[[Updated: see editor’s note below.]]
Innovative Spinal Technologies, the Mansfield, MA, maker of minimally invasive spinal repair devices, has filed for Chapter 7 bankruptcy protection after running out of cash and shutting its doors earlier this year. VentureWire published the news this morning. Sources told Xconomy that the bankruptcy was in the works after Wade broke the story about the startup’s shutdown in January.
The seven-year-old startup—which had raised $75 million from New York-based Orbimed Advisors, JPMorgan, MPM Capital in Boston, and corporate partners such as GE—burned through millions of dollars when it scaled up its operations with a relocation from Texas to a larger facility Mansfield in 2006 and a hiring plan that swelled its staff to more than 100 workers at one point, sources have told Xconomy. Yet sales of the company’s products—which included bone screws, plates, and a delivery system used in procedures to stabilize spinal segments in patients with damaged vertebral disks—were insufficient to support the expanded operations. Last year the startup was forced to cut its staff to 10 employees or fewer.
According to documents filed May 15 with the U.S. Bankruptcy Court for the District of Massachusetts, IST owes between $10 million and $50 million to a group of creditors that numbers between 100 and 200. The company’s current assets are between $1 million and $10 million.
Much of the blame for the startup’s demise has been pinned on president and CEO Scott Schorer, a former Army Ranger and Olympic rower, who had been with the company since it was spun off from the Texas Back Institute under the name MusculoSkeletal Research Corporation in 2002. He is also credited, however, with engineering the growth of the company from a research incubator to a venture-backed provider of medical devices. Obviously, the growth of the operation and its expenses outpaced its sales traction in the competitive market for spinal devices.
After IST shuttered in late-January, Schorer told Wade that the company was trying to avoid bankruptcy through a sale of assets. Prior to that interview, at least one prospective buyer, the Biomet Spine unit of Warsaw, IN-based Biomet, walked away from buyout talks with the startup, according to sources.
Interestingly, in an exhibit attached to the May 15 bankruptcy filing, IST says that its real property includes nine human cadavers and 20 human and bovine tissue samples, kept in two separate freezers in a surgical suite at the company’s former place of business in Mansfield. The exhibit warns that if the facility’s electricity were turned off, the cadavers and samples “would defrost and pose a significant health threat to anyone entering the surgical suite that has not been immunized and wearing the appropriate attire to dispose of such items.” The document does not detail the company’s plans for disposing of the cadavers and samples.
[[Editor’s note: The first paragraph of this story was changed to include a link to a story in VentureWire, which says it was the first to report IST’s bankruptcy filing today, not peHub.com, which was initially cited in this story.]]
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