Johnson & Johnson has reached into Orange County to add another medical device company to its portfolio.
The bad news: J & J; plans to move San Juan Capistrano-based Vascular Control Systems Inc. out of OC.
J & J;’s Ethicon Endo-Surgery Inc. unit completed its acquisition of privately held Vascular late last month for an estimated $100 million.
Though terms of the deal weren’t disclosed, venture capital sources said Vascular was sold for about 4.5 times the amount of funding raised by the company since its founding.
Vascular has raised about $23 million in its seven-year history from J & J;’s venture arm, J & J; Development Corp., along with MedVenture Associates of Emeryville, Three Arch Partners of Menlo Park and Shea Ventures, a unit of builder J.F. Shea & Co., in Walnut.
The deal is expected to end Vascular’s presence in OC.
The J & J; unit plans to move Vascular’s operations to an Ethicon facility by the end of the year, said Greig Altieri, Vascular’s chief executive and cofounder.
Altieri plans to leave the company.
“I’m going to be here for a short time during the transition,” he said.
Ethicon has operations in Somerville, N.J., San Angelo, Texas, and Cornelia, Ga.
J & J;’s venture arm is no stranger to OC. In May, Irvine-based stem cell startup Novocell Inc. landed a $20 million round of funding led by J & J; Development.
Novocell, which is looking to offer diabetics an alternative to lifelong insulin shots, started in 1999 and has raised $40 million in all.
J & J; Development also invested in former Laguna Hills-based medical device maker Volcano Therapeutics Inc.
Volcano, which makes devices that detect and treat vulnerable plaque in heart arteries, moved to Sacramento suburb Rancho Cordova after making an acquisition there in 2003.
Products
Vascular makes two products: Flostat, a clamp designed to treat uterine fibroid tumors through artery occlusion, and Cstat, a hemostat for blood loss control during surgery.
The company touts Flostat as an alternative to current methods of treating uterine fibroid tumors, which include surgical methods such as myomectomies.
The potential market is a large one. Uterine fibroids occur in an estimated 33% of women older than 30. They can cause pelvic pain, heavy bleeding and infertility, and are a common reason for a hysterectomy.
Women’s health is a focus of Ethicon, whose products include Gynecare and FemRx. The company also develops and markets devices for general surgery, cardiovascular surgery and managing wounds.
Buying Vascular “represents a strong, strategic fit with our gynecologic business,” said Sheri McCoy, who oversees Ethicon for J & J;, in a statement.
Developing relationships with J & J; helped produce the Ethicon-Vascular deal, Altieri said.
“With big companies, it helps to have a champion inside the operating company,” said Altieri, who pointed to the J & J; venture investment as a catalyst.
And Fred Burbank, another Vascular founder, had a previous relationship with Ethicon. In 1997, the J & J; unit bought another company he founded, Biopsys Medical Inc.
The concept behind Vascular’s product originated with Burbank, who reworked a medical device used by radiologists into one for gynecologists.
Vascular’s device is about two years from commercialization, Altieri said. The company’s device is starting pilot clinical trials in the U.S. and Canada, and is negotiating with the Food and Drug Administration for a pivotal clinical trial.
Financing also came into play in the decision to sell to Ethicon, Altieri said.
“For our next round of funding, we would have needed $25 million to $30 million,” he said. “It would be a huge dilution to the existing investors’ capital.”
J & J; Sales Force
Altieri also said that Vascular’s devices eventually will be sold through a big sales force under the J & J; banner.
“That’s something a small company could never do,” he said.
Vascular, with 14 workers, is a “small and lean operation,” Altieri said.
The Vascular-Ethicon deal also had a family tie.
Jason Altieri, Greig’s brother and a partner in Sonnenschein Nath & Rosenthal LLP’s San Francisco office, led the legal work on the sale.
Jason Altieri told VentureWire news service that he believed one reason Ethicon acquired Vascular was that the latter’s device would lead to less permanent destruction to surrounding tissue in treating the fibroids.
“More and more women are hoping to maintain fertility after surgery,” he said.
