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Kleiner Device Labs Receives FDA Clearance


Alpha surgeons will begin initial trials of the KG2 device.

In May 2021, the Kleiner Device Labs (KDL) team submitted their KG2 spinal fusion device to the FDA for 510(k) clearance.

This clearance is required before KDL can start marketing and selling the KG2 device. And on Sept 22nd 2021, management announced the KG2 has now been granted full 510(k) clearance!

For investors, it marks an important milestone towards successfully commercializing the product and marching towards a potential exit. (which is, in any medical device company’s path, what may be an eventual exit.)

For example…

On May 9th, 2019 – four years later – Boston Scientific (NYSE: BSX) announced plans to acquire the company for $465m in cash, plus additional payments on commercial milestones for the following three years. 

The valuation was based on an expected $60 million in sales in 2019… from one product… at a 7.75x multiple at the time of acquisition!

For investors who invested in their 2006 round at a $39m valuation, this represents a potential 11.9x return on invested capital (assuming no dilution).

Here’s another example…

The technology is called the PRECICE® Intramedullary Limb Lengthening System.

On February 4th, 2014, the company received 510(k) clearance for their next generation PRECICE® 2 Intramedullary Limb Lengthening System.

On September 30th, 2014, the company also received 510(k) for their MAGEC (MAGnetic Expansion Control) Spinal Bracing and Distraction System.

Then, on January 5th, 2016, NuVasive, Inc (NASDAQ: NUVA) bought the company for $380 million in cash, plus up to another $30m in additional earnouts (for $410m total)!

This valuation was based on approximately $40 million in sales in 2015… from two products… at an estimated 10x multiple at the time of acquisition!

For investors who invested in their 2011 round at a $15m valuation, this represents a potential 27x return on invested capital in ~5 years (assuming no dilution).  

  • While there is no guarantee that Kleiner Device Labs will be acquired, the market comps paint a compelling picture for what is possible in the medical device market. 

According to iData Research, it’s estimated that surgeons perform 352,000 interbody fusions – which is what the KG2 would fall under – each year.

The KG2 will cost ~$3,000 for a single-use device.

According to KDL management… if an average surgeon performs six surgeries per month using the KG2, that would mean 72 total surgeries per year that potentially generate $216,000 in annual revenue.

If we assume a 7x – 10x multiple, this means every single surgeon they acquire could potentially add $1.5m to $2.1m in total valuation!

This means if Kleiner Device Labs can successfully onboard 250 surgeons, who perform a combined 18,000 procedures per year…

The company could potentially generate an estimated $54 million in annual revenue and have a potential valuation of $378m – $540m!

Currently, they have 10 surgeons already onboard for the alpha round of testing. 

However, based on early interest from surgeons regarding the KG2, KDL management is projecting they could potentially reach this sales target by the end of 2025.

Not to mention, the KDL team has more follow-on products currently in development. 

 

Considering an investment in Kleiner Device Labs?

If so, you can review their offering on the Equifund Crowd Funding Portal by clicking here now.