If yesterday brought an indication that the medtech M&A scene was heating up, today a sign has appeared pointing to an upswing in venture financing for medical devices. Orthopaedics company ConforMIS has expanded an E round begun last year to a total of $167.7m, more than twice as big as the largest medtech VC round in the first half, and even beating the biggest venture financing achieved so far this year by a drug developer.
ConforMIS is already expanding at a rate of knots, having hired executives formerly at Zimmer and Genzyme, moved to bigger premises and scaled up manufacturing of its core products, bespoke knee implants. But a note in its SEC filings suggests that it may also be interested in acquisitions, perhaps with the intention of diversifying into new areas.
The Bedford, Massachusetts company has raised $78.7m, which added to the $89m it raised in the initial part of the series E round in 2012, brings the total to nearly $170m. This
The biggest VC haul received by a medical device developer in the first half of 2013 was the $70m obtained by ophthalmology-focused TearScience back in February (Second quarter of 2013 sees fewer, richer medtech VC rounds, July 23, 2013). Beating that record by just shy of $100m is no mean feat, but remarkably ConforMIS has also outpaced biotech company Intrexon’s $150m series F round to become the 2013 leader among all the companies covered in EvaluateMedTech or EvaluatePharma (Top VC rounds take an ever-bigger slice of the pie, July 18, 2013).
Potential business transactions
The main technology that has attracted such deep-pocketed investors is a patient-specific total knee replacement implant called iTotal. The initial device gained FDA 510(k) clearance in 2011 and launched that May; a next-generation version, the iTotal G2, launched in October 2012.
The company converts scan data, uploaded by the surgeon via ConforMIS’s website, into implants that are precisely sized and shaped to match a patient’s knee joint. The company claims that they fit better than standard implants, preserve bone and minimise surgical trauma. The same scans can also be used to create what ConforMIS calls disposable cut and placement guides to aid the implantation surgery.
UK firm Stanmore Implants also sells tailored implants; its Savile Row unicondylar knee implant was launched in January 2012. So similar was the technology that ConforMIS is suing Stanmore for patent infringement.
ConforMIS’s SEC filings stated: “Funds will be used for working capital and potential business transactions.” With the company expecting to hire 100 new employees over the next year or so to fill its new headquarters and its manufacturing plant in Burlington, Massachusetts, it will not be short of things on which to spend its $168m.
Elsewhere, the “potential business transactions” line may hint at future acquisitions. There are plenty of smaller ortho companies whose products could complement ConforMIS’s portfolio – perhaps even Stanmore – and a company that can part investors from such a large amount of cash may already be on its way to becoming a significant player in the market.