Tustin-based medical device maker Uptake Medical Inc. is attracting interest as a potential takeover target, according to its chief executive.
Chief Executive King Nelson confirmed last week that his company, which makes devices to treat emphysema, is in ongoing talks with several companies.
Nelson and two unnamed sources recently told the Financial Times’ MergerMarket online newsletter that a number of “large multinational consolidators” could be in the mix as potential buyers. Nelson said the list of prospects includes: Abbott Laboratories in Abbott Park, Ill.; Natick, Mass.-based Boston Scientific Corp.; Covidien PLC in Ireland; Minneapolis, Minn.-based Medtron-ic Inc.; and Olympus Corp. in Japan.
Uptake would welcome bids by strategic buyers or investors, said Nelson, who last year told the Business Journal that he saw the possibility of Uptake becoming a “pulmonary franchise” of a larger company.
“When we think about people who might have an interest, you think about the natural players,” he said.
Uptake, which does not disclose sales or earnings, has raised $75 million from investors in its eight-year history.
It completed a $35 million round led by Crescent Point Group, a Singapore-based venture capital firm, in January. Other in-vestors include Maverick Capital in Dallas, and GBS Venture Partners, an Australian venture capital firm.
Uptake’s lead device is InterVapor, which uses heated water vapor to treat hyperinflated parts of a patient’s lung without leaving any foreign materials. The procedure is intended to allow patients’ remaining healthy lung tissue to expand and function normally.
InterVapor is sold in Germany, Australia and New Zealand. The company is looking next at bringing it to market in Italy and other countries in Europe, as well as parts of Asia and South America.
The expansion plans could put the company on pace to break even in two to three years, with about $100 million in revenue outside of the U.S. within five years, Nelson told MergerMarket.
Large medical device makers are likely interested in Uptake as well as other smaller companies in the lung market, including Pulmonx Corp. in Redwood City, according to Nelson.
“The clinical results have improved, not just for Uptake Medical … (And) the large corporate players have an eye on what I would call ‘pulmonary medicine,’ which really is emphysema, chronic bronchitis and asthma,” said Nelson, who also listed chronic obstructive pulmonary disease, also known as COPD, which a combination of emphysema and chronic bronchitis.
Innovation
He said most of the innovation in the pulmonary field is coming from smaller, privately held companies.
“The big players, if they’re doing it, they’re keeping it a big secret,” Nelson said.
Boston Scientific and Covidien have re-cently acquired makers of lung disease devices.
Boston Scientific bought Sunnyvale-based Asthmatx Inc. in 2010 in a deal that could be valued at $443.5 million with milestones. Covidien earlier this year bought Israel-based superDimension Ltd., which makes minimally invasive pulmonology devices, for $300 million and future payments.
Both companies are taking steps beyond the pulmonary segment in OC.
Boston Scientific is in the process of buying San Clemente-based heart device maker Cameron Health Inc. in a deal valued at upwards of $1 billion. Covidien has expanded its neurovascular unit in Irvine, including the recent opening of a research and development center there.
Aussie Exchange
Uptake had considered a public offering of its shares last year on the Australian Stock Exchange, Nelson said.
“There’s a few American medical devices public on the Australian exchange,” he said. “[The Australian exchange has] an appetite for companies that are pre-revenue and pre-profitability,” he said.
Mounting financial difficulties in Europe stopped those plans late last year, and Crescent Point surfaced as an investor a short while later.
Uptake will start to seriously look at raising a fourth round of financing of $10 million to $20 million in early 2013 if the company isn’t sold by then. That money would be used to help fund a domestic pivotal clinical trial.
Uptake, which has about 30 workers, moved its corporate headquarters to Tustin from Seattle in 2010 after Nelson spent three years commuting from his OC home.
Nelson’s background includes 19 years with American Hospital Supply Corp. and Baxter International Inc. in Chicago.
He also was chief executive of VenPro Corp., an Irvine developer of replacement heart valves and valves to treat vein diseases. Medtronic bought VenPro’s heart valve business in 2001.
