Bay Area startup Outset Medical is building a device meant to cut out the middlemen in dialysis – that is, the technicians. It’s building a device, called the Tablo, that simplifies the entire dialysis process, and just raised $91 million in debt and in equity to do so.
“We’re trying to fundamentally change the service model – where you no longer need a dialysis clinic,” CEO Leslie Trigg told MedCity News in a phone interview.
This is the largest private medtech deal of the year. MedCity News first reported on this fundraise May 20, based on information from an SEC filing. The new funding will help Outset Medical kick off its commercial rollout with clinical use of the Tablo.
Trigg laid out the company’s business plan – which in theory could flip the current dialysis clinic model on its head:
Patients with kidney failure and other such diseases go to dialysis clinics to get treatment. They tend to go in three times a week, with treatment times running up to five hours from start to finish.
“The way we deliver dialysis hasn’t changed much at all since the 1970s,” Trigg said.
After all, dialysis is the first truly capitated healthcare service, Trigg said, dating back the 1970s. Everyone who needs dialysis becomes a Medicare patient – but there’s a $34 billion cap on dialysis every year.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
There are about 6,500 dialysis clinics around the country, run by companies like DaVita and Satellite. Treatments cost about $239 apiece. In all, there are more than 72 million dialysis treatments per year, she said. And the service model, Trigg said, is very labor intensive – with nurses and technicians doing every step of dialysis.
The Tablo device purifies tap water and makes dialysate on demand – streamlining the dialysis process for both patients and for care providers.
“The machine allows independent control in a clinical setting – allowing the provider to really change the staffing model,” Trigg said.
Providers have been very receptive to the device, she said. It already has FDA clearance for using the Tablo in the clinic – but is still waiting on approval to run a clinical trial that could clear it for home use.
The equity portion of the round – $51 million – was led by new investor Fidelity Research and Management Company, with participation from existing investors Warburg Pincus and The Vertical Group, as well as new investors Partner Fund Management, Perceptive Advisors and CRG. The debt portion – $40 million – also came from CRG.
