Location:                                           Northern NJ                                    

      Established:                                      Start-up                                                

      Gross Sales: (5 Yr Projection)         $23,407,500

      Cash Flow:                                         Positive at 36 months                                 

      Cash Flow:(5 Yr Projection)             $7,840,610

      Investment Requested:                     Total of $4,500,000 in 3 phases of $1,500,000

      Investment For:                                  See Use of Investment below

      Exit Strategy:                                      An attractive acquisition by a large medical device company  

Executive Summary

This firm is seeking funding to take a new advanced patient monitoring device from fully functional and clinically tested prototype stage to commercial stage.  The device, called a "Pulse Flowmeter, is potentially disruptive technology in the operating room, recovery room and intensive care unit, changing, in a fundamental way, doctors' approach to these acute care patients. The Pulse Flowmeter detects blood loss and heart failure very early, before there are changes in blood pressure. This can allow physicians to treat and thereby prevent their patients from going into shock.  The Pulse Flowmeter does this measuring peripheral perfusion (blood flow in the arms and legs), which decreases very early as a patient is heading in the direction of developing shock.  The initial target market is very large, including operating rooms, recovery rooms, surgi-centers and intensive care units.  This is a platform technology with many other uses, other than those stated above. Other markets to be addressed with different versions of the device include management of chronic congestive heart failure, triaging injured soldiers on the battlefield and the management of peripheral vascular disease.

The Pulse Flowmeter – THE 6TH VITAL SIGN

 The need and inspiration for the device originated when the inventor of the technology observed a patient die overnight from occult bleeding following minor elective surgery.  This experience led directly to the invention of the Pulse Flowmeter. 

Every year, 40 million patients undergo surgery in the USA. Many of these will have significant bleeding. In fact 20% of all surgical patients 65 years of age and older require blood transfusions. Many of these will become hemodynamically unstable and die.  It is very difficult to detect shock in its early stages because of the body's compensatory mechanisms which constrict peripheral blood flow to preserve blood flow to the heart and brain.

Every year 5 million patients in the USA are admitted to intensive care units. These patients are often hemodynamically unstable and are monitored intermittently with invasive Swan-Ganz cardiac output catheters. The Pulse Flowmeter provides similar information, but does so easily, safely, non-invasively and continuously.

THE COMPANY

This firm is a New Jersey Corporation, registered in 1998, with all stock owned by 5 principals. The founders have invested $2 million of personal funds in this firm.

The President:  A board certified cardiologist, MIT trained electrical engineer and inventor with 23 US Patents (19 on medical devices).  As Division Chief of Pediatric Cardiology, he managed a team of 5 doctors and 20 support staff. He  developed the original Pulse Flowmeter prototypes and conducted the clinical trials establishing the device’s validity and utility. 

The Vice President:  A biomedical engineer and inventor with 10 US Patents. He is the founder and CEO of a firm, which is  a leader in EMS Communications and mobile telemedicine.  In addition to management and engineer expertise, the Vice President is experienced in securing FDA 510(k) approvals.

This business model has sometimes been called “razor blade/razor.” There is the single purchase of a base item, in this case, the Pulse Flowmeter. But then, there is ongoing revenue from the use of a disposable, in this case, the electrode. Competitive technologies use an expensive disposable. This results in use of these devices in high risk patients only. In our business model, the disposable will be inexpensive, so that the device could economically be used on all patients undergoing surgery.

Strengths

• The Pulse Flowmeter solves a specific well identified problem in the medical community
• The Pulse Flowmeter is a unique product. It is the only non-invasive device that provides continuous, robust measurement of peripheral blood flow which is of great interest to physicians caring for patients at risk of bleeding and/or hemodynamic instability.
• There are multiple physician groups that desire this information including anesthesiologists, surgeons, intensivists and emergency room doctors.
• The management team includes a successful serial entrepreneur, the inventor of the device, a seasoned CEO of a successful medical device company and seasoned technical managers
• Use of the Pulse Flowmeter will save hospitals money by reducing unnecessary blood transfusions and shortening or eliminating ICU stay
• The addressable market is very large
• The market is well defined and reachable through existing distribution channels
• The device uses a disposable that will be sold in high volume and provide a source of recurring income
• Barriers to entry include multiple patents and significant technical knowhow
• The Pulse Flowmeter is a platform technology. With modifications, it can be used in the management of dialysis patients, heart failure patients and patients with peripheral vascular disease.

 Summary of the Projected Market

The addressable domestic market includes 76,200 operating rooms, 114,300 recovery room beds and 78,000 ICU beds for a total of 268,500 Pulse Flowmeters. In addition, each use requires a disposable proprietary electrode. In the US alone, there are 38 million surgical cases per year and 5.7 million ICU patients per year (2 electrodes per ICU stay) for a total of 49.4 million disposables per year. Thus, at our projected sales prices, the addressable domestic sales potential is $2.7 billion for monitors and $1.2 billion per year for disposables.

SALES PROJECTIONS

The expected price of the monitors is $15,000 and the disposable $25. The total addressable market (domestic only) for the initial target applications is 268,500 monitors ($4 billion) and 49.4 million electrodes per year ($1.2 billion/yr).  Predicting market penetration by year 5 results in monitor sales of $19.3 million and annual electrode sales of $4.1 million.

Projected Sales and Market Share

The estimate of market share has been extremely conservative, primarily because clinicians tend to be slow to adopt new technologies. Fortunately, the target market, anesthesiologists, tend to be much more open to new technologies than most other physicians. They are always looking for new information that can give them a better sense of the cardiovascular status of their patients and, therefore, have been at the forefront of adopting new patient monitoring technology. The market share has been estimated at only 0.02% for the first year of sales (54 units) and annual growth of only 0.10%.

Specific Target Markets

The primary specific target is anesthesiologists and the secondary target is ICU physicians. It is believed that ER physicians will also be interested in this device as it can guide fluid therapy in the trauma patient.

Competition

There are no devices other than the Pulse Flowmeter that provide robust, safe, non-invasive measurement of peripheral blood flow. In that sense, there is no competition for the Pulse Flowmeter. However, cardiac output monitors, if used judiciously may also provide information regarding the patient's volume status.

Use of Investment

The initial Series A round of $1.5 million will be used to rent a new facility, outfit & staff the facility, develop a disposable electrode, start the marketing effort, pay salaries of the Chief Technology Officer, 2 engineers and 1 administrative staff and hire an industrial design consultant.

The Series B round of $1.5 million will be used to pay for manufacturing costs and to pay salaries starting in year 2, Q1 for additional manufacturing engineers, assemblers and other technical support staff and, starting in Q3, for a CEO, CFO, CMO, VP marketing & sales, salesmen and support engineers.

The round C of $1.5 million is to pay for continued operations until the company becomes profitable in year 3.

summary

This is an excellent investment opportunity with good short-term payback and a solid exit strategy

The Pulse Flowmeter addresses a recognized unmet need and satisfies the market’s cost-cutting and risk reducing needs.  Unlike many start-ups, this firm has already developed a working prototype that has been successfully tested under clinical settings.  The firm’s principals have extensive experience in their respective fields. The development of the commercial version of the device can be performed in-house. If the firm chooses to use a subcontractor, this company has identified a quality medical device design-and-development firm that can advance the device to commercial status. Also, an excellent relationship with a medical marketing and sales company has been established that will result in rapid market introduction.

Sunbelt has been engaged by the seller to be the exclusive broker to facilitate a sale of the company as discussed in this Profile.  The information and financial data in this Profile was provided by the seller and from other sources believed to be reliable and no representation or warranty is made by Sunbelt as to the completeness or accuracy of such information.  A buyer should do such due diligence as they deem necessary to verify the accuracy of all information relied upon by buyer to buy the business.  Any opinions expressed in this Profile are subject to change without notice.