Medical Device Business Failures

Courtesy of Venture Capital Dispatch – WSJ here’s a list of recent device company failures.

It’s quite amazing how some businesses get so much money from venture capital and then go broke.

(Note: We’re keeping an ongoing tally of venture-backed company shutdowns this year as VentureWire reports on them.

Allux Medical Inc., Menlo Park, Calif. – For the past four years, it had been developing devices for treating upper airway and dermatological inflammatory diseases. But the company shut down after raising at least $13 million from Prospect Venture Partners, Three Arch Partners and Venrock, according to our records.

Archus Orthopedics Inc., Redmond, Wash. – The spinal device company quietly dissolved this summer. It was founded in July 2001 and was in clinical trials for a device for an alternative to spinal fusion surgery for the treatment of leg and back pain caused by moderate-to-severe degenerative lumbar spinal stenosis. Archus most recently raised a $35 million Series C round in January 2008 from Johnson & Johnson Development Corp., InterWest Partners, MPM Capital and Polaris Venture Partners.

Argolyn Bioscience Inc., Durham, N.C. – The peptide drug developer has filed for Chapter 7 bankruptcy after preclinical studies did not show convincing enough data to move its lead pain drug forward. Argolyn received a $15.8 million commitment in Series A-1 funding in June 2007, a round that was voted Deal of the Year by industry group Southeast BIO. Intersouth Partners and Quaker BioVentures led the round, joined by Amgen Ventures.

Aspen Medtech Inc., Bellevue, Wash. – Unable to secure enough funds to continue operations, venture-backed medical device incubator Aspen Medtech Inc. shut down. Aspen Medtech was founded in mid-2007 with $1 million in funding from Prospect Venture Partners and Three Arch Partners. The company intended to launch one company in a medical device field to be determined.

Cogentus Pharmaceuticals Inc., Menlo Park, Calif. – The pharma filed for Chapter 7 bankruptcy after raising more than $80 million, including a $62.5 million round just over a year ago, from investors such as Apothecary Capital, Keffi Group, Prospect Venture Partners, Pinnacle Ventures and Ridgeback Capital. Cogent intended to conduct Phase III trials for a pill designed to provide protective cardiovascular benefits while reducing gastrointestinal side effects associated with anti-platelet therapy.

DiObex Inc., San Francisco – Its venture backers – which include Domain Associates, Inventages Venture Capital, FirstMark Capital, Sofinnova Ventures and others –  cut the company’s headcount to zero and planned to sell DiObex’s asset, a diabetes drug, after failing to raise capital on acceptable terms. Formed in 2003, raised about $30 million.

Dynogen Pharmaceuticals Inc., Waltham, Mass. – A planned merger with a special purpose acquisition company sputtered last year, and its lead drug candidate later failed in clinical trials, leading to a Chapter 7 bankruptcy. Dynogen raised about $67 million from a group that included Atlas Venture, Abingworth Management, HealthCare Ventures, Oxford Bioscience Partners, Pappas Ventures and SV Life Sciences.

Innovative Spinal Technologies Inc., Mansfield, Mass. – The spinal-surgery device maker reportedly shut its doors and filed for bankruptcy after seven years in operation. It had raised nearly $75 million in funding from investors including GE Healthcare, JPMorgan Partners, MPM Capital, OrbiMed Advisors and Oxford Finance

OmniSonics Medical Technologies Inc., Wilmington, Mass. – The developer of an ultrasound technology that breaks up blood clots filed to liquidate under Chapter 7 bankruptcy in March. The company had raised more than $90 million from investors including Domain Associates, General Electric Pension Trust, Nomura Phase4 Ventures and Prism VentureWorks.

Pegasus Biologics Inc., St. Paul, Minn. – In May, the company ceased operations after unsuccessful fund-raising efforts and went into a sealed bid auction process for its assets. In July, it agreed to sell the assets to Synovis Life Science Technologies Inc. for $12.1 million in cash. The purchase price is less than the roughly $38 million in equity and debt raised by Pegasus. Previous investors in the company included Affinity Capital Management, Frazier Healthcare Ventures, Life Science Angels, Onset Ventures and Three Arch Partners.

Therative Inc., Livermore, Calif. – In a sign that the aesthetics device market is sagging in the recession, Therative, which sold an acne treatment since 2006, filed for Chapter 7 bankruptcy and ceased operations. Targeting the direct-to-consumer market, Therative was founded in 2005 and had raised more than $14 million in venture capital, according to VentureWire archives, most recently taking a $9 million Series C in mid-2007 led by Bessemer Venture Partners and joined by Band of Angels, Foundation Capital and RWI Ventures.

Trusera Inc., Seattle – The operator of a health Web site that had teetered on the brink of closure since March, tipped over the edge in May. Trusera was backed with $2 million in funding from investors including Benaroya Capital; Erik Blachford, former CEO of Expedia Inc.; Christopher Ackerley, partner at Ackerley Partners; Kim Rachmeler, vice president at Inc.; and Craig Tall, vice chair of corporate development at Washington Mutual Inc.

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3 Responses to Medical Device Business Failures

  1. pdriscoll says:

    To a large degree, you have to look at the amount of VC investment in each company as a measure of the associated risk of that business. The size of the investment is as likely a measure of the company's risk of failure as its risk of success. Moreover, the medical device market has gotten no less competitive over the past two years and, with investment actually being squeezed or just put on hold due to concerns about the economy, pending healthcare reform legislation and other limiting factors, it has caused more companies to cross the line at which they simply do not have the funds to operate anymore.

  2. HI Patrickthanks for taking the trouble to comment.I'm more than a little confused about how this process of VC funding happens but, from what I've seen, those guys don't get involved unless they're guaranteed a winner. And then I came across this list of failures.From what you've said this is natural fall out caused by both the trading environment deteriorating and VC's change to appetite for risk.Presumably we'll go back around the cycle in a few years time.The one thing I was interested to see was the fire sale of assets. Presumably the big companies pick up some interesting and inexpensive IPR this way?

  3. KennethSPoodale says:

    The main purpose of bankruptcy laws is to give people hopelessly overburdened with debt a chapter 7 bankruptcy financial fresh start. Bankruptcy filings are public records. However, under normal circumstances, no one will know about the bankruptcy. Credit Bureaus will maintain a record of the bankruptcy and it will remain on the credit record for 10 years.

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