Biotechnology startups break into pediatric care

Top: Lindsay Watson, PT, MPT, presents her pitch in April at the MCIC competition. Bottom: Watson (right), whose company won third place in the health technology pitch contest, with the first and second place winners. (Photos courtesy of Augment Therapy.)

Companies looking to bring to market the next great solution to a thorny problem in medical care for children and adolescents are forming across the nation. The market is ripe for disruptive ideas, but to succeed, entrepreneurs have to show investors and clinicians that what they’re selling can truly make a difference.

By Keith Loria and Emily Delzell

Children are not simply little adults, goes the old maxim, which holds true in clinical care. Whether it’s fitting orthotic or prosthetic devices, doing surgery, or delivering physical therapy, lower extremity providers often face challenges in meeting kids’ unique anatomical, physiological, and emotional needs with devices, implants, and management protocols that, frequently, have been adapted from those designed for adults.

Pediatric care is getting an influx of new medical and digital tools, however, from startups pitching innovative⎯and hopefully lucrative⎯solutions to unmet or undermet pediatric needs. Biotech companies with pediatric healthcare markets in their sights are popping up across the nation, as are incubators and accelerators that help these budding companies garner angel and venture capital and other resources.

The multinational healthcare corporation Johnson & Johnson, for example, in April announced its plans to open a 32,000-square-foot pediatric research incubator at the Washington, DC-based Children’s National Health System’s research campus. Set to open in 2020, the incubator will cultivate nascent but promising pharmaceutical, medical device, and health technology companies seeking to translate pediatric research into new treatments and technologies.

Notable pediatric healthcare pitch competitions include the Boston Children’s Hospital’s Innovation & Digital Health Accelerator, the Children’s Hospital Los Angeles’s Consortium for Technology and Innovation in Pediatrics, and Impact Pediatrics’ Health Pitch Competition at SXSW (South by Southwest) Interactive. The latter in March awarded $100,000 to its four finalists (see “Winning solutions,” page 42).

Other competitions give up to $100,000 in total awards, with dozens of biotech start-ups competing. This year’s pitch competition for the UCSF-Stanford Pediatric Device Consortium, which is funded by the FDA’s Office of Orphan Products Development to help pediatric device innovators move high-value, high-impact solutions toward commercialization, had 74 entrants, with 13 finalists each having the chance to raise $50,000 in seed funding.

Pediatric physical therapy has an 8% share ($2.8 billion) of a $35 billion annual physical therapy market, which is growing at a rate of 7% per year.

Not every startup goes the route of incubators and their competitions, but they can give entrepreneurs a running start as they try to move their great idea, technological breakthrough, or novel application to commercialization and beyond.

These pediatric startups are using technologies ranging from bioengineering to robotics to virtual reality. Here’s a look at two companies at different stages of development that are seeking to disrupt healthcare markets with innovative products designed to improve lower extremity care for young patients.

Bridging gaps in peripheral nerve repair

Axogen’s nerve connector, a porcine submucosa ECM coaptation aid for tensionless repair of transected or severed peripheral nerves. (Photo courtesy of Axogen.)

Alachua, Florida-based Axogen develops and commercializes regenerative medical technologies for peripheral nerve regeneration and repair in adults and children (see “Matthew’s nerve repair story,” page 44). The company seemed to achieve instant success in 2013, when it raised $18 million in its initial public offering, was uplisted to the NASDAQ for higher-profile trading, and made Deloitte’s Technology Fast 500 list as the 19th fastest growing company in North America.

In reality, though, the startup got its start in a garage in the early 2000s, when regenerative medicine was in still in its infancy, and struggled after the 2008 recession to secure funding and create a market for its products. Private investors and creative financing, including a reverse merger, helped the business continue to make strides, and now it’s a leader in a global peripheral nerve repair market that Axogen estimates is worth $2.7 billion in the US.

The company in May reported its 2019 first quarter financial results: a revenue of $23.3 million, a 35% increase compared with the first quarter of 2018.

“We are pleased with our start to the year, and the progress we’ve made strengthening and expanding our commercial capabilities,” said Karen Zaderej, chair, CEO, and president of Axogen. “We are also seeing growing surgeon awareness of our clinical data that we believe will continue to drive adoption in our core trauma market.”

Many patients and surgeons, however, still accept the loss of sensory and motor function as an inevitable outcome of traumatic nerve injury, said Axogen Medical Director Ivica Ducic, MD, PhD, a board-certified plastic surgeon with additional training in peripheral nerve surgery.

Axogen creates off-the-shelf nerve tissue allografts with a proprietary cleansing process for recovered human peripheral nerve tissue. The process preserves the essential inherent structure of the extracellular matrix (ECM) while removing cellular and noncellular debris, providing a 3D scaffold to bridge nerve gaps. With successful implantation, nerves typically regenerate 1 to 2 millimeters per day. The nerve allograft supports a natural healing response and over time it revascularizes, ultimately remodeling into the patient’s own tissue, Ducic said.

Allograft use means patients avoid the additional injuries and potential complications that can arise with the current standard of care for peripheral nerve injuries, which involve using a nerve from another location in the patient’s body to repair the damaged nerve, Ducic said.

“This can cause a loss of function and sensation at the donor site, effectively sacrificing movement or feeling in one location to try to restore it in another,” he said. “Our processed human nerve allograft eliminates the comorbidities and defects associated with a second surgical site.”

Expanding options for kids

Axogen’s off-the-shelf processed human nerve allograft for surgical repair of peripheral nerve discontinuities. (Photo courtesy of Axogen.)

For pediatric patients, said Ducic, the prospect of sacrificing a nerve from their leg to repair another, damaged nerve, presents new morbidity and a risk that can be hard to accept, especially as it can affect the patient’s entire life. Yet, living with nerve damage is equally unacceptable.

“Even in cases that are not life threatening, nerve damage can cause deficits that greatly impact children’s’ lives, preventing them from walking or moving normally, keeping them from activities they love in their formative years, and introducing potential for further injuries,” he said. “The negative impact of these deficits can be more profound for pediatric patients, considering the potential lifelong consequences.”

Conventional autograft repair is also more challenging in pediatric patients.

“Due to their size, children often have a limited supply of nerve donor sites to repair severe nerve injuries,” Ducic said, He also noted that nerves harvested from a second site often don’t match the size of the nerve being replaced, making surgery more challenging and time consuming.

“Repair of sharp transection injuries often results in tension at the repair site or misalignment of nerve fibers at the nerve coaptation site,” he said. “Each can inhibit proper nerve regeneration, resulting in impaired function and risk of pain. Our proprietary nerve connector enables what is called connector-assisted repair, a tensionless repair for nerve injuries that can reduce the potential for misalignment of the implanted never fibers with the nerve repair site.”

Axogen’s nerve grafts come in a number of lengths (15-70 millimeters) and diameters (1-5 millimeters), which allows surgeons to match a variety of anatomies and needs. The company’s products also include a novel porcine nerve protector with a multilaminar ECM that separates and protects nerves from surrounding tissues during healing and a minimally processed human umbilical cord membrane that can be used as a resorbable soft tissue covering to separate tissue layers.

Creating a new reality for PT

“The blend of telemedicine and augmented reality transcend time and place, which are huge barriers to healthcare delivery, and I thought the combination could be a perfect application for pediatric PT. So, I waited for someone to create a solution for me. Like a good little clinician, I stayed in my lane.”

—Lindsay Watson, PT, MPT

Watson got tired of waiting, however, and in 2017 founded Augment Therapy to develop the PT software platform she envisioned. It uses high-definition 3D cameras mounted on a TV to mirror a child’s image and place it in an onscreen environment with an avatar that engages the young patient in targeted therapeutic exercises.

Physical therapist Lindsay Watson, PT, MPT, is the founder of a Chagrin Fall, Ohio-based pediatric healthcare startup that’s using augmented reality to help kids heal from injuries and improve motor skills. Watson, who has specialized in pediatric physical therapy for 13 years, has experienced many challenges over the years with delivery of care.

“I do school-based physical therapy, which means I crisscross the county treating kids I see once a week. I felt that the carryover of my expertise on a daily basis was low, and that this issue was stifling progress for my patients,” she said.

When Pokémon Go, which lets users track an avatar though real-world neighborhoods, became a cultural phenomenon it sparked an idea in Watson for blending augmented reality—an environment in which real-world people and objects are enhanced by computer-generated perceptual information—with telemedicine to create a solution for kids and the physical therapists who treat them.

“I thought the combination of these two big concepts that aren’t normally brought together would seize and hold kids’ attention. It’s also a perfect application for pediatric physical therapy because the blend of telemedicine and augmented reality transcend time and place, which are huge barriers to healthcare delivery,” she said. “So, I waited for someone to do it for me. Like a good little clinician, I stayed in my lane.”

But no one came forward with a solution that fit Watson’s vision or that worked optimally for her patients. “I saw holes in the products created, and when I looked at the people who were typically creating these platforms, there wasn’t a clinician in sight,” she said. “After about two years, the idea was lingering in my head and I finally ran out of reasons why I wasn’t qualified to do it myself.”

Watson started educating herself about every aspect of bringing her idea to market. The eventual result was Augment Therapy. The company’s software platform uses high-definition 3D cameras mounted on a television to mirror a child’s image and place it in an onscreen environment next to an avatar that engages the young patient in targeted therapeutic exercises.

Therapists can monitor therapy remotely and collect critical data points—how often and for how long children do each specific exercise, for example—from anywhere. There’s no need for data collection with wearables, which often distract children with sensory processing disorders such as autism.

Winning solutions

Impact Pediatric Health (IPH) held its fifth annual pitch competition in March in Austin, Texas at SXSW (South by Southwest) Interactive. The 12 finalists, chosen from more than 100 applicants, had three minutes each to pitch to a panel of judges their targeted digital and medical technology solutions that address unique challenges in children’s healthcare.

The entrepreneurs then responded to questions from the judges, who were drawn from the seven major children’s hospitals that created the competition plus industry experts from companies and organizations including Microsoft, Johnson & Johnson, the American Nurses Association, and the Cambia Health Foundation

Four innovators won $25,000 each in direct funding to accelerate development of devices designed to improve the safety and delivery of pediatric care:

  • Smileyscope, Cambridge, Massachusetts, uses virtual reality to make pediatric procedures less scary for kids.
  • Bardy Diagnostics, Seattle, Washington, creates remote cardiac monitoring technologies and custom data solutions.
  • Prapela, Boston, Massachusetts, uses stochastic vibrotactile stimulation technology to help newborns breathe, relax and sleep.
  • PolyVascular, Houston, Texas, develops polymeric transcatheter pulmonary valves for children with congenital heart disease.

IPH is funded by the Southwest National Pediatric Device Consortium (SWPDC), a multi-institutional group that includes clinical, scientific, business, financial, regulatory, reimbursement, engineering, intellectual property, and academic partners.

The consortium has a five-year $6.75 million FDA P50 Pediatric Device Consortia grant to support innovation, mentoring, and collaborations among pediatric clinicians and surgeons, engineers, industry, and other part- ners for pediatric device development.

Moving the idea to market

Medical technology incubators and pitch competitions have now helped Watson’s company, founded in 2017, reach the pilot testing stage.

Augment Therapy won both the A and B awards at the 2018 GLIDE/Innovation Fund of America pitch competition, and has won or placed among the top finishers in at least six other Cleveland, Ohio-area pitch contests, including the final competition for Plug and Play Health, the Youngs­town Business Incubators Inaugural Shark Tank Pitch Event, and the AAMI Exchange.

“These pitch competitions have been pivotal in us securing investors and strategic partnerships with local health and business technology leaders,” noted Watson, who was named one of Crain’s Notable Women of Technology for 2018.

Augment Therapy’s plug-and-play software platform improves adherence to physical therapy by providing a fun, immersive experience. (Photo courtesy of Augment Therapy.)

Most notably, the company took third place in April in the Medical Capital Innovation Competition (MCIC) for XR Innovation in Healthcare. (XR refers to extended reality platforms, which combine real and virtual environments.) MCIC awarded a total of  $100,000 to top finishers (Augment Therapy received $15,000) plus access to business advisors, including world-class healthcare systems and collaborators.

“We were selected from a pool of over eighty companies from all over the world for the MCIC competition,” said Watson. “Twenty-two companies [the finalists] came to Cleveland and competed in a two-day challenge with seventeen judges from various top tier health and business organizations from all over. We took third place, a very big deal!” said Watson.

Watson⎯and her investors⎯believe there’s a large market for her innovative software platform. Pediatric physical therapy currently has an 8% share ($2.8 billion) of a $35 billion annual physical therapy market, which is growing at a rate of 7% per year. Watson’s vision for her physical therapy solution includes deployment in hospitals, clinics, hospitals, school systems, and patient homes.

A feasibility trial began in June at Rainbow Babies and Children’s Hospital in Cleveland, where the software platform is being tested with inpatients who have cystic fibrosis and sickle cell disease.

“These are kids who are often, for differing reasons, resistant to exercise. I believe both populations will profoundly benefit from our augmented reality solution,” Watson said.

Augment Therapy is also commencing an angel investment round to accelerate its development and validation of its platform. “We continue to seek out interested early adopters and research partners so we will be able to see what a difference our platform can make in the world,” Watson said.

Keith Loria is a freelance writer in northern Virginia.

Matthew’s nerve repair story 

A deep cut caused Matthew to lose nerve function from his heel through his first three toes. (Photo courtesy of Axogen.)

Alachua, Florida-based Axogen’s peripheral nerve allografts and other novel products are helping surgeons restore nerve function in pediatric patients, explained its medical director Ivica Ducic, MD, PhD, a board-certified plastic surgeon with additional training in peripheral nerve surgery. These patients include Matthew,* a 13-year-old who lost nerve function from his heel through his first three toes after sustaining a deep cut to the bottom of his foot.

“Matthew and his family were getting ready to sit down to dinner when he dropped a heavy butter dish on the kitchen floor. He leapt up to avoid being hit, and landed on a large piece of broken glass, which pierced the arch of his foot,” Ducic said. “The family went directly to the emergency room, where the injury was cleaned and stitched. At a follow-up appointment two days later, it became clear Matthew had lost sensation to the bottom of his foot due to nerve damage sustained in the accident.”

Matthew’s surgeon confirmed nerve injuries and repaired the resulting nerve gaps with Axogen’s human nerve allograft graft and nerve protector, a porcine submucosa extracellular matrix surgical implant used to protect injured nerves and reinforce nerve reconstruction while preventing soft tissue attachments. Surgery successfully restored Matthew’s nerve continuity and function and today he is an active teenager who runs for his high school track team.

“Because expertise from a nerve specialist must be sought quickly to achieve optimal surgical outcomes in peripheral nerve repair, patient and clinician education is paramount to increase availability and adoption of modern nerve care,” Ducic said.

*Last name omitted for privacy.

Axogen’s novel nerve repair technology helped surgeons restore Matthew’s nerve function. (Photo courtesy of Axogen.)



  1. Walton R, Finseth F. Nerve grafting in the repair of complicated peripheral nerve trauma. J Trauma. 1977;17(10):793-796.
  2. Whitlock E, Tuffaha SH, Luciano JP, et al. Processed allograft and Type I collagen conduits for repair of peripheral nerve gaps. Muscle Nerve. 2009;39(6):787-799.
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