KALAMAZOO — The $77 million investment in Ablative Solutions Inc. ranks as the largest known venture capital deal ever in Michigan, possibly helping draw more attention to the state’s life sciences research and development.
Netherlands-based Gilde Healthcare led the Series D financing round in Kalamazoo-based Ablative Solutions, which developed a catheter system to treat uncontrollable hypertension by deactivating nerves in renal arteries.
Petoskey-based BioStar Ventures, Michigan Accelerator Fund 1 in Grand Rapids, and Novus Biotechnology Fund in Kalamazoo co-led the venture capital round, which includes an unnamed major strategic investor and several local investors, some of whom have backed the company since its beginning in 2011.
The investment will fund the company over three to four years through a pivotal late-stage clinical trial in the U.S. and Europe to prove the treatment’s safety and effectiveness, then through U.S. regulatory approval and, if successful, a possible sale and exit for investors.
“We have enough money to get to what I would consider the finish line,” Dr. Tim Fischell, the founder, CEO and chief medical officer at Ablative Solutions, told MiBiz.
The company’s push toward the finish line could involve an acquisition, which Fischell calls the “most likely outcome.” The unnamed major strategic investor is one potential suitor for Ablative Solutions. The company made the investment “definitely with an eye toward acquiring this technology, of course assuming that it works, is safe and effective, and that we get FDA approval,” he said.
“They’re looking for a most likely exit over the next three or four years,” said Fischell, a serial inventor and entrepreneur who’s also a physician at the Borgess Heart Institute in Kalamazoo.
The investment reflects the continued maturity of venture capital-backed companies in Michigan, many of which started years ago and have steadily progressed in developing medical innovations, said attorney Phil Torrence, managing partner at the Kalamazoo office of Honigman LLP, who represented Ablative Solutions in the deal.
The investment’s size and the involvement of a global venture capital fund could bring added attention to the life sciences sector in Michigan, Torrence said.
“It’s a great win for everybody involved. We still have a way to go, but it definitely puts us on the map,” he said.
Torrence also served as legal counsel for two other significant deals that closed in December involving West Michigan-based life sciences companies: Grand Rapids-based Tetra Discovery Partners Inc. and Innovative Cardiovascular Solutions LLC of Kalamazoo.
‘RAISES THE BAR’
The three deals combined provide further indication of the progress that’s been made in Michigan’s life sciences industry and firms’ ability to attract larger capital investments from outside of Michigan to continue into later stages of development.
“There’s obviously some good activity that out-of-state money is looking at and deciding to put their money into,” Torrence said. “Time will tell, and the proof will be when we actually have a nice return on investment for everybody who’s put their money in, both local investors and the new investors that have come in to all these companies. The key is to make them a success.”
Previously, the largest publicly disclosed venture capital deals in Michigan were for $70 million in October 2017 for Duo Security Inc. in Ann Arbor, which last September announced a sale to Cisco Systems Inc. for $2.35 billion, and a $62 million investment in Ann Arbor-based Millendo Therapeutics Inc. in January 2016.
To Dale Grogan, a managing director at Michigan Accelerator Fund I, the investment validates a decision to become one of the early backers of Ablative Solutions. Like Torrence, Grogan also believes the deal and the involvement of Gilde Healthcare can draw more attention and outside investors into Michigan.
“The fact that you have a top 25 fund in the world, that raises the bar a little bit,” he said. “That speaks volumes.”
Ablative Solutions’ Peregrine System Kit targets nerves that influence the body’s regulation of blood pressure. Through a minimally invasive outpatient procedure, the kit delivers dehydrated alcohol in small doses directly to a space outside of the renal artery to block the overactive signaling of nerves.
The kit has the potential to go beyond treating hypertension for use in renal denervation procedures to treat medical conditions involving the heart and kidneys, Fischell said.
“Hypertension is the first application of this technology, but not likely to be the only one and (the other applications) may in some way actually be more interesting,” he said. “I believe there will be potentially other applications that in total could be as large as the hypertension opportunity with this same technology.
“If it works, we think we have a very robust technology and opportunity.”
The global clinical trials will involve up to 600 patients from at least 50 sites in the U.S. and Europe, and could take two to three years to complete.
The Ablative Solutions investment followed significant deals in two other life sciences based in the region.
Japanese pharmaceutical company Shionogi & Co. Ltd. formed a strategic partnership and invested $40 million in Grand Rapids-based Tetra Discovery Partners, a firm that’s working to commercialize a new drug compound that could treat Alzheimer’s disease and a form of autism.
The investment potentially could quadruple to $160 million through additional payments if Tetra Discovery meets clinical, regulatory and commercialization milestones, as well as through future royalties.
The initial $40 million strategic investment comes through an upfront $5 million payment for a licensing fee and a $35 million minority equity investment in Tetra Discovery. In exchange, Tetra Discovery granted Shionogi & Co. development rights to the drug compound in Japan, Korea and Taiwan.
“This is the partner that we’ve been looking for,” founder, Chairman and CEO Mark Gurney said of the Shionogi investment.
“It gives us the runway to achieve proof of concept in patients with our lead program,” Gurney said. “Should either the autism trial or the Alzheimer’s trial report out positive results, that would be our stepping stone to an IPO.”
Also in December, Innovative Cardiovascular Solutions, the developer of a device to improve patient safety during a heart procedure, closed on $8 million in capital raised to support clinical trials and production.
The Series C capital round supports further development of the company’s Emblok Embolic Protection System that’s designed to collect debris in the blood that may dislodge during a transcatheter aortic valve replacement. The device is designed to reduce the chance of a blockage and prevent a potential stroke or other neurocognitive damage.