Stem cell biologics company Arteriocyte (Cleveland) and private equity firm DW Healthcare Partners (Salt Lake City, Utah) have formed a new device company aimed at developing products for cardiac, orthopedic and vascular surgeries.
DW Healthcare provided a $10 million growth capital investment to the new company.
The new company, Arteriocyte Medical Systems (Cleveland), will build off technology from Arteriocyte, which is developing therapy products from adult-derived stem cells. Initially it will be located at Bioenterprise, a nonprofit in Cleveland, along with Arteriocyte.
Don Brown, CEO of Arteriocyte, will also serve as the CEO for the new company.
Arteriocyte was formed in 2004 as a spin-off of Case Western University (Cleveland) and the National Center for Regenerative Medicine. According to the company. it is the first in the U.S. to win FDA clearance to enter human clinical evaluation of catheter-based delivery of adult-derived stem cells (hemangioblasts) to treat chronic ischemia.
Brown told Medical Device Daily that Arteriocyte has grown over the last four years into developing stem cell biologics for regenerative medicine. He said the company has talked to a number of “very interested growth investment teams” that envision a convergence of medical devices and regenerative medicine in the near future, and Arteriocyte decided that the best way for that to happen was to form a new entity that would be focused more on development of devices need for these applications.
That will allow Arteriocyte to continue working on the R&D side, with the new company focusing more on the device side of the market, he said.
“Arteriocyte Medical Systems represents a significant expansion of our continuing strategy to acquire and develop leading clinical technologies for the medical marketplace,” Brown said. “We are excited to partner with one of the country’s leading healthcare private equity firms — DW Healthcare Partners. With their support, we can pursue a more aggressive growth and development strategy.”
Brown said the new company not only will develop new devices but also will identify and acquire existing products with “significant growth potential beyond their current use.”
“We are going to have a strong acquisition appetite,” he said.
Three executives from DW Healthcare — Jay Benear, MD, Rod Boone, and Doug Schillinger — will join the board of Arteriocyte.
DW Healthcare has more than $200 million under management. But Brown said the equity firm would play a bigger role in the new company than just providing investment money.
“DW brings a wealth of management experience in the medical industry,” Brown said.
Benear, a founder and managing director at DW Healthcare, is a clinically trained oncologist who worked for and then led Cancer Care Associates merger with US Oncology in 1995, Brown said. Under his leadership, CCA and then US Oncology grew from 15 to 42 doctors in four cancer centers, to almost 900 physicians treating 9,000 patients and generating more than $100 million in net revenue in 2000.
Boone has more than 20 years of experience building and operating healthcare companies, Brown noted. Before joining DW Healthcare, he was president/CEO of Royce Medical Holdings, a private equity owned orthopedics manufacturer. He also has been an executive at Syncore Pharmaceutical Services, Allegiance Healthcare and Baxter Healthcare.
Before joining DW Healthcare, Schillinger, who will serve as the new company’s chairman, worked for Bain, an international strategy-consulting firm. While there, he evaluated investment opportunities in a number of industries and functions including healthcare services and assessed potential deals ranging in size from $20 million to $2 billion.
Arteriocyte develops cellular therapies using multiple sources of adult-derived stem cells (marrow, peripheral blood and umbilical cord blood) to treat diseases where ischemia is the cause or a contributing factor in the disease progression.
Roberts Mitani acted as investment banker and placement agent on behalf of Arteriocyte in this transaction.