Invuity Sees A Clear Path In Minimally Invasive Surgery

Invuity Inc. is bringing a bright new look to the surgical field with a new type of illumination that is giving surgeons the opportunity to see inside the human body better than ever before. The company’s Eigr waveguide system directs standard light through a maze of advanced optical polymer structures that reflect and direct the light so it shines uniformly across – as one surgeon describes it – a “deep, dark incision.” Surgeons say the additional light enables them to do surgeries more quickly and effectively, and Invuity says someday its light might be capable of doing much, much more.

• Innovation in the medical device realm typically doesn’t focus on the infrastructure. Start-ups and investors instead spend their time and money developing novel implants or surgical tools to advance treatment and change how medicine is delivered.
• Invuity also looks to advance medicine, but the six-year-old company is taking a seemingly more mundane approach. Rather than develop new tools to cut, ablate, or manipulate tissue, the company is selling a novel lighting technology that makes surgery simpler – and potentially safer.
• Invuity’s “waveguide” tools flood the surgical field with light, making head lamps and overhead lights almost unnecessary and giving surgeons clear, crisp views of surgical openings, which grow smaller and smaller each year as device technology advances.
• With several products on the market in oncology, spine, and other fields, Invuity is enjoying a fast enough sales ramp-up to draw investments from investors who have traditionally steered clear of medical device companies. It’s also exploring – through partnerships and its own R&D – just how far and bright its light can shine.

A primary objective of companies in the medical device field is to enable larger procedures to be done through smaller incisions. In some cases, surgeons and interventionalists can track their progress on a CT scan or through the camera of an endoscope. But those less-invasive procedures that don’t allow for that level of visualization have largely been lit by the same technology employed for decades – a ceiling light or a lamp affixed to the forehead of the surgeon. With this ambient and indirect light, surgeons are trying to perform delicate surgeries down “deep, dark holes” that will only get deeper and darker as new procedures are developed to spare patients from suffering unsightly scars or enduring unintended side effects. Performing minimally invasive surgery this way is like looking for an item under a couch using only the floor lamp behind you as illumination.

While venture capitalists and entrepreneurs spend nearly all of their time, money and efforts on creating the tools to make those less invasive procedures possible, very few resources have been committed to lighting the way for surgeons to use those tools. Device developers clearly assume that existing imaging and illumination technologies are sufficient to accommodate the high tech tools they’re developing, and larger medical suppliers seem content offering fiber optic-equipped products as a potential solution. But the success enjoyed by start-up Invuity Inc.suggests the assumption might be incorrect; device makers have spent their time building high powered cars without worrying enough about the headlights that make driving safe. Historically, device companies developing new cannulas, catheters or other pieces of the infrastructure of the surgical suite haven’t generated the returns of those that develop new surgical devices. But the growing allegiance to Invuity’s Eigr illumination technology among surgeons and the intense interest from investors in the company’s latest round suggests the company might prove to be an exception to that rule.

Founded in 2004, Invuity is selling a new type of illumination that is giving surgeons – largely in breast and spinal surgeries – the opportunity to see inside the human body better than ever before. The company’s Eigr system shapes standard light through a maze of advanced optical polymer structures that reflect and direct the light so it shines uniformly across – as one surgeon describes it – a “deep, dark incision.” The low-profile light device is thin enough to fit inside a retractor or suction device, so it doesn’t impede the surgical procedure. Equally important, the light doesn’t generate any heat, so it eliminates the risk of accidental burns during a procedure (or the threat of setting fire to surgical drapes in the OR). Surgeons say Eigr’s technology changes their view of surgery completely. Alison L. Laidley, MD, a surgeon at Texas Oncology in Dallas says that after her first procedure under Eigr she told the manager of her operating room, “You've given me something that I’ve been waiting a really long time for. You just have to get this for me because I can’t go back.”

Such testimony – and Laidley isn’t alone in her appreciation – speaks to the largely ignored opportunity Invuity has tapped into with the new illumination system. Dana Mead, general partner at Kleiner Perkins Caufield and Byers, Invuity’s first institutional investor, says Invuity has an opportunity to “disrupt illumination, where there hasn’t been a lot of innovation, historically.” The positive reception from surgeons has put Invuity on pace to enjoy “triple-digit” growth, according to CEO Philip Sawyer. This past quarter, the company had revenue of approximately $800,000, exceeding the annual product revenue it recorded last year, following last year’s full release of its light-equipped surgical tools. The early commercial success validates the idea conceived by the company’s co-founders, orthopedic surgeon (and mechanical engineer) Kenneth Trauner, MD, and optical engineer Alex Vayser. The pair pinpointed the need for a new method of illumination while working as consultants for a maker of larger joint orthopedic implants that was exploring a minimally invasive method of hip replacement. Investor appetite for the company’s latest round of financing – a $25 million Series D [See Deal] – serves as an exclamation point on the surgeons’ validation.

Exhibit 1

Eigr Illumination Technology

Invuity Inc.

Invuity is clearly a different kind of company. The nature of its technology makes that clear, but so does the structure of its business. A device company typically hangs its future upon the singular success of a medical device or technology, putting every egg in a single basket. Invuity ( in developing a novel and innovative approach to assisting surgery – has created a technology platform that stands on multiple legs. Two-thirds of the company’s revenues come through the sale of its own Eigr-equipped tools and equipment, selling primarily to breast cancer surgeons, orthopedic surgeons and neurosurgeons performing surgery on the spine. The remaining third come from partnership agreements with larger medical device manufacturers that include the Eigr technology in their own products. Invuity officlals aren’t allowed to reveal the partners, per the agreements, but conversations with people in the field say Invuity is supplying Medtronic PLC and Lanx Inc. with illumination equipment through a partner arrangement. Sawyer says Invuity is currently concentrating its efforts on those three principle legs – oncology, orthopedic/spine and third-party partnerships – to expand its business.

Seeing The Light

The entire operation rests upon Invuity’s innovative illumination technology. Trauner and Vayser started what was then called Spotlight Surgical soon after concluding their consulting positions with the orthopedic implant maker. The pair experimented with lighting technologies starting with light-emitting diode (LED) technologies. Eventually, the work led to Eigr, which Vayser describes as a “sophisticated lens system that shapes and directs the light into the surgical cavity.” Eigr starts with a traditional light source, brought up through a cable connected to waveguides that are incorporated into its retractors, cannulas and other surgical tools. The magic occurs as the light passes through the sequence of tiny polymer lenses – measured in microns – that reflect and shape the light into a rectangular pattern that floods the sides of the wound evenly. The dispersal of the light ensures that the surgeon’s head and hands don’t block the light, a common problem with head lamps that often forces delays in surgery. Such distribution of the light also disperses energy, ensuring that no one point is receiving enough focus energy to become hot. (The waveguide elements are removed after surgery. Sawyer says they wouldn’t fare well under sterilization. Invuity sells replacement parts, creating the recurring revenue model.)

Trauner and Vayser took two to three years to perfect the design of the optical system. Both came to Invuity with experience in optics or imaging. Vayser, who serves as the company’s chief technology officer, was the co-founder and president of Medivision Inc., a leading manufacturer of custom surgical endoscopes and imaging devices. Trauner, the chief science officer, held the post of CEO until Sawyer took over in 2010. Trauner is a practicing orthopedic surgeon, but he also holds an engineering degree. He put the latter to work at Coherent Inc., developing arthroscopic laser systems. He also founded the Center for Biophotonics at the University of California in Davis. But Invuity’s challenges were unique. Blood itself presents an enormous problem for light, Trauner says. Blood absorbs a great deal of light in a surgical wound, presenting as almost a “liquid black felt.” As Invuity looked initially into developing tools for spine surgery, Trauner and Vayser recognized they’d need bright but uniform light to compensate for the level of blood and properly illuminate the opening.

The work led to the creation of Invuity’s highly precise waveguides. Vayser says manufacturing of the Eigr waveguides requires equally precise design and manufacturing. “Because the waveguide is transilluminated, any imperfection, air bubble or irregular mechanical feature that may be acceptable in a conventional injection-molded component is brightly illuminated. You cannot tolerate that in this kind of a device,” he says. “So an enormous amount of effort goes into making sure that manufacturing is done correctly and precisely.” The company manufactures the parts itself in a plant in San Francisco, and it intends to increase capacity, using part of the proceeds from its recent round of capital.

Sawyer says Invuity execs began fundraising in April to raise the money to expand its manufacturing facility in San Francisco, hire a larger sales force and beef up research and development. “We were really looking to just do a very quick round because we’re busy enough with the business,” Sawyer says. To that end, the company declined to pursue investments from strategic partners. Instead, Invuity turned to a relatively new firm managed by principals who knew Sawyer from his days as CEO of Fusion Medical Technologies, developer of a surgical sealant. Sawyer took the company public in 1996 [See Deal] – a time when medical device companies were welcomed onto the public markets with open arms – and eventually sold it to Baxter International Inc. [See Deal] Valence Advantage Life Sciences Fund II, which is run by the team that also manages the Caxton Advantage Life Sciences Fund, led the recent Invuity Series D round which drew capital from return investors Kleiner Perkins Caufield & Byers and InterWest Partners. Wexford Capital, a hedge fund manager, also participated.

Invuity impressed Valence in two ways. Managing Director A. Rachel Leheny, who received a PhD in laser spectroscopy, says the Eigr system represents an impressive conjoining of different optical technologies. “It is actually very, very impressive,” she says. But equally impressive is the revenue ramp rate the company is generating. “This is not a technology in search of a solution,” Leheny says. “This is a problem that is solved with technology. And the problem is: how do you illuminate a minimally invasive incision with light that’s on the outside of that space?. You need something that’s cool, bright and all-illuminating, if you will, to light up that tiny hole so that the surgeons can see what they’re doing.”

Invuity’s ability to solve that problem impressed Valence in a second way – the potential for return. At Caxton, Valence’s partners managed to steer away from investing in companies that faced a long life as a private company. Then and now, the firm invests in privately held companies and micro-cap public stocks that promise a shorter runway to liquidity. Caxton realized returns in Gemin X Pharmaceuticals (sold to Cephalon, now Teva Pharmaceutical Industries Ltd., for up to $525 million [See Deal]) and Corthera (sold to Novartis AG for up to $620 million [See Deal]) and through the initial public offering of Anthera Pharmaceuticals Inc. [See Deal] In addition, Caxton Advantage has made substantial investments in several publicly traded biopharmaceutical companies. Only one private company remains in Caxton’s portfolio.

Turn On Exit Signs

Medical device start-ups that develop high end therapeutic implants might typically face a longer path to exit. On the other hand, companies developing surgical tools can often get to market quickly, but don’t necessarily create a large amount of value, serving as tuck-in acquisitions for major companies. Invuity offers a different proposition because it has a platform that enables many existing and new surgical procedures. This had great appeal for the Valence managers. “We always think about the exits,” Valence Advantage Managing Director Eric W. Roberts says “And I think it’s pretty clear that Invuity’s products can drive sales for a broader set of surgical products for their partners, making them a critically important company strategically for major surgical products companies.” Roberts suggests Invuity could be an IPO candidate once sales grow, and says investment bankers have already inquired about the company, but the more likely outcome is a strategic acquisition.

“Invuity is a company that because of its breakthrough technology and its razor-razor blade business model has gross margins similar to those of pharmaceutical companies.” – Eric W. Roberts, Valence Advantage

Invuity represents the first investment from Valence’s new fund and it’s also the first medical device investment made by the Valence team. As noted above, the Caxton portfolio consisted entirely of biopharmaceutical companies. Roberts says Caxton had considered device investments in the past but “couldn’t get comfortable with any of the ones we considered. Invuity is a company that because of its breakthrough technology and its razor-razor blade business model has gross margins similar to those of pharmaceutical companies.” If that’s the case, Invuity boasts a quality that pharmaceutical companies can’t even match, limited risk from the Food and Drug Administration. Invuity’s illumination system only required 510(k) clearance from the FDA.

Chris Ehrlich, general partner at Interwest Partners, admits that the firm’s interest in Invuity was “half offense and half defense.” The defensive qualities included avoiding prolonged FDA approval timelines. “Everybody’s tired of getting pushed around by the FDA and the incredible capital intensity of having to pay for monster pivotal trials.” Invuity, on the other hand, offered " very limited regulatory risk and was incredibly capital-efficient. That was our thesis.” Ehrlich says others shared his enthusiasm, calling Invuity’s raising of the Series D “one of the easiest financings I’ve ever done.” Interested investors were calling him, saying they were drawn by the upside and the limited exposure to the FDA.

It wasn’t just a defensive investment for Interwest though. “Offensively we liked it because it is in the path of progress,” Ehrlich says. “The move toward minimally invasive procedures creates an obvious opening for Invuity to pass through.” Ehrlich says the story doesn’t end with Invuity making current procedures easier. Using the superior light, surgeons quickly recognize new ways of performing other open surgical procedures with a less invasive approach. Invuity – while concentrating its sales and marketing efforts on oncology and spinal surgery – is able to provide new surgical tools to specialties it hasn’t yet actively pursued. Surgeons, without prodding from the company, are coming up with their own applications for the Eigr system, Ehrlich says. “Eigr is something that enables a lot of procedures,” Ehrlich says. “It’s something that’s kind of a must-have for some procedures, nice to have for others, and when the docs try it, universally they like it.”

Broad Interest, Narrow Focus

Sawyer acknowledges “some of the doctors are pulling us into different specialties.” In some cases, the company’s breast retractors are being requested for colorectal surgery and vascular surgery. Invuity management works hard to keep the company’s concentration on orthopedics/spine and oncology surgery. When hospitals request devices for other procedures, they try to accommodate the orders. “But we’re really focused on going deeper first in the franchises that we’re already building: oncology, breast and thyroid, and then spine/orthothrough our orthopedic channel,” he says. “We intend to go deeper in those two areas before we expand more horizontally.”

“when you’re doing micro-diskectomies, you put the right angle device in and, well, you just can’t do the case without Eigr. We’re spoiled now.” – Michael J. Gratch, MD

The company has adopted different approaches to selling in the two specialties. In spine, Invuity has three people managing roughly three dozen distributors selling directly to spinal surgeons. As part of the Series D financing, the company will add three direct representatives to the sales force. Sawyer says distributors provide a deeper and more cost-effective way of reaching spine surgeons. The potential for a better-lit surgical field in spine is obvious. These surgeons work in tight quarters alongside the spinal column in an opening that can get bloody. Spine surgeon Michael J. Gratch, MD, says Eigr makes surgery safer for patients. “What you’re seeing in there is so much different than what you see with the regular light source or a head light source,” he says. “I’m doing spine fusion essentially through inch and a half incisions, putting screws, rods, etc. in there. When you put the Invuity suction device in, the clarity just blows you away. Or when you’re doing micro-diskectomies, you put the right angle device in and, well, you just can’t do the case without it. We’re spoiled now.” Gratch, who performs surgery at Doylestown Hospital in Pennsylvannia, says he’s been using Eigr for roughly a year. Cost might have posed an obstacle, as Invuity’s tools cost roughly two to three times the cost of equivalent tools equipped with fiber optic technologies (approximately $100 vs. $200-$300.) But Gratch says his hospital pays the extra cost without complaint. “It doesn’t interfere that much with the price of the case especially when you’re using it for the bigger spine fusion surgeries. It’s a drop in the bucket.” Gratch adds, “It’s been a great thing. I really enjoy using it.” Gratch has used Eigr-equipped devices on intercervical diskectomies and fusions, lumbar micro-diskectomies, and minimally invasive spine fusion. He says he’s also eager to use Invuity’s new Eigr bladed retractor that could be used in cervical spine surgery, which must account for a different curvature of the spine. For lumbar laminectomies where the incision is large enough, the additional light is probably not necessary.

Hip and knee implants also require larger incisions that might make Eigr unnecessary. But those procedures already have moved toward minimally invasive approaches, so eventually the progress might make them a prime target for Invuity. Stephen Anderson, director of sales for spinal and orthopedics at Invuity, says the company does sell a standard retractor used in total hip surgery “that can be used in any total hip procedures, but our surgeons are finding that there is a real need in anterior hip surgery,” he says. “The incisions are not as small as they are in, say, spine surgery, but they’re still small relative to what the surgeons can see and do in total hips.” For the past year, Invuity has been selling hip retractors to hospitals in the Northwestern US. Invuity has seen sufficient adoption to roll out sales nationwide, building enough inventory to ensure it can meet rapid adoption. For Anderson, the challenge for selling in large joints is the same as selling in spine. “The surgeon really has to want the product,” he says. “And we’re fortunate enough that our surgeons really do, and are going to bat for us with the hospitals.”

Path Of Progress

Invuity executives say they’re seeing similar adoption in oncology, specifically breast cancer. (See (Also see "The Evolving World Of Breast Cancer Management" - Medtech Insight, 6 Jul, 2012.).) Breast cancer surgeons might be moving even more rapidly toward minimally invasive procedures than other specialties as surgeons pursue new procedures to spare patients from significant scarring. “As breast surgeons, we’ve relied primarily on the overhead lights in the operating room to illuminate the operative field,” says Dr. Laidley, the breast surgeon at Texas Oncology in Dallas. “Well, if the operative field now is really more or less underneath the skin, it’s very hard to direct a big overheard light into a small wound to illuminate the field so that I can do the surgery as safely and as quickly as possible.”

Surgeons say the move toward nipple-sparing procedures, including mastectomies, requires a new approach to removing cancerous tissue and restoring the breast through plastic surgery. Dr. Rache M. Simmons, chief of breast surgery at New York Presbyterian Hospital/Weill Cornell Medical Center, says she’s found the Eigr light to be useful in nipple-sparing mastectomies, which involve an incision along the inframammary fold where the bottom of the breast connects to the chest. As the surgeon reaches the upper part of the breast, traditional retractors tend to twist out of position so the light shines up from the skin “and not down where you’re operating. So I end up detaching the light source and having a resident basically hold it like a flashlight,” she says. “This is really inconvenient for the resident, and it’s dangerous because you can burn the patient or set the drapes on fire.” Invuity’s Eigr stays cool and spreads light across the whole cavity, she says. Simmons says the color of the Eigr light is also helpful. “It’s not yellow; it’s white, so it’s more pure,” she says. “Because it’s more pure, you can see the anatomy so much better because the view is not distorted.”

Simmons’ enthusiasm is rewarding. Anthony Carnemolla, director of sales, oncology, says the company designed the retractor with breast surgeons in mind. “We’ve found that the breast surgeons view our technology as enabling and that helps them move the needle,” he explains. Carneomolla says surgeons are eager to treat through minimally invasive approaches even though the procedures are challenging and time consuming because the patients are better-served by the outcome. But the choice to do minimally invasive procedures comes at a cost to hospitals and surgeons. The longer, less invasive procedures don’t have their own reimbursement codes. Carnemolla says hospitals are “being paid exactly the same as they would be for performing this big, wide-open procedure,” he says. If the Eigr-equipped tools shave even a few minutes off the time of a procedure, “We’re putting a tool in their hands that helps them bring this procedure back to some parity.”

The Invuity Eigr light seems to be a game changer. Surgeons interviewed agree that once they’ve performed a procedure under Eigr they’re reluctant to go back to traditional lighting, at least for those particularly challenging procedures. Gratch, the spinal surgeon, says he’s used the retractor and suction device. “Both of them are tremendous, especially for micro-spine surgery,” he says. “They make a huge, huge difference.” Such enthusiasm is crucial to making sales in these economic times when hospitals grow increasingly resistant to new, more expensive technologies that provide only an incremental benefit over existing products. Indeed, Intuity executives agree their biggest challenge isn’t selling the concept to surgeons but to hospitals, but the same can be said for any new medical technology. Once again, surgeons say the additional cost is a consideration, but hasn’t kept their hospitals from buying Eigr-equipped tools.

Invuity’s CEO Sawyer says the company will continue to focus its attention on breast cancer and orthopedic/spine applications, reaching deeper and delivering new products that will assist surgeons in these specialties. But the illuminating quality of its products is expected to draw interest from other specialities as well. The company’s Saber – a light that can be slipped into tight spaces – is drawing interest from other surgeons outside of oncology and orthopedics. Meanwhile, the company is preparing to release its version of the Yankauer illuminated suction device, which will be useful in a broader and additional array of surgeries than its current offering. Sawyer anticipates the device to be effective in other specialities, including cardiac surgery, and, in fact, he expects sales in non-core specialties to contribute measurably to the company’s bottom line. The incidental interest might serve to build a customer base before Invuity decides to move into its next speciality. The company would merely follow the natural flow of business from surgeons.

Shining Forward

A similar tide is carrying Invuity into Europe. Sawyer says one of its corporate partners – he declines to identify either partner – is beginning to sell its Eigr-equipped devices in Europe. Invuity is adding a salesperson to help manage its international sales. The company holds the CE mark for its products but didn’t see the need to go abroad with the US opportunity growing so quickly.

Invuity’s story is still developing. The company is in full sales mode now. But it’s also poised to grow through improvements upon its Eigr technology. The company will use some of its new financing to add to its research and development team, (whose members might also bounce over to manufacturing if the need arises). One might wonder how much more R or D you can do around light, but Invuity has ideas. Sawyer says one possibility includes developing light that might enable surgeons to more easily differentiate between different types of tissue. According to Trauner, the co-founder and orthopedic surgeon, “When you flood a massive amount of light into a wound, surgeons can actually discriminate the tissue better … you can actually see the edges of various tissues.” Potential new hardware includes a surgical port that is internally illuminated – a lighted tube, essentially – to make sensitive surgeries in areas like the spine easier and safer.

So what can Invuity be? Kleiner Perkins’ Dana Mead says the company could take a decidedly different form. He recalls that spinal giant Nuvasive Inc. started out with a retractor that allowed for lateral access to the spine when Kleiner Perkins made its first investment. “At the time, they didn’t have the implants, or the other pieces, like biologics, that they’ve added over time,” he says. “I think Invuity has the chance to identify a number of procedures that they enable with their technology. And if that’s the case, then they have the ability to build around those procedures so it can become more than just illumination.” Invuity’s chances of evolving into a broader company is helped by its ability to pay its own way through direct sales of its products and the potential for new corporate affiliations. “We have a lot of degrees of freedom,” Sawyer says. “You really have to try to create a strong company that is independent of needing help from larger entities. I think we’ve created the foundation for a very strong company, irrespective of any partnership.” Sawyer earned his stripes – and the confidence of investors – taking Fusion public and eventually leading it to a significant strategic sale. Time will tell if he can repeat the performance with Invuity, which is a decidedly different company in a completely different market. But with broadly enabling technology, burgeoning sales and the potential for groundbreaking technologies in two major medical fields – orthopedics/spine and oncology – it would be a mistake to dismiss the company as merely a light show.