Welsh Carson Taps Into Spinal Market with K2M Buy

Article preview from Start Up- September 01, 2010

Welsh, Carson, Anderson & Stowe, a long time investor in health care services companies, signaled its intent to invest more deeply in the device sector with the acquisition of a majority position in spinal company K2M Inc.

Welsh Carson Taps Into Spinal Market with K2M Buy

Article preview from Start Up- September 01, 2010

Welsh, Carson, Anderson & Stowe, a long time investor in health care services companies, signaled its intent to invest more deeply in the device sector with the acquisition of a majority position in spinal company K2M Inc. [201010103] The privately held company – previously backed by surgeons, individual investors and venture firm Ferrer Freeman & Co. – now has the capital necessary to expand its offering of spinal implants, moving beyond its current base in complex spinal procedures.

Though some venture and public investors have cooled recently on spine companies – particularly compared with the excesses of the mid 2000s, which saw hundreds of spine start-ups raise venture capital, Welsh Carson clearly sees an opportunity. To broaden its medical device investment, two years ago the buyout firm hired Daniel A. Pelak. Pelak had served as CEO of InnerPulse Inc. ( See "InnerPulse: Bringing the Interventional Revolution to CRM," IN VIVO, December 2006 [2006800212].) He had previously been CEO of Closure Medical Corp., a biomaterials company acquired by Johnson & Johnson in 2005, after working for two decades at Medtronic Inc. [200510042]

Pelak says he's long held that the spinal market is a "fertile ground for somebody who is able to provide growth capital." Asked why he identified K2M as his first WCAS target, Pelak pointed to the breadth of the product pipeline and the experience of its management. In his opinion, the company didn't need fixing, just capital to pay for growth initiatives such as building up product inventories and broadening its distribution channels, primarily outside the US.

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