3

Changing The Standard of Care
New medical devices, born of the convergence of healthcare and technology, represent a promising growth opportunity for Safeguard Scientifics. Our newest Life Sciences partner company PixelOptics is capitalizing on this trend with the world’s first electronic corrective eyeglasses called emPower! Addressing a $13 billion progressive addition lenses market, we believe that PixelOptics is changing the standard of care for eyeglass wearers.

Safeguard led the $45 million financing for PixelOptics, which was comprised of $35 million in equity and $10 million in venture debt. Specifically, Safeguard deployed $25 million in equity. Syndicate partners include Delphi Ventures, The Carlyle Group, Longitude Capital and Stark Investments. Horizon Technology Finance provided the $10 million in venture debt. Proceeds will be used for working capital to launch and commercialize emPower!

The Market
Publicly traded medical device companies are slowly recovering from the effects of the recession.  According to the March 23 edition of Barron’s:  “…(M)edical device stocks have been on the rise for the last several months amid increasing confidence that healthcare utilization rates in the U.S. may finally turn a corner this year.”

Publicly traded comps include Luxottica, the largest lens retailer through its Pearle Vision and LensCrafter outlets; LCA Vision; Shamir Optical, STAAR Surgical; Cooper Companies; and TearLab Corp.  Other large competitors with vision operations are Johnson & Johnson and its Vistakon unit; Novartis with Ciba; and Bausch & Lomb.

The ophthalmic and optometric segment of the Medical Device market is trading at an average multiple of 2.2 times enterprise value to 2011 estimated revenues, according to a March 21 research note published by brokerage Stephens.

Nearly 1.8 billion people worldwide suffer from presbyopia, a degenerative eye condition that will effect virtually all adults over the age of 51. Treatment options include corrective lenses, multifocal contacts and surgery. Progressive addition lenses, one of the most common treatments for presbyopia, generate an estimated $13 billion per year on over 50 million pairs sold. The presbyopic market represents 50% of the global optical lens market, and is projected to increase with the aging of the population.

Who is PixelOptics?
Founded in 2005 by Dr. Ron Blum, an optometrist and former general manager of advanced technology in the Johnson & Johnson Spectacle Lens Group, PixelOptics has developed proprietary, lightweight composite, static and electronic lenses for single vision, bifocal, trifocal and progressive eyeglasses.  The company’s technology is protected by hundreds of patents and patent applications in the U.S. and around the world.

As we age, the human eye loses the ability to focus on near objects, a condition commonly known as farsightedness, or presbyopia. Conventional progressive eyeglass lenses that address this problem can blur objects more than an arm’s length away, distorting the view when on a staircase or when swinging at a golf ball, for example.

As the New York Times recently reported, emPower! electronic spectacles correct that distortion with a liquid crystal insert in the bottom part of the lenses.  The crystals change how light is bent, similar to how varying levels of lens thickness do in conventional glasses.  To call up reading power in emPower! glasses, users touch the side of the frame.  Batteries in the frame send a current that changes the orientation of molecules in the crystals.  Touch the side of the frame again and the reading power disappears.

Although the eyeglasses are loaded with electronics – microchips, rechargeable batteries, wires, and an accelerometer – emPower! specs look just like ordinary, high-end glasses.  Thirty-six different frames will be offered initially.  Panasonic Healthcare Company manufactures the electronic lenses, which can be popped out and replaced if a prescription changes.

PixelOptics also has assembled a network of well-established lens and frame specialists with national field representatives to demonstrate and distribute emPower! glasses during its product launch planned within the next 12 months.

PixelOptics is a promising and welcome addition to Safeguard’s Life Sciences partner companies.

Click here to read more of the “Communicating Value and Increasing Transparency” series.