Medical Device Daily Contributing Writer And MDDs
Precision Therapeutics (Pittsburgh), looking to expand its testing business focused on personalizing cancer treatment, disclosed plans last week to go public. The company registered to sell up to $80.5 million in stock in an initial public offering.
Precision has been selling its ChemoFx chemoresponse test since 1997, but curtailed sales effort in 2003 due to reimbursement issues.
Following additional testing and product refining, Medicare in April 2006 began reimbursing for the use of ChemoFx in gynecologic cancers, and in August 2006 the company re-established a direct sales force.
The test uses a patient’s live tumor cells to assess the likelihood of responding to various cancer drugs or drug combinations. ChemoFx measures both the responsiveness, or sensitivity, of tumor cells to particular drugs, and their resistance, the company says.
Sales and marketing efforts at Precision now are targeting the gynecologic cancer market. The company in 2006 published a study that it said showed that ovarian cancer patients treated only with a drug or combination to which their tumor cells were classified as responsive by ChemoFx experienced a median tumor progression-free interval around three times the median progression-free interval for patients treated only with drugs classified as non-responsive.
The company plans to expand ChemoFx marketing efforts to additional indications such as breast, lung and colorectal cancers. The company noted that the FDA has approved 55 cancer drugs for commercial use, with about 400 additional cancer drugs now in clinical development.
The company says that the intrinsic cell response to a chemotherapeutic agent is the main determinant of tumor response, so it designed ChemoFx to analyze that tumor cell behavior. A resulting ChemoFx report based on the tissue, taken from the patient via biopsy or surgery, classifies the patient’s tumor as “responsive,” “intermediate” or “non-responsive” to each drug or combination requested by a physician.
The ordering physician can provide a list of up to 12 drugs or drug combinations to be tested against the patient sample. The ChemoFx process entails enriching and expanding the malignant tumor cells, challenging the cells with the selected chemotherapies, directly measuring the surviving cells and interpreting the results.
The company’s revenues for the first six months of this year were $962,000 (vs. $169,000 in the first six months of 2006), while its net loss for the first half of this year was $5.6 million. Precision had $10.5 million in cash as of June 30, a total that does not include $9.5 million brought in this month through a sale of convertible notes.
ChemoFx is provided at $450 per drug or drug combination tested, and the company’s average invoiced price is about $3,300 per test billed. Net revenue, however, is less than the average invoiced price because many payors do not provide coverage or reimbursement for ChemoFx, Precision said.
The company said it has obtained prospective Medicare coverage for the use of ChemoFx in gynecologic cancers, and been fully or partially reimbursed by more than 425 different private payors, including managed care organizations, on a case-by-case basis for numerous cancer types. For the first six months of this year, it has billed for 559 tests.
Precision in February 2006 raised $22 million in a venture round, bringing it total financing at that point to about $50 million.
Proceeds from the offering would be used to expand sales and marketing functions, including educating physicians and payors as to potential treatment benefits and economic value of the test. Funds also would be used for clinical studies to support validation of ChemoFx beyond gynecologic cancers, and on enhancements to ChemoFx to incorporate additional chemotherapies and to allow for testing of tumor responses to biologic therapies.
Among the largest Precision shareholders are Adams Capital Management, with a 39.1% stake, followed by Quaker BioVentures (21.5%), TVM Life Science Ventures (9.1%), and Birchmere Ventures (8.8 %).
In other financing news:
Nanogen (San Diego) reported an agreement for a $20 million registered offering to institutional investors of senior convertible notes and warrants. The transaction is expected to fund today, the company said.
The unsecured senior convertible notes to be issued will bear annual interest at a rate of 6.25% per year and provides investors the right to convert principal into registered shares of Nanogen common stock at $1.27 a share, which carries a premium of about 12% over the closing bid price of Nanogen’s stock on Aug. 24. The notes have a three year term and, subject to certain conditions, the company may elect to make payments of interest in cash or stock.
After 24 months, Nanogen will have the right to force conversion of the notes into shares of the company’s common stock, depending on the performance of the common stock. The company will initially place $7.3 million of the funds in a restricted bank account that will become unrestricted subject to certain stock price performance criteria.
Additionally, the investors initially received warrants to purchase about 11 million shares of common stock at $1.14 a share for a term of five years, which may be replaced with additional warrants if these initial warrants are exercised. Under certain circumstances, the company can force the exercise of these warrants, depending upon the performance of its common stock, which will provide the company access to added capital.
Nanogen said it expects to use the proceeds from the offering for working capital and general corporate purposes.
Nanogen’s products include real-time PCR reagents, the NanoChip electronic microarray platform and a line of rapid, point-of-care diagnostic tests.
Seven Hills Partners served as the placement agent for the transaction.
Rubicor Medical (Redwood City, California), a private medical device company developing minimally invasive technologies for breast biopsy and tissue removal, said it has entered into a $10 million loan agreement with lenders Comerica Bank and Oxford Finance Corp.
Rubicor said it will use the facilities for working capital requirements, capital expenditures and other corporate growth initiatives.
Rubicor currently markets three disposable devices for breast biopsy and surgery: Flash, Phantom and Halo. Flash technology allows for single insertion, multi-sampling, core biopsy for breast lesion diagnosis without having to re-insert the device into the breast. Phantom provides surgeons with a soft-tissue excision device for breast surgical procedures. Halo enables physicians to capture complete breast tissue abnormalities through a minimally-invasive procedure in the office exam room.
The DiBari Group acted as advisor for the company in this transaction.