SurgRx Raises $21 Million Series E
By Lisa Lacy
July 26, 2005 -- In an effort to replicate its success with radiofrequency device start-up Novacept Inc., New Enterprise Associates said it invested in SurgRx Inc., developer of a nanotechnology-based vessel-sealing instrument. The company closed $21 million in Series E financing in late May.
New investor NEA led the round that originally targeted $15 million and closed after only five weeks of fund raising, according to Chief Financial Officer Ed Unkart. All existing investors participated, including Alta Partners, Prospect Venture Partners and California Technology Ventures.
SurgRx President and Chief Executive David Clapper was previously the CEO of Novacept, a Palo Alto, Calif.-based start-up which developed a device to treat abnormal uterine bleeding and was sold to Cytyc Corp. for $330 million in early 2004 after raising $73 million in funding.
Unkart said Novacept was a good investment for NEA and so "when we did the Series E, we went to investors we had worked with before, figuring we could do the financing much quicker and would see if that worked and NEA liked what they heard."
"We were able to get invested more quickly than if we had been complete strangers," Unkart added.
NEA General Partner Ryan Drant concurred, saying of Clapper, "We really followed him...They had just begun fund raising and we pounced on it."
According to Drant, NEA bought 12% of SurgRx. 80% of the company is held by outside investors overall.
SurgRx has raised $43 million to date. Proceeds from the most recent round are expected to take the company to breakeven in 18 to 24 months.
Series E capital will be used to build a direct sales force in the U.S. While SurgRx's EnSeal products have been commercially available for about a year both domestically and internationally, Unkart said the company does not have much of a sales and marketing presence in the U.S.
SurgRx's EnSeal System enables surgeons to cut and seal blood vessels and tissues using what it calls smart electrode technology to sense specific characteristics of vessels and then deliver the precise amount of heat and energy needed to cut and seal it. Applications include gynecology, urology, colorectal and general surgery, such as removing a uterus in a hysterectomy or mobilizing a bowel.
"It's basically a better mousetrap story," Unkart said. "It's a better device than existing devices on the market and we need a sales force to get it in front of surgeons."
Comparable products include Valleylab's LigaSure -- Unkart said EnSeal "[creates] stronger seals faster" with less thermal spread, less smoke and less charring of tissue than LigaSure - as well as the Harmonic Scalpel from Johnson & Johnson Inc. which Unkart said is "more of a cutting device than a sealing device."
Founded in 2002, the Palo Alto, Calif.-based start-up had over 30 employees as of a September 2004 interview.
As a result of the financing, NEA Partner Sigrid Van Bladel joins the nine-member board.
For more information, please visit the SurgRx web site.
7/28/2005
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