Why we invested in Neurode.
We’re pleased to announce our investment in Neurode’s $3.5m US seed round alongside Khosla Ventures and Psymed Ventures.
ADHD is outpacing standard of care.
Attention-deficit-hyperactive disorder (ADHD) is no longer just a quirk in childhood development. It’s a cross generational epidemic.
The proliferation of mobile computing and informational deluge have created more time for distraction at the expense of preserving cognitive horsepower. This very dynamic has dialed up the chatter around ADHD, particularly as more and more people discover their not alone. The growing influence of Gen Z and Millennials in social media have pushed for broader recognition of ADHD as a neurodivergent condition affecting all demographics.
In other words, both increased public awareness and broadening out of ADHD have sent diagnoses rates climbing. If we interrogate the data, there are two sub populations driving this.
Adults and women.
Adults — Rate has doubled in the last decade and is growing 4x faster than children. My hypothesis is that the new generation of parents are noticing characteristics in their children that they themselves exhibited — before they could access a diagnosis or were encouraged to. DSM-5 criteria for ADHD was based on research in children. Fixed age cut offs, child-like symptom characterization implies many more adults remain underdiagnosed.
Women — Four decades ago, the ratio of male to female diagnoses was 10:1. Today, its almost 1:4 and they represent the fastest growing patient group for stimulant medication. Why? Women have been chronically underdiagnosed because for decades, we indexed ADHD to the male phenotype — not female. Women more often display inattentiveness, which is far easier to mask than hyperactivity. ADD was in fact removed from the DSM-5 in 1987 after researchers found little difference with ADHD. Research conducted with mostly men.
GP’s are simply ill-equipped today to deal with growing wait-lines of woke Gen z, hyper-aware women and millennial adults seeking answers to their past. Not surprising when the standard of care (stimulants) haven't changed since the 1920s’.
Pharmacotherapy is facing the music.
There is a growing tension between drug and patient. Largely due to two reasons: Supply crises and stimulant effects.
Supply crises.
Supply of widely prescribed stimulants Adderall and substitute Ritalin experienced its first collapse two years ago during the pandemic. Though an isolated event, it unearthed the true gravity of the disorder and exposed the limitations of panacea solutions, as well as the bad actors compounding the problem.
Numerous telehealth providers had emerged over the same period to provide patients convenient access to off-label and generic versions of ADHD medications — notably Aderall and Vyvanse. Several providers, including Singlecare, Done and Cerebral were caught by the Drug Enforcement Administration (DEA) for over-prescribing. Later that year, production quotas were reintroduced and Aderall was added to the FDA shortage list with Vyvanse following suit. Generic manufacturers face thin margins on their medicines, leaving them with little incentive to scale up production to meet demand. Between 2022 and 2023, pharmaceutical product discontinuations rose by 40%. Drug shortages are becoming more frequent and lasting longer.
Ultimately when a dominant treatment is faced with a supply crisis and regulatory crackdown, there’s typically very little capacity in the market to compensate.
Stimulant effects.
Psychostimulants are effectively industry regulated doses of speed. Whilst most studies tout against its addictive properties, our brains are hardwired to trust and reward anything that is tangible. Why do you think GSK’s Paracetomol is raking in billions of dollars every year.
For ADHD patients already prone to addictive behaviors, there is risk of heightened withdrawal spells if medication is discontinued due to unmanageable side effects or supply shortage. Both of which are becoming more common. In fact last week, a 28 year old I spoke to explained that after missing a day’s worth of Vyvanse he experienced four days of elevated anxiety. A recent study found at higher doses (>/40mg Aderall, 100mg Vyvanse and 30mg dextroamphetamine), adult patients are 5.3x more likely to develop psychosis or mania.
A 2009 NIMH study found that by the 6–8 year follow-up, medicated and non-medicated adolescents (14–17) showed no significant differences in improvement. All medication children underperformed compared to the normative group on majority of measures. Risk of depression increases 18-fold for children on Ritalin.
The emerging crop of parents are becoming less tolerant of long term stimulant medication for their kids, for exactly this reason and as they learn for themselves. For Women, there are lingering uncertainties about the long term impacts.
Approaches such as pharmacotherapy are trusted because they have been proven. But on their own, they are rate limiting — especially when targeting more heterogenous physiologies such as ADHD. My thesis is that by augmenting the SOC through other modalities, we can enhance therapeutic benefit and decrease the reliance on drugs.
Enter Neurode.
Nathalie and Damian are doing exactly this by developing the first non-drug treatment for ADHD. To do this, it leverages two modalities: Electrical stimulation + Monitoring.
Electrical stimulation = tRNS (Transcranial random noise stimulation). This works on the principle of stochastic resonance i.e using random electrical noise to amplify weak brain signals, boosting cortical excitability, potentially improving focus and cognitive performance.
Monitoring = fNIRS (functional near infrared spectroscopy). Uses light absorption as a means to detect changes in blood oxygenation and blood flow. i.e Brain activity.
How it works: Users wear the headband 20 mins/day, during the stimulation session they will engage in “brain training” and be guided via the companion app. The app will also provide access to real time insights on performance and progress day-day. This combined approach has already been proven to increase efficacy in treatment of ADHD.
ADHD is a functional disorder, that is the symptoms are a product of the brains interplay with genetics and the environment — meaning symptoms vary person-person. Neurode provides users closed-loop stimulation and treatment protocols that adapt to their own hyperactivity/inattention behaviors.
Closed-loop stimulation -fNIRs (Diagnostic) informs tRNS (Modulation) to achieve optimal therapeutic benefit.
G2M Motion: B2C2B — this combines the benefits of typical D2C and clinical go to market to enable faster product iteration and customer acquisition. Neurode will first sell directly to the end user (It has received IRB approval to do so as a class II). This allows the team to test the product with a select number of users and understand the design elements that might optimise for compliance and UI/UX. Early learnings may also help inform key endpoints in future pivotal studies.
Remember, providers are constantly being pitched solutions that hold the promise of saving them fortunes. As a result, more healthcare buyers are expecting greater longitudinal evidence before engaging with payers.
Why they win
Reimbursement strategy: The no.1 correlative predictor of success in medical devices is coverage (at least I believe it to be). Billing codes exist for both patients and clinicans. Clinicians are entitled to a recurring claim of up to 147 dollars (US). No other ADHD treatment on market provides remote monitoring claims. Level of cover occurs on an insurer by insurer basis and depends on the health economic case provided and the level of insurance of the patient.
Fast Follower: In an emerging market, there are many advantages to being a fast follower. Neurode is following two.
Neurosigma (NS)
Advantage = 510k predicate, can leverage NS studies which use similar modalities.
Differentiation = Neurode have developed superior UI/UX. NS uses wired pulse generator with clunky components that require continuous cleaning, supervision and frequent replacement.
Flow Neuroscience (FN)
Advantage = Fantastic team and example for products embodying the B2C2B motion. First non-invasive stim treatment for Depression to receive CE mark approval and FDA breakthrough device designation. Impressive pivotal clinical trial data. Already sold 30,000 devices. Can leverage studies and similar patient experience.
Differentiation = Neurode have developed additional monitoring modality and stronger reimbursement case.
Not reinventing the wheel: Neurode are leveraging existing modalities, making them smaller and more usable. Most notably, they have shrunk the form factor of fNIRS into a wearable headband. This means less time spent derisking the science and engineering, and more time spent building a high utility product.
Why they wont’
- Higher energy requirements of non-invasive electrical stim to yield efficacy.
- Subtlety factor of appearance. “ How conscious are patients of wearing a headband”
- Poor compliance
- Insignificant clinical readouts
Founders obsessed with the problem.
The team have executed at a rapid pace since writing our first cheque, even when they were on a shoestring budget. When I first met Nathalie, there was an immediate relentlessness and obsession with solving a problem. One that was lived. By the time we met again, she had already corralled a community of 500+ ADHD’ers.
There's a reticence in venture to backing first-time founders. My thesis is that many of these founders have something to prove and what they lack in “wisdom”, they make up for in boldness. Sometimes knowing too much is a curse. Nat and Damian pair well, they both understand and respect each others competencies. Nat’s ADHD is her own superpower.
Neurode are entering a critical phase in their development. The team are currently rolling out their Beta in the US and expected to release clinical trial data in the coming months. If interested, we’d love to hear from you. Drop me a note on harikesh@stoicvc.com.au or get in touch via the website form.
Disclaimer
Stoic Venture Capital is a licensed venture capital fund manager (Stoic Venture Capital ILP) under the Venture Capital Act. The fund remains under the guidance and authority of the Australian Securities and Investments Commission (ASIC).
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services.
