Regulation A+ attracted a lot of attention when it was part of the Jumpstart Our Business (JOBS) Act that was signed into law in 2012. The idea was to enable crowdfunding for companies as an alternative route to traditional venture capital by raising up to $50 million from a wide range of investors, regardless of their accredited status.
Initially, there was substantial concern that, particularly in the life sciences, speculative, early stage companies could take advantage of unsophisticated investors. But, instead of being over-exploited, the Reg A+ pathway has remained largely unused in biotech and med tech beyond the rare, single-digit millions fundraising.
Med tech gets an A+
In 2017, Cambridge, Mass.-based robotic motion assistance company Myomo Inc. became the first company to conduct a Reg A+ IPO to then list on the NYSE. It raised $5 million via the process last June and subsequently listed on the exchange; it even conducted a successful follow-on offering of $11.5 million later in the year. Myomo has a current market cap of $28 million.
Given the relative lack of access to venture and IPO capital within med tech, as compared to other sectors such as biotech or tech, other med-tech startups are likely to try their hand at this Reg A+ path to attract investment.
Biolife4d is the latest med-tech company to throw its hat into the ring to get a Reg A+, 'mini' IPO done. It has just launched an offering to raise up to $50 million to back its ambitious efforts to create a 3-D printed, functional heart, within roughly the next three years. It aims to sell up to 5 million shares at $10 each.
The Chicago, Ill.-based company expects it will be a good fit with the Reg A+ model, given the huge problem it's trying to tackle, which could appeal to investors motivated by doing transformational good in the world.
"With equity crowdfunding, you've got patient investors. They understand that they may not have a return in six months or a year, but they're confident that you have the ability to execute. The other thing is this has a huge social component. There's impact investing, and a lot of equity crowdfunding people are impact investors. They're certainly concerned about having a return on their investment, they're not doing donations. But, equally, they want to see their money going toward a huge social benefit," Biolife4d CEO Steven Morris told BioWorld MedTech.
Morris was previously the president of private original equipment manufacturer (OEM) Inland Midwest Corp., which merged with Medtorque Inc. in 2015. IMC was a supplier to major industry players including Medtronic Spinal and Biologics, Wright Medical, Biomet and Zimmer.
His original interest was in using 3-D printing for rapid prototype manufacturing, but that turned into an investigation of bioprinting. After consulting with an array of 3-D bioprinting experts, Morris concluded that much of the necessary research on component problems already existed, and just needed to be assembled into a whole to successfully create a functional, 3-D bioprinted heart.
"I literally went out and found the preeminent people that were doing research in those areas," said Morris. "Everyone was saying 'we're getting closer, we're getting closer,' but it's still pretty much science fiction to me. I realized that each of these people were pretty much concentrating what they're doing, and not on a process like this, but just on their individual piece of the process. And all of these people were really at the precipice of being able to of being able to take this to apply it to a process like 3-D bioprinting."
On the science side, Morris turned to a leading cardiac transplant facility with a pioneering track record, the Texas Heart Institute. It conducted the first successful heart transplant and also implanted the first artificial heart.
The Biolife4d chief medical officer is Jeffrey Morgan, the surgical director for mechanical circulatory support and cardiac transplantation at Texas Heart Institute. He is also a professor and division chief for cardiothoracic transplantation and circulatory support, the surgical director for the Advanced Heart Failure Center of Excellence, and the chair of surgery at Baylor College of Medicine. The startup's chief science officer, Ravi Birla, also has an impressive pedigree as the former associate director of stem cell engineering at the Texas Heart Institute. He just left that position to join Biolife4d at the start of 2018.
The big idea
The ultimate aim is to develop the ability to create a personalized organ, similar to an individual patient's heart as based on a 3-D image from an MRI. The cells used would originate from a blood draw to derive stem cells that are reprogrammed as heart cells, and then used to create bio-ink to print the organ to the particular patient's specifications.
Ahead of that hugely ambitious goal, Morris expects that Biolife4d could tap into some other component markets along the way, such as custom heart valves and cardiac patches.
"There's a huge need for a heat valve. Right now, they're using pig valves for transplants because that's the best we have. But it's not really a good fit; they don't really last. There's a lot of complications and the things that go along with that," said Morris.
"This would enable a solution for that, and also for cardiac patches for someone who has a heart attack," he added. "The blood stops flowing to certain parts of the heart and the tissue dies. A cardiac patch to put over that area to help the heart beat is another potential opportunity for us."
After its 'mini-IPO,' Biolife4d expects to also be able to tap more into institutional capital, as well as grants from the likes of the National Institutes of Health. And it expects this Reg A+ offering will get it enough initial cash to advance its research sufficiently to tap into further funding via grants, as well as traditional venture or private equity investors.
The patient need is certainly great. Heart disease outstrips cancer as the more common cause of death globally. Heart transplants are the most common attempt at a solution for patients with the most extreme heart failure. But transplants have their own huge drawbacks including scarcity and rejection, which make them a relatively unattractive and narrowly offered option.
"Less than 2 percent of the people that are on the waiting list actually got heart transplants last year. Think about it. For the vast majority, there's not a lot of hope; they end up pretty much dying. Even the people that get heart transplants, about 50 percent of them die within 10 years because they either reject the organs or they die as a result of the immunosuppressive therapy," noted Morris.
He concluded, "We're now at a point in humanity where we can finally have a solution for all of these people. We can take care of the supply issue by literally making custom-made bioprinted hearts for people out of their own cells, and when it gets transplanted, they won't have to have immunosuppressant therapy."