August 31, 2010

Medical Device Daily

EndoGastric Solutions reports closing $30 million F round

EndoGastric Solutions (Redwood City, California), a player in the emerging field of natural orifice surgery (NOS), said that Canaan Partners and Radius Ventures co-led a $30 million Series F financing designed to support the company through profitability.

Existing investors Advanced Technology Ventures, MPM Capital, Foundation Medical Partners, Chicago Growth Partners, and De Novo Ventures joined to finalize the investment round.

“The goal of this round is to increase the size of the sales force and to complete our clinical trial strategy . . . to support a successful reimbursement strategy,” Thierry Thaure, the company’s president/CEO, told Medical Device Daily.  While there seems to be some evidence of economic recovery in the industry, Thaure said it is “still very challenging” to raise funds in the current environment and that his company is “fortunate to have had a success.” He added that the company’s growth in the last 12 months is what attracted investors to participate in this round.  “We are going after a less invasive solution in a very large untapped market,” Thaure said. “As everybody knows, one adult out of ten has refl ux and 30% of those refluxers aren’t happy on a pharmacological solution or have significant complications [related to the disease].”

EndoGastric Solutions’ EsophyX and StomaphyX product platforms offer surgeons an incision-less surgery during which they are able to enter through the patient’s mouth to offer substantive anatomical repair without incisions for gastroesophogeal reflux disease (GERD).

The company has previously reported that 85% of patients remain symptom-free and off daily GERD medication at one year after the procedure using the EsophyX device (Medical Device Daily, June 4, 2008).  The technology also reduces the patient’s risk of developing esophogeal cancer and all the other complications that come with regurgitation, such as asthma
and chronic cough, Thaure told MDD.

“Our technology offers signifi cant clinical, economic and strategic benefits to our hospital and surgeon customers,” Thaure said. “Over the past two years, the EsophyX and StomaphyX product platforms have been embraced with a high level of enthusiasm by the surgeon community, resulting in 100% revenue growth and 150% utilization growth in 2009 and thus far in 2010.” 

Thaure said the company’s goal is to establish NOS as the standard of care for patients with chronic acid reflux whose clinical needs are not met with medical management, and in the future, patients who suffer from obesity.

“We are investing signifi cantly in meeting this goal.  This round of investment will support increasing our commercialization initiatives and expanding our clinical trial initiatives, which include two randomized, controlled clinical trials, one large prospective registry, and approximately 10 investigator initiated studies,” Thaure said.

Mike Carusi, general partner of Advanced Technology Ventures, called the financing a “clear signal that the board of directors believes in the direction the company is taking and the milestones that have been achieved.”

“EndoGastric Solutions sits in the unique position of offering patients and surgeons therapeutic solutions to significant unmet clinical needs,” said Brent Ahrens, general partner of Canaan Partners. “The company has demonstrated a clinical advantage, developed a business model to bring this value to patients, and built a management team that knows how to execute. We are excited to support the company in accelerating the adoption of these innovative procedures and building a franchise with signifi cant value.”

Late last fall, EndoGastric Solutions reported the closing of a $21.5 million Series E financing (MDD, Nov. 30, 2009).

Kathleen Regan, venture partner of Radius Ventures said it is “rare to find a company experiencing this level of growth and addressing markets as substantial as refl ux and obesity.”  She added that her firm believes EndoGastric Solutions is on the path to establishing NOS as the standard of care in these two areas. 

Following the investment, Ahrens and Regan joined the company’s board. Rockport Ventures advised on the transaction.