Investors hope to gain from pain

Venture capitalists want to take the pain away. Or at least that’s the message behind a series of investments that several firms have made recently into biopharmaceutical companies focused on developing treatments for pain and inflammation.

VC firms such as Atlas Venture, MPM Capital, Hopewell Ventures and InterWest Partners have invested about $111 million in 11 pain-focused companies in the last six months, according to data from Thomson Reuters (publisher of PE Week).

Maybe it shouldn’t be surprising that VCs are paying so much attention to the large sector of pain medication. The U.S. government estimates that between one-sixth and one-third of all Americans experience chronic pain at some point in their lives. Market research group Datamonitor estimates that sales of anti-pain drugs exceeded $24 billion in 2007.

Nearly one-third of those sales, or $7.5 billion, was for opioids, drugs based on the chemical compounds found in opium. The market for opioids is expected to grow to $10 billion by 2017, according to Datamonitor. Most of the growth in the market will come from reformulations of existing compounds, which make opioids less addictive and with fewer side-effects.

“The most striking thing about the pain market is that you can make a huge amount of money selling drugs that have been around for 100 years by just making them safer,” says Regina Hodits, a partner with Atlas Venture.

Hodits currently sits on the board of two pain-related companies: Anti-inflammatory company Fibrex Medical, and opioid-reformulation company Egalet. Denmark-based Egalet has raised more than $70 million from Atlas Venture and Index Ventures to pursue opioid compounds that are less addictive.

Drugs aren’t the only area of pain treatment ripe for innovation. VCs are also backing medical devices working on improved drug-delivery systems. Hopewell Ventures invested in drug delivery device manufacturer Symbios Holdings with a $2.5 million Series B round in September. Symbios makes “pain pumps” that deliver analgesics directly to the site of a trauma.

The Symbios disposable pain pump makes sense for patients, doctors and even hospital administrators, says Hopewell’s Craig Overmyer, since regional pain management allows a patient to spend less time in hospitals. Allowing patients to move through the post-operative sections of the hospital faster can improve the institution’s bottom line, he says.

“When you go to the dentist, you don’t get pumped with narcotics—you get a shot directly to where you need it,” Overmyer says. But that’s not often the case for other types of surgery, he says. Instead, patients are often given generalized analgesics. “It’s like using a sledge hammer to put in a small nail.”

Some investors are also backing companies that are researching how pain works in the body. Measuring a research subject’s response to pain can be subjective and difficult to monitor in clinical trials. Pain is also one of the conditions most-prone to the placebo effect. Some 30% to 40% of patients in double-blind trials that receive fake treatments for their pain report feeling better, experts say.

And there’s little room for error. A clinical study for a pain medication, which would study the effects on more than 1,000 people, might cost $5,000 to $10,000 per person.

At least one company is working to better track the pathways of pain and has created software that may eventually accelerate clinical trials of new pain and anti-inflammation drugs. Pittsburgh-based Immunetrics raised $13 million from LaunchCyte and another undisclosed firm in September. The company has developed proprietary algorithms for modeling pain in “virtual patients.”

Company executives did not respond to requests for comment, but Immunetrics may be poised to arm all the drug companies fighting to displace existing pain drug giants.