Interest in life sciences still healthy
OmniGuide is the latest to land scarce financing
Despite recent turmoil in the credit and stock markets, investors continue to pour money into local life sciences start-ups.
In the latest example, OmniGuide Inc., a Cambridge company that has developed a laser scalpel for minimally invasive surgery, plans to say today that it raised $25 million in its fifth round of venture financing, led by Psilos Group, a New York healthcare investment firm.
OmniGuide is at least the fifth Massachusetts life sciences company to raise $25 million or more in venture funding in the past month. Concert Pharmaceuticals Inc. in Lexington raised $37 million, Constellation Pharmaceuticals Inc. of Cambridge brought in $32 million, Bedford-based Resolvyx Pharmaceuticals Inc. garnered $25 million, and Stromedix Inc., another Cambridge biotech, hauled in $25 million.
"It's a good time [to raise money] if you've got a good idea and good people," said Stephen Knight, managing partner of Fidelity Biosciences in Cambridge, a venture arm of Fidelity Investments. "The pharmaceuticals industry is in need of great products and technologies. And the biotech industry has proven to be a great source of innovation."
Just in the past two months, major pharmaceutical companies have snapped up two Cambridge biotechs at significant premiums. Takeda Pharmaceutical Co. bought Millennium Pharmaceuticals Inc. for $8.8 billion, and GlaxoSmithKline bought Sirtris Pharmaceuticals Inc. for $720 million. Meanwhile, many medical device companies have also continued to find success, because of strong demand for better healthcare products.
OmniGuide chief executive and cofounder Yoel Fink said he was bracing himself to have difficulty raising money, noting the stock market upheaval, the national credit crunch, and paucity of initial public offerings this year. But Fink said he was pleasantly surprised.
"For the right kind of business, there is still significant opportunity," he said.
OmniGuide, which has raised nearly $75 million since it was founded in 2000, is based on technology pioneered at the Massachusetts Institute of Technology with government funding.
At MIT, Fink and other scientists developed a thin, flexible, hollow fiber, lined with a special mirror-like coating, that can carry a carbon-dioxide laser beam. The laser, in turn, can be used to carve away tumors or make incisions, without disrupting the surrounding or underlying tissue. And because it is carried by a flexible fiber, Fink said, doctors can thread it through a nose, mouth, or other opening (such as a tiny incision) without major surgery.
Unlike many small companies that raise venture capital, OmniGuide already has a product on the market. The Food and Drug Administration cleared its fibers for sale in 2005. OmniGuide sells the fibers, which are designed to be used only once, for $600 to $1,100 apiece, in conjunction with a $30,000 laser system made by a partner.
But sales are still modest. OmniGuide, which has 80 employees, recorded $2 million in revenue last year and is on track to take in more than $7 million this year. Fink is betting sales will grow as more hospitals and doctors embrace the system. The system is currently used mainly by ear, nose, and throat specialists, but Fink said it could in coming years be used by neurosurgeons, spinal surgeons, gynecologists, gastroenterologists, and other surgeons. Eventually, Fink said, the fiber could also be used to carry laser beams in other applications, such as telecommunications. "Fundamentally, we believe this is a better way of sending light through fibers," he said.
The company's chairman is Analog Devices cofounder Ray Stata, an early investor who served as OmniGuide's first chief executive. Other investors include 3i Group PLC, Alliance Technology Ventures, Argonaut Ventures, Electro Scientific Industries Inc., Gainesborough Investments, Mukesh Chatter, State Venture Partners, Westbury Partners, and Jeff Swartz.
Fink, the OmniGuide chief executive and an MIT materials science professor, said he plans to return to the university in mid-2009 when his two-year leave expires.
Todd Wallack can be reached at twallack@globe.com.
