A Medical Device Daily

Arbios Systems (Waltham, Massachusetts), a company developing medical devices and cell-based therapies for life-threatening liver failure, reported in-licensing of a portfolio of U.S. patents as well as pending U.S. and foreign applications and other intellectual property (IP).

The exclusive license includes five issued U.S. patents with claims for methods of treating liver failure, multi-organ failure, multi-organ dysfunction syndrome, sepsis, septic shock, systemic inflammatory response syndrome and related inflammatory disorders by selective blood filtration. Arbios did not name the licensor.

"The in-license of this important patent portfolio represents a significant development for Arbios and our Sepet product candidate," said Walter Ogier, president/CEO of Arbios. "We now have the protection of issued and pending patents for our lead Septet liver assist device development program." He said the IP also provides further protection for extension of the company's Septet technology "into other areas of critical care medicine, including major opportunities for the treatment of multi-organ failure, sepsis, and related indications in critical care medicine."

The patents relate to the use of blood filtration devices that remove from patient blood a broad spectrum of inflammatory and other disease mediators ranging from small molecules through intermediate size blood proteins with molecular weights up to the size of beneficial immunoglobulins. The patents also relate to the combined use of replacement fluids, including human serum albumin, or combined uses of secondary selective plasma adsorption devices and/or certain classes of anti-inflammatory therapeutic drugs.

Arbios will pay royalties on net sales of products covered by the license. It also will owe maintenance and milestone fees and have certain other obligations under the license.

In connection with the license, the company issued the licensor a warrant to purchase 225,000 shares of Arbios common stock at $1.50 a share with a 6-year term, and it entered into consulting arrangements with certain inventors of the patents subject to the license agreement, to assist the with the continued prosecution of the patents and consulting services.

Vivus (Mountain View, California) reported an agreement to transfer its exclusive rights and assets related to EvaMist, an investigational metered dose transdermal estradiol spray for the treatment of menopause symptoms, to KV Pharmaceutical (St. Louis).

Closing of the transaction is expected by mid-year following satisfaction of various conditions and completion of an FTC antitrust review.

Vivus is eligible to receive an upfront payment of $10 million upon the closing and another $140 million upon approval of the New Drug Application for EvaMist under review by the FDA. Vivus may also receive milestones of up to $30 million, based on sales of EvaMist through the term of the agreement.

KV will be responsible for the manufacturing, sales and regulatory requirements once the product is approved.

Marc Hermelin, KV's CEO and chairman, said, "EvaMist targets a new and compelling market for Ther-Rx with great growth potential, menopause, with an innovatively delivered drug that is designed to promote patient compliance. EvaMist has the potential to be one of Ther-Rx's largest products in terms of revenue."

In other dealmaking news:

• Emeritus (Seattle), a provider of assisted living and Alzheimer's and related dementia care services, has agreed to acquire all of the outstanding stock of Summerville Senior Living (San Ramon, California), with Summerville issusing 8.5 million shares of its stock to Emeritus. After the merger, the former Summerville shareholders will hold about 31% of the outstanding stock of Emeritus.

Based on Emertius' closing stock price last Thursday of $30.06, the deal has a value of $255.5 million.

The Apollo Funds, as holder of a majority of the voting stock of Summerville, have approved the merger. Saratoga Partners IV, and Daniel Baty, CEO of Emeritus, combined holders of about 65% of the voting stock of Emeritus, will vote in favor of the merger. Deal close — expected in July — is subject to Emeritus shareholder approval.

Granger Cobb, president/CEO of Summerville, will assume the titles of president and co-CEO of Emeritus.

Summerville operates 81 communities in 13 states, providing independent living, assisted living and Alzheimer's and dementia related services. Upon completion of the merger, Summerville will be an Emeritus subsidiary and will retain the brand name in the operation of their communities. After the merger, Emeritus will operate 284 communities in 36 states comprising 24,448 units with a capacity for over 28,000 residents. Baty will continue to serve as chairman and co-CEO of Emeritus and the company will continue to be traded on the AMEX under the symbol ESC.

• Transcend Services (Atlanta) has engaged Morgan Keegan & Co., to assist it in identifying U.S. medical transcription service organizations, provide valuation analysis, support due diligence and assist in obtaining the debt and/or equity financing for possible acquisitions.

Transcend said the medical transcription market in the U.S. is large and fragmented, with about 1,500 firms generating an estimated $6 billion in outsourced revenue annually. It said that the firms fitting its acquisition profile are those with revenue of about $5 million and reputation for excellent customer service in the acute care medical transcription market.

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