Long-Time Mayo Portfolio Company Torax Medical Lands $25 Million Financing
Long-time Mayo Clinic Ventures portfolio company Torax Medical of Shoreview has completed its biggest equity financing round yet, with the VC arm of the Rochester health care giant again taking part.
Torax, founded in 2002 by veteran medical device executive Todd Berg, announced last week it had completed a $25 million Series E financing round, its largest so far. The company’s previous record was $16 million in 2012, according to Securities and Exchange Commission records.
The latest round was led by the pharmaceutical conglomerate Johnson & Johnson and included participation by existing investors such as Sanderling Ventures, Thomas McNerney & Partners, Accuitive Medical Ventures, Kaiser Permanente Ventures and Piper Jaffray Companies.
Also on that list is Mayo Clinic Ventures, which was one of the earliest investors in Torax thanks to the participation of Mayo researchers in the development of the company’s “magnetic sphincter” devices for treating Gastroesophageal Reflux Disease (GERD) and fecal incontinence.
The big financing comes hot on the heels of an announcement that a clinical team at Mayo's Jacksonville, Florida campus in April became the first to successfully implant Torax’s FENIX Continence Restoration System in four patients.
Both the fecal incontinence device and Torax’s device for GERD, called LINX, are based on its technology of small bands of interlinked magnetic titanium beads that use their attraction to mimic the functions of the anal sphincter in the case of fecal incontinence, and of the esophageal sphincter in GERD patients.
Torax received a humanitarian device exemption for FENIX from the U.S. Food and Drug Administration in December, meaning the device can be used in patients with the approval of a hospital's Institutional Review Board. Mayo Clinic is the first and, as yet, the only medical center to approve use of the device.
The humanitarian status for FENIX is because it addresses accidental bowel leakage, which “can be debilitating due to social isolation, depression, loss of self-esteem and self-confidence,” according to Paul Pettit, M.D., a female pelvic medicine and reconstructive surgery specialist at Mayo Clinic. The condition is especially common in women over 45 — some 20 percent of that group can be affected. Often the cause is childbirth, when the muscles and nerves near the anus are damaged.
Current treatment options are very limited with many patients ultimately requiring a colostomy. The FENIX device, on the other hand, requires only a minimally invasive, 45-minute surgical procedure, begins working immediately after implant and does not require activation by the patient or post-operative adjustments by a physician.
When the system is implanted, the string of magnetic titanium beads is placed around the anal canal in the closed position. The intentional passage of stool provides enough pressure to open the beads, then the magnets spontaneously close again.
Berg said in a statement he will use the $25 million to scale up the commercial rollout of the FENIX and LINX devices in both the United States and Europe.
Insurers have begun covering the devices and the market has quickly responded. For instance, the LINX system was granted coverage in April by Health Care Service Corp., the fourth-largest commercial health insurer in the U.S., including Blue Cross Blue Shield organizations in Illinois, Montana, New Mexico, Oklahoma and Texas covering some 15 million enrollees. It deemed the LINX system was “a viable alternative to gastric surgery as an effective way to counter chronic heartburn and acid reflux.”
“Strong commercial success of both our LINX and FENIX devices has established a foundation that we will now use to accelerate our sales growth,” Berg said. “Our goal is to provide first-line, minimally invasive therapies to patients suffering from GERD and FI. These chronic diseases are both debilitating to patients' quality of life and a major economic burden on our healthcare system.”
The financing, he added, “will significantly expand patient access to the unique clinical benefits of the LINX and FENIX products.”