Last night we reported that Mansfield, MA-based Innovative Spinal Technologies, a maker of implants to correct degenerative spinal disorders, had gone dark—the company’s website was down and phone calls were going unanswered. A former employee who recently left the company now tells Xconomy that IST shut its doors on Friday, filed for bankruptcy protection, and let the last of its employees go after a planned sale of the seven-year-old startup to another medical device company fell through.
The source identified the potential buyer as Biomet Spine of Parsippany, NJ. IST was “in the process of selling” but Biomet backed out for unknown reasons, the source says. “They had no more options and were out of money,” hence Friday’s closure.
If all this proves right, IST used up almost $75 million in venture and private equity funding before its demise. That funding included a $6.2 million Series A round raised shortly after the company was spun out by the Texas Back Institute in 2002; a $39 million Series B round in 2005, the same year the company moved from Plano, TX, to Mansfield; an $18 million Series C round last September; and a previously undisclosed $10 million venture debt deal.
Participants in IST’s 2005 Series B round included Boston-based MPM Capital and New York-based Orbimed Advisors. We’ve contacted both firms for comment on IST’s shutdown, with no reply as of this writing. We have also been unable to locate a bankruptcy filing for Innovative Spinal Technologies in online indexes of court documents.
The former employee we spoke with, who continues to work in the medical industry and therefore requested anonymity, says the company shed staffers throughout 2008 in an effort to cut costs. After peaking at over 100 employees in 2007, the company was down to 50 employees by March 2008, 30 by May, and 20 by the fall, the source says, and only about 10 employees remained at IST by last week.
The source attributes IST’s failure mainly to poor management decisions, rather than difficult business conditions or any lack of fundamental demand for its products, which were designed to help people with damaged intervertebral disks by fusing or stabilizing their spinal segments.
“If you look at the spine market, it’s a growing market,” the source says. “There are many thriving companies. The problem was that we were not one of them.”
The company, which had several FDA-approved spinal products on the market, earned only about $5 million in revenues in 2007-2008, according to the source. That was partly a result of problems shifting from an internal sales force to an outside distributor, the source says.
The source also says the company suffered from high management turnover. “Starting in March of 2007, we lost our VP of sales, then one every month or two, until every senior manager had turned over.” To the source, at least, that was an indication of dissatisfaction or difficulty with
