The second quarter’s drought of venture funding for healthcare startups broke last week when San Clemente-based Opus Medical Inc. raised $13.6 million in a third-round investment.
Opus plans to use the money to market its AutoCuff device, which is used to repair rotator cuff soft tissue, said Chief Executive James Hart.
The money is from new investor Prospect Venture Partners of Palo Alto and returning investor Three Arch Partners of Menlo Park.
“We found the C round to be easier than our last round,” Hart said. “In 2001, when we started the B round, it took us nearly a year to complete that financing. In comparison, this round went probably six to eight weeks.”
In another healthcare funding, Refractec Inc., an Irvine maker of devices to fix vision problems, said it is about to wrap up a $9 million third round, according to Chief Executive Mitch Campbell.
Versant’s Link: “A lot of the exit strategies are acquisitions”
Refractec, which Campbell said should do some $12 million in sales this year, is using the money to further push its ViewpoinT CK system, which uses radio waves, instead of a laser, to correct farsightedness.
“The nice thing with us is if you have a proven business model that you know can work, it makes it a lot easier for (venture capitalists) to make a decision,” Campbell said.
It had been quiet on the healthcare venture front in recent weeks following a decent first quarter. The Money Tree survey from PricewaterhouseCoopers, Venture Economics and the National Venture Capital Association showed healthcare, life sciences and biotechnology investments in Orange County were $22 million in the first quarter.
That was down from $36.2 million in the first quarter of 2002. A $31.5 million investment in San Clemente’s Cameron Health Inc. helped push up the year-ago figure. Cameron Health is developing a defibrillation device.
“Many of us are certainly careful about new investments,” said Ralph Sabin, managing director of the Irvine office of Encino-based Pacific Venture Group, a healthcare investor.
But Sabin also offered this: “I’m not so sure that last year was necessarily a hot market-it only seems hot compared to how bad tech has been.”
“There’s no doubt this environment in the past two years has been challenging,” said Refractec’s Campbell. “Funding’s definitely gone down, I think, because (venture capitalists) are becoming more picky.”
Venture capitalists are being more cautious because “they know the IPO market’s not there, so they’ve got a longer window,” he said.
William Link, a managing director at the Newport Beach office of Menlo Park-based healthcare investor Versant Ventures, said he looks beyond public offerings.
“A lot of the exit strategies are acquisitions,” he said. “Since it takes years to develop value in medical devices, entrepreneurs and venture capitalists are not turned off by a lack of an IPO market.”
In the first quarter, Arbor Surgical Technologies Inc., an Irvine developer of aortic heart valves, led in fundraising, snagging a $10.8 million round. Arbor’s investors include Three Arch Partners and Sapient Capital, a Wyoming firm.
Other companies that raised money in the quarter: SenoRx Inc., an Aliso Viejo-based developer of noninvasive breast biopsy devices, $6.4 million; Lathian Systems Inc., a Newport Beach healthcare software developer, $3 million; USGI Medical Inc., a San Clemente maker of gastrointestinal devices, $1.5 million; and Novacardia Inc., a heart drug developer in Laguna Niguel, $500,000.
Copyright CBJ, L. P. Jun 23-Jun 29, 2003
