Already in the market with an FDA-approved product intended to improve treatments for diabetes patients, Boston Medical Technologies Inc. (BMT) recently received a $22.6 million Series C injection from the venture capital community.
The Wakefield, Mass.-based medical device company’s latest venture windfall is slated to last for at least the next 15 months and will be used to ramp up its sales and marketing efforts, which have ebbing toward full throttle since October.
“We started looking for money in Q4 2000 and, at that time, money became quite tight,” said Harry Mitchell, vice president, chief financial officer and treasurer with Boston Medical Technologies. “But we got more than we were looking for, and we had several groups that took more than their pro rata shares.”
Prism Venture Partners, which participated in BMT’s first and second financing rounds, stepped up again to lead the oversubscribed transaction with a $10 million infusion.
“We wanted to vote with our wallets, and we did that,” said John Brooks, a founder and general partner with Prism. “The business was starting to take off, and it takes a lot of time for management teams to raise capital. If we had to have them focus [exclusively] on the capital-raising process, we would have lost that momentum. It would have cost us six months worth of progress to raise the money, so we decided to lead the round.”
Joining Prism were new investors TSG Equity Partners and the University of North Carolina at Chapel Hill, along with repeat players Atlas Venture Partners, Collinson, Howe & Lennox, Phoenix Home Life Mutual Co., Exeter Capital and the Boston University Community Technology Fund.
BMT received a $56 million post-money valuation on the transaction. The company has raised a total of $38 million in venture financing since 1998, including a $10 million Series B round that closed in late 1999
Heading Off An Epidemic
As the number of diabetes patients continues to rise, the need for improved medical techniques has become more pressing, Mitchell explained.
That’s where Boston Medical Technologies comes in. Its flagship product, the Anscore Health Management System, enables physicians to measure a patient’s heart rate variability under certain stress conditions and, thus, determine the health of the autonomic nervous system, which controls the function of all the organs in the body.
Essentially, such a technique enables doctors to head off some of the most debilitating ailments associated with diabetes, such as liver and kidney failure and silent ischemia, or heart attacks. And in some cases, if symptoms are caught early enough, they can even be reversed, said Prism’s Brooks.
“In the past, [more primitive] machines were used at the research level by neurologists,” Mitchell said. “But it was extremely expensive, and it took a lot of time to analyze the data, and they had to be trained to assess the autonomic nervous system. We’ve taken that knowledge and brought it to the physician level.”
While there are other companies marketing heart rate variability devices, BMT argues it can offer added value because it is connected to a large data center able to analyze information and return test results to a doctor’s office in approximately 15 minutes.
As such, Boston Medical Technologies owns and operates one of the largest databases of diabetes-related information in the world, which could eventually translate to additional revenue streams such as the sale of trend reports and the like, Mitchell said. He cautioned, however, that the company must adhere to strict government guidelines when it comes to keeping patient information confidential.
With its latest VC infusion in hand, the company plans to turn its attention to expanding business opportunities in the U.S. and, eventually, in Europe, most likely through strategic partnerships.
“We’d love to talk to someone with a strong position in Europe, that has relationships with endocrinologists and general practitioners that treat diabetes,” Brooks said. “We have our hands full deploying in the U.S., however, and trying to raise money is a little too expensive right now, so the best way [to expand] is going to be through a partnership.”
To date, BMT is active in several areas of the U.S., including Northern California, New England and the Midwest.
As for an exit strategy, Mitchell and Brooks seem to have slightly differing viewpoints. Mitchell said he would ultimately like to see BMT go public, while Brooks said he sees the company as more of an acquisition target, especially in the wake of major transactions in the diabetes care industry such as Johnson & Johnson’s acquisition of Inverness Medical Technology Inc.’s diabetes products division and Medtronic Inc.’s M&A deal with MiniMed Inc. Brooks, however, did not totally rule out the possibility of an eventual IPO, should market conditions improve.
He added that if the company does decide to pursue additional private funding, it won’t likely do so until sometime next year.
Contact Robyn Kurdek at Robyn.Kurdek@tfn.com