Itamar Medical raises $12m from existing investors
The company is considering an IPO in 18-30 months.
Gali Weinreb 6 Oct 05 15:25
Sources inform "Globes" that Itamar Medical has completed a $12 million financing round from its current investors. Itamar Medical develops non-invasive devices to diagnose heart disease and sleep disorders.
International medical devices company Medtronic (NYSE: MDT) invested most of the money raised, and now owns 30% of Itamar Medical. Compugen chairman and CFO Martin Gerstel owns 16%, and co-founder Dr. Giora Yaron, who also founded P-Cube and Pentacom (acquired by Cisco Systems (NYSE: CSCO), and who was CEO of Itamar Medical until 2000, owns 9%.
Caremi Partners owns 8% of Itamar Medical, Bay City Capital 4%, Dr. Alejandro Zaffaroni 6%, and Lehman Brothers 2%. Prof. Danny Gur, on whose invention the company’s developments were based, and who parted the company on unfriendly terms five years ago, still has a small holding in the company.
Itamar Medical said that it expected its proceeds from the current financing round to see it through to the break-even point, following which no more financing rounds would be needed. At the same time, in order to expand its business at the rate it deems proper, the company plans another private placement, followed by an IPO (probably 18-30 months from now).
Itamar Medical has invested $30 million of the capital that it has raised to date in conducting clinical trials and attaining approval from the US Food and Drug Administration (FDA). Approval for the company’s device for treating sleep disorders was obtained in 2003, and its cardiac device was approved in 2004. The current round is designated mainly for supporting sales and marketing in the US.
"Globes": Why have you chosen to market and sell independently? By this stage, most Israeli companies have already merged with large international companies, are cooperating with other companies, or are at least recruiting a local distributor.
Itamar Medical president and CEO Israel Schreiber: ”Our product uses a new technology, based on a new signal. It requires new work processes, so the burden of proof was on us. It’s hard for a company like ours to get a reasonable exit price at the outset, or to cooperate with a large company.”
What about Medtronic, which made its first investment in you as early as 2000?
”On the face of it, the connection with Medtronic does seem made for a merger, or at least cooperation. The truth is, however, that we haven’t reached a model that’s good for both sides. At the beginning, they offered us an exclusive marketing agreement, but it didn’t go through, because while Medtronic is an enormous marketing machine, they are stronger in marketing to treatment institutions, and not as strong in marketing to diagnostic institutions, which constitute our market. What is true today, however, will not necessarily be true tomorrow.”
Itamar Medical’s two devices are based on measuring nervous system activity and related vascular events in peripheral areas of the body the limbs. The signal, called peripheral arterial tone (PAT), is measured with a small device, the Endo-PAT2000, connected to the patient’s finger.
The FDA approved this device in 2002, but Itamar Medical is selling it exclusively to research institutes at the present time, not to the general market. “Research institutes have accepted the Endo-PAT2000 as a cardiac device. They are conducting trials in various fields of cardiac treatment and preventative care, and they report whether their treatment lowers or raises PAT. The more such research accumulates, the more credibility we gain, and demand rises in the market. Right now, we’re participating in eight large clinical trials, including two important cardiac treatment trials in the US,” Schreiber says.
Schreiber won’t say so explicitly, but it appears that the company is focusing on research institutes because the cardiac diagnostic market, which includes tens of thousands of related clinics and hospitals, is simply too big for the company and its limited marketing budget. It is possible that the support of research institutes is the proof that Schreiber is looking for in order to attract a large or medium-sized company to cooperate with, or acquire, Itamar Medical at a price that the latter regards as suitable. Interest on the part of insurance companies, if and when it comes, is likely to decide the issue quickly and powerfully in Itamar Medical’s favor.
Published by Globes [online] - www.globes.co.il - on October 6, 2005
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