Device makers look to gain from new weight loss drugs
‘A device that may give you 15 percent weight loss, and looked like it was blowing away the competition, is now going to look weak in comparison to drugs.’
LEE KAPLAN, director, Massachusetts General’s obesity institute
The makers of minimally invasive surgical devices seemed poised to capture a wide swath of the obesity treatment market. Patients needed an option that lay between the two treatment extremes: cutting open the abdomen to perform permanent bariatric surgery, or changing your diet or exercise routine.
Then, a new class of weight loss medications that successfully mimic the feeling of fullness hit the market, and the landscape changed.
“It turns out that what came along — before those endoscopic devices have really matured — is these new drugs,” said Lee Kaplan, director of Massachusetts General’s obesity institute. Since the
Food and Drug Administration approved Novo Nordisk’s Wegovy in 2021, it and similar drugs that followed have swiftly captured the public’s interest — and are on their way to generating billions of dollars in sales.
For the companies developing surgical tools and gastric balloons to treat obesity, the drugs present both a rich opportunity to capitalize on new interest in the condition and an existential threat to their market share. While devices might have been a more appealing path for patients than previous generations of weight loss drugs, which didn’t work especially well and often had dangerous side effects, some of the new drugs on the market and in development can approach the weight loss levels seen with bariatric surgery with fewer side effects.
As the drugs start to rival the effectiveness of surgery, the bar for devices has been raised.
“A device that may give you 15 percent weight loss, and looked like it was blowing away the competition, is now going to look weak in comparison to drugs,” Kaplan said. Devices that aim for 10 percent weight loss will be a “waste of everybody’s time,” he added. Kaplan has consulted with drug and device companies working on obesity treatments, including Novo Nordisk and Eli Lilly.
At the same time, device makers are keen to ride the momentum as the narrative around treating obesity shifts.
“The rise of these GLP-1 receptor agonists has created an influx of patients who are now thinking about weight loss as more of a medical issue, as something that you can go see your doctor about,” said Shantanu Gaur, chief executive of swallowable balloon pill company Allurion.
Some are even pitching their products as potential treatments to be used in combination with drugs, piggybacking on the widespread interest in finding treatments that can sustain weight loss in the long run.
Obesity-treating devices fall into several categories. There are general purpose surgical devices that can be used for long-lasting bariatric surgeries like gastric bypass. These are sold by major manufacturers like Medtronic or Ethicon, owned by Johnson & Johnson. Then there are the minimally invasive, or endoscopic, devices that shrink stomachs with stitches administered via a flexible tube inserted through the mouth. Apollo Endosurgery, recently acquired by Boston Scientific for $615 million, is the major endoscopic player. Permanent bariatric surgery can result in around 30 percent total weight loss, while endoscopic
surgery can lead to around 15 percent.
Outside of surgery are the space-filling devices, otherwise known as gastric balloons, sold by companies like Allurion, Apollo, and ReShape Lifesciences. These balloons are pumped with water and take up space in the stomach, creating the sensation of fullness, before eventually being excreted after a set number of months. The therapy is typically paired with a lifestyle change program. Allurion has been cleared in the European Union but has not been approved in the United States. The company is running a year-long clinical trial after the FDA asked for more data in its first application for approval.
In the meantime, the company made $64 million last year in other countries and has signed a SPAC deal to go public. Medtronic is set to distribute Allurion’s balloons in Europe, the Middle East, and Africa.
“There’s a huge opportunity for, not just us, but anyone in the weight loss space right now,” Gaur said. “This entire population that’s now interested in weight loss, a significant proportion of them are not going to be left satisfied with the drugs and many of them may not even try the drugs at all.”
But to reach this market, companies have to first convince insurers to pay for their devices or procedures. Typically, obese patients have to fail to see improvement from lifestyle changes before insurers will pay for treatment. Insurance coverage of obesity treatments is spotty even after lifestyle treatment failure. Very few broadly cover minimally invasive devices, and some will incorporate higher copays. Drug makers have the same issue. If drug companies are successful in lobbying Medicare for reimbursement codes, that dynamic might change and would set the tone for how doctors order therapy.
Dennis McWilliams, a partner at Santé Ventures and the founder of Apollo, hopes the work drug makers have done on this front will benefit device makers, if devicemakers can show they enhance or work as well as the drugs.
“The work of the drug makers, who frankly have much larger budgets on these things than device companies, will end up benefiting the device industry as well,” McWilliams said.
He described trying to get reimbursement at Apollo as “hand-to-hand combat with payers on an individual patient basis.” If every patient struggling with obesity opted to get treatment, it would bankrupt the US health care system, he said — meaning payers are particularly picky about who gets costly care.
“If you had a patient that met all of the requirements of surgery, that was willing to go through a diet and exercise regimen and document all of that, if they had the right insurance and the right geography and the right physician who was passionate about it, then you could get insurers to approve it on a one-off basis,” McWilliams said.
In the United States, 42 percent of adults and 20 percent of children have obesity. Analysts have estimated the weight loss drug market could reach $100 billion within a decade, whereas estimates for obesity surgical tools tend to hover around $3 billion. Just 1 percent of patients that are eligible for bariatric surgery actually get it, though the number has grown since 2011. The market for devices treating obesity is leagues smaller than drugs.
Kaplan, who’s advised both Apollo and Allurion in the past, said it’s unlikely that these devices will ever be used widely to combat obesity. The data that exist so far suggest that the endoscopic and gastric balloon devices simply aren’t as potent as the drugs. The stomach staples eventually loosen, and the balloons eventually disintegrate.
“I don’t think Allurion is ever going to solve the obesity problem because it’s too weak,” Kaplan said. “But for somebody who wants to lose five or 10 pounds for a wedding; there’s a lot of cultural interest in weight loss.”
McWilliams said he still believes in endoscopic surgeries as a meaningful way to combat obesity. But because it’s now harder to capture that market, a device singularly focused on obesity is less appealing to investors. McWilliams is more interested in companies that start out treating diabetes and along the way, show evidence of weight loss, the same course drug companies took.
“If you’re a company developing a sole weight loss device right now, that’s still a really hard sell for venture investors,” McWilliams said. “I think there’s still just a lot of battle scars for that.”
Bariatric surgery, which permanently shrinks the stomach with a gastric bypass or sleeve, is still the gold standard treatment for weight loss. John Morton, a bariatric surgeon at Yale, said he envisions a world where the two therapies work together, helping patients stave off weight pre-operation or maintain weight loss post-op.
“There’s really not a lot of data there yet,” Morton said. “In an ideal world, I could see us using the drugs before surgery, lock in the results with the surgery, and maintain the results with another drug.” Morton consults for Medtronic, Ethicon, Novo Nordisk, and Eli Lilly.
Some device makers have started to suggest their products as a way to enhance the effect of the drugs. Allurion put out a study following patients for six months who used both the balloon and the drugs; it led to an average weight loss of 19 percent.
“The hard question is, does the device add anything to the drug over the long term?” Kaplan said.
For now, patients who are nervous about surgical risk may opt for the drugs first, whereas those who are hesitant about medications may prefer more of a “one-and-done” approach.