All-Michigan VC Team Helps Bring State-Grown Medical Imaging Technology to Market

6/3/10

There are three reasons Michigan can feel good about a recent $8 million venture capital investment in Detroit-based medical imaging company Delphinus Medical Technologies.

  1. It is an investment in a Michigan company;
  2. The investment comes from an all-Michigan VC team;
  3. It is an investment in Michigan-grown technology developed in one of the state’s premier research institutions—one that deals with real-life cancer cases every day.

Delphinus Medical’s breast-cancer-detection technology, SoftVue, has been undergoing development at the Barbara Ann Karmanos Cancer Institute in Detroit for the past 10 years. Unlike mammography, it does not use radiation or compression to image the breast to detect early stages of breast cancer.

Instead, the breast is submerged in warm water and surrounded by an ultrasound ring that emits sound waves, detects the waves that are reflected off the breast tissue, and measures the speed and attenuation of the waves that pass through the tissue. (Conventional ultrasound devices rely on reflected soundwaves alone.)

The Delphinus system then employs sophisticated computer algorithms to translate the ultrasound data into detailed, three-dimensional images of the tissue.

According to Delphinus CEO Bill Greenway, the system not only avoids the discomfort and radiation associated with traditional mammography but can also help differentiate between different types of cancers and avoid unnecessary biopsies.

“Detecting cancer earlier, particularly in breast cancer, is really not the Holy Grail anymore,” Greenway says. “The thing that really is necessary today is to detect and be able to differentiate between those cancers which are aggressive and potentially will cause great harm to the woman versus those that really won’t.”

Delphinus_1So, while the SoftVue’s broader application could eventually be as a screening tool to replace mammograms, the most-compelling—and near-term—application is its boosting accuracy in the diagnostic phase, possibly helping women avoid unnecessary, painful, and costly biopsies.

It’s what has Michael Gross, managing director for investor Beringea, excited about Delphinus. Beringea, with offices in Farmington Hills, MI, co-led the startup’s financing last month.

“From a market perspective, that’s what gets us excited because you can see how you can cut significant costs out of the system with a more-accurate, noninvasive diagnostic technology,” Gross says. “And it’s better for the patients because nobody wants to have a biopsy when they don’t need one.”

What really sealed the deal for Gross, who did the due diligence for Beringea, was the wealth of actual patient data from Karmanos. Real patients signed wavers and helped test and refine the system.

“That’s the beauty of having the technology spun out of a busy center like that,”Gross says. “You really have that bench-to-bedside development potential.”

Also impressive, says Gross, was the leadership team—particularly CEO Greenway, a former engineer at General Electric who went on to hold leadership positions at imaging companies InfiMed, Lodox Systems, and Hologic. Greenway got involved with Delphinus a couple of years ago, when researchers at Karmanos were ready for a nonscientist to take the technology to the next level. What sold Greenway was the unique technology combined with its potential to fill an unmet need in the market.

The next step, Greenway says, is to use this $8 million infusion to significantly refine the system’s design and then build 10 of them to send out to large medical research institutions. That in turn will help validate initial findings in order to win FDA approval.

Beringea co-led the Delphinus deal through its InvestMichigan! Growth Capital Fund, which provides expansion capital to promising Michigan businesses. Beringea co-manages $100 million of the $175 million fund, doing lead or co-lead investments in later-stage VC deals. Credit Suisse manages the other $75 million, doing primarily co-investments.

Also leading the Delphinus investment was Arboretum Ventures of Ann Arbor, MI. And joining them was North Coast Technology Investors, with offices in Ann Arbor and Midland, MI.

The investment was significant for Michigan because all of them are Michigan-based VC groups. Is this a sign that the VC climate is improving here?

“I think it’s definitely a step in the right direction,” Gross says.

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