Israeli start-up MediGuide has been bought for $300 million cash by medical technology and services giant St. Jude Medical (NYSE: STJ).
Under the deal, the acquiring company is taking on MediGuide's liabilities, to the tune of $17 million, so that MediGuide's shareholders will in fact receive $283 million in cash. This sum will be paid in three installments: $138 million on the signing of the agreement, $111 million in November 2009, and up to $34 million in April 2010.
MediGuide was founded in 2000 by Gera Strommer, president and CEO, and Uzi Eichler, vice president technology, as a spin-off from Elbit Systems (Nasdaq: ESLT; TASE: ESLT), which owns 41.3% of the company, and with backing from Israeli venture capital fund Vitalife. Since it was founded, the company has raised $45 million from a small number of investors, among them Eliezer Fishman's Fishman Group, Docor International Management, and Elbit Systems. Philips and Boston Scientific have also invested in the company.
Sources inform "Globes" that the negotiations over the acquisition were short, and that St. Jude was advised by Bank of America. MediGuide did not have advising bankers.
MediGuide has developed technology and products for minimally invasive navigation and tracking within the human body. Its devices are for use in cardiac procedures and catheterization. The system consists of sensors mounted on a catheter introduced into the body, with the locating done on the basis of the distance of the sensors from several sources of magnetic radiation, with an accuracy of fractions of a millimeter.
The information from the sensors is combined with an image of the interior of the body, in a way that is similar to the way locating using a GPS device works. Since in catheterization or other invasive procedure, the human body undergoes changes, the device measures physiological indications from the body breathing, EKG, and so on and amends the picture accordingly.
Elbit Systems president and CEO Joseph Ackerman said, “We believe the acquisition provides MediGuide an excellent opportunity to continue its growth, while allowing Elbit Systems to focus on its core business areas.”
Since its foundation, MediGuide has sought collaboration agreements with large market players. The company now has agreements with Medtronic, Siemens, Asahi Intecc of Japan, Boston Scientific, and Philips. It has yet to make substantial sales.
2008 will certainly be remembered as a good year for MediGuide. In January, the company signed a collaboration agreement concerning its Medical Positioning System (MPS) intra-body navigation products with medical device giant Medtronic (NYSE: MDT). The companies will jointly develop products on the basis of MediGuide's technology. Initially, the joint development will not involve any cash element, but the agreement provides an option for future investment by Medtronic, investment that it seems will not now be required.
Vitalife jumped in, the other funds missed out
When MediGuide's two entrepreneurs were just beginning to formulate the idea and trying to raise money, they approached most of the venture capital firms that invest in healthcare companies. All, except for Vitalife, gave them the cold shoulder, among other things because the entrepreneurs were inexperienced in the medical field. More than one partner in the local venture capital industry must now be looking back eight years with frustration and regret. It is estimated that MediGuide's investors, particularly the early-stage ones, will see returns of 15-20 times their investments, a huge achievement by any standards, but particularly remarkable in the light of the returns venture capital firms have been making on sales in the past few years.
Eliezer Fishman is the controlling shareholder in "Globes."
Published by Globes [online], Israel business news - www.globes.co.il - on December 22, 2008
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