Memorandum

Sano plans to launch wellness-focused CGM patch in 2016; announces $10.3 million round of seed financing – July 2, 2015

Executive Highlights

  • San Francisco-based startup Sano just announced a $10.3 million round of seed financing. The company plans to launch a wearable platform for continuous glucose monitoring in 2016.
  • The technology revolves around a transdermal sensor patch that continuously captures and transmits blood chemistry data. The first-gen product is intended as a wellness-focused wearable. There are many unanswered questions about accuracy, reliability, manufacturing, cost, data output to avoid regulation, and consumer viability.
  • Investors include True Ventures and Felicis Ventures, both majority owners of Fitbit, along with Intel Capital, First Round, Elevation Capital, Floodgate, and Rock Health.

San Francisco-based startup Sano recently announced a $10.3 million round of seed financing. The funds will help scale the company's team of 20 employees to prepare for a 2016 launch of a consumer-facing, transdermal sensor patch for continuous glucose monitoring. Sano has been in stealth mode for some time – no clinical trials announced, little fanfare – so the accuracy, reliability, manufacturing, cost, consumer-facing design approach (vs. a medical device), real-time data output, and consumer viability remain major question marks. The company has a single webpage up, calling itself “a biometric sensor and software company with a patented, breakthrough technology.” Everything is very quiet for now. We last saw Sano’s CEO Ashwin Pushpala at a SXSW panel in March; at the time, he was optimistic about the FDA’s recently released general wellness draft guidance, though offered no timing or product details.

Based on what we know, the technology revolves around a small, non-invasive, transdermal patch that continuously captures and wirelessly transmits blood chemistry data to a mobile device. Sano is exploring a wide variety of applications for the wearable platform (e.g., electrolyte balance), though glucose monitoring is reportedly its first priority. The technology’s secret sauce remains unclear. The company has a 2014 patent filing here, which shares the most specific details we’ve seen on the approach: microneedle arrays with sensor chemistry on the needles; potential use of glucose oxidase; a layered sensor design; and the possibility for multiple measured analytes. We’re excited to see these sorts of wearable wellness technologies become broadly available, helping people with and without diabetes become more focused on general health.

Sano is planning to develop its first-gen product as a consumer-grade wearable. It’s a logical revenue-generating, minimum-viable-product strategy for a startup, and one Echo Therapeutics has also pivoted to in recent months. We’re not sure what the data output must look like to avoid an FDA Class III submission, though we assume quantitative glucose numbers would not be shown (e.g., perhaps only qualitative info like red and green lights or “in-range” vs. “out-of-range”). We’d note that the sensor will need a fair level of accuracy to precisely measure time-in-range in a non-diabetic population. We’re also not sure how many consumers would be willing to pay for such a wearable biometric patch (we know from dQ&A that many patients with diabetes hate paying for things, to over-generalize); we assume the cost will be non-trivial to start (i.e., hundreds of dollars/year). Depending on the design, we wonder if it could be useful for behavior modification in prediabetes or type 2.

On the back end, Sano plans to liberate the data as part of an analytical platform they’ve described as “API for the bloodstream,” which will allow users to view their metabolic profile on any mobile device. We imagine such a product would be very welcome to the self-tracking, tech-savvy, early adopter wellness community; uptake will of course depend on cost, the quality of data output, form factor, and application pain. We assume a medical application for diabetes is much further into the future, if at all.

We’re intrigued by Sano’s approach, and certainly the list of investors (including majority owners of Fitbit) and the involvement of Rock Health are very positive signs. Founder and CEO Mr. Ashwin Pushpala has been working on the technology since graduating from Rock Health’s second accelerator class in June 2012. Sano originally received $20,000 in seed funding from Rock Health and has grown to ~20 employees now. Much of the team comes from leading technology companies (Apple, Google, Samsung, Fitbit) and academic institutions (Stanford, UC Berkeley, MIT), lending credibility to the efforts. Still, given the challenging history of non-invasive glucose monitoring startups, we remain only cautiously optimistic at this stage.

  • Sano raised this round of financing (oversubscribed) from True Ventures, Intel Capital, Felicis Ventures, First Round, Elevation Capital, Floodgate, and Rock Health. The interest from True Ventures and Felicis Ventures, majority owners of Fitbit (who recently rocketed out of the gate in its IPO), stands as a notable vote of confidence in the startup. It is not clear how much cash Sano has in the bank, though we assume significant capital (hundreds of millions) is needed for clinical trials, manufacturing, and commercialization for a medical device version. It’s hard to believe the company can get this patch to market on such little funding, particularly for a consumer play where massive scale is needed.
  • From a regulatory perspective, we are not sure how the FDA will approach a consumer (“wellness”) non-invasive CGM patch. As we understand it, the product will specifically avoid a medical indication so that it meets the FDA’s recently released general wellness product criteria (e.g., to help inform healthy behaviors, to aid athletes) under which devices are not regulated – see the draft guidance released in January. However, there remains a big grey area in terms of what will actually fall under the FDA’s enforcement discretion and it will be telling to see how Sano’s technology is regulated. We assume a lot of thought will need to go into the data output to ensure people with diabetes don’t use this off-label.
  • The consumer wellness arena brings fewer barriers to entry, though we’re also not sure if there is a sustainable business model. We assume the initial version will be fairly expensive (>$100) – particularly if it uses glucose oxidase – but perhaps a market of early adopters would be interested. Of course, the ease of use and form factor expectations are also much higher for a non-medical indication. We’d note that the sensor will need a fair level of accuracy to precisely measure time-in-range in a non-diabetic population.
  • Sano recently filed a patent, from which we learned some new tidbits about the potential device design (see images here). Of course, the patent filing does not necessarily reflect the company’s most updated plan for product design. However, it is directionally interesting and certainly the most specific detail we have heard to date.
    • The patent mentions glucose oxidase, meaning the actual sensor chemistry could resemble traditional CGM offerings. Multiple other sensing layers are mentioned (e.g., phenylenediamine, gluteraldehyde, lysine, tyramine, trehalose, lipids, surfactants, etc.) that could be used for multi-analyte detection.
    • Consistent with the company’s “API for the bloodstream” approach, the patent lists many measurement applications: electrolytes, glucose, bicarbonate, creatinine, blood urea nitrogen (BUN), sodium, potassium, biomarkers, cell count, hormone levels, alcohol content, gases, drug concentrations/metabolism, and pH. The patent suggests that filaments would be configured to sense more than one analyte and could be arranged in a number of different patterns.
    • Based on the language of the patent, the sensor will be microneedle, transdermal-based. The patent mentions a potential configuration in which the device would penetrate a patient’s stratum corneum (an outer skin layer) through the interstitial fluid; however, it also notes that the sensor may be alternatively configured to penetrate deeper layers of a user's skin in order to sense analytes directly from the patient’s blood.
      • The microneedle arrays with sensor chemistry on the needles differs from other previous microneedle approaches. For example, Arkal’s approach uses interstitial fluid extraction through porous needles.
    • We’re not sure how the sensor will be powered or transmit data to a phone. The patent doesn’t mention “battery” or “power,” and this strikes us as a challenging design consideration for a patch form factor.
  • Competition in the non-invasive CGM space includes:
    • Google/Novartis, who are developing a glucose-sensing contact lens. We last covered this project in April, where the team was granted US patents for the device design – that signaled continued interest in the device. Based on an interview with Google/Novartis in the Wall Street Journal this week, this is still “several years away” from commercialization.
    • Echo Therapeutics, who is developing a non-invasive CGM for general wellness. The company’s strategic partner, Medical Technologies Innovation Asia (MTIA), expected to begin a clinical trial in 2H15 that would pave the way for regulatory approval and commercialization in China by the end of the year. Echo’s runway is very short – cash stood at ~$1 million as of March 31 – and it’s hard to say whether the company will meet this timeline. Publically, Echo has suggested that its technology is roughly two years away from the US market, so a 2016 launch for Sano would give it a first-to-market advantage stateside.
    • Glucovation, founded by former Dexcom engineers. Dexcom filed a civil suit against Glucovation’s founders alleging breach of contract, trade secret theft, unfair competition, among other complaints; the lawsuit is ongoing, with a civil jury trial expected this November. [More details can be found here by searching “2014” as the year and “00018216” as the case number.] As of our update on Glucovation last June, the company planned to develop and commercialize a consumer-focused wearable sensor for glucose tracking (“SugarSenz”). The ambitious goal was a low-cost, no fingerstick calibration, sub-10% MARD, seven-day-wear, self-applicating, ANT+/Bluetooth LE-based, minimally invasive, non-enzymatic-based glucose sensor. Though we are not legal experts, the case against Glucovation seemed quite persuasive based on the evidence outlined in the case briefing.
    • Biovotion, a Swiss-based, ICU-focused wearable devices company that aims to non-invasively measure glucose. We only learned about this company this week as mentioned in a Goldman Sachs report on Digital Health. With its Gen 1 product, Biovotion has developed an arm-band based monitoring system that continuously monitors many vital signs (e.g., heart rate, blood oxygen, skin temperature, etc.). The ultimate goal with a future-generation product is to non-invasively measure glucose. There are no details as to the approach, and this seems to be very early stage at this point in time.
  • The microneedle array approach has many strengths, but it is not without challenges. Discomfort during application/wear will hinder consumer viability outside of hobbyists, research, and imposed wellness programs/incentives. Aside from pain, the patch also needs to be strong enough to stick to the skin and accurate/reliable enough to sense glucose without going subcutaneous – a tall order for the product’s form factor.
  • In principle, microneedle arrays are capable of both sensing and drug delivery – we wonder if the same product could both sense glucose and deliver a drug like insulin, amylin, GLP-1, glucagon, etc. Companies could feasibly do basic sensing in a first consumer release, and then deliver drugs in a future version that has made it through the FDA. This is speculation on our part, and the chemistry and realities of microneedle delivery might make this challenging.

Close Concerns Questions

How does Sano’s technology work? What’s the secret chemistry for transdermal glucose monitoring?

How accurate and reliable is Sano’s glucose monitoring patch? How frequently will it transmit data to a mobile device? How long is the wear time?

What will the data output need to look like to avoid a regulatory submission?

What other analytes will the patch measure?

How will the patch be powered and communicate with a mobile device?

How much will the patch cost?

How scalable is the manufacturing?

Will Sano commercialize on its own or with a partner? 

How large is the market for a consumer/wellness CGM?

Will Sano seek a medical indication for diabetes in the future?

-- by Varun Iyengar, Adam Brown, and Kelly Close