A Medical Device Daily

Atritech (Plymouth, Minnesota) a clinical-stage device company, reported that it has completed a $30 million round of financing. Thomas, McNerney & Partners led the round along with a substantial investment from Split Rock Partners and insider investments from Prism Ventures, Tullis-Dickerson and Vector Group.

Over the past three years, the company has raised about $75 million in capital.

With this new funding, the company said it will complete the FDA review of the PROTECT AF clinical trial results along with the commercial launch of the Watchman LAA Closure Technology in Europe. The PROTECT AF clinical trial evaluates the Watchman device vs. the current standard of care, warfarin, in patients with atrial fibrillation (AF).

Last August, Atritech reported the filing of its PMA to the FDA. The company will present the PROTECT AF results to the FDA's Circulatory System Devices Panel on April 23.

The Watchman device continues to be implanted in a Continued Access Registry (CAP) while the product is under review at the FDA. To date more than 110 devices have been implanted in CAP at about 20 sites in the U.S. and Europe.

The Watchman is designed to keep harmful-sized blood clots from entering a patient's blood stream, potentially causing a stroke. Patients with AF are at a greater risk of having a stroke. Typically these patients require blood thinning medications to prevent these clots from forming in the heart. Current medical therapy requires frequent monitoring and has diet and other drug interactions causing many patients to stop taking them. The company believes the device may be an effective alternative for patients with AF who may not want to take blood thinning medications for life.

"After nine years in the development and clinical stage, we are ready to present our case to the FDA and launch commercial operations outside the United States," said Jim Bullock, president/CEO of Atritech.

The PROTECT AF results will be unveiled at a Late-Breaking Clinical Trial session during the I2 Summit Scientific Meeting at 8:30 a.m. on Saturday. The I2 Summit is part of the annual meeting of the American College of Cardiology (Washington) being held March 28-31 in Orlando, Florida.

Prospect Medical Holdings (Los Angeles), which owns and operates four community-based hospitals and manages the medical care of about 190,000 HMO enrollees in southern California, reported that it has received notices of non-monetary default on its first and second lien credit agreements, under which Prospect currently owes about $139 million (comprised of $136 million in original debt and $3 million in added PIK fees).

The notices contend that the company violated a requirement associated with the May 15, 2008 credit agreement amendments to divest certain operations by Dec. 31, 2008. That date was subsequently extended to March 17. The notices declare, among other things, the lenders' right to terminate the loans, exercise any and all remedies available and immediately begin assessing default interest rates.

Prospect said it "vehemently disputes" the existence of any event of default. The company said it has made, on time and in full, all of its required principal and interest payments since the inception of the loans, and anticipates continuing to do so for the remaining duration of the loans.

Since the credit agreements were amended in May, Prospect said it has been in full compliance with all financial and other loan covenants, has significantly exceeded all of its performance projections and has successfully undertaken a wide variety of operational initiatives that have substantially enhanced the value and performance of the company.

At the time that the company entered into the May credit agreement amendments, it was underperforming and the lenders assessed substantial penalties and fees and instituted very significant interest rate increases. Based on that prior underperformance, the company's maximum leverage ratio covenant was set as high as 7.40 to 1, and the minimum Trailing Twelve Month (TTM) EBITDA covenant was set as low as $16.75 million.

As reported in the company's earnings release for the quarter ended Dec. 31, 2008, it had TTM adjusted EBITDA of $43.7 million and a net debt adjusted TTM EBITDA ratio of 2.51. The company expects to report an even higher TTM adjusted EBITDA and an even lower net debt adjusted TTM EBITDA ratio when it reports results for the current quarter.

Prospect has formally engaged an investment banking firm to undertake a refinancing of the current debt, and it said it "firmly believes that it will be able to complete a refinancing - on substantially more attractive terms and with a capital partner more aligned with, and supportive of, the company's excellent performance and disciplined future expansion plans."

In the meantime, Prospect is currently negotiating with its lenders, and is hopeful that an agreement between the parties can be reached.

Prospect manages the medical care of individuals enrolled in HMO plans in Southern California, through a network of about 14,000 specialist and primary care physicians.

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