Article preview reprinted from Start-Up - July 2009
Private investors in orthopedic companies still are backing traditional and large joint companies, but soft tissue and biomaterials are drawing a solid total of early-stage capital. Read more...
Ortho VCs Are Getting Soft, But Still Show Spine
Article preview reprinted from Start-Up - July 2009
This past month's news of the monster private equity financings of Small Bone Innovations Inc. and ConforMIS Inc. drew a bright, white hot light on the state of venture investing in orthopedics start-ups. Does the $144 million committed to Small Bone Innovations, a mega start-up committed to the extremities (or small bone) sector, reflect broader investor interest in that increasingly interesting sector? Likewise, what does $50 million put into in knee replacement company ConforMIS so far say about the entrepreneurial interest in the large but sleepy large joint sector? (See "SBI and ConforMIS Think and Act Globally In Search for Funds," this issue, for a detailed look at the two deals.)
A review of data in Elsevier's Strategic Transactions database revealed that venture investors aren't showing much interest in funding start-ups targeting the small bone arena where SBI is operating. But they are putting some dollars behind young companies targeting the hip-and-knee markets, which is understandable given their size. VCs have also embraced new approaches to orthopedics by backing companies developing biomaterials or targeting soft tissue.
Perhaps the most surprising revelation is the fact that investment in spine companies—a supposedly overheated market—remained strong. Since the start of 2006, investments in companies with treatments for spinal disorders have accounted for 54% of the capital raised (for a total of $769 million) and 44% of the deals (36). Spine-oriented companies raised roughly one-third of that capital, $250 million, over the past 18 months, so investors have shown continued interest (especially since the pre-2008 tally is weighted by the $110 million Globus Medical Inc. raised in 2007). There is some indication of a slowdown with only two deals reported this year including a $15 million Series A round in SpineGuard SA and a $23 million Series E-1 for Paradigm Spine LLC, a non-fusion spinal implant company. SpineGuard, despite raising a Series A, is already selling an FDA-approved pedicle screw placement system so investors may be trying to play a little safe.
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No publication reviews leading edge companies and technology better than START-UP. Each issue of START-UP profiles the most important new product companies, identifies the hottest technology areas, reviews funds flowing into private companies and investment trends, and reports on university tech transfer licensing. Industries covered: pharmaceuticals, biotechnology, medical equipment & devices, and in vitro diagnostics.
