Jim Peterson spent the better part of 20 years helping to improve the quality of the world’s blood supply at Haemonetics Corp. (NYSE:HAE), where he was CEO from 1998 to 2003. And while he was passionate about the importance of that work, his new role as chief executive for CeQur Ltd. might be even closer to his heart.
Peterson spoke with MassDevice just before giving a presentation on the patch-like device CeQur is developing for insulin delivery at the OneMedPlace Finance Forum in San Francisco Jan. 13. He told us about the personal connection he feels to his current work, which stems from the fact that his daughter has diabetes, and why he sees Montreux, Switzerland-based CeQur’s device as a potential market leader.
MassDevice: You’re about to present at the OneMedPlace Finance Forum. Can you give us a quick preview?
Jim Peterson: I really have three points to make. The first is that insulin delivery devices and technologies are coming and will be a major help for people with Type II diabetes, a major help for them in overcoming the barriers to taking insulin properly and consequently living longer and healthier lives. This technology is coming and CeQur is a very important one of these technologies. There are two other startup companies that have their eyes on this space, one is Calibra; the other is Valeritas.
The second point is that this is a huge market opportunity. People have always known that there are four times as many Type II diabetics taking insulin as Type 1, and 80 percent of all insulin in the world is consumed by Type II diabetics. However, the Type II diabetic population has been very under-served as far as technologies helping them with that struggle. It’s estimated that the market is easily a $2 billion marketplace for this new generation of products.
And my third point is that, by all measures that I’m aware of, the CeQur technology that came from this large Danish industrial products organization is positioned to be the leader in this new marketplace.
MassDevice: You just raised $30 million in a Series A round. Are you still seeking more financing? How far do you expect this current round can take you?
JP: We did the spinout from Danfoss Corp. in early 2008 and, with those investors, we’ve carried forward the work they had done for 2008, 2009 and now 2010. We know that we can accelerate moving this product to patients with additional funding, both in 2010 and then moving into 2011. We are continuing to be very active in our Series B funding, with the goal of accelerating what we can do in 2010 and carrying us through 2011 to full worldwide market introduction. Along the way, we will be bringing this product to patients in Europe, halfway through 2010. We will have CE Marking in midyear.
MassDevice: What’s your event horizon in terms of U.S. market launch?
JP: As we all know, the 510(k) process is undergoing a lot of change. As part of that, for this new class of product, we are required to do modest, but very well-structured and actually exciting, clinicals. We will be starting those mid-year and carrying those into 2011 and then submitting and looking for our 510(k) approval toward the end of 2011 and at that time would the have our launch in the U.S. By that time we will have had more than a year of experience in building the marketplace outside of the U.S.
MassDevice: You’re the former CEO of Haemonetics. Can you give us a sense of the differences between these two positions? How did you learn of CeQur and what attracted you to it?
JP: I have a diabetic daughter, so I had really committed myself for the last five or six years to promoting technologies to help improve diabetics’ quality of life. I’m a biomedical engineer by training and living with diabetes in the family, so after finishing my work in making blood safer and more available on a worldwide basis I turned my attention to using technology to improving the quality of life for people with diabetes. This is one very important step in that direction.
I’d spent a year-and-a-half with Warburg Pincus in New York, helping them invest in the diabetes space, and so had gone through all the technologies that are out there, so I had an understanding from that. I had already helped some seed investors move a small Danish company to Sunnyvale, Calif. M2 Medical has a new idea for a disposal insulin pump for Type I diabetics. We got them funded and they’re off and running with about 30 employees. So I was chairman of that and when I stepped back from that, became an advisor to Danfoss on what to do with what they had in-house, because they’d been developing technologies since 2001 for the diabetes space.
This appeared to me to be the highest-impact product. Although, quite candidly, Type I and Type II are so different that I had to get up the learning curve on Type II diabetes. Part of that was an excruciating 12 hours I spent interviewing 12 Type II diabetics who take insulin, all in a row, and that was my introduction to the terrible struggle these people have in taking their insulin. If you’re Type I and you skip your shots and don’t take your insulin, you get to go to the intensive care unit and spend 10 days and then you come out and after that you never, ever again skip your shots.
Type II diabetics, since they still have some residual capability for making insulin, they can abuse themselves. They can skip shots and consequently they’re unhealthy. Their A1cs are higher than they should be — that’s a measure of the amount of glucose stuck on red blood cells, which tells you what’s happened over the last three months — and consequently live unhealthier lives. It’s very clear, it’s well documented in the surveys as well as all the anecdotal work, that they have trouble taking their insulin for three reasons: Number one, they can afford not to like to stick themselves four times a day. They can get by with something less than that; most Type Is can’t. Secondly, during the day you’ve got to carry all this stuff around with you. You left it at the car, you left it at home, you’re out to lunch and you forgot to bring it along — the hassle of it all. Number three is discretion. Say you’re a construction worker, you’re out on the job and it’s lunch break. Where do you go, even though you may have this material in your lunchbox, where do you go to give yourself your shot? The way technology will overcome those barriers is by having a patch-type device that sticks on your body for three days. It’s giving you insulin all the time. Your doctor told you to press the button at breakfast, lunch and dinner. It’s always with you, you don’t have to carry stuff around with you, its discreet.
MassDevice: There’s certainly no shortage of companies looking into the insulin delivery market, both with patch-like devices like CeQur’s, as well as implanted and wearable monitors and the like. What is CeQur’s main differentiator to separate it from the pack?
JP: There are only three companies working on this, to our knowledge: CeQur, Valeritas and Calibra. And, as we all know, 90 percent of all medical device innovation has always come from start-ups. It doesn’t come from Boston Scientific or from Philips, it comes from the start-ups. [Our space] is not cluttered. There are a lot of other people who have a lot of other things for diabetes, but for this problem, there are only the three of us working on this.
MassDevice: Is this a platform technology with other potential uses for the device?
JP: The diabetes market is so big, so dynamic and the demand for this is so high right now, because of all the meetings and buzz about this coming. We can only do a couple of things well in life, as much as we’d like to do many things well, so we’re just focused on doing this really well.
MassDevice: CeQur chairman Eric Milledge has deep ties to Johnson & Johnson and he’s made no secret of his interest in generating M&A deals. Do CeQur’s plans include an exit to a larger company in the future?
JP: Eric retired from J&J several years ago. Even though he built the whole OneTouch brand, he’s the author of that, he did acquire Animas, the insulin pump manufacturer, right before he left. He saw CeQur as a very important opportunity to help patients and so he signed on as chairman of our board.
There is no question, however, that a trade sale is the most logical place for this technology to go. We can bring it to market and build our own organization around it as others have done. All our pro formas show how to do that and show the financing needed to do that. But the truth is that it really does belong in the hands of someone like Lilly or Sanofi Aventis or one of the other big players in the diabetes space. Strategically it fits very well with what they need to be doing and so one could predict that that’s where it will eventually end up. However, along the way we can build our own organization and be a fully integrated operation to bring this product to market.
MassDevice: Will you be growing your presence in Massachusetts as a result of the new financing. Any new hires planned?
JP: We’re pretty well-staffed right now. We’re adding a few things here and there. Our operational headquarters is in Marlborough, Mass., even though the corporate company is Swiss and we still have R&D in Denmark. We have about 20 employes in the Bay State and then maybe 10 in Denmark and one-and-a-half in Switzerland. I’m there and our CFO is there and that’s all.
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