“Change is happening quickly. And we exist to help companies harness it.”

Tim Petersen
Managing Partner

Investing in the future of healthcare.

Market and demographic trends in the healthcare system provide ample opportunities for successful venture capital investing in our target sectors of medical devices, life science tools & diagnostics, and tech-enabled care delivery. An increasing focus on chronic condition management, incentives for wellness and prevention, rising consumer engagement, and the expansion of integrated care are forces that shape our strategy.

We emphasize “better, faster, cheaper” technologies that align with current value-based healthcare initiatives. We target collaborative CEOs with experience and domain expertise who are seeking investment partners rather than passive financiers.

Generally, we pursue companies that:

• Demonstrate capital efficiency, requiring less than $40-50 million to achieve an exit
• Deliver meaningful healthcare system cost savings
• Have launched commercially or are within two years of commercialization
• Reside in “under-ventured” geographies in nascent segments

See Case Studies below for examples of companies that exemplify our investment strategy.

Featured Case Studies

nVision Medical - Changing a Care Paradigm

nVision Medical is a women’s health company developing a novel balloon catheter capable of unprecedented access to the fallopian tubes for ovarian cancer diagnostic assessment. Ovarian cancer has historically lacked good diagnostic technologies, resulting in late-stage diagnoses and poor patient outcomes. Recent research indicates that ovarian cancer often originates in the fallopian tubes and nVision developed its device as a diagnostic option for women at high risk of developing ovarian cancer.

After tracking the company’s clinical and product development progress for several years, Arboretum made an initial investment in early 2016. The factors that led us to lead the financing included:

• Overwhelming response from clinicians, confirming the clinical need for nVision’s device
• Absence of existing or emerging competitive technologies in the market
• Strong engagement from potential strategic acquirers early in the company’s life cycle
• Evidence of capital efficient execution during its early years

Arboretum led the $12 million Series B investment and recruited additional syndicate partners to the company. Arboretum played a critical role helping to shape clinical strategy and navigating the strategic process with potential acquirers. Following a clinical study demonstrating the nVision device’s ability to successfully collect cancerous cells for diagnostic purposes, the company received significant interest from strategic acquirers. This interest culminated with Boston Scientific acquiring the company for an upfront payment of $150 million with an additional $125 million in potential clinical and commercial milestone payments.

Pear Therapeutics - Delivering a New Class of Therapy

Pear Therapeutics is the first company to develop prescription digital therapies to address a broad range of behavioral health conditions including addiction, schizophrenia, post-traumatic stress disorder, anxiety, depression, and sleep disorders. Unlike other patient-facing healthcare apps, which are typically focused on wellness promotion, Pear’s software programs are designed and scientifically validated for the treatment of disease. Pear’s lead product, reSET is a software program for treating substance use disorder. In randomized controlled trials, the use of reSET led to a doubling of abstinence rates in patients with substance use disorder.

Arboretum co-led Pear’s Series A investment when the company was in the early stages of preparing its FDA submission for the substance use disorder product. Aspects of Pear that created a highly compelling investment opportunity include:

• Alignment with the macro-trend of emphasizing higher value care through technology-enabled solutions
• Strong intellectual property portfolio, providing the company a blocking market position
• Very large market opportunity with several viable exit paths
• High-quality syndicate partners with complementary areas of expertise

Arboretum joined two new syndicate partners to co-lead Pear’s $16 million Series A financing. Arboretum has been closely involved on the board of directors with setting commercial strategy, introducing commercial partners, and devising future product and regulatory priorities. Pear received FDA approval for the first ever prescription digital therapeutic and will continue with subsequent products addressing other important behavioral health issues.

NeuMoDx - Better, Faster, Cheaper

NeuMoDx Molecular is an Ann Arbor-based company that is commercializing a new platform for molecular diagnostic testing. The company is led by the experienced team of Jeff Williams and Sundu Brahmasandra, who together previously led HandyLab to its eventual sale to Becton Dickinson in 2009. Molecular diagnostics is a fast-growing segment of the in-vitro diagnostics market, but existing systems are expensive, complex, and lack sophisticated automation when compared to other diagnostic modalities. Through a unique combination of automation and microfluidics, the NeuMoDx system offers best-in-class ease of use, throughput, and cost per test.

Arboretum initially funded NeuMoDx in 2012, when the company was still at concept-stage. Given Arboretum’s connection to the founders, Jeff Williams approached Arboretum exclusively to raise the company’s initial capital. The investment in NeuMoDx illustrates some of the key criteria we consider for seed stage investing:

• Experienced management team with a track record of success building and selling companies
• Geographic proximity, allowing for close monitoring as the company develops
• Compelling technology in a market with multiple potential acquirers

Arboretum has been influential in providing strategic direction that helped accelerate the company’s product development timeline and helped recruit new investors Pfizer Ventures, Baird Capital, and Venture Investors to subsequent investment rounds. Since Arboretum’s investment, NeuMoDx has completed development of its system, gained regulatory approvals for its first assays, and is now preparing for commercial launch. With this progress, NeuMoDx recently entered into a commercialization agreement with QIAGEN which also includes an option to acquire the company.

NxThera - Less Invasive, Lower Cost, Improved Outcome

NxThera has developed vapor ablation-based treatments for benign prostatic hyperplasia (BPH) and other men’s health conditions. BPH, commonly referred to as an enlarged prostate, is highly prevalent among older men, resulting in frequent and sometimes painful urination. NxThera’s goal is to offer a minimally invasive, office-based procedure called Rezum, for patients who otherwise would require prostate resection surgery. Benefits of the Rezum procedure include reduced side effects, post-procedural pain, and cost, while providing similar clinical outcomes to surgery.

Arboretum led NxThera’s 2008 Series A investment after being introduced to the opportunity by the company’s founder, Michael Hoey. NxThera was very early in development at the time of Arboretum’s investment, but several factors made for a compelling investment thesis:

• Experienced and knowledgeable founder
• Novel technology backed by a solid intellectual property position
• Significant cost reduction potential while maintaining excellent patient outcomes
• Strong initial investor syndicate

Arboretum led the $3.25 million Series A financing and recruited an additional syndicate partner to the company. Following the investment, Arboretum played critical roles in recruiting the company’s independent Board Chairman, Andre de Bruin, the company’s CEO, Bob Paulson, and a strategic investor for the company’s Series B round. NxThera commercialized the Rezum system after securing FDA clearance in 2015. After scaling revenues rapidly over 18 months, the company was acquired by Boston Scientific for over $300 million upfront plus $100 million in potential revenue-based milestone payments.

Accuri Cytometers - Unlocking Market Potential

Accuri Cytometers was founded in 2005 with technology licensed from the University of Michigan. The company’s flagship product was the C6 flow cytometer, which was dramatically cheaper, smaller, and easier to operate than existing flow cytometers. Even at a price two-thirds less than that of competitors, C6 achieved industry-leading performance standards. Prior to Accuri’s launch of the C6, flow cytometry was unavailable to many researchers due to prohibitive cost and complexity of existing systems. The C6’s low cost and accessibility could open new markets for flow cytometry within many disciplines of microbiology, immunology, pharmaceutical development, and diagnostics.

Arboretum’s initial investment into Accuri took place in 2007, as the company was nearing its commercial launch. Arboretum’s partners were acquainted with the company’s founding CEO (Jennifer Baird) and CTO (Collin Rich), and had tracked the company’s progress for several years prior to investing. Accuri had several features that aligned with Arboretum’s investment strategy:

• Meaningful value proposition based on significant cost reduction
• Capital efficient operating plan with commercial-ready product
• Minimal regulatory and reimbursement risk
• Talented management team located in Ann Arbor

Arboretum co-led the $5 million Series B financing with Baird Venture Partners, and joined the board of directors. Following the Series B, Accuri completed product development, launched the product in the US and Europe, and achieved rapid revenue growth. The company raised two additional rounds of capital, and Arboretum played an important role in identifying and recruiting a new Series D investor and venture debt provider. Arboretum was also instrumental in recruiting a new CEO, Jeff Williams, after Jeff successfully sold HandyLab (another Arboretum portfolio company) to BD. Under Jeff’s leadership, the company continued its growth trajectory and in early 2011 BD acquired the company for $205 million, more than 10 times the company’s annual revenue.

Advanced ICU Care - A New Model of Healthcare Delivery

Advanced ICU Care (AICU) is a healthcare service company providing remote, outsourced physician services to intensive care units (ICUs) at community hospitals across the United States. Studies have shown that ICUs staffed by fellowship trained physicians in critical care medicine (intensivists) reduce both patient mortality and length of stay in the ICU. The US has a serious shortage of intensivists, making it extremely difficult to recruit these physicians to be physically present at community hospitals. AICU solves this problem by providing “telemedicine” to these ICUs, as it remotely staffs community hospitals with intensivists and ICU nurses from its operations center in St. Louis.

Arboretum invested in AICU’s Series A round just as the company was signing its first hospital customers in 2006. Factors contributing to Arboretum’s investment decision included:

• Capital efficient business model
• Near-term commercial opportunity
• Market with no venture-backed competition
• Innovative care delivery platform enabling improved patient outcomes

Arboretum has held a seat on the board of directors since the initial investment in 2006 and has played key roles in shaping the company’s operational strategy and courting new investors, including Versant Ventures who led the $5 million Series B. A focus on capital efficiency has enabled AICU’s growth to a $40+ million revenue business with less than $30 million invested.