Apple Tree Bankrolls Johnson & Johnson Spinout Tusker Medical



Brian Gormley

Apple Tree Partners is bankrolling a startup that could make treating recurring ear infections easier for children and less nerve-wracking for parents.

Apple Tree has spun Tusker Medical Inc. out of Johnson & Johnson to develop technology designed to enable patients to have ear tubes placed in a doctor’s office instead of a surgical procedure.

J&J acquired this technology through a $785 million purchase of venture-backed Acclarent Inc. in 2010. It has retained other Acclarent technology used to treat inflamed sinuses in an in-office procedure instead of a surgical one.

Apple Tree hasn’t disclosed the amount it has invested in Tusker, which formed in February with the firm’s funding. The firm takes a long-term view with investments and aims to build significant ownership stakes, Partner David McIntyre said.

New York-based Apple Tree is the only venture investor in Tusker, which intends to build a portfolio of treatments for ear, nose and throat conditions. Johnson & Johnson has a minority equity stake in Tusker.

Venture investment in products for the ear has been sparse. The $960 million startups raised from 1999 through 2015 is the second lowest among 17 medical-investment categories analyzed by market tracker Dow Jones VentureSource and WSJ Pro Venture Capital.

Investment in ear treatments has increased recently. Companies secured $123.2 million in 2015, up from $119.9 million the previous year, according to VentureSource.

Apple Tree sees an emerging trend toward less-invasive ear, nose and throat treatments that is similar to one that has transformed cardiology. Heart treatments that once required major surgery, such as aortic valve replacement, can now be performed in catheter-based procedures.

Seeing the trend, Amir Abolfathi joined Apple Tree last year as an entrepreneur in residence to search for opportunities to launch or fund an ear, nose and throat company. That led to the creation of Tusker, which he leads.

Ear infections usually go away on their own or when treated with antibiotics. When they become chronic, patients can undergo outpatient surgery to have ear tubes placed. The procedure enables fluids to drain and equalizes pressure in the eardrum. Surgery is effective but places emotional stress on parents, Mr. Abolfathi said.

More than 500,000 ear-tube surgeries are performed on children annually, according to the American Academy of Otolaryngology – Head and Neck Surgery. This makes ear-tube procedures the most common childhood surgery performed with anesthesia, according to the academy.

Tusker’s investigational system doesn’t require general anesthesia. It has two parts. The first uses iontophoresis, in which a low level of electrical energy pushes ions of anesthetic into the eardrum. Then the ear tube is placed quickly through Tusker’s delivery system.

The company, based in Menlo Park, Calif., hopes to initiate studies next year that could lead to Food and Drug Administration approval, Mr. Abolfathi said.

Source: WSJ Pro Venture Capital