Acorn Grasps $16M Series C Placement

Acorn Cardiovascular Inc. of St. Paul, Minn., raised $16.3 million in venture capital last month to further development of its device that is intended to minimize the effects of congestive heart failure.

New investors U.S. Bancorp Piper Jaffray and Bessemer Venture Partners joined all of the firm’s existing investors in the offering of Series C preferred shares, said Donald Rohrbaugh, Acorn’s president and chief executive.

The existing group included Series B investors New Enterprise Associates, Three Arch Partners, The Spray Venture Fund, Artesian Capital, Winton Partners and Medical Innovation Partners. Winton and Medical Innovation provided Acorn’s seed financing in early 1997.

CHF causes the heart to dilate, which results in less efficient heart function. Acorn bases its product, the Acorn Cardiac Support Device, on the concept that if enlargement of the heart can be halted, CHF can be halted. Rohrbaugh said the device, a mesh-like jacket that is slipped around the heart, has been described as a girdle for the heart.

“Use of the jacket still allows the heart to function in a normal fashion,” Rohrbaugh said. “[In fact] the jacket absorbs some of the stresses of the heart and can actually see some recovery.”

The device can be implanted during heart valve procedures or a coronary artery bypass graft surgery. Rohrbaugh said the device can also be implanted separately from those procedures and more quickly than a routine CABG surgery.

Proceeds from the investment will be used to continue through European clinical studies that were begun in late April. The company needs to perform enough tests for the product to receive the CE mark, which is the European community stamp of approval that the product is safe.

Rohrbaugh said the company plans to initiate clinical testing in the U.S. in the fall. Proceeds will also enable the company to improve manufacturing processes and quality systems that will improve the marketability of the product.

Rohrbaugh said Acorn would likely hold a private round in late 2000 or early 2001 that would be the last financing prior to an initial public offering, unless the company receives and accepts an acquisition offer.