Sources inform ''Globes'' that Sony Corporation (NYSE: SNE; TSE: 6758) has invested $10 million in Rainbow Medical Ltd. Last year, "Globes" reported that Sony wanted to expand its medical devices operations. Company representatives met Israeli medical devices companies, but decided against making any acquisitions for now, opting instead to invest in Rainbow Medical, which invests in the industry.
Sony is not the first corporation to invest in Rainbow Medical. Global medical devices giants, including Medtronic Inc. (NYSE: MDT), Abbott Laboratories Inc. (NYSE: ABT), and Italy's Sorin SpA (BIT: SRN) have invested in the company. The first investment in the company was by GlenRock Israel, headed by Leon Recanati.
Rainbow Medical, which invests in the inventions of serial entrepreneur Yossi Gross, is managed by Efi Cohen-Arazi. He told "Globes" today, "We are very proud to work with Sony and we are fully cooperating with it."
Sony confirmed that it has invested in Rainbow Medical, but declined to disclose further details.
Sony is building its brand in the healthcare field, marketing medical imaging products, and will now try to sell its own medical devices. The strategy is being implemented with a $644 million investment in Olympus Corporation (TSE: 7733), giving Sony an 11% stake in the company. The companies have set up a joint medical devices venture, which will focus on miniature imaging systems for endoscopic procedures. Olympus will develop the endoscopes, and Sony will develop the lenses and data processing systems for the images.
Sony CEO Kazuo Hirai said, "Sony aggressively seeks to grow its medical operations."
Sony has been struggling in recent years with losses in its core businesses, and Hirai has said that it must expand out of its core businesses and enter new markets, including healthcare.
Rainbow Medical does not specialize in endoscopes, and Sony's investment is apparently intended for another field. Rainbow Medical specializes in complex systems, especially implants. The devices often involve electrical stimulation of the body, or replacing an organ's functions with electrical functions. All these devices target large markets where there are few solutions.
The sources said that, for now, Sony will keep a business development executive in Israel in a full-time position, who will answer to the Sony-Olympus joint venture. This executive will apparently seek acquisition opportunities in Israel as well as maintaining ties with Rainbow Medical.
Sony originally sought to acquire a company to set up an Israeli R&D center. While it ultimately opted to invest in an investment company, Rainbow Medical will effectively function as a kind of R&D center for Sony.
Personal and business ties
Like other multinationals which have invested in Rainbow Medical, Sony can ask it to develop customized products. "Our closeness and business and personal ties with these corporations enable us to learn about the needs of our corporate investors at a very early stage," said Cohen-Arazi. "Our in-house inventor, Yossi Gross, and his team of talented inventors and engineers, work to develop the right solutions for the corporation."
These solutions are developed through joint ventures between Rainbow Medical and the corporation which wants the particular inventions. Rainbow also develops products through its portfolio companies, in which the corporations have indirect stakes through their investments in Rainbow.
An example of one of these companies is Enopace Biomedical Ltd., which raised $18 million from Sorin a few months ago. Sorin has an option to acquire the company for an undisclosed among. Enopace has developed a minimally invasive, implantable neurostimulator that increases cardiac efficiency by reducing left ventricular workload. The company is targeting an $11 billion market, one of the largest markets in cardiology.
Sorin, a global leader in cardiology products, made a strategic investment in Rainbow Medical because of its interest in Enopace. Sorin invested $7 million Enopace in November 2011.
Another portfolio company, Vascular Dynamics Inc. is developing the MobiusHD, atheter-delivered implant for the treatment of high blood pressure (hypertension). The company, which mainly operates in the US, has raised $13.5 million from a US investment fund, and is about to begin a clinical trial there.
Portfolio company Mexillent Ltd. is developing the iRaise Sinus Lift Implant, a minimally invasive dental procedure for lifting the sinus. "The company has begun production of the product for human implants. We estimate that, in 18 months, we can begin human clinical trials," says Gross.
Recanati says, "A new company, which were are proud of is BlueWind Medical Ltd., which has developed a platform for wireless neuro-stimulation for the treatment of peripheral neuropathic pain. This implant is so small that it is injected, and is powered by an external power source. Leading multinationals are very interested. We believe that the company has huge potential, as an alternative to drugs, when medication does not work. The first indication is for the treatment of chronic neuropathic pain."
A unique model
Rainbow Medical's model includes a single in-house entrepreneur for a great many companies, which enables it to move forward relatively quickly, and avoids investor-inventor tensions. (However, the company will have to show that it is possible for a start-up to progress without this tension). The company provides its portfolio company with services, including regulatory relations, financial management, and legal advice. It generally invests about $3.5 million in the portfolio companies, bringing them to human clinical trial stage, before it starts to look for other investors.
Rainbow Medical was founded in 2007, and raised $50 million in its second financing round, led by Abbott and Medtronic, in 2012. According to its business plan, it will not need additional substantial financing, but will soon be financed from revenue. "We receive queries from parties interested in investing in us, but we don’t need money right now. We accept such partners only if they bring strategic value, like Sony," said Cohen-Arazi.
Rainbow Medical is considering entering the Chinese market, with a focus on treatments for diabetes, which is spreading rapidly. "There are 100 million diabetics in China," said Gross.
Published by Globes [online], Israel business news - www.globes-online.com - on May 9, 2013
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