Scout Medical: The Device Incubator That Batted 3-For-3

Xconomy Seattle — 

Everybody in the Seattle life sciences scene has heard about Accelerator, as a model for venture-backed incubators of promising biotech startups. But when the report cards come due on its portfolio companies in a few years, it may end up the second-ranked local incubator of life sciences startups behind Scout Medical Technologies.

Scout was founded in 2000 in Kirkland, WA, and went out of business three years later. While it was around, it put $8 million to work from MPM Capital, the world’s largest healthcare venture firm, and brought together four experienced medical device innovators—Jim Fitzsimmons, Clif Alferness (an Xconomist), John Adams, and Scott Wolf.

Scout’s strategy was to start three medical device companies with its seed capital, and five years later, all three are alive and kicking in Seattle’s Eastside suburbs. The three descendants—EndoGastric Solutions, Archus Orthopedics, and Cardiac Dimensions—have raised more than $204 million in venture capital combined, and built workforces of more than 100 people altogether. EndoGastric Solutions has approval to market two devices in the U.S. and Europe, while Archus has European clearance for marketing its device, and Cardiac Dimensions CEO Rick Stewart says his company expects to have European approval “very soon.” It’s too early to say that each company is a big commercial success, but Scout took three raw concepts and turned all three into viable companies with potential to treat serious back problems, heart defects, and chronic heartburn.

“Scout was a very successful incubator,” says Fitzsimmons, now the CEO at Archus Orthopedics.

Here’s a basic rundown of the three companies that emerged from Scout:

Archus Orthopedics. I profiled this Redmond, WA-based company back in September. Archus has developed an artificial spine joint that’s supposed to allow patients who get back surgery to maintain a more normal range of motion, as opposed to conventional surgery that fuses the joints together. The company has raised $61 million since its founding in 2001, from MPM Capital, Polaris Venture Partners, InterWest Partners, and Johnson & Johnson Development. Archus has clearance to sell its artificial facet joint in Europe, and has tested the device in more than 200 patients in clinical trials, although it will probably take until 2012 to get enough data to get FDA approval to market the device in the U.S., Fitzsimmons says. Archus has about 45 employees in Redmond, and none are in sales, so it will need to find a partner or expand to start generating cash flow.

Cardiac Dimensions. This Kirkland, WA-based company has been working on a non-invasive implantable device that wraps around a leaky heart valve for patients with congestive heart failure. The device is supposed to help the organ pump blood more efficiently. The company has raised $64 million since its founding, from a similar syndicate that backed Archus: MPM Capital, InterWest Partners, Polaris Venture Partners, and Johnson & Johnson Development, as well as Seattle-based Frazier Healthcare Ventures, Lumira Capital, Mitsubishi UFJ Capital, and WestRiver Capital. The company has 30 employees and expects to have its clearance to market the product, called Carillon, in Europe soon says CEO Rick Stewart in an e-mail. More clinical trials are needed in the U.S. so it will probably be 2011 or 2012 before it gets approval in this country, he says. “Things are going very well here,” Stewart says.

EndoGastric Solutions. This Redmond, WA-based company also has offices in Redwood City, CA. The original product it worked on was designed as a minimally-invasive device that could tighten up loose tissue at the barrier between the esophagus and the stomach, where stomach acid can backwash upward and cause heartburn. This product, called EsophyX, is approved in Europe and the U.S. Another product approved in the U.S. and Europe, called StomaphyX, is supposed to help patients lose weight by shrinking a patient’s stomach without any incisions as with bariatric surgery. The company has raised $79 million in venture capital from DeNovo Ventures, Chicago Growth Partners, MPM Capital, Advanced Technology Ventures, Foundation Medical Partners, and Oakwood Medical Investors. The company didn’t respond to my request for comment on how many employees it has.