Stimatix GI Ltd., whose product is designed to give stoma patients control over when they defecate, is seeking a partner to help the company compete in a $2 billion market controlled by three companies including Denmark’s Coloplast A/S.
Stimatix is in talks with investment banks to help it find a partner or a buyer this year, according to Steve Rhodes, chairman and chief executive officer of The Trendlines Group, a business incubator with about 60 companies in its portfolio, including Stimatix.
A stoma is an artificial opening in the abdomen to allow feces out of the body after the colon or ileum are surgically cut to combat cancer, ulcerative colitis or Crohn’s disease. Stoma patients usually attach a bag to the feces exit point, leading to involuntary excretion which may cause psychological as well as hygienic challenges. Stimatix’s colostomy device is working well in a 30-patient trial nearing its end, Rhodes said.
“One patient told us he can finally sleep on his stomach,” Rhodes said in an interview at Trendlines’ headquarters in Misgav, a Galilean town in northern Israel surrounded by rolling green hills. “This could avert embarrassing situations for patients.”
Stimatix, which has a European Union and U.S. Food and Drug Administration clearance, would compete with Skillman, New Jersey-based ConvaTec Inc., Coloplast, and Wokingham, England-based Hollister Ltd. The three ostomy-bag suppliers share about 90 percent of the market for 1.5 million patients worldwide, according to Rhodes.
Coloplast, the largest provider of ostomy products, rose as much as 3.2 percent, and traded 2.4 percent up at 293.80 kroner at the close in Copenhagen. Humlebaek-based Coloplast sold about 4.6 billion kroner ($828 million) in ostomy care products in the fiscal year ended Sept. 30, more than 40 percent of total revenue, according to data compiled by Bloomberg.
Ulla Lundhus, a spokeswoman for Coloplast, said the company doesn’t comment on speculation about future acquisitions.
“If it works the way they say it does it could be hugely exciting and you’d absolutely see a scramble for others to have this technology,” said Ingeborg Oie, an analyst with Jefferies International Ltd. “We would need to see some kind of patient results to understand the commercial potential. The industry has been skeptical about this kind of approach as I understand there’s been several attempts similar to this one in the past.”
With the products now on the market, stoma patients have no control over when their bags fill up, Rhodes said. Stimatix’s Sphincter product seals to the stoma and a patient feels when the bowel has discharged feces, Rhodes said. Stimatix counts Pontifax Venture Capital Fund, the fund previously chaired by the late Teva Pharmaceutical Industries Ltd. patriarch Eli Hurvitz, as another investor.
Trendlines invests in about four companies a year and its portfolio businesses have raised about $165 million to date, according to Rhodes. The incubator also invests in agricultural technologies and a unit also develops technologies in-house.
Trendlines reached an agreement in November for research and development of medical devices in the areas of pain and urology with Chadds Ford, Pennsylvania-based Endo Health Solutions Inc. In April, it sold PolyTouch Medical Ltd., a developer of hernia mesh placement technologies, to Dublin-based Covidien Plc for an undisclosed amount. Covidien bought two other Israeli medical-device companies that year, including Oridion Systems Ltd. for $346 million.
“Many of the large global companies we deal with tell me they need to develop an Israel strategy,” Rhodes said. “They don’t want competitors to beat them to some of the technologies being created here.”
Another investment, urine-monitor developer Flowsense Medical Ltd., said in December it reached an initial understanding to be sold to a foreign health-care company for $7 million to $10 million. Trendlines expects as many as five deals this year for as much as $1 billion, Rhodes said.