Troubled Victorian medical device startup Seer Medical has been placed in voluntary administration amid a product recall and legal battle with its ousted cofounder.
Lindsay Bainbridge and Andrew Yeo from Pitcher Partners Melbourne were appointed administrators on January 6 following a pre-Christmas board meeting where the medtech’s directors voted to hand over the books.
Pitcher Partners will keep the company operating as they prepare it for sale or restructure.
Bainbridge said the Seer Medical board placed the company in administration ahead of releasing its next generation model for EEG and ECG monitoring at home to detect epilepsy in the hope of finding the right partner to restructure.
“It is early days but we are undertaking a review of the company with the intention to present the business to market for sale or restructure via a deed of company arrangement,” he said.
“This is a good moment to restructure the business in readiness for the release of Seer’s new device. We will be working with the board and stakeholders to consider options and expect to release an Information Memorandum for the company by the end of next week.”
Dr Dean Freestone, Professor Mark Cook and George Kenley founded Seer in 2017. It went on to raise $34 million series A in 2021, backed by Cochlear, multi-family office EWM Group, SG Hiscock and impact investor Giant Leap.
Investor troubles
Within 12 months, the Victorian government’s $2 billion investment fund Breakthrough Victoria (BV), took a $30 million stake in the form of a convertible note, rather than direct equity. That gave the fund the right to invest in a future raise at a discount.
It was one of BV’s first investments and at the time, the fund said the deal would allow Seer to nearly double its workforce and footprint in Victoria, creating 225 jobs by 2028, while expanding into the US and UK. Seer was named the 2022 Victorian startup of the year.
But just 12 months on, the company slumped into a rolling crisis, with Dr Freestone departing as CEO in mid-2023.
In January last year, he was seeking funding to save the business, but that deal fell through. Freestone went on to accuse BV of blocking alternative investors, a claim they deny, including the super fund Hostplus.
Cook, and the rest of the board including Cochlear’s Mark Phelps resigned amid concerns that Seer was on the brink of administration.
Breakthrough Victoria intervened with $4 million in emergency capital, and became a shareholder, but nearly a third of the workforce of around 200 people were made redundant. Freestone alleges he was ousted at that point, and four months later, lodged an unfair dismissal claim currently before the courts.
By March last year, Breakthrough Victoria was under pressure for its performance amid calls for the fund to be abolished.
Defending its investment in Seer at the time, the fund said: “this investment structure affords BV downside protection and additional rights to ensure impact for Victorian taxpayers from the investment.
Then-CEO Grant Dooley, who subsequently resigned, said: “BV continues to believe in Seer and its technology. It’s a world leader in neurological monitoring for epilepsy. They’re on target to do $11 million in revenue this financial year, and as of September 2023 they had over 15,000 patients in Australia.”
The fund went on to explain that “a slower-than-expected expansion into the US has put pressure on Seer’s balance sheet. As such, BV is working with Seer on a number of measures designed to help them through this period. This includes some significant reductions in overheads, which has resulted in job losses.”
Recall setback
By August Seer was unravelling quickly. The company issued a voluntary recall of its Home System monitor the US amid investigations by the Food and Drug Administration, as well as in Australia via the Therapeutic Goods Administration (TGA). Around 20 clinics Seer had around Australia were also closed suddenly on August 20.
“The impact of the recall is that no new patients will be monitored by Seer once the current studies are complete,” Seer said, adding that it “considers the health risk to be low”.
Meanwhile Freestone launched Federal Court unfair dismissal case against Seer and Breakthrough Victoria, alleging he was forced out of the startup as part of the BV funding package, claiming there were multiple contraventions of the Fair Work Act. BV denies the allegations.
Just before Christmas, Breakthrough Victoria’s attempt to have the case thrown out was rejected, but Freestone was ordered to update his claims because it did not comply with “basic rules of pleading”.
In the meantime, the company had been seeking additional funding to no avail and on December 18, the board decided to put Seer in administration.
It’s not yet known if Dr Freestone’s legal action will continue.
A Breakthrough Victoria spokesperson said the fund “looks forward to working with the administrator and remains a strong believer of the potential impact of Seer Medical’s technology to improve public health and people’s quality of life globally.”
Administrator Lindsay Bainbridge Seer’s first-generation video ECG-EEG system has been used by more than 19,000 Australians and there are more than 50 million people with epilepsy worldwide.
“The global market for home epilepsy monitoring is growing quickly, given the financial benefits of diverting patients from hospital bed observation and enabling at-home diagnosis,” he said.
“Seer Medical has already attracted interest from significant investors including Cochlear, Mayo Clinic and Breakthrough Victoria, and companies pursuing similar solutions hold valuations in the tens and hundreds of millions.
“The work to identify partnerships, build markets and secure FDA clearance for the new system has already begun, so this marks an ideal time for a new investor or ownership arrangement to take Seer to the next level.”
Seer and Dr Freestone were contacted for comment. We’ll update this story if we hear back from them.
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