Massachusetts Medical Startup Could see $60 million Payday with Sale to Japanese Firm

A Boston startup company that makes technology used to improve medical testing for gastrointestinal disorders has sold itself to a Japanese buyer, the Boston Globe reported.

With venture capitalists becoming more active and the IPO market heating up — particularly in the medical and technology sectors — our Massachusetts general counsel attorneys expect to see more action when it comes to business sales, mergers and acquisitions through the remainder of the year.
The parties did not disclose the terms of the sale of Spirus Medical Inc., of West Bridgewater, to Olympus Corp. of Japan. Olympus specializes in consumer electronics and medical devices. Spirus Medical makes an endoscope that improves gastrointestinal testing. Several sources told The Globe the value of the deal could reach $60 million if Spirus meets a series of milestones and wins regulatory approval for the device.

That would make it among the largest venture-backed deals involving a medical technology company in Massachusetts this year. It also highlights a growing trend among tech and medical startups: Virtual companies that have a great idea but few employees; subcontracting and partnerships keep costs low and companies can sell for a profit before the product even makes it to marketplace.

Of primary concern in such arrangements is that the startup has outstanding legal advice. Unfortunately, solid legal advice is often another line item targeted for savings, when in reality such virtual companies need more legal advice to succeed — not less. Copyright and patent infringement is a concern as work is contracted to larger companies with more resources — so is the outright theft of trade secrets.

And when it comes time to sell there are a number of complexities. A sale may fall through because of systemic legal problems with the company’s founding or operations. And the potential buyer is typically at a significant advantage because of its size and access to high-quality legal representation.

In this case, Olympus is the global leader in endoscopes. It competes with two other Japanese corporations, Fujitsu Ltd. and Pentax Corp. in the sale of endoscopes to doctors around the world. The devices are used in a variety of medical procedures, including panendoscopies and colonoscopies. Spirus has fewer than 10 employees and has been backed in part by BioVentures Investors, a venture capital firm based in Wellesley.

Until Spirus, there had been little innovation in the space for decades — all three companies are selling essentially the same device to doctors and medical facilities. Spirus founders are developing a spiral sheath that allows for manual rotation through the GI tract. A powered version of the device is also under development. Thus far, clinical trials have shown the devices speed up testing and give doctors better visibility.

A clinical professor at Brown Medical School called the device a “significant game changer,” saying it would permit examination of the entire small bowel, something current devices do not permit.

The company is slated to move to an Olympus office in Southborough.

The Massachusetts business law attorneys at The Brown Law Firm, LLC are available for no-cost, confidential consultations. Call (617) 489-0817.

Additional Resources:

Endoscope innovator is sold, by Robert Weisman, The Boston Globe.

Boston Bar Assosiation