Viscogliosi Bros., LLC

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Contacts: Marc Viscogliosi, Viscogliosi Bros, LLC (212) 583-9700 ext. 103
Nick Kilsby, EKK PR (203) 406-8800 ext. 21

SPINAL DISC REPAIR START-UP ORTHONICS RECEIVES FUNDING FROM VISCOGLIOSI BROS., LLC AND GRA VENTURELAB

NEW YORK – 2004 – Orthonics, Inc., an Atlanta start-up company developing new biomaterials for spinal disc repair and regeneration, has received initial funding from Viscogliosi Brothers, LLC, a New York-based closely held venture capital/private equity and merchant banking firm focused on the musculoskeletal/orthopedics industry. Terms of the funding were not disclosed.

The funding provides the private-sector match for the company’s Phase II grant from VentureLab, a Georgia Research Alliance program that encourages commercialization of technologies developed in Georgia’s research universities. The funding will allow Orthonics to continue development of its spinal disc repair and regeneration technologies, which are based on research from the Georgia Institute of Technology.

Spinal discs are tough, rubbery materials that separate vertebrae in the spinal column. When damaged, they can press on nerves and cause pain. Surgeons can remove the damaged disc and fuse the spinal vertebrae, but that procedure greatly limits motion in the back. Orthonics’ novel biomaterials could provide a non-fusion alternative in the more than one million spinal surgical procedures that take place each year – an estimated $3 billion market.

"We’re extremely pleased with this investment. The Viscogliosi Brothers have an outstanding track record in orthopedics and their investment in Orthonics is a great endorsement of our business plan and technology," said Orthonics CEO Steve Kennedy. Both parties expect that Viscogliosi Brothers will be the lead investor in a round of seed financing to take place in a few months.

Orthonics’ technology is based on research from the laboratory of Barbara Boyan, the Price Gilbert, Jr. Chair in Tissue Engineering and deputy director of research for the Georgia Tech/Emory Center for the Engineering of Living Tissues. (Boyan is also the Georgia Research Alliance Eminent Scholar in Tissue Engineering.) The company’s technology includes an improved hydrogel biomaterial and a novel surface patterning technique used to create a more natural attachment between the artificial material and bone or cartilage tissues.

"We have a technique for creating micropatterns on the biomaterial’s surface that cause cells in contact with it to behave in a specific way," Kennedy said. "By designing the surface properly, we can cause cells that are precursors to bone cells to become bone cells and start making bone, and we can cause cells that are precursors to cartilage cells to become cartilage cells and start making cartilage."

The ability to control cell differentiation and cause the incorporation of new bone and cartilage tissue into the artificial material may allow Orthonics’ devices to replace or repair portions of the spinal disc while eliminating the need for devices such as screws for attaching the company’s "bionic" materials to spinal vertebrae.

"The natural cells that are in contact with the prosthetic device are tricked into thinking that it is bone, and this causes them to attach to the biomaterial and start growing new bone or cartilage," he explained. "The device will then become naturally attached to the bone. This eliminates the need for spikes and screws and allows us to repair just the damaged portion of the disc annulus or nucleus without having to replace the entire disc. We also expect to be able to repair the facet joints in the spinal column to relieve the debilitating pain associated with the degeneration of those joints."

The ability to control natural repair processes at the cellular level could be used to stimulate regeneration of the damaged portions of the disc, a process that normally occurs very slowly – or not at all in older patients. The Orthonics hydrogel material does not cause inflammatory reaction in the body, and is expected to last longer than current materials used in implantable devices, Kennedy said.

Proof-of-principle commercialization work on the technology has been supported by a Phase I VentureLab grant. Kennedy and Boyan have been working together under the auspices of Georgia Tech’s VentureLab program for about a year, and formed Orthonics in December of 2003. Two provisional patent application requests have been filed.

Kennedy praised the VentureLab program – and Georgia Tech’s interdisciplinary research program – for making rapid progress possible. The company is operating in the ATDC Biosciences Center, a science and technology incubator located in Georgia Tech’s Environmental Science and Technology Building.

"Georgia Tech has a world-class biosciences center and an abundance of state-of-the-art resources in other areas," he said. "To accomplish the micropatterning, for example, we needed to do micro-electromechanical systems (MEMS) microfabrication. Those resources were available at Georgia Tech’s Microelectronics Research Center – which is right across the street from the ATDC Biosciences Center. This project couldn’t have happened at very many other places."

Pre-clinical animal trials of the disc material could begin later this year, followed by clinical trials in humans by 2006. Like other medical devices, the spinal disc repair and regeneration materials will require approval from the U.S. Food & Drug Administration.

The investment firm has been following Boyan’s work for several years.

"Barbara Boyan’s reputation and credibility in this technology made this investment attractive to us," said Marc Viscogliosi, a principal and co-founder of Viscogliosi Brothers. "We are very pleased to be working with the Georgia Institute of Technology. We’ve been impressed with the Georgia Tech VentureLab program, and with what the ATDC Biosciences Center can offer to early-stage biomedical companies. We’re looking forward to taking this company to the next level."

Supported by the Georgia Research Alliance – a private non-profit corporation that supports commercially-relevant research at Georgia universities – the VentureLab Seed Grant program provides funding to faculty members to advance promising technologies. Phase I grants support validation of the technology, while Phase II grants – which require an investor match – support creation of a prototype designed to make the technology attractive for larger private investment.

About Viscogliosi Bros., LLC
Established by Marc R. Viscogliosi, John J. Viscogliosi and Anthony G. Viscogliosi in New York City in 1999, VB was the first venture capital/private equity and merchant banking firm dedicated to the musculoskeletal/orthopedics sector of the health care industry. Today, VB is a leading independent firm with a mission to create, build and finance companies founded on innovations developed by surgeons and uniquely focused on "life changing" musculoskeletal/orthopedic technologies. VB has worldwide surgeon, industry and trade relationships and significant financial expertise in the musculoskeletal/orthopedic sector.

As principals of VB, the Viscogliosi brothers have a combined total of more than 35 years experience analyzing and investing in the musculoskeletal/orthopedics sector. The have pioneered innovative financial, strategic and management initiatives for companies in the sector, from start-up, seed and development stage all the way to exit, while helping thousands of people lead better lives through the orthopedic and spinal products marketed and sold by the companies they have assisted in developing and financing.

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