Biotech Firm Boosted by a Private Offering
BiO2 raising $7.5 million for ‘game changer’ device
Premium content from San Antonio Business Journal – by W. Scott Bailey
Date: Sunday, May 23, 2010, 11:00pm CDT – Last Modified: Wednesday, May 19, 2010, 5:54pm CDT
BiO2 Medical Inc. has created a device its executives believe could save millions of lives.
The San Antonio-based company is in the process of raising $7.5 million in private equity to move that product one step closer to the market. Company officials say they plan to use the proceeds from the offering to secure a CE Mark — Europe’s equivalent to FDA approval — for BiO2 Medical’s device, the Angel™ Vena Cava Filter Catheter.
The new medical device was designed to prevent the occurrence of pulmonary embolisms in critically-ill patients. Such embolisms are usually the result of a blood clot, which forms in the leg but travels upward to the lungs where it blocks blood flow, leading to serious illness or death.
BiO2 Medical officials say the occurrence of pulmonary embolisms is on the rise, causing some 300,000 deaths annually in the U.S. and roughly another 450,000 deaths in Europe each year.
The company’s Angel™ Vena Cava Filter incorporates two functions into a single device: A temporary and removable vena cava filter and a central venous access catheter.
BiO2 Medical Chairman and CEO Christopher Banas says the new device could ultimately mean the difference between life and death for hundreds of thousands of patients annually.
According to a regulatory filing the private company is required to make with the SEC as part of its $7.5 million private equity offering, BiO2 Medical had, as of May 3, raised a total of nearly $6.7 million from 57 investors. Company President Dr. Paul Castella says the remaing $800,000 is committed and BiO2 expects to finalize that investment shortly. The company is currently in the product development stage and, according to the SEC filing, has no revenues.
Banas, who co-founded BiO2 Medical, says the cash infusion is critically important in helping the company bring its new product to market. “It will give us enough operating capital to get a CE Mark in Europe for this first-generation filter catheter that we developed,” he explains. “It will let us do all of the animal (testing) studies at Texas A&M University (and all of the) testing to support European approval.
“Our plan,” Banas adds, “is to get a CE Mark first and then work toward (FDA) approval soon thereafter.”
The CE Mark will allow BiO2 Medical to sell and distribute its new device in Europe. And that, Banas contends, represents a multimillion-dollar opportunity.
“The total market opportunity (in the U.S. and Europe) is a huge number,” he says. “It’s going to be in the billion-dollar range.”
Up for grabs
Banas also co-founded CardioSpectra Inc., a privately held company that developed innovative Optical Coherence Tomography, or OCT, technology. In 2007, San Diego-based Volcano Corp. acquired CardioSpectra for about $63 million, according to Banas.
Is there an opportunity for BiO2 Medical to leverage its filter catheter technology into a similar company sale?
“Absolutely,” Banas insists. “Our business model is that we invent technologies or license technologies, conduct all of the early product development, do the regulatory filing and then seek the commercialization. At some point during this process, we are going to see if there is a candidate out there to acquire us.
“Our intent,” he adds, “is to manufacture this (filter catheter) device and then sell the entire concept to a company as a turnkey operation with a saleable product.”
Might BiO2 Medical fetch a price comparable to the CardioSpectra sale?
“We’d like to think that it’s going to be significantly higher than what CardioSpectra brought in,” Banas says.
The BiO2 Medical team has an impressive history of product development and commercialization in the medical arena. In 2003, for example, Banas and Dr. Julio Palmaz, then partners in Advanced Bio Prosthetic Surfaces, licensed a unique stent technology to Cordis, a division of Johnson & Johnson.
Plenty of options
Karutz Flavin Wells Investment Bankers LLC has served as an advisor to BiO2 Medical and is leading its current round of financing. Meade Flavin, a partner in KFW, says most of the funding raised through the $7.5 million offering has come from private investors. He says Targeted Technologies, a medically focused venture fund headed by Alan Dean, invested roughly $1 million.
In the fall of 2009, according to SEC filings, BiO2 Medical initiated a $1 million debt offering. That debt was exchanged for equity as part of the recent offering, Castella says. The Business Journal previously reported that BiO2 Medical received $1 million from the Texas Emerging Technology Fund in late 2008.
KFW has been retained to assist BiO2 Medical with corporate development and future transactions. Flavin says Banas and Castella have an impressive track record when it comes to commercializing intellectual property.
Flavin says he expects that BiO2 Medical will attract some suitors.
“We believe BiO2 is going to be particularly attractive to strategic companies who are already in the filter and/or catheter market or to those companies who wish to enter this growing market,” he says.
Dr. Luis Angel is a co-founder of BiO2 Medical. He is also the chief medical officer for the company, the inventor of the Angel™ Vena Cava Filter Catheter and is director of Lung Transplantation and Interventional Pulmonology at the University of Texas Health Science Center at San Antonio.
Flavin says the BiO2 Medical team has earned strong investor confidence.
“There is a tremendous amount of interest in BiO2,” he says. “Investors have placed a big bet on Dr. Angel’s novel solution and the team’s ability to execute. I think it was a well-placed bet.
“The fact is, BiO2 Medical could have a saleable device in the European market by this time next year,” Flavin adds. “And this device could be a game-changer.”
In the meantime, Banas says BiO2 Medical will likely need to pursue yet another round of financing to seek FDA approval for its product and to begin the manufacturing process. And whether BiO2 Medical officials elect to market their product or sell the company, Banas suggests that they and the San Antonio entity are in a strong position.
“We have a lot of options ahead of us,” he says.