A Diagnostics & Imaging Week

Naviscan PET Systems (San Diego), specializing in high-resolution PET scanners, reported completing a $15 million Series C round of financing led by QuestMark Partners (Baltimore) and joined by Sanderling Ventures, Mayo Medical Ventures and Walker Ventures, all previous investors in Naviscan.

Michael Ward, a partner at QuestMark, will join Naviscan’s board of directors.

The company said that proceeds from the financing will be used to further validate and commercialize its PEM Flex Solo II PET scanner, Naviscan’s patented high resolution PET scanner. The company also will use the proceeds to continue development of other imaging and intervention technology, including proprietary imaging agents.

Naviscan says it is the first company to obtain FDA clearance of a high-resolution PET scanner designed to image small body parts. The device was developed to help physicians and researchers diagnose and locate cancer, guide interventions and advance new clinical therapies.

Paul Grayson, president/CEO and chairman of Naviscan, said, “The PEM Flex Solo II PET scanner provides unprecedented clarity and resolution, allowing physicians to image tumors less than 2 millimeters in size. It is the difference between seeing and not seeing the tumor, meaning early detection and the potential for more cures.”

Current reimbursed indications for the PEM Flex Solo II include surgical planning, treatment evaluation and tumor staging in breast cancer patients.

“We wanted to support Naviscan’s commercialization and product development efforts because we believe the product’s superior resolution, sensitivity and specificity may improve patient care and lead to better outcomes,” said Ward.

Naviscan PET Systems was founded in 1995.

QuestMark Partners is focused on expansion-stage growth companies including those in software, medical devices and the Internet.

In other financing activity:

• InSight Health Services Holdings (Lake Forest, California) reported that the offer to exchange shares of InSight’s common stock for up to $194.5 million aggregate principal amount of 9-7/8% senior subordinated notes due 2011 of InSight’s wholly owned subsidiary, InSight Health Services, has been extended and will expire at 11:59 p.m., EST, May 16, unless extended. As of May 1, about $109.1 million of notes had been tendered to the exchange agent.

InSight is a provider of diagnostic imaging services serving managed care entities, hospitals and other contractual customers in more than 30 states, including the following targeted regional markets: California, Arizona, New England, the Carolinas, Florida and the Mid-Atlantic states. InSight’s network consisted of 109 fixed-site centers and 108 mobile facilities as of Dec. 31.

• Biosite (San Diego) reported that, in accordance with NASDAQ rules, 18 non-officer employees were granted with the following terms: each option has been classified as a non-qualified stock option, has an exercise price equal to the fair market value on the grant date, has a ten-year term, and vests in 16 equal quarterly installments over four years (on each quarterly anniversary of the applicable vesting commencement date).

Biosite is a bio-medical company commercializing proteomics discoveries to aid in the diagnosis of critical diseases and health conditions. It reports its Biosite Triage rapid diagnostic tests used in more than 70% of U.S. hospitals and in more than 60 international markets.

• TomoTherapy (Madison, Wisconsin) has filed for an IPO of 10.9 million shares, with the price range of $15-$17 a share.

The company is the developer of the Hi-Art System, a radiation delivery system designed to change the intensity of the radiation beam so that it adapts to the shape of the tumor. Using a computerized tomography scan, the system focuses on killing cancer cells, TomoTherapy says, with “sub-millimeter accuracy” to kill cancer cells while sparing healthy tissue. As of December 31, 2006, it reported an installed base of 108 Hi Art systems worldwide.

The company said the funds will be used to expand marketing, support continued R&D, expand international service and support and for general corporate purposes.

TomoTherapy was founded in 1997 by medical physicist Thomas “Rock” Mackie and mathematician and software engineer Paul Reckwerdt. The company works with the University of Wisconsin (Madison) in researching its technology.

Among the risks the company lists is that it licenses its technology from the Wisconsin Alumni Research Foundation (WARF) and that WARF has the right to unilaterally terminate the agreement if Tomotherapy is not able to pay royalties or satisfy other obligations related to use of the technology.

The company’s revenue increased from $75.8 million for the year ended Dec. 31, 2005 to $156.1 million for the year ended Dec, 31, 2006, an increase of 106.1%. Its gross profit increased from 33.9% to 34.2%.

Proposed ticker symbol on the Nasdaq TTPY. Lead managers are Merrill Lynch, Piper Jaffray and Thomas Weisel.

TomoTherapy opened its European headquarters in Belgium in 2006.

• Novadaq Technologies (Toronto), a developer of imaging systems and image-guided therapies for the operating room, has priced its previously reported private placement of 2 million common shares at $7.50 a share, for gross proceeds of about $15 million.

Closing of the offering is expected on or about May 23. The company said that net proceeds will be used to fund R&D, for sales and marketing and recent acquisitions. These include acquiring the exclusive distribution rights to the Heart Laser system from PLC Medical Systems (Franklin, Massachusetts) for transmyocardial revascularization in the U.S., and acquiring certain business assets of Xillix Technologies (Richmond, British Columbia)

The shares will be offered through a syndicate of agents, led by RBC Dominion Securities and including Blackmont Capital and Versant Partners

• Cytyc (Marlborough, Massachusetts) said that through Cytyc Development, it has made a venture investment in Combinent BioMedical Systems (Boston), an early-stage company developing a vaginal implant for delivering a combination of drugs, currently given orally and intravenously. It said the goal of the company’s R&D is to improve treatment of a number of women’s health diseases with large markets and high unmet needs. The amount of the funding was not disclosed.

Robert Langer, PhD, professor of chemical engineering at Massachusetts Institute of Technology (MIT; Cambridge, Massachusetts), and William Crowley Jr, MD, chief of the Reproductive Endocrine Unit of the Department of Medicine at Massachusetts General Hospital (Boston), are the founders of Combinent. Langer has more than 550 issued or pending patents worldwide, with many licensed or sublicensed to pharma, biotech and medical device companies.

Crowley is a researcher focused on gonadotropin-releasing hormone agonist for the treatment of precocious puberty in children and endocrine disorders in women.

Cytyc said that the financing will be used mainly to fund clinical trials.

Cytyc joins VIMAC Ventures and Commons Capital in this financing. John McDonough, president of Cytyc Development, will become a member of Combinent’s board, which will include Langer and Sena Biswas from VIMAC Ventures.

McDonough said, “We believe we are financing a unique delivery platform that will yield multiple products for the treatment of serious reproductive, endocrine, and metabolic diseases affecting women.”

Cytyc manufactures diagnostic and surgical products with a focus on women’s health.

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