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Domain Elite Invests $6.5M in GI Device Maker to Expand in China

Xconomy San Diego — 

When Domain Associates unveiled an initiative to commercialize new healthcare technologies in China last year, partner Brian Halak said one of the big challenges would be getting biomedical innovators to license their technologies for the huge, but still-developing market.

The venture firm, which is based in San Diego and Princeton, NJ, has been thinking outside the box for the past few years in terms of developing new business models for venture investing in the life sciences. Halak told me last year that the concept of Domain’s initiative in China was comparable in some ways to The Foundry, the Menlo Park, CA-based incubator for medical devices.

Now, after 13 months, the partnership that Domain established with Elite Consulting in Beijing is announcing its first move—although it’s not a licensing deal per se. Instead, the Domain Elite partnership says it has invested $6.5 in Smart Medical Systems, an Israeli company with innovative endoscopy and colonoscopy products, as part of a multi-phase effort to move Smart Medical’s gastrointestinal technologies into China, Hong Kong, and Taiwan.

Domain Elite has some other deals in the works as well, and Halak says each one has been structured a little differently. In the Smart Medical deal, Halak said a tight collaboration with the device maker proved to be a better approach than trying to in-license the Israeli company’s technology.

Smart Medical's endoscope

Smart Medical’s endoscope

Smart Medical has a subsidiary in Hong Kong, and apparently already had ambitions in the region. Still, it can be difficult for a small company to pursue the healthcare market in China. So part of Domain Elite’s $6.5 million investment is allocated directly to the subsidiary, according to a joint statement being released today.

Smart Medical, founded in 2005 in Ra’anana, Israel, has developed an approach that incorporates balloon catheters in the design of its endoscopes and colonoscopes, the medical devices that use a flexible tube equipped with a camera to look at the inside the human digestive tract. An endoscopy procedure examines the upper gastrointestinal (GI) tract (the esophagus, stomach, and small intestines) while a colonoscopy looks at the lower portion of the GI (large intestine, colon, and rectum).

Smart Medical Systems NaviAid G-EYE endoscope 2In the United States, such examinations are used mostly to screen for signs of cancer along the inner wall of the GI tract. The device used in the exam also has a tool that can be used to remove pre-cancerous polyps in the gut.

Smart Medical’s flagship product is designed with a balloon that can be inflated to make it easier for doctors to find pre-cancerous polyps, which can be obscured by the natural folds of the colon. The company also has designed another balloon device that attaches to the end of its endoscope, so doctors using the device can advance the endoscope faster and farther into the gut.

Procedures that usually require general anesthesia and can take 60 minutes or longer can be done using Smart Medical’s technology with local anesthetics in 15 to 20 minutes, according to Smart Medical CEO Gadi Terliuc.

“We see it as a much-easier procedure for physicians,” Terliuc said yesterday from Israel during an international conference call that included Halak in New York and Domain Elite CEO Micah Zimmerman in Beijing. “The physician training is easier, and the procedure itself is much less expensive.”

Cancer is the most common cause of death in China, and colorectal cancer has become the second most-frequent type of cancer, Zimmerman said. Early screening and detection can make a big difference in the survival rates of patients diagnosed with colorectal cancer.

Endoscopies and colonoscopies are fairly common in the United States (about 15 million colonoscopies are done in the U.S. annually), but Zimmerman said such procedures are still relatively new in China. He said the Chinese market for such procedures is growing by 30 percent to 40 percent a year, and predicts that growth will continue in China for years to come.

Smart Medical’s technology is currently marketed in Europe, and two of the company’s three products have been cleared for use in the United States. CEO Terliuc said the Domain Elite investment also would help the company advance its related technologies in the United States and other global markets.