Align Technology Bites Down on $105M, Braces for Possible IPO

In a deal that is being hailed as the largest venture capital round ever raised for a medical device company, Align Technology Inc. recently secured a $105 millionSeries D financing. The adult orthodontics provider shattered the previous industry high-water mark of $42.5 million, which had been raised in a fourth round transaction by glucose monitoring equipment manufacturer Therasense Inc. in February.

“We were originally looking for $50 million, but just from our first six phone calls we had close to $250 million in interest,” said Zia Chishti, co-founder and chief executive with Align Technology. “The plan was then to cut it off at $70 million, but the [oversubscription] allowed us to command some pretty strong financial terms.”

Chishti added that the transaction was designed to be a mezzanine round. Although he would not give a definitive timetable for when Align would register for its initial public offering, he did say that it was likely that the company would probably “put the wheels in motion” on “some type of equity deal” before year-end.

Oak Hill Capital Partners and The Carlyle Group acted as co-leads on the mezzanine placement. Each of the private equity firms laid out $28 million for 7% of the Sunnyvale, Calif.-based issuer, which has now raised $144 million in the venture capital market.

“We’ve followed the orthodontics industry for a while and we think that it is one of the most attractive areas in health-care because it is not subject to significant regulation,” said Steven Gruber, managing partner with Oak Hill Capital Partners.

ABS Ventures was also involved in the deal with a significant play, although more information about its specific investment was unavailable at press time. Additional participants included existing investors Kleiner Perkins Caufield & Byers, Domain Associates, Gund Investment Corp. and QuistMark Partners.

The company, whose genesis was in Chishti’s own experience as an adult orthodontics patient, was established while Chishti and co-founder Kelsey Wirth were both students at Silicon Valley neighbor Stanford Business School.

“We were in the midst of all this Internet hoopla, but we were pretty cynical about it and Kelsey and myself didn’t want to do something that we felt was mainly herd-driven,” Chishti said.

Rather than ignore technological innovation, however, Chishti and Wirth helped develop a patented system called Invisalign, which uses computer-designed clear plastic devices called “aligners” to strengthen crooked teeth. Since being launched earlier this month, the company has trained almost 4,000 orthodontists an designed up over 3,000 patients. –