A company focused on heart monitoring had the honor of kicking off the initial public offering year in the med-tech space last month. CardioMEMS (Atlanta), a startup company developing devices for monitoring heart patients, reported that it is seeking to raise more than $86 million, with all of the shares in the proposed offering being sold by the company.
The company is trading on the NASDAQ under the symbol SENS.
The company’s first commercial device, the EndoSure Wireless AAA pressure measurement system —or EndoSure system — is comprised of an implanted sensor and an external electronics module. The sensor is inserted during the minimally invasive cardiovascular repair of abdominal aortic aneurysms (AAA), via a catheter into a patient’s aneurysm sac to measure and communicate pressure information to an external electronics module from inside the sac.
Since a goal of the endovascular AAA repair procedure is to eliminate or minimize pressure on the walls of the sac, the company believes the EndoSure sensor is a valuable tool in helping a physician to determine during the procedure if the AAA has been adequately repaired.
The EndoSure system was cleared by the FDA in October 2005 for measuring intrasac pressure during endovascular AAA repair and is used alongside traditional angiography.
The FDA clearance, however, does not allow the company to promote the EndoSure system as a replacement for traditional angiography or for measuring pressure after the procedure. The company said it plans on conducting clinical trials to seek FDA clearance for measuring pressure after the procedure.
CardioMEMS said it is adapting the EndoSure system for use in patients with heart failure and in patients with hypertension. The heart failure and hypertension sensors are further miniaturized versions of the EndoSure sensor that use the same materials, manufacturing methods and operational concepts as the EndoSure AAA sensor.
The IPO offering comes after a strong close in 2006 for the company. In November, CardioMEMS closed on $22.6 million in venture capital. Nearly half the total came from Arcapita Ventures. The company, which is based at the Georgia Tech Advanced Technology Development Center (Atlanta), reports that it has raised more than $50 million in venture capital since its 2001 launch.
In December, the company said that two of its wireless sensors for monitoring hearts had been successfully implanted in two human patients.
In November 2005, the company entered into a license and development agreement with Medtronic (Minneapolis), as well as a related supply agreement, to adapt the sensor technology for use as a wired pressure sensor system capable of working with Medtronic’s implantable devices to address impaired cardiac function, hypertension, or both.
Medtronic is funding the efforts under this joint development program through a series of milestone payments totaling $3 million. CardioMEMS also is entitled to receive royalties on sales of Medtronic devices incorporating its technology, subject to the terms of the license agreement including a cumulative royalty cap of $25 million. Medtronic is a 15.1% stakeholder in the company.
CardioMEMS noted that it has incurred net losses in each year since its inception in 2000, including losses of $3.3 million in 2003, $5.1 million in 2004, $8.8 million in 2005 and $13.3 million in the nine months ended Sept. 30, 2006.
The underwriters of the offering are Banc of America Securities as sole book-running manager, CIBC World Markets as co-lead manager, and Jefferies & Company and Pacific Growth Equities as co-managers.
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InnerPulse garners $50 million in ‘C’ round
InnerPulse (Research Triangle Park, North Carolina), a privately held company developing technologies for the treatment of abnormal heart rhythms, reported the closing of $50 million in a new equity financing, one of the largest private rounds in the med-tech sector in recent memory. The company, formerly known as Interventional Rhythm Management until June 2006, said that the new capital will be used for the completion of the company’s implantable defibrillator — the Percutaneous Implantable Cardioverter Defibrillator (PICD) and to support the infrastructure required to advance the company from its early developmental phase to human clinical trials and commercialization.
Dan Pelak, president/CEO of InnerPulse, put the company’s most recent funding in perspective. “If you look at med-tech IPOs that are being done,” he told Cardiovascular Device Update, “in many ways, we almost raised as much in a private financing as some of the IPOs have. I can’t recall, at least in recent years, any [private med-tech rounds] that have topped this.”
The syndicate of investors included Johnson & Johnson Development Corporation (New Brunswick, New Jersey), Medtronic (Minneapolis) Synergy Life Science Partners, Ascent Biomedical Ventures, Delphi Ventures and Frazier Heathcare Ventures. Additionally, the company noted that Boston Scientific (Natick, Massachusetts) and Greatbatch (Clarence, New York) remain significant stockholders of InnerPulse.
Pelak said the funds from this, the company’s C round of financing, should take the company through to commercialization in Europe, which he projected should take place in late 2008. But, he noted, the funds will not take the company up to U.S. clinical trials. With this round, he said the company has now raised more than $85.2 million since its founding in 2003 and incubation by Synecor.
According to Pelak, the company has been successful at raising funds for its plans to pioneer an alternative to traditional electrophysiological devices, because investors see the potential for a largely untapped patient population at risk for sudden cardiac arrest (SCA). InnerPulse’s products employ a technology designed to simplify the ICD implant utilizing a minimally invasive approach that shortens the procedure, reduces post-implant discomforts, and renders the device invisible. The company believed the minimally invasive nature of the technology will expand the number of implanting physicians, thereby providing access to more patients who critically need defibrillator technology.
There are an estimated 450,000 people in the U.S. alone that suffer SCA every year, and the company is targeting a “gap” in implantable cardioverter defibrialltor referrals, which it believes “conservatively” represent less than 25% of all the current prospective primary prevention patients.
“We view this as really augmenting traditional defibrillators and believe that we’ll grow the market for defibrillators fairly significantly,” said Pelak.
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AED shipment delays will put off spin of Physio-Control
A major divestiture — the proposed spin-off of its AED business, Physio-Control (Redmond, Washington) by Medtronic (Minneapolis) — will not be happening on any sort of near-term timeline. The spin-off will be delayed indefinitely by the halt of shipments of automated external defibrillator (AED) products by Physio-Control.
Medtronic disclosed in December that it would spin off the AED, saying it would happen between May and October 2007, because the AED technology did not match well with its focus on implantable defibrillators, especially on the marketing side.
Physio-Control, which provides AEDs and other emergency response products, said the decision to suspend U.S. product shipments was made to “address quality system issues” at the company’s Redmond facility. The company said the action is not related to a specific product, does not affect Physio-Control products currently in use worldwide - and thus is not cause for a recall — and does not impact any other Medtronic products. Physio-Control and Medtronic said they intend to work “expeditiously with FDA” to address open issues in order to resume shipments to the U.S. market.
While Clark noted that the shipment suspension will delay the spin-off of Physio-Control, he said that Medtronic still intends to go forward with the transaction “as soon as these matters are resolved” but predicted no timetable for that.
Physio-Control was acquired by the firm for $538 million in stock in June of 1998. Earlier in that year, the company laid off 600 Medtronic employees and closed eight plants. The company currently has a market share of about 45% to 50% for defibrillator monitors and roughly 35% for AEDs.
Less than a week after Physio-Control reported the suspension of shipments to U.S. customers, the company told its employees that it is considering layoffs, according to an article in the Seattle Post-Intelligencer. The company did not yet have a timeline for any potential layoffs, Clark said. Physio-Control employs 1,200 people, about 800 of them in Redmond.
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Business bought from Baxter now to be named Fenwal
Texas Pacific Group (TPG; San Francisco/London) and Maverick Capital reported that the transfusion therapies business that they are acquiring from Baxter International (Deerfield, Illinois) will be named Fenwal, Inc. when the transaction closes later this quarter. Fenwal was the original name of the business when it was established in 1949. The deal to sell the business to TPG and Maverick for $540 million was unveiled late last year.
The purchase included a global product portfolio of manual and automated blood-collection products and storage equipment, as well as five manufacturing facilities located in Haina, Dominican Republic; La Chatre, France; Maricao and San German, Puerto Rico; and Nabeul, Tunisia.
Fenwal, TPG said, will be one of the world’s largest suppliers of products and services to the blood banking industry. The business has developed technologies for “transfusion medicine” that support blood collection and blood therapy for nearly 60 years.
Ron Labrum, incoming CEO, said, “The Fenwal brand is recognized around the world as being synonymous with innovation in transfusion medicine. The name signals a renewed vigor to bring about new and better technologies, backed by the service and support expected from an industry leader.”
In 1949, a medical student named Carl Walter, with a $2,000 investment from entrepreneur T. Legare Fenn, founded Fenwal Laboratories. Walter had developed the first flexible, disposable blood-collection container. In addition to eliminating complications associated with blood collected in glass bottles — such as air embolism, contamination and breakage — Fenwal’s Blood-Pack system enabled the separation of whole blood into its components through a series of connected disposable containers, creating a shift from whole-blood transfusion to blood component therapy, and enabling the administration of only that component of blood needed.
Current development is focused on technologies that automate the process of cell separation and other processes.
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CarboMedics lawsuit vs. ATS seeks damages, contract enforcement
CarboMedics (Austin, Texas), a company owned by the Sorin Group (Milan, Italy), last month reported filing suit against ATS Medical (Minneapolis), alleging that ATS failed to order valve components as required by a long-term supply agreement. The suit seeks enforcement of the supply agreement on a continuing basis and monetary damages. It was filed in the U.S. District Court for the District of Minnesota.
CarboMedics said that in 1990 it gave ATS a license to intellectual property for a bileaflet heart valve designed by CarboMedics and agreed to develop the manufacturing processes by which ATS Medical could bring that heart valve to market. In exchange, ATS entered into a long-term supply agreement with CarboMedics whereby ATS is required to purchase about $20 million worth of valve components from CarboMedics between 2007 and 2011.
“We have completed a comprehensive review of the commercial agreements at stake and as a result, feel we have to take this action in order to seek enforcement of the contract,” said Charles Griffin, president of CarboMedics. “We are confident that in this case the court will recognize the serious breach of basic contract rights by ATS.”
ATS responded to the charges with its own statement.
“After careful review of the facts and observation of conduct by CarboMedics over a long period of time, ATS Medical has concluded that CarboMedics has rejected, undermined and breached its contractual relationship with ATS Medical,” said Michael Dale, president/CEO of ATS. “CarboMedics’ decision to file suit represents, in our opinion, an attempt by a competitor to strike advantage where none exists.”
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Biophan reports re-evaluating accounting of investment in Myotech
Biophan Technologies, (West Henrietta, New York), a developer of biomedical technology, has filed Form 10-Q for the period ending Nov. 30, 2006.
The company said it recently re-evaluated the accounting treatment of its investment. In order to comply with FASB FIN 46(R), the company has consolidated Myotech from the date of acquisition, Nov. 30, 2005. In order to accomplish this consolidation, the company had the patents held by Myotech appraised by an independent valuation firm, Biophan said.
The patents that Myotech holds were appraised at $26 million, which is now included in Biophan’s consolidated balance sheet. And Biophan recognized roughly $226,000 in revenue from licensing, MRI testing and consulting. The company said it expects to recognize additional revenue from these transactions in the next several quarters.
Biophan licenses technologies, designed to improve the MRI safety and image compatibility of medical devices, to device manufacturers. In addition, it is commercializing the Myotech Myo-Vad, a cardiac support system.