With $14.7 million in new venture funding, Renal Solutions may be the answer kidney dialysis patients are waiting for. More than 300,000 people in the United States suffer from kidney disease and need dialysis regularly, which can be very expensive, not to mention inconvenient. However, Renal Solutions is trying to develop dialysis systems that patients can use from home – a market that is expected to reach $1.6 billion a year over the next few years.
Despite the market potential, it wasn’t easy for Renal Solutions to find investors – it took the Pittsburgh-based company more than a year to close this Series A round of funding. However, Renal Solutions was only looking for $7.5 million when it started out and eventually settled for almost double. This round takes the company’s post-money valuation to $22 million. “To use a cliche, if you can get it – take it. It took us 15 months to get this round. When we started out we expected to close the deal in six months. This is not an easy market to raise money in,” says Peter DoComo, president and CEO of Renal Solutions.
The round of funding was led by Birchmere Ventures, with the investor syndicate including Blue Chip Ventures, Draper Triangle Ventures, University of Pittsburgh Medical Center and Amkey Ventures. The investors have taken three out of Renal’s seven board seats. Bluechip Ventures contributed $3 million to this round while the lead investor Birchmere put in $2 million.
For Pittsburgh-based Birchmere, which has traditionally invested primarily in information technology firms, this investment is its first in the medical device industry. “Historically we haven’t had any investment in the medical device industry, but the more we learned about Renal and its product we realized that it is a paradigm shift in treatment of end-stage renal disease. We talked to a lot of local hospitals and doctors and came away with the feeling that there is a real need and demand for this kind of therapy,” says Gary Glausser, partner at Birchmere Ventures.
Renal Solutions will use most of the funding to speed up the developement of Allient Sorbent Hemodialysis system, its in-home kidney dialysis system, According to the company, Allient allows patients to self-treat in their homes, rather than going to a clinic several times a week. “Whereas clinics condense dialysis into two hours of rapid-fire blood cleansing that leaves most patients sick and weak, Renal’s dialysis system can operate slowly and gently while the patient sleeps. And clinic operators have every incentive to partner with Renal, because its machine could cut their overhead and save them the cost of building new treatment centers,” says DoComo.
Renal is one of three companies that are in an advanced stage of developing a home dialysis system. Illinois-based Aksys is the only the company that has received FDA approval for its product and will be the first to enter the market. Renal Solutions expects to be the second entrant. “We are in the final stages of development and we are engaged in the regulatory process with the FDA. We expect to get approval by late fourth quarter of 2003 or early first quarter of 2004,”says DoComo.
Renal also hopes to differentiate its product from Aksys on the basis of the amount of water used by the machine during dialysis. While Aksys’ system requires a 50 gallon tank of water, the Allient system hopes to reduce that to just 1.5 gallons, making it easier for patients to install the machine in their homes.
This round should sistain the company for 18 months, after which the company will be a seeking a second round of private equity funding.