Progress in an Alimentary/Business Journey

“At the end of the day, our weight loss device is life changing,” Allurion Technologies cofounder and chief scientific officer Shantanu Gaur told students in Charlie Johnson’s Isenberg course, New Ventures. Gaur was describing his company’s Elipse intragastric balloon, which he advised, “can be placed in a lunch break without anesthesia or endoscopy.” With the [essentially] procedureless Elipse, “you lose 15 to 20% of your body weight in four months,” he said. You should view the Elipse, he added, as the centerpiece in a lifestyle strategy that emphasizes more mindful eating and exercise. 

The device and its delivery system, Gaur noted, are simplicity in themselves. In a doctor’s office, consumers swallow an uninflated gastric balloon inside a capsule attached to a retractable trailing filament-thin catheter, which extends from mouth to stomach. In the stomach, the capsule immediately degrades, after which a water-based solution, expressed through the tube, inflates the balloon. As soon as the solution fills the balloon, the catheter/tube is withdrawn through the mouth. Now in place, the balloon creates a sense of satiety that curbs excessive eating. Four months later, the Elipse’s release valve opens by itself, speeding the device’s natural, unobtrusive, discharge from the body.

A Market Disruptor

The Elipse, which received European Union regulatory authorization in December 2015 and awaits FDA approval, is available in ten countries across Europe and the Middle East, notably in the Persian Gulf. (Roughly 70% of Saudi Arabians are overweight.) In 2017 (through mid- November), the Elipse improved the lives of 4,000+ new recipients.  “The consumer experience is tremendously important to us. Everything we do is around designing a product of value for the consumer,” emphasized Gaur.

The entrepreneur/physician (M.D. Harvard Med School) noted that the Elipse is the first solution, in a crowded field ranging from surgery to medicines to behavior modification programs, that delivers high- percentage, virtually zero-risk success. “None of the surgeries have been consistently successful,” he remarked. “Back in the late 80s/early 90s, the anti-obesity fen-phen drug had huge success until its withdrawal from the market following its connection with heart and cardiovascular issues,” he remarked. The bottom line for today’s spectrum of treatments (minus the Elipse): “They’re either too unsafe or not effective enough—way too inconvenient and in some cases too risky for the consumer.”

Scaling up Via Funding

Founded in 2009, Allurion credits its lead funding to Boston-based Romulus Capital, which has invested in the startup since 2010. Last summer, Allurion’s evolution accelerated after raising $27M in Series C funding from Romulus and several other investors. In the beginning, fund raising proceeded slowly, Gaur told the students. “We talked with fifty funds, many of them from a list of investors that we created which had funded companies similar to ours. Investors in the U.S., Allurion discovered, are keener on general technology and biotech opportunities than on medical devices. Fortunately, Gaur explained, that doesn’t hold for investors in Europe, the Middle East, and Asia, where there is “tremendous wealth.”

“I was the point person in all of the negotiations with prospective funding partners,” Gaur continued. “Closing the [Series C] deal involved term sheets, due diligence, and 40-page definitive agreements. Once the lead funding [$13.5 M from Romulus] was in the bank, though, the rest moved quickly,” he told the students. “We were able to say to other investors: here are the terms.” That minimized subsequent negotiation, although Gaur persuaded his lead funder to relinquish one of its two designated board seats for board participation by a seasoned industry player—“someone who had done it before.”

Getting out the Word

Allurion’s success in the Series C round aside, Gaur refuses to rest on those laurels: “Now we’ll need more capital because of the huge scale ahead of us,” he confessed, reflecting on game-changing fortunes that lie ahead.  A critical ingredient in that market build-out has been Allurion’s initiatives to generate public awareness. To that end, the company retained a PR firm to help tell Allurion’s story via traditional and social media. Allurion’s big break came in August when Gaur pitched the Elipse to a national audience and an enthusiastic Jim Cramer on CNBC’s Mad Money. “It’s incredibly powerful to gain a national and international audience,” Gaur told the students. Just as crucial, he added, has been the enthusiastic response of Allurion customers. One hundred customers who share their positive experiences via personal narratives and family photos on social media can scale up the word very quickly, he emphasized. “Those stories are so much more important than statistical numbers of pounds lost,” he insisted.

Learning from Experience

Allurion’s market experience in Europe and the Middle East are yielding crucial dividends, noted Gaur. “We’ve treated 4,000 more people since last year; the learning has been huge.”  In Europe,  85% of Allurion’s customers have been women (around age forty and 30 to 40 pounds overweight) who don’t qualify for surgery. The cost of the procedure in Europe is approximately $2,000. Ultimately, he added, pricing won’t prove linear: “If we cut the price by 50%, we don’t double the market; we increase it tenfold.” How to achieve that price cut?  “One possibility might be “to substitute digital [for in-person] advisory maintenance,” he said. Another finding: “People are willing to pay cash for the Elipse. That has allowed us to enter the market earlier on. Getting insurance companies to pay can be a product killer.

“We have a ten-year vision, even a thirty-year vision that will offer complementary products built to scale,” Gaur continued. To that end, learning from the Elipse’s scaling experience, he affirmed, is sure to add critical value.