from the July 2010 issue

Medtronic invests $70m. in cardiology Co BioControl

Medtronic Inc. (NYSE: MDT) will invest $70 million in Israeli medical device start-up BioControl Medical Ltd. Medtronic also obtained an option to acquire BioControl for $550 million, subject to the company obtaining approval from the US Food and Drug Administration (FDA) for its proprietary implantable nerve stimulation devices. Medtronic also has an option, which is highly unusual: if BioControl fails to complete the clinical trials of its devices or obtain FDA approval for them, Medtronic can still acquire the company for $350 million. Medtronic and BioControl signed the strategic agreement a few days ago, after several months of negotiations. BioControl's devices are designed to control muscles through nerve stimulation. In 2006, it sold its urology product to American Medical Systems Inc. for $50 million.

Yossi Gross and brothers Eyal and Boaz Lipshitz founded BioControl in 1999. On the basis of Gross's invention, the company began developing products and raising capital. Investors include Pitango Venture Capital, GlenRock Israel, Vitalife Life Sciences Venture, Tamir Fishman Venture Capital's (TASE: TFVC) Eucalyptus Ventures, Biomedical Investments Ltd. (now owned by Clal Biotechnology Industries Ltd. (TASE: CBI)), and Switzerland's HBM BioVentures.

Since the sale of its urology product line in 2006, BioControl has focused on development of the CardioFit system, the first device in the world for treating heart failure through nerve stimulation of the heart muscle instead of directly aiding the heartbeat. CardioFit stimulates the vagus nerve in the neck with an electro-stimulator that is monitored by an intra-cardiac electrogram (EGM) sensor. Preclinical trials indicate that stimulating the vagus nerve reduces heart failure and improves heart function.

BioControl still has a long way to go, with at least three years of clinical trials ahead of it. Medtronic's investment is intended to help finance the trial's and reduce the pressure on and uncertainty for BioControl.

BioControl's management deliberated between signing an investment agreement with an option to sell with Medtronic, or making a financing round. Times are hard, even for a company with a proven track record, for raising capital from new investors, so BioControl opted for the deal with Medtronic.

The investment in BioControl is Medtronic's second major move in the Israeli life sciences market, following the acquisition of Ventor Technologies Ltd. for $325 million, and the establishment of an innovation center for seeking technologies of interest to the medical devices giant.

Reprinted from the Israel High-Tech & Investment Report July 2010

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