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Case presenter

Medtrak
Ned Hill
153 Andover Street, Suite 106
Danvers, MA 01923
Phone - (978) 739-9544
Fax - (978) 739-9545
nedhill@medtraknav.com

Many of the most important advancements in medical science in the last decade have been in the field of minimally invasive procedures, enabled by the rapid evolution of medical imaging technologies. A host of instruments have been designed to cut, extract, join, see, inject and replace parts of the body through tiny incisions. The linchpin between imaging and intervention is the precise tracking of these instruments' positions during procedures to ensure they are acting on the correct anatomical structures, while minimizing collateral damage.

Medtrak's system will keep track of these instruments more effectively. Medtrak has created technology for three-dimensional positioning of instruments used in computeraided medical procedures. For the first time, surgeons can have both sub-millimeter position accuracy and line-of-sight independence using radio frequency (RF) waves.

Medtrak will sell positioning subsystems as OEM kits to suppliers of image guided systems (IGS) workstations. Materials will include a control board, transmitter assemblies for attachment to instruments and a receiver assembly, at a BOM cost of about $1,500. Northern Digital Incorporated (NDI), the current dominant supplier of positioning subsystems, sells camera-based systems. The list price for a comparable NDI positioning subsystem is around $20,000. Even if NDI offered their customers a 50% OEM discount, and if Medtrak's product were priced to match (despite its advantages), Medtrak would still achieve 80% margins.

Medtrak is a start-up company with a proven technology. Created by a seasoned executive team with a 25-year track record of establishing, building and selling successful technology companies, the company also has a medical advisory board with experts in emerging surgical procedures. The proof-ofconcept, seed stage was completed using capital from individual investors and development funding from one of the leading IGS manufacturers. The company is offering $1.5 million in equity at a post-money valuation of $6.5 million. It will use the money to complete prototype hardware and software and launch product sales.

Medtrak's near-term customers are the suppliers of surgical navigation or IGS solutions. These include GE, Medtronic, Brainlab, Johnson and Johnson (Depuy), Stryker, Smith and Nephew, Biomet, Z-kat, Praxim, and Zimmer. As Medtrak evolves and miniaturizes its technology, future customers will also include makers of systems for endovascular and catheter-delivered therapies. Sales of imaging workstations used for image guided surgery are expected to exceed $1 billion by 2008.

Medtrak's primary revenues will be derived from volume sales of OEM positioning kits to IGS providers. Additional revenue will come from development funding from these customers to optimize Medtrak products for their specific systems. Several IGS providers like GE, Medtronic and Stryker have long histories of acquiring small innovative companies as a strategy for technology renewal and growth.