ISTO Tech Seeks Late-Stage VC, Eyes IPO

ISTO Technologies provides hope for anyone with knee injuries or back pain.

ISTO, of St. Louis, has developed cell technology to help repair the cartilage of the knee, back or spine. Dr. Mitchell Seyedin, ISTO’s president and CEO, said the company will be looking for a late-stage investor, or mezzanine funding, later this year.

Seyedin, who was speaking Thursday at the BMO Healthcare Conference in New York, didn’t disclose how much ISTO will be seeking. ISTO has raised $45 million through five rounds of funding, from Ascension Health Ventures, Alafi Capital, Life Sciences Partners, Mid-America Transplant Services and Zimmer Holdings.

ISTO expects to produce about $10 million in 2010 revenue. “We are targeting to be cash flow positive by 2011,” Seyedin said during the conference. Seyedin also founded Orquest, which was acquired by Johnson & Johnson in 2003.

ISTO may also be looking to tap the capital markets in the future. “An IPO is possible in 18 to 24 months,” Seyedin said.

The company has a patent on juvenile cell technology that is uses to regenerate adult cartilage cells. It takes cells from juvenile cadavers that it develops for cartilage implants or injections. Juvenile cell technology has proven to be more effective than adult cells in regenerating cartilage, Seyedin said.

It has three products. DeNovo ET is a “scaffold-free living cartilage” that is implanted into the knee and is currently in clinical trials with the FDA. NuQu is injectable cartilage that is used to help back pain. The product is in Phase I clinical trials. The last product, InQu, has been cleared for spinal fusion application and is commercially available.

ISTO is considered an “orthobiologic” company, which refers to the use of biology or biochemistry to solve an orthopedic problem. Other companies in the sector include Osteotech, RTI Biologics, Orthovita and Exactech.

“In the last decade, orthobiologics has really come on,” a banker said.

If orthobiologics work, they are an alternative to hip and knee replacements, the source says. “People would pay dearly for this. It’s hard to run on artificial joints,” the person said.