Instrumentation Metrics Plays $30M VC Tune

Looking to pioneer the development of a noninvasive glucose monitoring technology for diabetics, Instrumentation Metrics announced last week that it closed a $30 million Series D round of venture financing. However, that may not be all the capital the company will raise, as it plans to hold the round open until the end of March for some late-coming investors, says Donald Hetzel, the company’s president and chief executive officer.

Hetzel declined to name the investors still mulling over their participation in the financing, although he did say the round’s total will not exceed $40 million.

First-time investor Alliance Technology Ventures led the round’s first portion, which also included new backer A.M. Pappas & Associates. Existing investors Apax Partners, the Sprout Group and Adams Street Partners all stepped up their commitments to the company as well.

Founded in 1995, Instrumentation Metrics hopes to make it easier for diabetics to monitor the level of glucose in their blood through a VCR-sized device that uses a beam of light to measure blood glucose levels.

“If a diabetic keeps their glucose level around normal, this can significantly reduce the late-stage complications of diabetes – like blindness or loss of limbs – that are truly horrible,” says Hetzel, adding that in order to keep tabs on their glucose levels, current practices call for diabetics to test their blood at least four times a day, if not more.

But since traditional testing requires drawing blood through finger-pricking, which is not only a hassle but painful, most diabetics are very lax when it comes to monitoring their glucose level, which could set them up for large health risks later, he adds.

“This is the most compelling noninvasive technology we have seen, and in the last year they have made profound technical progress,” says Eric Linsley, chief investment officer at A.M. Pappas, when asked why the firm chose to invest this time around.

Indeed, over the last year the company has done initial testing of a prototype device on about 100 people for a minimum of eight weeks, generating results that were favorably comparable to traditional finger-stick tests, Hetzel notes.

Instrumentation Metrics will use the recently raised capital to complete development of its noninvasive device, fund clinical trials and file a pre-market approval application with the Food and Drug Administration, likely in the fourth quarter of 2003, Hetzel says. The company is currently generating no revenue and probably won’t until the end of 2003 when it expects to begin selling its device to diabetics, pending FDA approval. Initially, the device will likely cost around $5,000, although future incarnations will cost only half as much and should be much smaller, perhaps the size of a handheld PDA device, Hetzel says.

The current capital infusion will be enough to carry the company through the FDA approval process, says Janet Effland, a general partner at Apax. If it passes muster with the government, Instrumentation Metrics will need another post-approval round of funding to successfully launch its product, she adds.