California is seen by Frazier Healthcare Ventures (Seattle/Palo Alto, California) as “first and foremost on the cutting edge of medical devices,” says Nathan Every, MD, general partner of the venture capital firm, which forthrightly describes itself as “West-Coast-centric.”
But the absence of a “Left Coast” location doesn’t lock an entrepreneurially oriented device firm out of Frazier Healthcare Ventures’ FH V fund plans, just closed at $475 million, Every told Medical Device Daily.
A California or other Pacific Coast address isn’t “a hard and fast rule” for targeting Frazier Healthcare investment dollars, he said.
Overall, about one-third of the newly closed fund will go to the medical device sector, according to Every, a former practicing cardiologist. And while about an 80% slice of the company’s medical-device pie will be focused westward – a reasonable premise given the company’s office locations – the rest may go to firms anywhere in the country.
He noted that Frazier Healthcare already has made key investments in device firms in the East, primarily in North Carolina.
Closing of the FH V fund brings to more than $1.2 billion the investments under management, and the firm said that the recent closing “solidifies [our] national standing as one of the top five firms dedicated to healthcare venture investing.”
Providing a further breakdown of the company’s financing expectations, Every said Frazier will put the majority of its investments into early stage firms looking for their very first funding – even in the proof-of-concept phase – with about 25% going to later-stage companies, perhaps even those with FDA approvals.
Another emphasis of this “bifurcated” approach, he said, is to look for “serial entrepreneurs” and “very large markets.”
Using a sports analogy, he said Frazier Health looks not just for a particular device type (i.e., a “position” player) but for the “best athlete – great entrepreneurs have great ideas. We’re open to anything.”
These potential “great idea” areas range from the cardiovascular and less-invasive surgical arenas to the “GI [gastrointestinal] space to obesity,” he said. “We certainly target physician users who embrace new technologies.”
Frazier reported that its V fund recently made its first investment in FoviOptics (Santa Clara, California), describing it as “a mid-stage medical device company” developing a non-invasive glucose monitor that will read blood glucose levels by means of shining a light into a patient’s eye.
Frazier puts the annual market for glucose testing equipment and disposables at more than $5 billion, and that a pain-free device such as the one being developed by FoviOptis will drive more frequent testing, better disease management and lowered healthcare costs.
Founded in 1991, Frazier Healthcare Ventures reports having made investments in more than 85 “emerging” healthcare companies. It says that the experience of its investment team “encompasses product development and launch, clinical trial implementation and design, industry operating experience, academic research and clinical practice.
Besides Every, the seven general partners of Frazier Healthcare Ventures are Alan Frazier, Nader Naini, Dr. Jamie Topper, Patrick Heron, Trevor Moody and Tom Hodge. Hodge, Moody, Heron, Topper and Every were promoted from partner to general partner with the closing of Frazier Healthcare V.
Combined, Frazier has a 13-member investment team, which it calls “one of the largest teams solely dedicated to healthcare venture investing.”
In other financing activity:
• Alliance Imaging (Anaheim, California) reported that it has commenced an offer to exchange up to $150 million of its 7-1/4% senior subordinated notes, due 2012, for any and all of its outstanding 7-1/4% senior subordinated notes, due 2012, issued in a private placement.
The sole purpose of the exchange offer is to fulfill the obligations of Alliance Imaging with respect to the registration of the private notes.
The exchange offer will expire, unless extended, at 5 p.m., EDT, on June 27.
Alliance is a national provider of shared-service and fixed-site diagnostic imaging services, providing these services primarily to hospitals and other healthcare providers on a shared and full-time service basis, in addition to operating a number of fixed-site imaging centers. The company had 466 diagnostic imaging systems, including 354 MRI systems and 56 PET or PET/CT systems, and more than 1,000 clients in 43 states at March 31.
• Universal Health Services (UHS; Edina, Minnesota) reported that it entered into an amendment of its revolving credit agreement on May 26, increasing the aggregate facility size from $100 million to $125 million and extending the maturity by around 1.5 years to May 2010.
The amendment also reduces the applicable borrowing spreads and modifies the financial covenants to provide more operating flexibility for UHS and provides for higher borrowing base advance rates such that the existing borrowing base increased from approximately $90 million to $110 million at closing.
Gary Blackford, president and CEO of UHS, said, “Our increased flexibility and capacity will allow us to grow as the leading medical equipment lifecycle services company well into the future.”
UHS is a medical equipment lifecycle services company, offering solutions designed to maximize utilization, increase productivity and support patient care, serving customers in all 50 states and the District of Columbia.
• Ardent Health Services (Nashville, Tennessee) reported the extension of the expiration date for its previously announced cash tender offer and consent solicitation by its subsidiary, Ardent Health Services Inc., for its outstanding 10% senior subordinated notes, due 2013, from 5 p.m., EDT, on June 13 to 5 p.m., EDT, on June 27. The company reported receiving tenders and consents from holders of $224.97 million in aggregate principal amount of the notes, representing about 99.99% of the outstanding notes.
The price determination date will be 2 p.m., EDT, 10 business days prior to the expiration date.
Ardent currently owns 34 hospitals in 13 states, providing a range of medical/surgical, psychiatric and substance abuse services.