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How Harpoon Medical Secured an Exit Strategy 2 Years Before its $100M Acquisition

Friday, March 23, 2018

Written By  – Reporter, Baltimore Business Journal

Harpoon Medical Inc.'s $100 million sale to a Southern California medical device company was a deal two years in the making.

Bill Niland, the former CEO of Harpoon, described the University of Maryland, Baltimore-born firm's path to an acquisition, in front of an audience of investors and entrepreneurs Thursday evening.

Backed by more than $4 million, Harpoon set out in 2015 to find a "strategic partner" to help lead its next round of funding and support a patient trial that would help its device obtain regulatory approval in Europe. There were about five companies working in the structural heart space the company was looking at, Niland said. Irvine, California-based Edwards Lifesciences Corp. was one of them.

Edwards ended up putting about $13 million behind Harpoon in December 2015, Niland said, and Harpoon signed a structured financing deal that gave Edwards the option to acquire after reviewing early trial data.

Fast forward to December of last year, Edwards Lifesciences Corp. (NYSE: EW) announced it was acquiring Harpoon for $100 million up front, and up to an additional $150 million over the next 10 years pending certain performance marks.

Harpoon was officially founded in summer 2013. Niland left his executive position at another startup, called Vapotherm, to help cardiac surgeon Dr. James S. Gammie develop and commercialize his invention: a medical device for use in minimally invasive heart surgery. Harpoon's technology was licensed via UM Ventures, a joint research and technology commercialization effort between University of Maryland, Baltimore and University of Maryland, College Park. UM Ventures made the first equity investment in Harpoon, of about $100,000. Harpoon also got some early funding from Maryland Technology Development Corp.

"Those early investments — $100,000 or $200,000 — they weren't huge, but it was enough money so that we knew we could keep moving along," Niland told the crowd at an Anchor Ventures networking and speaker event. Anchor Ventures, a collaborative effort between Johns Hopkins Technology Ventures, UM Ventures and University System of Maryland, is a monthly tech-oriented event series.

News of Harpoon's first major multimillion-dollar funding round came in 2014. Harpoon raised a $3.2 million Series A round, led by Epidarex Capital. Kyp Sirinakis, a managing partner at Epidarex, said her firm was impressed with how quickly Harpoon was moving in its development, and with its team. She highlighted how important — and unusual — it was that Dr. Gammie remained heavily involved with the business, though inventors typically prefer to remain in the research realm and away from the entrepreneurial side of things. Epidarex aims to act as a catalyst for life sciences funding in the region, to help bring more outside attention and money to the area, Sirinakis said. Harpoon serves as a prime example of that effect.

The Abell Foundation and Maryland Venture Fund also participated in the Series A, which allowed Harpoon to ramp development and move toward clinical trials.

By 2015, Harpoon needed more funding to support clinical trials. That's when the deal with Edwards started.

There were obvious advantages to the structured financing deal, Niland said. On one hand, Harpoon was able to hone in on its goals and did not have to worry much about running out of cash. But Niland admitted it was also a "long two years," full of daily monitoring, due diligence and data reporting.

Ultimately, Sirinakis said the deal provided some assurance for the various investors involved that "if we did well and hit the right marks, there'd be an exit." Investors got big returns on the initial sale — the Abell Foundation, for example, disclosed it received $5.2 million, a 10-times return — and they could see millions more over the coming years as Harpoon's device continues on the path to U.S. regulatory approval. Niland said the device could start being used in Europe later this year.

The startup will stay in Baltimore, operating under the Edwards name. Niland said more than half of the startup's 18 employees are remaining on as Edwards employees, while his role as a consultant will expire come summer. Then he is "on to the next thing."