software screens and expect that one to two days of training will suffice.

How important is a good Web site to a device company, particularly a start-up?

Extremely important. We are very proud of the focused work we put into our Web site. For a start-up, it is our face to the world and must address the needs of all of our constituents: interested physicians, prospective future patients, investors, suppliers, and the like. 

How did you come up with the name “ImThera,” by the way?

It came from innovations in IMplantable THERApy.

What is the status of the pilot study in Europe? How concerned are you that the results may not be what you’re hoping for?

We have started the European pilot study trial. It is taking longer to recruit than we expected. We've had a few bumps on the road, such as software bugs and such. The protocol is well designed and the medical staff is outstanding, and we've had very good early results. So I am not concerned with the results but am worried about timing.

What contact have you had with FDA regarding your device?

We've engaged FDA consultants to help us with the design of our FDA protocol. We plan to have a pre-IDE meeting in the near future and hopefully apply for the IDE soon after that.

When will you hold U.S. trials and when do you hope for FDA approval and expect to introduce the device in the United States?

We will start U.S. trials once we have an FDA approved IDE. I cannot comment at this time on expected market entry into the U.S.

What have you discovered during the process of launching ImThera that surprised you or proved especially challenging?

Managing consultants from a long distance has been very challenging.

Finally, based on what you have learned as a chief executive what advice could you give to other entrepreneurs with novel device technologies?

Let’s see. One, make sure that there is a problem needing to be solved. Two, make sure that you fully understand the science behind the problem. Three, don't specify or build your product until you have a proven model. Four, leverage suppliers and consultants at all levels. Five, be fair and equitable to all constituents such as employees, investors, suppliers, and customers. Six, maintain full watch on cash and burn rate. Seven, you must truly believe in what you are doing and be 1000% committed to the end. Eight, honesty and integrity. Nine, open communications. And ten, be passionate and fearless.