NnBU plans $19M ICO to fund blockchain-based medical device R&D

The conceptual design of NnBU's c-section device. (Image: NnBU)

NnBU has filed to raise $19 million in an initial coin offering (ICO). The startup plans to use the cash to develop a blockchain-based device that exposes babies born via cesarean section to conditions comparable to those they would have encountered in the birth canal.

Nicosia, Cyprus-based NnBU has designed the device to address negative short and long-term health outcomes associated with cesarean births. Babies born via c-section carry a marginally higher risk of respiratory problems. In the longer term, there is some evidence linking the procedure to a higher risk of asthma, allergy and autoimmune disorders.

NnBU thinks it can address these health problems by immediately putting babies born via c-section into a device that simulates some of the conditions found in the birth canal. The baby is put face down in the device so fetal lung fluid drains. Then, four phases of pressure are applied sequentially to the baby. Each phase mimics a different stage of the birthing process, from initial contractions to exiting the body.

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The startup wants to expose babies to these pressures in a belief that “stresses of a natural birth are necessary to initially stimulate the baby’s immune system.” The device doesn’t mimic the bacterial colonization that happens during a baby’s passage along the birth canal, which some researchers think cuts the likelihood of developing chronic diseases later in life. 

NnBU has a preliminary, patented design for the device. Now, it wants $19 million to wok with the Fraunhofer Institute for Manufacturing, Engineering and Automation to develop the device and set up a production plant. The goal is to bring the device to market in Austria, Germany and Switzerland in 2020, before embarking on a global expansion that reaches North America in 2022.

Rather than go down the traditional VC route, NnBU is lining up an ICO. This fundraising approach has some similarities to IPOs but investors buy tokens, not stock. In the case of NnBU, holders of the tokens will split 12.5% of the company's annual consolidated sales between them, assuming it ever becomes a revenue-generating business.

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The ICO is one of the ways in which NnBU is bridging the medtech and cryptocurrency worlds. The other is through the blockchain-enabled features of its device. Blockchains are digitized, decentralized ledgers that were first designed to track Bitcoin transactions. 

NnBU is using the model in three ways. Blockchain is behind a system that restricts access to the device to trained medical staff. The technology also prevents anyone other than qualified personnel from performing maintenance work on the device. And, finally, the blockchain will support an opt-in data-gathering program intended to improve understanding of the health of babies born via c-section. 

The early-stage nature of the R&D program means there are significant doubts about NnBU’s ability to deliver a device that lives up to its design specifications. In NnBU’s favor, its partner the Fraunhofer Institute is well established. But the therapeutic rationale behind the device is unproven and NnBU is yet to hire staff to implement the blockchain features.