Burlington, MA-based ConforMIS has tapped government and private funds around the globe to raise $50 million, providing a huge financial boost to expand its business of providing patients with customized knee implants based on CT or MRI scans of their damaged knees.
ConforMIS chairman and CEO Philipp Lang tells me the company drew investments for its Series D financing round from sovereign funds of Kuwait and Singapore, both new investors in the firm, as well as private equity investors such as previous backer Aeris Capital, of Zurich, Switzerland and Palo Alto, CA. Other investors in the financing round, which wrapped up in June, weren’t disclosed because they asked not to be named, Lang says. The capital is expected to fuel growth of the firm’s U.S. and European sales forces, which are focused on selling its approved knee implants. Lang also says the firm’s technology could be used to develop products for other major joints, such as hips and shoulders.
This financing round is notable because of its large size, especially in the midst of an economic slump. It’s also worth noting the significant contributions from foreign sources. For ConforMIS, which provides products for patients whose arthritic or damaged knees require reconstructive surgery, the funding will improve its ability to push adoption of a relatively new way of making knee implants based on the precise dimensions of each patient’s anatomy. Lang, who founded the company in 2004, says his 90-employee operation is poised for significant growth now that the financing deal is closed.
“We did this fundraising to build this into a full-fledged orthopedics company with a much broader product portfolio in the future,” says Lang, a radiologist who practices on a limited basis at Brigham and Women’s Hospital in Boston. “That doesn’t happen overnight, but that will be an ongoing process over the next couple of years.”
Though it has differentiated products, ConforMIS is up against some much larger and more established competitors in the multibillion-dollar global market for knee implants, such as Johnson & Johnson (NYSE:JNJ), Smith & Nephew, and Stryker (NYSE:SYK). Yet demand for knee implants is expected to grow as aging Baby Boomers seek knee replacement surgeries to stay active.
ConforMIS seeks to both improve implants and make procedures to reconstruct joints less invasive. Lang says that the personalized shape of the firm’s knee implants help reduce the amount of bone surgeons need to remove from patients’ joints. The company also makes surgical instruments for individual patients with the same CT and MRI scans used in the process of making their implants. These customized instruments are designed to guide where surgeons cut and drill into the knee to install the implant, eliminating the need for certain tools and steps that are common in such procedures. ConforMIS says that other manufacturers make knee implants and related surgical instruments in set sizes that are not tailored for individual patients. (Rebecca drilled into the key innovations that ConforMIS brings to the market for knee implants in an in-depth company profile in 2007.)
The company, which does not disclose specific product costs publicly, also plans to complete a study in the near future to show that its knee implants and instruments provide economic benefits because they contribute to shorter surgery durations and post-operation hospital stays for patients than procedures using standard products and surgical techniques. The firm’s implants are comparably priced with other new designs for knee replacements made by other manufacturers, according to Jong Lee, the company’s senior vice president of marketing and business strategy.
“What we are trying to build into our business strategy,” Lee says, “is that all told, when everything is done, we think we can deliver one of our procedures at basically comparable cost to a standard knee-replacement procedure.”
ConforMIS plans to use the latest financing, which was preceded by three equity rounds totaling a bit more than $30 million, to expand its U.S. sales force to be able to cover the entire country. In Europe, the company already has a sales team based near Nuremberg, Germany, and it plans to grow its European presence to include a sales office in the United Kingdom. The company began marketing its products in late 2007. Lang notes there could be future partnerships with the company’s new investor, the government of Singapore, which contributed to the firm’s financing through its life sciences fund, Bio One Capital. Singapore often invests in U.S. companies that at least show an interest in doing business in the Southeast Asian country.
“Bio One Capital is truly a value-add investor from the perspective that we are actively looking into manufacturing resources and market expansion in Asia,” Lang says, “and I’m sure in due time they will be helping us there.”