@ EndoChoice raises $43 million | SEBIO

EndoChoice raises $43 million

Posted by on Jan 4, 2013

ALPHARETTA, GA – Medical device maker EndoChoice Inc. has raised $43 million from Sequoia Capital and existing investors to broaden its product offerings.

EndoChoice develops and sells gastrointestinal-related medical equipment and devices to GI physician offices, hospitals and surgery centers. The company plans to add more than 100 jobs in the next several months.

The capital infusion will, among other things, allow EndoChoice to develop and sell endoscopes — thin, flexible tubes outfitted with lighted ends and miniature cameras that allow physicians to visually inspect, diagnose and treat cancers and other diseases in the GI tract.

Menlo Park, Calif.-based Sequoia, which has invested in Apple, Google and LinkedIn, has a track record of building billion-dollar companies and taking them public, EndoChoice CEO Mark Gilreath said.

“Our intention is to grow a great company,” Gilreath said. “We believe EndoChoice would be a good candidate for an IPO.”

Sequoia’s investment in EndoChoice indicates Atlanta can develop sustainable businesses, said David Hartnett, past-president of the Southeastern Medical Device Association.

“It’s validating in a great way Atlanta’s technology company inventory,” said Hartnett, also a vice president at the Metro Atlanta Chamber. “Sequoia has not only invested in EndoChoice, but has looked at numerous medical device and technology companies in Atlanta.”

Sequoia’s investment is likely to draw interest from other venture firms.

“When you get a Sequoia to come in,” Hartnett said, “you’re going to see Kleiner Perkinsand the larger funds analyzing the territory for deals.”

As part of the capital raise, EndoChoice will merge with Peer Medical Ltd., an Israel-based company that has developed a GI endoscope that allows physicians to detect more cancerous polyps during colonoscopies. Currently, EndoChoice does not sell endoscopes — a primary tool for GI physicians.

Conventional endoscopes have a 170-degree field of view, Gilreath said. Peer’s endoscope has a 330-degree view, making it a far more effective diagnostic tool.

“Conventional scopes are comparable to driving a car without side windows,” Gilreath said. “The Peer scope provides the side windows for a full view and it’s a tremendous difference.”

Peer Medical’s endoscopy technology has been fully developed and undergone clinical trials to demonstrate safety and effectiveness. EndoChoice plans to take it to market in 2013. EndoChoice will also use the $43 million to acquire RMS Endoskopie, a German GI endoscope developer and manufacturer.

By broadening its portfolio, EndoChoice is able to offer doctors a comprehensive GI procedure kit — which includes the devices, diagnostics, equipment and supplies needed for a procedure. That saves the health-care practice the hassle and cost of sourcing individual items from multiple suppliers.

“When we go into a GI practice, we’re selling a superior experience for the GI caregiver,” Gilreath said earlier. “Most of the GI departments we walk into, today, are dealing with 23 different vendors. They should be dealing with seven.”

EndoChoice competes in a $7 billion global GI endoscopy market that is highly fragmented, with numerous players having just one product to sell. The acquisition is part of Gilreath’s plan to make EndoChoice a “platform company” — or one that offers a complete array of products relating to a particular medical specialty.

“We have a very special advantage, with not only the broadest portfolio, but a highly differentiated portfolio, because we do our own R&D,” he said.

EndoChoice, which was launched in 2008, expects revenues of more than$33 million in 2012. EndoChoice profit margins, Gilreath said, are consistent with medical technology companies — which he pegged at more than 50 percent. The company recently achieved profitability and has raised about $16 million so far from investors: Cincinnati-based River Cities Capital Funds; Nashville, Tenn.-based Council Capital; and Virginia Beach, Va.-based Envest Private Equity.

In February, the company, which has almost 200 employees, expanded its headquarters in Alpharetta by 70 percent, to 60,000 square feet, the third time in the past two years it has increased its square footage to keep up with growth.

Last year, EndoChoice acquired Interactive Optics Inc., a Nashville-based endoscope repair company that had been an EndoChoice strategic partner for the past four years. It also opened distribution, assembly and manufacturing operations in Reno, Nev., to help the company better serve West Coast customers.

EndoChoice has more than 2,500 customers in the U.S., and offers more than 500 products.

EndoChoice Inc.

Background: Develops and sells gastrointestinal-related medical equipment and devices to GI physicians, hospitals and surgery centers. The company plans to add more than 100 jobs in the next several months.

In the news: EndoChoice raised $43 million from Sequoia Capital and existing investors. As part of the deal, EndoChoice will merge withan Israeli endoscopy developer and acquire a German endoscopy manufacturer.

 

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