Top Deal: Breathing Life into CHF

Summary

At time of publication, May 23rd, 2019, Respirix raised $700,050 of the $1,500,000 funding

The Respirix team has been selected as a “Top Deal” by KingsCrowd. This distinction is reserved for deals selected into the top 10% of our due diligence funnel. If you have questions regarding our deal diligence and selection methodology please reach out to [email protected].

Problem

Congenital Heart Failure (CHF) is the leading cause of hospitalization in people over the age of 65. A whopping 25% of people hospitalized for CHF will be readmitted in 30 days.  

It is estimated the US spends approximately 4% of the entire health care budget on CHF. Hospitalization costs for CHF account for 70% of the $10B annual costs in the US. Additionally, as part of the Affordable Care Act, hospitals with readmission rates over the national average could face reimbursement penalties up to 3%.

According to a recent Centers for Disease Control report, 80% of heart attacks and strokes in middle age people are preventable. One of the main prevention methods is to ensure patients are properly taking appropriate medicine.

Solution

Monitoring Pulmonary Artery (PA) results in a 50% reduction in hospitalizations of CHF in a recent study.

Outstanding!

Just put PA in all people impacted by CHF.

If only it were so easy.

The only FDA approved device for CHF monitors is CardioMEMS. CardioMEMS requires a surgical procedure to implant. The actual device is $17,750, plus the cost of the surgical procedure to implant the device and reimbursement is challenging.

What if there were a non-invasive solution for monitoring patients?

Respirix developed an easy to use, low-cost, portable handheld device which monitors pulmonary artery pulsations during the heartbeat to assess heart health. The patient blows into a tube attached to the Respirix device to monitor the patients CHF. According to Respirix research, Respirix’s device, Cardiospire can produce 87% of the signal an implanted device captures. This creates a statistically significant correlation.

Cardiospire costs $1,000 for the device and $2,400 in annual monitoring service fees. The 1^st year of Cardiospire costs at total of $3,400 as opposed to the $20,000 cost of an implant monitor, the current gold standard of care.

Customers

Almost 6 million Americans have CHF. About half of those diagnosed with CHF will die within five years of their diagnosis. Heart disease remains the leading killer of adults in the United States. The US propensity towards sedentary lifestyle with high consumption of processed foods, further contributes to this epidemic. With so many Americans currently diagnosed with CHF, this is a large market to address.

Competitors

There are several competitors. CardioMEMS is the strongest invasive competitor. A key component of Cardiospire’s differentiation is its non-invasive implementation. The closest non-invasive competitor is Sensible Medical’s product, ReDS. ReDS is a vest strapped to a patient which monitors lung fluid to determine heart health. In studies, ReDS seems to work. ReDS costs $25,000 and is designed for home health workers to bring around to monitor CHF patients.

There are a number of other startups at various stages of FDA approval offering noninvasive CHF monitors such as Vixiar, ToSense, EKO, and NanoWear. Many of these noninvasive competitors are plagued by inconclusive research results as to efficacy.

Team

Respirix is a spinoff from TheraNova, the successful medical tech incubator. TheraNova incubates products under their three mandates; improve outcomes, reduce costs, and expand access to care. TheraNova’s principle is, in this age of hyper machine learning with the ability to have self-driving cars, the medical industry is still using “dumb devices” such as tubes in the body. TheraNova has spun off over fourteen companies which extract actionable data from commodity devices like urine drainage, feeding tubes and PICC lines to better inform medical professionals and thus resulting in improved outcomes for patients.

TheraNova has deep experience in FDA approval, research, and commercialization of products. It supported the initial stages of Respirix and set them up with key staff and advisors who will guide the team through the commercialization process.

Respirix CEO, Eric Kriegstein joined in 2018. Previously, Kriegstein was a principle at Signatures Capital. TheraNova CEO, David Burnett pitched Respirix to Signatures Capital in 2016 during the spin off. Kriegstein was so compelled by the Respirix opportunity, he left Signature’s to run Respirix. Prior to this, Kriegstein has a decade worth of experience evaluating early stage investments with various funds.

The rest of Respirix’s team is borrowed from TheraNova. Respirix only lists two employees in the financials, a CEO and CMO. Respirix’s status as a TheraNova spinoff affords it significant benefits in utilizing TheraNova’s experts in the various positions to move Respirix quickly and economically to commercialization.

Why We Like it

1. TheraNova: TheraNova has successfully spun off fourteen companies. TheraNova is not afraid to shut down a project prior to spin off if market viability is unlikely. The resources and support Respirix have received and will continue to receive will ensure it is surrounded by strong expertise. According to Kriegstein, “TheraNova is clever at doing clinical studies in a capital efficient manner.”

2. Market: CHF is a global health care issue. There is substantial evidence that successful monitoring of CHF patients will dramatically improve care. Considering the aging population in the US, greater focus on reducing health care costs, and poor lifestyle choices will ensure a strong market for CardioSpire when it receives FDA approval.

3. Platform: In keeping with TheraNova’s key principles, Respirix intends to use the data collected from its devices to further improve monitoring as well as different applications. In multiple interviews, Kriegstein has referred to the potential, “platform” application of CardioSpire. He provided no further specifics, but indicated the company has visions beyond heart monitoring.

4. Business Model: Respirix utilizes TheraNova’s well-oiled playbook. The CardioSpire device is likely to have a low upfront cost. $1,000 or lower. Respirix estimates it will be able to manufacture the device for $500. Then there is a $200/month monitoring fee to process the information. This results in a strong recurring revenue stream. If today, 50% of those diagnosed with CHF are expected to die in the next five years, and proper medication management can reduce 40% of hospitalizations for CHF, it might mean Respirix’s success will lead to less people dying of CHF and more patients CardioSpire’s $200/month monitoring fee.

Rating

Respirix is a Top Deal. Respirix’s focus on FDA approval as opposed to commercialization is an example of its economical ethos. As soon as CardioMEMS received FDA approval, St. Jude’s Medical acquired it for $455 million before the first device was sold.

Respirix is set up for success. As with all early stage investments, Biotech companies have risks. Unlike other biotech early stage companies, Respirix was founded via an incubator which provides experiential guidance to avoid the costly research mistakes which are an acceptable part of navigating the FDA process.

While this is the first company Kriegstein has led, he has excellent mentors from the TheraNova family to provide advice and guidance to ensure Respirix thrives. At the estimated cost of $500 to produce each device, Respirix can be positioned as a low cost, effective solution to successfully treating the 6 million Americans with CHF.