Irvine-based Pegasus Biologics Inc., a maker of implants used to repair muscles, tendons and other soft tissue, has raised $20 million in a third round of venture capital funding.
The investment brings Pegasus’ total raised to $32 million.
Pegasus, which started in 2003, makes collagen implants to fix soft tissue after spine surgery, sports injuries or other conditions. The implants are derived from collagen from horses.
The company has sales in the “seven figures,” said France Dixon Helfer, Pegasus’ founder and president.
Pegasus plans to use the latest funding for sales and marketing and for a line of new products, according to Dixon Helfer.
“The company has grown significantly since our last round, so we needed to raise another round to grow our business,” she said. “We have the opportunity to become a very big company. That’s our goal.”
New investor Onset Ventures, a Menlo Park firm, led the latest funding. Minneapolis-based Affin-ity Capital Management was another newcomer. Returning investors Three Arch Partners of Menlo Park and Frazier Healthcare Ventures of Seattle also took part.
Onset was “extremely excited about our business immediately,” Dixon Helfer said.
“We had gone to others, but we basically accepted their term sheet,” she said. “They co-invest a lot with Affinity.”
As part of the deal, Leslie Bottorff, an Onset general partner, joined Pegasus’ board.
Separately, Gary Restani, president of Hansen Medical Inc., a Mountain View-based device maker, also joined the board.
Surgeons who use Pegasus im-plants “have been particularly impressed with their patient outcomes” and are finding new uses for the products, Bottorff said.
Since Pegasus’ last funding of $10 million in 2005, the company got a pair of Food and Drug Administration approvals.
Products include the OrthAdapt Bioimplant, which helps repair soft tissue in orthopedic and sports tissue surgeries.
“Because it’s extremely strong and thin, it can be used in small joints,” Dixon Helfer said. “What we found at about the middle of last year is that the product started taking off real fast for orthopedic extremities, especially foot and ankle procedures.”
Pegasus’ latest product, Unite Biomatrix, is used to treat wounds, including diabetic foot ulcers.
“Wound care is set to explode,” Dixon Helfer said. “My strategy has always been to have one major product a year launched.”
Next year, Pegasus plans to come out with a “bone void filler” to repair defects.
Pegasus is awaiting European Union regulatory approval for the product.
The company has some U.S. projects in the works, according to Dixon Helfer. Some unnamed healthcare companies have inquired about working with Pegasus, she said.
The company isn’t profitable. The latest round of funding could take Pegasus to profitability, according to Dixon Helfer.
If the company becomes profitable, it could look to be acquired by a larger device maker or do an initial public offering, Dixon Helfer said.
“It will be one or another, and we’ll know in a year,” she said.
Pegasus has 55 workers and is gearing up to move to new space within the county. The company has a spot in mind but hasn’t signed a lease yet, Dixon Helfer said.
It also has a research and development facility in Gainesville, Fla.
“We have a huge product development pipeline ongoing,” Dixon Helfer said.
Competitors include Wright Medical Group Inc., an Arlington, Tenn.-based public company, “who we come up most against in” operating rooms, she said.
Wright makes Graft Jacket, which is made from skin grafts.
Johnson & Johnson’s DePuy unit is another competitor.
Dixon Helfer, who’s worked for medical device makers and has a background in collagen, started the company with $100,000 of her own money and an early $1.75 million from friends and family.
