RiverVest Funds I, II & III RiverVest Fund IV Archer Seed Fund

/ CASE STUDY

Fulfilling a Need Beyond the Seed

How partnering with this early commercially scaled company proved to be a winner!

box for logos standard bariatrics

/ MEDICAL DEVICE COMPANY / ACQUIRED BY TELEFLEX (NASDAQ: TFX) IN 2022

May 17, 2023

Cincinnati-based bariatric surgeon Jonathan Thompson, M.D., founded Standard Bariatrics in 2014 to address key unmet needs for weight-loss surgery confirmed by his bariatric surgeon colleagues. He attracted seed investors from the local biotech community to fund the company, hire key employees, and develop a first-generation device. The greater challenge was getting the company’s lead product Titan SGS® developed and financed all the way through commercialization. Here’s how that happened and the role RiverVest played. 

THE SNAPSHOT

THE IMPACT

Standard Bariatrics’ medical devices are designed specifically for gastric tissue. Bariatric surgeons realize that consistent, repeatable results and more consistent and symmetrical sleeve pouch anatomy deliver better outcomes for their patients undergoing gastric sleeve weight-loss surgery and for the clinics where these procedures are performed. 

RiverVest’s Role

When the timing was right to advance Standard Bariatrics’ development plans, RiverVest led the $20 million Series A financing and partnered with Hatteras Venture Partners. RiverVest Vice President Karen Spilizewski joined the board, and RiverVest Managing Director Jay Schmelter served as an observer. RiverVest later participated in Standard Bariatrics’ $35 million Series B financing.

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“Karen and Jay understood not just where we were going, but the value we had.  They also brought in other key capital that got us off to a strong start and scaling quickly.”

Matt Sokany, CEO, Standard Bariatrics

THE UNMET NEED

Obesity is an epidemic; 42 percent of adults in the United States have obesity, frequently accompanied by related medical conditions including heart disease, stroke, type 2 diabetes and certain types of cancer.

 

Observational studies and randomized trials show that, compared with medical weight management alone, bariatric surgery is the most effective treatment for severe obesity, leading to greater weight loss and comorbidity resolution, longer lifespan, and improved quality of life.

 

While nearly 30 million adults in the U.S. meet NIH criteria for bariatric surgery, fewer than 1 percent undergo the treatment, whether due to perceived risks, primary care provider hesitancy to make the referral, skepticism regarding long-term effectiveness of bariatric surgery, or insurance challenges.

STANDARD BARIATRICS’ SOLUTION

Of the roughly 250,000 bariatric surgeries performed each year, 150,000 are sleeve gastrectomies. During sleeve gastrectomy, about 80% of the stomach is removed, leaving a tube-shaped stomach about the size and shape of a banana. With the new, reduced stomach pouch, patients more quickly reach satiety, feeling satisfied after eating smaller amounts of food, which is one key component of losing weight and maintaining weight loss.

 

For more than two decades, surgeons have relied on general surgical tools and freehand techniques when performing sleeve gastrectomies, which can create inconsistent pouch anatomy that may cause complications such as gastroesophageal reflux disease (GERD) and nausea.

 

Standard Bariatrics’ anatomy-based approach allows gastric sleeve surgeons to achieve more consistent and symmetrical sleeve pouch anatomy, setting patients up for the best possible outcomes.  

The Titan SGS: An Anatomy-Based Approach

Standard Bariatrics’ Titan SGS® long staple line enables surgeons to plan and place staples in one firing, minimizing variations often associated with the current use of multiple overlapping short-cartridge staple firings.

  • A stronger staple line that is more resistant to leaks
  • Staples better match patients' native anatomy
  • Potential improvement in resolution of GERD and nausea
  • Improved procedure time and operational efficiencies
  • One firing to complete the sleeve pouch anatomy
  • 88% less bleeding at the staple line
  • 82% fewer malformed staples

Read the latest Standard Bariatric/Teleflex news here.

“Obesity is an epidemic, and gastric sleeve surgery is one good solution.  If you have a technology that makes the sleeve gastrectomy procedure faster, more repeatable, and more consistent, with potentially better outcomes, fewer complications, and lower costs, that’s a winner.”

 

KAREN SPILIZEWSKI, RIVERVEST VICE PRESIDENT/STANDARD BARIATRICS BOARD MEMBER

 

The Details

Treating obesity is complicated. The disease itself and the mechanics of weight loss are complicated, with many contributing factors leading to different outcomes.  It’s not an area in which RiverVest would typically invest, but Standard Bariatrics had several key elements working in its favor. Here’s how this deal came together.

 

Getting Funded: The Need Beyond the Seed 

 

Cincinnati-based bariatric surgeon Jonathan Thompson, M.D., founded Standard Bariatrics in 2014 to address key unmet needs for weight-loss surgery confirmed by his bariatric surgeon colleagues. He attracted seed investors from the local biotech community to fund the company, hire key employees, and develop a first-generation device. 

 

The greater challenge was getting the company’s lead product Titan SGS® developed and financed all the way through commercialization.

 

The problem that Dr. Thompson and the team at Standard Bariatrics were determined to solve was the difficulty in achieving a consistent, straight resection line in gastric sleeve surgery, the most common procedure in treating morbid obesity. For the past two decades, surgeons had relied on short, six-centimeter general-purpose surgical staplers to perform sleeve gastrectomy, which required surgeons to go in and out of the patient multiple times to fire five to seven cartridges into stretchy stomach tissue to complete the resection. 

 

Standard Bariatrics’ Titan SGS™ 23-centimeter, anatomy-based device could resect the patient’s entire stomach in a single firing, avoiding overlapping staple lines. The result would be a symmetrical sleeve shape and stronger staple line that is more resistant to leaks. 

 

But, from an engineering perspective, was a 23cm stapler even possible?

 

When first approached about the device, RiverVest Vice President Karen Spilizewski wasn’t convinced. Deeply embedded in the medical device research and development ecosystem in Ohio, Karen is often approached by very early-stage entrepreneurs like Dr. Thompson. Standard Bariatrics did not meet RiverVest’s disciplined investment criteria at that time. 

Due Diligence

 

As soon as the U.S. Food and Drug Administration (FDA) in 2017 cleared the company’s predicate device – a clamp that would pave the way for the stapler – Karen and RiverVest Managing Director Jay Schmelter dug into their due diligence. Within three months, they’d checked the boxes that green-lighted RiverVest’s investment:

  

 

A Calculated Risk 

 

The most likely hurdle was a regulatory one: Would the FDA require a clinical trial? No other stapler in the history of medical devices had required a clinical trial, but if the FDA wanted one, at least the company wouldn’t have to prove weight loss; sleeve gastrectomy is a known and effective procedure. Furthermore, Standard Bariatrics’ clamp had already been cleared by the FDA.

 

The RiverVest team determined it could tolerate the regulatory risk and led the $20 million Series A financing. When the FDA did request a clinical trial, the team was surprised but prepared. This was particularly challenging during the COVID-19 pandemic when most elective surgeries had come to a screeching halt, but they succeeded! 

 

Standard Bariatrics’ Titan SGS™ stapler was cleared in April 2021 following a successful 62-patient, multi-center trial in longitudinal gastric stapling. The company closed on its $35 million Series B financing the following month and bariatric surgeons began flocking to the transformational technology. By mid-2022, the Titan SGS had been used in more than 4,000 surgeries, making the company attractive to several potential acquirers.  

 

The Exit 

 

Teleflex Incorporated (NYSE: TFX) acquired Standard Bariatrics on September 27, 2022 for an upfront cash payment of $170 million at closing, with additional consideration of up to $130 million payable upon the achievement of certain commercial milestones.

 

Follow Standard Bariatrics/Teleflex growth here