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Monday, June 23, 2014, 7:00 am

Sanovas to accelerate spinoff strategy

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    SanovasSAN RAFAEL — Life sciences incubator and medical device developer Sanovas Inc. is planning to create six more spinoff companies within the next year on top of the half-dozen it created earlier this year.

    As part of an expansion that more than doubled its physical size, Sanovas (415-729-9391, www.sanovas.com) recently set up and capitalized the following spinoffs, according to CEO Larry Gerrans:

    • MicroCam, Inc., which focuses exclusively on building small-diameter, cost-effective surgical cameras.
    • PulmGenix, Inc., which involves a joint venture with the Mayo Clinic on asthma therapy.
    • RetinalGenix, Inc., which is developing retina imaging technology;  OtoGenix, Inc., which is developing a balloon sinuplasty to treat chronic sinusitis.
    • AngioCure, Inc. , which uses Sanovas’ three-balloon catheter to help clear blocked arteries.
    • Sanovas Pulmonary, Inc., which is commercializing technologies for interventional pulmonary surgeries.

    Those six spinoffs, all focused on minimally invasive surgery and associated technology, will help Sanovas reach a much broader, global market that is increasingly gaining access to once-elusive surgeries in emerging markets, Mr. Gerrans said.

    Larry Gerrans

    Larry Gerrans

    “The overwriting principle here is that minimally invasive surgery is better than open surgery, but it’s very expensive and there are a lot of barriers to enabling the world’s middle class to afford these procedures,” Mr. Gerrans said. “We want to make devices that are now affordable to about 3 billion people,” including developing economies in China and India, he added.

    “The first six are out and running. The first six have to do with actual catheters and cameras and some of the physical measures,” Mr. Gerrans said. “The other six companies have to do with diagnostics, drug delivery and surgical robots,” he said, though they are still in the planning phases. “Companies are being formed and being incubated, intellectual properties are being developed and we will formally announce those companies to market soon.”

    Sanovas initially started with a focus on technology for pulmonary surgeries, but eventually it found that operating on the lungs required a great deal of expertise in all aspects of minimally invasive technology.

    “Sanovas has spun out these subsidiaries a result — trying to overcome pulmonary issues. It was necessary with regard to lungs, so we developed this formulaic approach, which made us come up with smaller devices,” Mr. Gerrans said.

    The spinoff companies, both established and any forthcoming, will likely go public at some point, or perhaps be an attractive buy for a larger company, Mr. Gerrans said. Any initial public offering would come within approximately two years, he said, though it’s far too soon to speculate on how much capital Sanovas would look to raise.

    “It is, absolutely,” Mr. Gerrans said in response to questions on if filing IPOs for some or all of the spinoffs. “Depending on how the capital markets go. For us, we’re moving through the revenue phase. As we drive revenue, we will evaluate IPOs on a case-by-case basis, but we want to make sure we have enough cash for each company.”

    The company, which went from about 12,000 square feet in Sausalito to some 30,000 square feet in San Rafael, has raised about $24 million to date, Mr. Gerrans said. It is currently in the process of closing on another round of funding, likely in the range of $25 million to $30 million expected to close sometime in July, he said.  If and when that raise is successful, he said about $15 million to $20 million would be put toward the existing six spinoffs.

    “That will be the funding that’s required,” Mr. Gerrans said. “The nice thing about that is these companies have already been incubated and established. We’re off the cocktail napkin.”

    Sanovas also plans to double its number or employees from about 30 full-time workers to 60. It also works with about 20 consultants, which is also expected to increase.

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