Augmedics snaps up $82.5M to advance spinal surgery using AR and AI

Spinal is one of the fastest-growing categories of surgery, with the number of operations taking place annually now approaching 8 million. But their frequency belies the complexity and sometimes less-than-perfect outcomes of these procedures. That’s created a vacuum that technology is mobilizing to fill: today, a startup called Augmedics that’s built an augmented reality-based navigation platform to improve the process and outcomes of spinal surgeries — using AR to give surgeons “x-ray vision” — is announcing $82.5 million in funding to continue expanding its platform.

The funding, a Series D, is coming from a mix of financial and strategic investors. CPMG out of Texas is leading the round, with  Evidity Health Capital coming in as a “syndicate partner,” with previous backers H.I.G. Capital, Revival Healthcare Capital and Almeda Ventures also participating. This latest investment brings the total raised by Augmedics to $148 million and it’s not disclosing valuation.

In the growing field of medtech startups using AR to expand how surgeons can work — and amid direct competitors going bankrupt — Augmedics has had some interesting traction.

Founded in Israel and now headquartered in Chicago, the company had its hardware and software approved by the FDA in 2019, started to deploy it in the market in 2020, and recently saw the 4,000th procedure performed using its “xvision” tech. Now, the plan is to use the funding to build the next generation of that platform, which combines software with custom-made hardware, and for commercial development.

At a time when many startups are struggling to close rounds, those numbers helped seal this deal. “In a field where many make claims about the benefits of augmented reality in surgery, Augmedics stands apart with a proprietary AR navigation solution, delivering best-in-class surgical accuracy daily to ORs across the country,” said Kent McGaughy at CPMG. “For nearly two decades, we have studied and invested in enabling surgical technology. We are excited to partner with Augmedics, the clear leader in augmented reality surgery.” McGaughy and Evidity’s Paul Enever are also joining Agumedics’ board.

We’ve been hearing about the potential of using augmented reality technology in medical environments for many years now, but Kevin Hykes, Augmedics’ CEO, said much of that has been somewhat of a false start in part because of the shortcomings of many of the solutions.

“We have to spend a lot of time debunking all the noise,” Hykes said in an interview.

What exactly are the issues? Some have decried that custom headsets are expensive to make and design — hardware is hard — a state of affairs that has led many in the field to turn to off-the-shelf AR technology.

It’s a false economy, Hykes believes. The problem with mass-market AR kit is that it simply doesn’t meet requirements of a surgeon.

Among the issues that Hykes cited: regular AR gear interrupts the critical peripheral field of vision; models usually are designed for “infinity” viewing, covering the far distances you might want for gaming or other AR applications, but back surgeons on average work at a distance of about 50 centimeters.

On top of this, the amount of updates hardware makers put into their devices are impractical for the kinds of regulatory cycles that medical devices require: a business built around off-the-shelf AR tech would likely be wrapped up in red tape all the time working to stay with the most current version of a device — with updates that might not even pertain to how they want to use it.

“Even if the device ‘had it all’ you’re still stuck within a highly regulated industry, so if the hardware maker changes the platform you have to resubmit to the FDA again,” he said.

Meanwhile, the many sensors and cameras that a company like Augmedics does want to use may not be part of a third-party hardware maker’s roadmap.

One major, recently emerged, caveat one has to mention here is Apple. The innovations (and sensors and cameras) that Apple is bringing to the space with the Vision Pro, coupled with its other efforts in AR, are worth watching, not least because the company has a long term plan to work closer with industry — and specifically the health tech space. (Some have even argued that it was a turn to health diagnostics that helped Apple shift public perception of its smartwatch from “nice to have” to “must-have”.) Given the price tag of its high-end headsets, you can imagine that non-consumers may well become potential customer targets.

All the same, for now, Hykes said that for Augmedics, the way ahead was definitely in the building of its own hardware, optimized exactly for what it wants to do.

Augmedics’ platform is described sometimes as “x-ray”-like, but in fact it is based around CT scans that are made of a patient’s spine, which in turn are digitized and calibrated to be viewed from the perspective of a surgeon wearing Augmedics’ headset. This effectively gives the surgeon a detailed look at the patient’s spine in real-time.

This in turn can replace fluoroscopy in procedures that are non-invasive, where the back is not cut open: that is significant because fluoroscopy, which is a chemical-based process that involves x-rays, has many health drawbacks both for doctors and patients.

And in more invasive procedures like spinal fusions to correct scoliosis, the Augmedics’ approach lets surgeons have a more complete view of the spine at all times without needing to look away — typically this is achieved now with cameras and screens.

Longer term, Hykes said that the company has had a lot of inbound interest in building applications on Augmedics beyond those for spinal surgeries.

He said the company sees opportunities in working in other musculoskeletal areas, as well as cranial procedures, anywhere that uses CT and MRI scanning to get accurate pictures of soft tissue alongside bone. Knees, hips and shoulders are obvious areas.

“Not a week goes by that a surgeon doesn’t get in touch with an idea,” he said. But for now, the focus will remain where it is.

“A company of our size and stage needs to stay focused to demonstrate, to prove that this is an indispensable part of the future,” he said.

That doesn’t mean there isn’t scope even within that for multiple applications. “We’re in over 70 hospitals in the U.S., and what we hear is that this is a remarkable teaching tool,” Hykes added.