Innovative Spinal Technologies Jilted, Now Bankrupt, Source Says
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CEO Scott Schorer, a former Army Ranger and Olympic rower who had been with the company since its founding as a research incubator in 2002.
Whether or not personnel issues were part of the problem, the money seems to have turned over quickly at IST. “To go through $75 million in 41 months is quite a burn rate,” the source says. “My personal opinion is that the money wasn’t spent wisely or effectively.”
Multiple voicemail messages for Schorer requesting comment on the situation—left at his IST office and with a business partner at Roosevelt Ridge, a Boulder, CO, real estate development Schorer founded—had not been returned as of this writing. We were able to reach Victor Polk, an attorney at Greenberg Traurig who represented IST, but Polk said he could not speak for the company and referred all questions to Schorer.
The medical device company that had reportedly been courting IST, Biomet Spine, is a subsidiary of Warsaw, IN-based Biomet, best known as a manufacturer of synthetic replacement hip and knee joints. We contacted Biomet this morning to get its side of the story, but Barbara Goslee, Biomet’s director of corporate communications, said the company had no comment on the matter. “It’s not our practice to respond to this type of report or request,” she said.
IST’s attractions to potential buyers may have been dimmed by quality-control issues that earned it a warning letter from the U.S. Food and Drug Administration in 2007. “In this case there was no action by the FDA—it was purely a warning—but those don’t happen very frequently, and I think it speaks to some of the management issues we had,” our source says.
The former employee claimed to have contacted in Xconomy in order to preempt potential misinformation about the reasons for the company’s failure. “I’m sure the spin will be that the spine market is tough, and raising money is tough, and all of these things prevented a company like IST from begin successful,” the source says. “That is clearly not true. Companies are still raising money and even thriving in the spine market. But we did do some good things, and I hope these products eventually find a good home at a well-managed company.”
Update, Feb. 3, 2009: We’ve now published a third story looking deeper into the causes of IST’s shutdown. It includes responses from IST CEO Scott Schorer.