On 3rd June Biotronics 3D launched the latest version of its medical imaging technology; '3DNet Medical'. This technology is delivered through 'the cloud' offering freedom to clinicians and patients to access and interact with medical imaging from any location and any computer connected to the internet. Please click on the screen below to see a video of the launch presentation

Over the next few weeks I will be publishing a series of blog posts explaining the rationale behind the investments in the Longbow portfolio.  As some of the investments were first made several years ago, I thought that it would be interesting to illustrate the developments and changes which have occurred since investment measured against our intial assessments and the company's own milestones. There is no better place to start than at the beginning, our first investment; CyDen Ltd a developer of light based aesthetic products.

CyDen develops and markets a range of devices for aesthetic and medical treatments based on 'Intense Pulsed Light', or IPL.  Rather than use up this post describing this in more detail, check out this brief summary.

So what made us invest in CyDen? 

Let's start with a high level view.  At the time of investment in 2005, the market for aesthetic procedures had been growing strongly over the previous few years.  Technology emerged in the 90s to take advantage of our better understanding of the ageing process, for treatments such as permanent hair removal and wrinkle and cellulite reduction.  However such 'professional' treatments performed in spas or doctor's surgeries are expensive.  CyDen's technology promised to reduce the cost of professional equipment significantly and thereby reduce the cost to the consumer.  We felt that it could drive mass adoption of these procedures.  Furthermore, they had a roadmap that promised consumer products. 

Even in 2005, an affordable consumer product was considered something of a holy grail.  Large companies such as P&G and J&J were partnering with professional aesthetic equipment manufacturers to develop home-use devices.  Our view at the time was that if they struggled to make salon equipment more affordable ($10,000s) then they were a long way from making home use equipment affordable (low $100s).

To summarise, CyDen had developed technology that would make products affordable for the mass market when others were struggling to achieve this, while many of the relevant consumer product companies had declared their interest.

As with all early stage investments, we need to believe that we are backing the right team.  Cyden was founded in Swansea, which for those that don't know, is a world renowned centre of expertise in the use of lasers and light for medical and aesthetic treatment.  The primary reason for this is the presence of the charming and energetic Professor Marc Clement of Swansea University (now Vice Chancellor of the University of Wales).  He and a number of his students have pioneered this field and a cluster of businesses sprung up there as a result.  Marc joined forces with a talented electrical engineer, the late Jan Simonsen, regulatory expert Mike Kiernan and Kevin Smith.  

The plan was to develop a low cost professional product and leverage the income and brand into launching a consumer product.  Ron Petersen, a Longbow partner was recruited as CEO to make this happen.

After four years, how did our investment thesis hold up?

There have been successes and disappointments.  The disappointments first.

• There were too many vested interests downstream in the supply chain so that it proved too difficult to deliver a substantially cheaper product to the professional end user.  Despite a technology advantage, it was therefore coming from behind established competitors without any significant price advantage.  Sales grew rapidly to over £2.5m per annum but never scaled much higher.  In 2009 CyDen licensed its technology to a competitor in return for a sales royalty.  As a consequence, the consumer product was developed more out of investment funds than surplus cash flow.
• Jan Simonsen, the genius behind the iPulse technology sadly died.  Although he had already achieved a working home-use product as well as a further pipeline of new technology for successor products, his absence is keenly felt.

Despite these setbacks, our projections of the market potential were correct and CyDen has achieved some significant successes.

• A recent report forecasts that home-use aesthetic devices will grow to a retail value of $1.3bn per annum by 2013. 
• Large FMCG companies remain interested in this space.  Unilever Ventures saw the potential and invested into CyDen during 2008 and 2009.  Those early development deals that I mentioned above are yet to produce anything viable.
• CyDen was the first company to achieve the holy grail of an affordable, effective and safe consumer hair removal device.  It was first to market in February 2009, sold exclusively under a Boots brand as 'Smooth Skin' iPulse in the UK.  Despite no sales and marketing spend, sales significantly exceeded Boots' expectations.
• The product achieves permanent hair removal after a regime of treatment over 3 to 4 months.  Neither Philips nor Remington, who have subsequently launched consumer IPL products, can make that claim as their products require a continuous treatment to suppress hair growth rather than eliminate it.
• iPulse is available in leading retailers in the UK (Boots), Spain (El Corte Ingles), Germany (Schlecker) and Japan
• CyDen is expecting to be ready to launch a new skin rejuvenation product during 2011. The skin rejuvenation market is substantially bigger than the hair removal market.

What is the future for CyDen?

CyDen has recently received further investment to enable it to proactively raise consumer awareness and promote its products.  Competition is hotting up with Philips and Remington launching products; albeit at a higher price point.  We believe that they are inferior products but we cannot underestimate the power of the brands.  As it stands, CyDen is the market leader in the UK as it is ahead in terms of sales through Boots, but there is much more to do.

Marc now heads up the CyDen Institute of Light Technology and has stepped down as Chairman to be replaced by Chris Outram, an experienced executive and founder of OC&C, a leading management consultancy business.  These moves reflect the changed nature of the business.  It is no longer a company in development, it is a company in a rapid growth phase.

FDA regulatory approval is awaited, which will permit iPulse sales into the vast US market.  Mike Kiernan, one of the original founders and highly experienced regulatory clinician, has done an excellent job navigating the FDA and we are certification is expected later this year.  With FDA approval, we know that the large global personal care companies will be taking a closer look at CyDen and this is expected to produce a range of exciting opportunities for the Company.

For the next instalment of the 'Why we invested..." Blog series I will be reviewing Ambicare Ltd, a developer of a range of light emitting devices for the treatment of skin conditions such as acne and skin cancer.

Join the Discussion - Our blog is not designed to be a one way street. We encourage our readers to comment on posts they are interested in, ask questions and suggest topics for upcoming blogs.

Don't want to post a comment? Feel free to email any questions you have on this blog or the blog series please email them to erudd@longbow.co.uk.

CyDen’s marketing strategy is to be the most recommended brand in the category, and as such identified ‘Winning on the web’ as a key strand for communications. To achieve this, CyDen is running an ambitious social media campaign for iPulse through Grappa PR and Communications.

Starting at the beginning of April, the campaign has already generated impressive results in a short space of time, with many of the most influential beauty bloggers and vloggers (video bloggers) reviewing Boots Smooth Skin, powered by CyDen’s iPulse technology. This in turn is generating buzz, word of mouth and recommendations about the product among consumers online, increasing brand awareness and driving sales in-store and via http://www.boots.com/en/Boots-Smooth-Skin/.

Some of these influential blog sites for beauty and fashion-conscious females have active subscriber numbers close to 90,000 people. That’s a bigger audience than many mainstream women’s magazines. Factor in the high levels of interactivity that exist among subscribers and site visitors – many of whom are actively seeking out information and advice - then it is easy to see why authentic endorsements of Boots Smooth Skin are proving so valuable. For example,Tacky Blue Eyeshadow is currently charting her progress with Boots Smooth Skin. Beauty Scribbler and Lollipop 26 are equally as enthusiastic – and they are just the tip of the iceberg.

See Left: Screen shots of Tacky Blue Eyeshadow, Twitter and Facebook.

Key beauty websites are also being targeted. Editorial coverage has been confirmed on leading sites such as handbag.com and sofeminine.co.uk, which each have audiences in excess of 1.5million. Grappa’s social media campaign also includes Twitter, Facebook and online forums, which together are successfully delivering an audience of 25-45 year old women. Mainstream press interest is also being carefully managed. Influential titles such as the Daily Mail and Grazia have been primed to encourage their readers to make Boots Smooth Skin an essential part of their beauty regime. And who can blame them? iPulse technology is the only safe, painless and effective way to achieve permanent unwanted hair removal.

The social media campaign will gather pace in the UK - while after dipping its toes into the digital waters of Spain earlier this year, CyDen is planning a bigger splash. You can find out more by contacting Allisyn James at CyDen.

Bioceramic Therapeutics has changed its name to Repregen.

The company has also recently been featured in Science Business Online. Please click here to read more.

Ambicare's Ambulight device, a light-emitting sticking plaster which treats skin cancer, has been reviewed on Sky News. To read more on the product and watch clips please visit Sky.com.

A rumour surfaced in the press last week suggesting that Pfizer was likely to buy Enzon.

Enzon is a leader in the field of PEGylation, which is a way of extending the time certain drugs stay in the body in order to improve results.

To us at Longbow this represents the clear endorsement that we are on the right tracks with our investment in Polytherics as we believe that they can do a better job.

It does not actually matter whether or not the rumour is true, the fact that the market “thinks” it likely means that PEGylation is coming of age.

Having completed the final investment of the Approved EIS Fund 09 in December 2009 I am now able to reflect with pleasure on the diversification we have achieved with this Fund.

The portfolio is well diversified across the healthcare and life sciences sectors with one beauty company, three related to cancer treatments, one to cardiovascular disease and one to orthopaedic/dental. There are two retail products, one biotech company and four medical device companies, with 2 products ready to launch, one awaiting regulatory approval and a fourth in development.

Co-investors have included Takeda Pharmaceuticals, Imperial College, Esmee Fairburn Foundation, Finance Wales and Scottish Enterprise.

We will be closing our 2010 Approved EIS Fund at the end of this tax year and there are already several exciting investment opportunities being explored and I am looking forward to another year of interesting and worthwhile investing.

Longbow is pleased to announce that ‘iPulse’ (CyDen’s European version of the iPulse ‘Smooth Skin’ light therapy hair removal device, also sold in Boots) has been recognized with a Telva Beauty Award.

Telva is a popular and leading Spanish women’s magazine which hosts Spain’s most renowned beauty awards. The jury, formed by the most important beauty editors in Spain, has selected iPulse as the best beauty device for in home use. They described the devices as “fabulous” and “great value for money”.

This is another great accolade this year for CyDen, whose home-use ‘Smooth Skin’ device is currently the best selling electrical item in Boots and the top selling product on Boots.com this year, having sold over 12,000 units since its launch earlier this year.

Other winners included L'Oreal, Lancome, Lancaster, Olay and Clinique.

Below is a photograph of Kevin Smith, Managing Director of CyDen receiving the award.

Breastlight was launched on Boots.com at the beginning of September 2009 and in-store during October with the help of the Boots Centre for Innovation. Please click here to read a case study, produced by the BCI detailing how they helped Breastlight reach Boots shelves.

I have been busy over the past couple of weeks having a final catch-up with portfolio companies before Christmas and there is a positive overarching theme.  All CEOs who have recently been to trade shows have reported a dramatic change in sentiment within their markets.

Harry Hatzakis at Biotronics 3D could barely contain his excitement today when talking about people queuing at the stand at RSNA (Radiologist Conference) in Chicago.  He reported interest from multinationals as well as smaller companies. 

 Eddy Littler (CEO of Domainex) returned in November from BIO-Europe saying that it had been the best week since he joined the company in January 2008.  That sentiment was echoed by Keith Powell (CEO of Polytherics).  Both were on the receiving end of interest from both large pharma and smaller biotech seeking collaboration. 

If this continues, 2010 will be a good year.