It’s a new era for NeuWave Medical. The Madison, WI-based device and software maker says that earlier this week, it was acquired for an undisclosed sum by Ethicon, a surgery-focused subsidiary of Johnson & Johnson (NYSE: JNJ).
NeuWave had raised about $54 million from investors, a large chunk of which came from the company’s $25 million Series C funding round last May. At the time, CEO Dan Sullivan projected the company would top $20 million in revenue in 2015, but this week he declined to comment on the company’s financial performance last year.
NeuWave’s products use microwave energy to “ablate,” or eliminate, tumors, primarily ones located in patients’ lungs, livers, kidneys, and bones. Cincinnati-based Ethicon makes sutures, wound-closure devices, and other tools used inside operating rooms.
Sullivan says the deal will help his business expand beyond the U.S. and Canada, where the lion’s share of its devices are currently sold. He says NeuWave can also currently sell in Europe, albeit only “in a limited way.”
“The vision has always been to go beyond North America,” Sullivan says in an interview. “Clearly, Johnson & Johnson has a global presence, which should open a lot of doors for us. We’re getting ready to expand our markets in the coming months.”
Sullivan says NeuWave has about 110 employees, up from about 80 as of last May. Most are based in Madison, he says, while the rest work remotely or from the company’s Minneapolis office. He says he expects few workers will have to move once the acquisition is finalized, which is likely to occur before the end of June.
NeuWave’s devices are currently used in more than half of the top U.S. cancer hospitals, Sullivan says, citing a U.S. News & World Report ranking.
One customer is the University of Wisconsin Hospital and Clinics, which is part of the same institution where researchers developed the technology that underpins NeuWave’s inventions. The company was founded in 2004 by three UW-Madison professors—radiologist Fred Lee and engineers Daniel van der Weide and Chris Brace. Lee remains “very actively involved” with the company, Sullivan says.
The Wisconsin Alumni Research Foundation, which manages intellectual property for the university, worked with NeuWave early on to license certain parts of its technology. Sullivan says some of the company’s patents continue to be licensed through the foundation, but there are also “NeuWave patents.”
After receiving FDA clearance, NeuWave began selling its products in 2011. Today, its flagship device is the Certus 140 ablation system. It includes the probes whose tips deliver energy to soft-tissue lesions, as well as a wheeled workstation with a touch-screen monitor.
A typical ablation procedure involves placing one or more antennas into a tumor, and then discharging microwaves that cause water molecules within the lesion to oscillate. Their rapid, back-and-forth movement creates friction and heat, in theory destroying the tumor while leaving healthy tissue unharmed.
These procedures are considered “minimally invasive,” in part because they only require a small incision. Eventually, no incision may be necessary; Sullivan says NeuWave is continuing to develop a flexible catheter with a microwave tip. This probe has the potential to be used in cheaper, less invasive alternatives to chemotherapy and lung-removal procedures. The Ethicon acquisition is unlikely to affect NeuWave’s timeline for commercializing the catheter, he says.
One area NeuWave has focused on in recent years is developing computer applications that will complement its devices and show up on the screens it has sold to hospitals up to this point. In July, the FDA cleared the company’s new software for sale. Sullivan says that customers should be able to start using it later this year. He says any existing client will be able to license it, but must pay to do so.
“The software represents a new product that the customer can choose to purchase and add on to their existing system, at their option,” he says.
By this point, selling companies off to larger acquirers is becoming old hat for Sullivan, who joined NeuWave as CEO in 2014. He was previously president and CEO at SuperDimension, which in 2012 was sold for $300 million to Covidien, now part of Medtronic (NYSE: MDT). Prior to that, he was an executive at Scimed Life Systems, which Boston Scientific (NYSE: BSX) bought in 1995 for $865 million.
“All deals are different,” he says when asked to compare the latest deal to others in his career. “This one just has the opportunity to be really exciting, with the emerging technology that NeuWave has.”
That reaction sounds a bit ho-hum, at least compared with how advocates for life science businesses in Wisconsin took the news.
“This is exactly what we want to see,” says Lisa Johnson, who leads BioForward, an industry trade association based in Madison. “It shows that companies are looking here for value and innovation.”
Earlier this year, Johnson moderated a panel that offered an opportunity to look at a selection of biotechs in the state that were acquired in the last five years.