31 May TomoTherapy considers IPO with medical-device business on the rise
A technology that could bring better, safer treatments to cancer patients worldwide might have fallen through the cracks. Now Tomotherapy, a Madison medical-device firm with more than 200 employees that has grown to $44 million in sales, could go public within a year, its founder said.
The company is run by Thomas “Rock” Mackie, a UW-Madison professor who was spurred into going commercial when GE Medical cut off its funding for his radiology research projects.
“I thought they were too good to die,” Mackie said.
Before building Tomotherapy, Mackie had tried to open-source some medical software and give it away – only to find that the high cost of FDA trials nixes the open-source software model for health care. Mackie refocused on developing a company that could commercialize radiology software and bring it to a waiting market.
That led to Geometrics Corporation, a UW-Madison spinoff that took software developed and used in-house at the university, refined it and made it available to clinics nationwide. After obtaining FDA approval Geometrics was sold, and Mackie moved on to his latest creation for treating cancer precisely and with a minimum of collateral damage.
The way Mackie explains it, Tomotherapy’s innovation sounds simple: “We make a three-dimensional image, and we can see where the tumor is.”
With that knowledge, clinicians can target radiation treatments so they do a minimum of damage to healthy parts of a patient’s body. Instead of blasting away cells in an entire area, the radiation can focus in on just the tumor cells.
“It’s cool science,” said Peter Shively, a lawyer with LaFollete Godfrey & Kahn.
In the mid 1990s the law firm started working with Mackie on Tomotherapy, leading to incorporation in 1997 and four rounds of venture financing.
And, Shively added, “It’s a little bit of a story about the underdog. This is a company that started very small … and is now competing against national and international companies.”
On top of the heap is Varian, a maker of medical and other scientific instruments. John Neis, co-founder of the Madison firm Venture Investors, sees the firm staying atop the market but said Tomotherapy has a chance at the big time as well.
“We don’t think it’s going to be very long before they’re the number-two player in the market,” he said.
Venture Investors made the initial VC investment in Tomotherapy in February 1999 and has had an inside track on company financing since. Neis said the numbers so far look promising: $12 million in revenue in 2003, $44 million last year and a target of $90 million in 2005.
The firm’s total venture investment so far – from a collection of investment firms – has been about $30 million, Mackie said.
That kind of progress is only natural, said Mark Gehring, who wrote the software underpinning Geometrics. He has since become chief technology officer of Emageon, which provides medical imaging software and support, but remains a friend of Mackie.
“When you have clinical value like that you will get financial success as well,” Gehring said.
If its success leads Tomotherapy to go public, it could add another feather to Madison’s cap, not just the company’s. Few public companies are headquartered in Wisconsin, and just a handful in Madison.
There’s Third Wave Technologies, which makes molecular diagnostics, and Sonic Foundry, which makes multimedia presentation systems. Bone Care, which was just a few miles out of Madison in Middleton, was recently sold to Massachusetts-based drug giant Genzyme.
Around Milwaukee, health-care companies such as Merge Technologies (medical imaging) and Criticare Systems (patient monitoring) join several manufacturing, IT and financial outfits. The giant GE Healthcare, though it has major operations in Milwaukee, is headquartered in the United Kingdom.
In all, a public Tomotherapy would join an exclusive club.
“Having companies go public certainly creates some liquid wealth in the community, which is a plus,” Neis said.
It could also draw talented people to the region as a whole – people who fear that if the small, private company they join is gone in five years, because of buyout or failure, they won’t be able to find another good opportunity.
“To the extent we build a critical mass of public companies, we’ll retire that issue,” Neis said. “I think it would be a benefit for the community.”