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Davids and Goliaths of medical imaging

This week at the Annual Meeting of the Radiological Society of North America, Philips and GE both revealed their newest medical imaging technology, which can produce finely detailed 3D images of the body. The product announcements were picked up by major news outlets, from Reuters to the BBC, a testament to the profound impact on medical diagnosis and treatment such technologies can have. High-end CT scanners - which take large numbers of X-ray pictures and stitch them into 3D models using powerful computers – enable more efficient and accurate diagnosis in health care systems, providing not only obvious medical benefits but economic ones as well, particularly for countries and regions with aging populations.

While the news stories focussed on Philips and GE, Siemens and Toshiba are also fiercely competing in this space. Toshiba’s equivalent imaging equipment has been tested in Johns Hopkins Hospital in the US since early 2007. GE, Philips and Toshiba’s systems are large and expensive but have a broad range of diagnosis applications.

Added to this are a plethora of VC-backed companies operating in the medical imaging and diagnosis field, with a range of technologies in use to generate the images and data. Just this week Biospace Med raised €12.1 million in venture funding to help accelerate market penetration of their orthopedic imaging technology. The technology claims to have a 10 fold reduction in radiation exposure, and produce 3D images in a single scan without the need for any ‘digital stitching’ of multiple images.

Other companies with medical imaging systems include BMDSys, who have developed non-invasive, contact-free cardiac diagnostic imaging systems using extremely high sensitive magnetic sensors, known as Magnetic Field Imaging (MFI). The system claims to be offering “the next revolution in cardiac diagnosis”. Also providing solutions for cardiac-related problems, Heartscape Technologies have developed their PRIME ECG system, an FDA-approved medical device that claims to accurately and rapidly diagnose heart attacks. This system comes in the form of a disposable vest with sensors, providing colour, 3D imaging information for rapid diagnosis. Another start-up, Astron Clinica , aims to revolutionise skin imaging, helping dermatologists and plastic surgeons to diagnose, and monitor skin health.

So whilst the large players such as Philips, GE and Toshiba are pushing large, expensive technology for the diagnosis of multiple conditions, the smaller innovators are seeking to penetrate specific markets based upon specialist applications. Focussing on individual conditions allows the technology to be tailored so it can be much more effective in providing clear advantages in diagnosis. It also provides focus for commercialisation, and enables clear comparison to be made with existing technologies which serve as diagnostic tools for those conditions.

Perhaps the best prospect for future success in this space sits with those companies who have versatile technology platforms, able to commercialise in one application and expand into other fields with limited modification required. Launching a new technology with a focussed market is a smart first step – but the big money will be made by disrupting the incumbents.

The Week's Deals

Setanta Sport Holdings, the Ireland- and UK-based international sports broadcaster, has raised £90m (€130m) from a share issue to existing investors, including Doughty Hanson, Balderton Capital and Goldman Sachs.  The company described the investment as a “war chest” and will use the capital to pay for rights acquisitions such as the deal to show FA Cup and England international games in 2008. Over 20 per cent of the company is now owned by founders, Michael O’Rourke and Leonard Ryan, and the management team, who also participated in the share issue.

Gigle Semiconductor, the UK-based semiconductor company, has raised $20m (€13.5m) in series B funding led by new investor Scottish Equity Partners and also including existing investors, Accel Partners and Pond Venture Partners.  The investment will be used to support the development and launch of the company’s product.  Gigle is developing an integrated circuit that allows multimedia networking using existing wires in the home.

biospace med, the France-based orthopaedic imaging company, has raised $18m (€12m) in series B funding.  The round, led by NBGI Ventures and Crédit Agricole Private Equity, will be used for worldwide expansion, particularly in the US.  Existing investors Edmond de Rothschild Investment Partners and UFG Private Equity also participated in the round.  biospace’s lead product assesses the balance and posture of patients through full-body imaging in a weight-bearing position.

The Week's Exits

e-therapeutics, the UK-based drug discovery company, has raised £1.33m (€1.85m) following its IPO on AIM.  The company was hoping to raise £3m (€4.18) to fund R&D work into disorders including depression, high cholesterol and malignant melanomas, which it believes have not yet been fully researched by rival drug companies.  Professor Malcolm Young, the founder and chief executive of e-therapeutics, blamed the stock market turmoil for the low share price and attempted to reassure investors by revealing that the company had been in discussions with several blue-chip companies, which were hoped to increase revenues.

Precimed Group, the Switzerland-based developer of orthopaedic instruments, has been acquired by Greatbatch, the US-based manufacturer of components for medical devices, for $125m (€84m), plus an additional earnings-based cash payment of $10m (€6.8m).  The transaction will close in early 2008 and is intended to establish Greatbatch as one of the top three suppliers to orthopaedic equipment manufacturers.  The deal includes the assets of a pending acquisition by Precimed.

Docutec, the Germany-based developer of document processing software, has been acquired by the Brussels Euronext-listed I.R.I.S. Group, a specialist in converting paper documents into a digital format.  The financials terms of the deal have not been disclosed.

People Moves

Green Issues Communications, the UK-based consultancy services company specialising in stakeholder liaison and management, has appointed Simon Miller as managing director. The previous managing director and company founder, Tom Curtain, has moved to the role of chief executive. Mr Miller was the UK managing director of APCO Worldwide and a board director at Hill & Knowlton.

Outsmart, the Israel-based provider of network convergence, has appointed Jacob Bros as chief executive following the departure of Menahem Tirosh. Mr Bros was previously vice president, sales with the company and before that had worked at Unipier and Comverse. Outsmart has developed a smart convergence platform that allows operators to provide unified services to both fixed and mobile network users.

Selected Recent Updates

Tiani Spirit is an Austria-based software developer, specialising in the development of reference products based on the 'Integrating of Healthcare Enterprise' guidelines, an industry  initiative designed to improve the way computer systems in healthcare share information.   The company had recently received investment from T-Venture and this week Martin Tiani, the chief executive and founder, told Library House that the investment had been €1.5m for a 16 per cent stake, valuing the company at €9.375m post-money.  This stake has a fixed-value call option and is due to mature at the end of 2009.  Mr Tiani, who holds the remaining 84 per cent of the company, says that the strategic relationship with T-Venture was a strong incentive for seeking the funding and that there were no specific plans in place to raise capital again in the future.  The company anticipates revenues of €7m in 2008 and says that plans for the future depend on the progress of the business over the course of the year.

Avaloop is the Austria-based designer of the online game, Papermint.  This week, Mr Martin Sirlinger, the managing director and co-founder, disclosed that the company is currently fundraising and expects the round to close in February or March 2008.  The capital raised will be used to fund international expansion, initially into German-speaking markets, closely followed by moving into the UK and either France, Spain or Italy.  Mr Sirlinger informed Library House that the company is seeking strategic media partners, primarily in the gaming industry, who can support the company in its expansion plans and that the timing of the beta release would be in April or May 2008.  A second phase of international expansion is planned, to move into North and South America, and Mr Sirlinger says that the company may use existing investors to fund this growth rather than open an external financing round.  Following the close of the ongoing round, the company will double its headcount from 20 to 40.

UK-based Vivacta develops diagnostic technologies that can be used at the point of care, removing the need for laboratory testing.   The company recently raised $12m (€8m) to commercialise the piezofilm technology used in its lead product, a sensor platform that tests whole blood in-situ, from existing investors Spark Ventures and Viking Technologies, joined by AGF Private Equity and HBM Biopartners.  Chief executive Neil Butler told Library House this week that the company is seeking partnerships with large diagnostic companies with the ultimate aim of being acquired by one in 2010.  The company is in the process of expanding its team, with an engineering manager due to start in December 2007, a financial controller joining in January 2008 and 10 further employees in the new year to develop the pilot manufacturing facilities.  Mr Butler says that clinical testing of the lead product should be completed by Q4 2008, with an introduction to market decided by the company’s marketing partner, but anticipated in Q1 2009 and profitability achieved in 2010.