Since this column often explores topics related to funding, development strategy, and the identification and filling of unmet needs in the marketplace, this month’s installment explores the case of the dry-eye device-maker Oculeve, which sits at the intersection of all these elements. Oculeve started with only one mission—to recognize an unmet need through a blank-slate observation of clinical practice—and leveraged an interdisciplinary approach to think out-of-the-box for addressing it. If you’re working on a new device or therapy and looking to gain traction with it, the Oculeve story is a great example of managing the early stage funding process, moving a project through the development cycle and driving the program to a point where it registers with large pharma.

Oculeve was born out of the Stanford University Biodesign Fellowship program, a mentored program in which physicians and scientists are put into small teams and assigned an area in which to innovate. The focus of this particular team, including scientist/engineer Michael Ackermann, PhD, was ophthalmology. The team, consisting of a biomaterials scientist/engineer (Garrett Smith), a board-certified surgeon (Victor McCray, MD) and a mechanical engineer (Brandon Felkins), along with Dr. Ackermann, were new to ophthalmology, and set out to embed themselves in a busy clinical ophthalmology practice. They observed the physicians and patients in the office and operating room daily and tracked such things as the flow of patients and reasons for their office visits. After about a month, they had accumulated a list of approximately 350 unmet needs.  Recognizing that almost one in every three patients who were seen had dry eye, that’s what they focused on.

To determine how they were going to approach dry-eye therapy, the team broke down the disease into two basic components: decreased production of the critical components of the tear film, and inflammation, the latter leading to further breakdown of the body’s ability to create tears from the lacrimal glands. They identified the unmet clinical need—and gap in therapy—for an immediate restoration of the tear film. Leveraging their background in neuroengineering, and after evaluating many different approaches, the team focused on neurostimulation for creating tears.

The initial focus for stimulating tear production was with an implant to directly stimulate the lacrimal gland, which they tested in more than 40 subjects. To carry out this testing, however, the new business needed funding.

In order to fund the early stages of proof-of-concept testing, a start-up company should be open to seeking funding from alternative sources, which may be grants, friends and family, seed investors, service-in-kind investments from development partners or even prize money from winning business-plan competitions. Early data generation can then drive subsequent larger rounds from the traditional VCs or pharma partners. This is an important point for the new entrepreneur to recognize. Many times we see early-stage start-ups that attempt to pursue large rounds of financing from the start but don’t gain traction.  However, when possible and appropriate given the nature of the project, leveraging off-the-shelf devices, or already approved and marketed drugs of a similar pharmacologic class with a repurposing approach, can facilitate small, pilot clinical testing to generate the required proof-of-principle, and a reason for others to believe in it.

In Oculeve’s case, its early development was funded through winning business plan competitions, which brought in up to $50,000. After that, Oculeve was formed, and attracted seed capital of $100,000 from Kleiner, Perkins, Caufield and Byers, and $100,000 from “sophisticated angel investors.” This supported the development of a prototype off-the-shelf stimulator that they used to directly stimulate the lacrimal gland via a needle electrode through the eyelid. The data supported raising $500,000 additional capital through debt financing, followed by closing a Series A sale of preferred stock in the company of $7.59 million in August 2012, from Kleiner, NEA and Versant. This allowed them to spin-out the technology from the university and with the capital, run additional studies outside of the United States, including studies in Mexico, New Zealand and Australia.

Early data from the orbital implant were promising in some patients, but inconsistent in others. During the clinical trials of the implant, Oculeve identified an interesting finding that patients with the best response had tearing in both eyes despite a unilateral implant. This led to the realization that tearing could be more powerfully stimulated by activating a reflex. Oculeve changed its tack and developed a nasal stimulation device that activates the nasolacrimal reflex. The device is handheld, non-invasive and doesn’t involve an implant or needle. Of course, that realization and evolution of the product delivery transformed the nature of the device into a product that was acceptable to an even greater number of patients.

In reflecting on the impetus of going outside the United States with the implant, Dr. Ackermann indicated that the main driver behind going to Mexico and the Philippines was speed, given that the timeline for opening an investigational device exemption in the United States was prohibitive for them. However, after the evolution to the non-invasive nasal stimulator, which is considered a non-significant risk device and therefore didn’t need an IDE in the United States, he chose to keep running the studies in Mexico, despite a more straightforward institutional review board approval that would have been needed in the United States. This was done mainly to stay under the radar until the patent portfolio was locked down and the scientific foundation of the treatment was better understood. In Oculeve’s case, the technology is disruptive in the way in which it is delivered, and protection of intellectual property was a main driver of the decision.
In prior columns, we’ve discussed situations where going outside the country for studies is warranted and have explored other case studies. In the case of Oculeve, partnering with an investigator with whom there is a relationship and trust, and setting up the study so the sponsor could be on-site in a collaborative fashion, helped ensure success and quality data.

In March 2014, Oculeve completed a larger round of $16 million in financing. This infusion funded a large, well-controlled Phase II dry-eye study with a focus on precise endpoints designed to support the regulatory process and build value for partner discussions. As a result, Oculeve was acquired by Allergan in August 2015. Allergan’s CEO Brent Saunders has espoused the open-science model of research and development, in which innovation is sought from both internal laboratories and external start-ups and university settings in order to increase R&D efficiency. The company then follows through with the clinical development and regulatory process in order to bring these innovative products to patients. To that end, Allergan has 70 programs in mid- to late-stage development. Oculeve was a great strategic fit for Allergan, which markets Restasis and Refresh tears and has multiple clinical development programs in dry eye. “At Allergan we use our open-science model to harness the power of the new innovation ecosystem,” Mr. Saunders states. “This approach allows us to develop de-risked, late-stage assets and cutting-edge early-stage programs within our targeted therapeutic areas, such as eye care. This provides significant rewards to the entrepreneurs and higher return on our R&D investments and is a true win-win for the innovation ecosystem.”

The Oculeve story shows the value of first seeking an unmet need as opposed to a product, building a company around a structured process of mentorship, and throwing in a little serendipity, as well. Leveraging expertise from other areas of development, Oculeve’s researchers and owners drove efficient pilot testing with off-the-shelf products, raised seed funds to support prototyping and then, when things didn’t go as planned, they learned from their observations and adapted effectively, creating a superior, less-invasive approach to delivering the neurostimulation.

An important take-home point from Oculeve’s story is the value of early proof of concept, built around efficiently executing small, high-quality studies that both prove the concept and demonstrate the basic science—which was needed, given the novelty of the approach. The testing was designed to ensure that their data would inform decision-making, shifting and revision of plans, and the ability to secure additional capital to run the definitive Phase II clinical trial that supported industry partnering.

Mr. Chapin is senior vice president of the Corporate Development Group and Dr. Hollander is chief medical officer at Ora Inc. and assistant clinical professor of ophthalmology at the Jules Stein Eye Institute, UCLA. Ora provides a comprehensive range of development, clinical-regulatory and product consulting for developers, investors and buyers; preclinical and turnkey clinical trial services and regulatory submissions; and integration with asset, business partnering and financing support in ophthalmology. They welcome your product development comments or questions. Please send correspondence to or visit