In a move that may alter the dynamics of the automated external defibrillator (AED) market, Medtronic (Minneapolis) has unveiled a plan to send its 1998 acquisition, Physio-Control (Redmond, Washington), back out on its own sometime in the first half of the company's fiscal 2008. The spin-off, said Art Collins, Medtronic CEO and chairman, is being made because Physio-Control "is not central to our long-term strategic business."

In a conference call, Collins described the spin-off of its division making AEDs as a win-win situation. He said, "[w]e believe this transaction … will allow Physio to renew its focus, while allowing Medtronic to focus" on opportunities that align better with its strategic aims. Those aims, he said, include pursuing growth in the mid-teens.

Medtronic picked up the firm for $538 million in stock in June of 1998. The company, which operated as Medtronic's Emergency Response Systems division, will continue operations with its headquarters in Redmond, Washington, the location of its headquarters prior to the Medtronic buy-out.

Gary Ellis, Medtronic's CFO, said the move will offer Physio-Control "new levels of investment and operating flexibility" and that for the next six to nine months, the spin-off will have "no impact on current fiscal year per-share guidance, … but our fiscal '08 guidance" will be affected. Ellis said that transaction-related costs "are not expected to be significant."

Physio-Control has not suffered under the Medtronic umbrella. It had $178 million in sales in 1998 and should ring up about $450 million in fiscal 2007. However, Ellis suggested that Medtronic's flagging interest in Physio-Control's product line might eventually have resulted in under-investment.

Brian Webster, who will assume the title of CEO of the new Physio-Control, said that the emergence from the Medtronic umbrella represents "a chance to assume all control of our operations and our strategic direction." He said that the firm as an independent entity "will continue to provide the state-of-the-art technology and the world class service our customers have come to expect."

Medtronic picked up the smaller unit in a pooling-of-interests stock transaction that netted Physio shareholders $27.50 in Medtronic stock for each share of Physio-Control. However, the subsequent explosion of sales of implantable defibrillators and coronary stents pushed AEDs into the background, despite the fact that Physio-Control grew its revenue stream at about the anticipated rate of 8% to 12% a year.

"Medtronic is a very different business" than it was in 1998, Collins said, adding that the resources that Physio-Control needs to grow may not be available from the Medtronic checkbook. Medtronic said it will pump the freed-up financial resources into other units. Implantable cardioverter defibrillators are still an "attractive growth platform" as are several other technologies, Collins stated. The firm's drug-eluting stent (DES) business will benefit from the sale, too, "but not exclusively," he said, a rather clear reference to the potential roll-out of the company's Endeavor DES in the U.S., which it hopes to see happen by the second half of next year.

Collins characterized Physio-Control as "an attractive business, but perhaps more so as an independent company." He said that a problem with attempting to build and promote both AEDS and ICDS is that "[t]here are not enough tangible operating synergies to make business sense." They are mechanically very different and, for Medtronic, made in different locations. "The selling and servicing requirements are different," and even sales to hospitals are not that closely tied, he said.

Ellis also noted that Medtronic was never able to create any sales synergies between the products in the hospital market since AEDs are a capital equipment purchase while ICDs are purchased as therapeutic devices. "There really is very little synergy on the [sales] call side," Ellis observed.

Latitude System FDA-approved

The FDA has approved what Boston Scientific (Natick, Massachusetts) calls the first remote monitoring system to provide clinicians with direct device data integration capability into the Centricity Electronic Medical Record (EMR) from GE Healthcare (Waukesha, Wisconsin). The companies recently reported the first integration of remote device information direct to EMRs. The FDA approved the Latitude Patient Management software — a remote monitoring system for cardiac device patients — with integration capabilities into the Centricity EMR.

The system is for patients implanted with a Contak Renewal 3RF device, a combination pacemaker and defibrillator with radio frequency, Dave Knutson, a Boston Scientific spokesman, told Cardiovascular Device Update. While the patient is sleeping at night another device — the communicator, which Knutson said resembles a Caller ID box with a short antenna — sits near the bed and collects vital information from the patient's implanted device and sends it to the doctor's office through the phone line to a secure web site. A doctor or nurse accesses the web site to check the patient's device and vital signs. "For the patient it offers peace of mind and daily assurance that their device is working every single day," Knutson told CDU.

Boston Scientific gave demonstrations of its Latitude Patient Management System at the meeting of the American Heart Association (AHA; Dallas) in mid-November, but Knutson said the company will not be giving formal presentations or releasing any clinical results yet. He anticipates that next year's AHA conference will likely include a presentation on the device.

Knutson said the system also reduces unscheduled doctor's visits because if a patient thinks something might be wrong he or she can call the doctor who can "simply go online and say, 'you know what, your device is working perfectly — why don't you wait and come in tomorrow for your scheduled visit.'"

Another feature of the system, he said, is the device's ability to send the doctor yellow and red alerts. Yellow might tell the doctor, for example, that the device's battery is getting low and red normally indicates something is wrong with the device or the patient. Guidant (Indianapolis) received FDA approval for the Latitude Communicator and secure data storage system in September 2005.

Being able to use the system with GE's Centricity EMR provides another benefit for the physician, Knutson said. "Now our doctor who logs on not only gets a device status and the patient's status, but can get the patient's whole medical history," Knutson said.

Vishal Wanchoo, president/CEO of GE Healthcare Integrated IT Solutions, called the GE/Boston Scientific collaboration a "major stepping stone" in GE's effort to provide a comprehensive patient record across the continuum of care. "The ability to collect patient data remotely using Latitude technology and integrating that data, along with historical medical information, within the patient's electronic medical record should empower physicians to make more accurate decisions at the point of care," Wanchoo said. The Latitude system could cost up to $33,000, Knutson said, which includes the implanted device, the communicator, the hardware the physician needs to be able to access the information, and 24-hour monitoring to alert the doctor if anything appears to be wrong.

Because the device is portable, Knutson said it also is convenient for the patient to use at home or while traveling and that its operation doesn't depend on patient compliance. "This asks the patient to do nothing but go to bed at night," Knutson said. "The compliance is there."

According to Boston Scientific, the Latitude system will eventually be available for other types of heart failure devices too, such as pacemakers and implantable cardioverter defibrillators. The company's medical devices are used in a broad range of interventional medical specialties.

Cardiocom launches diabetes telemonitoring

Cardiocom (Chanhassen, Minnesota) is adding blood glucose monitoring and the Autolink Diabetes Telemonitoring System to its existing telemonitoring devices for chronic diseases such as congestive heart failure, chronic obstructive pulmonary disease (COPD), asthma, coronary artery disease and obesity. The company also has formed a new division, Glucocom, to focus on its diabetes products.

"We actually rolled out [the diabetes function] with some of our existing customers — two of our existing customers — in April of this year, but we have not formally launched it to the outside market customers until [now]," Jodie Root, vice president, sales and marketing for CardioCom, told CDU.

The new system consists of the GlucoCom Blood Glucose Monitor. The monitor collects glucose data and sends it to the secure GlucoCom Diabetes Management Web site using technology, specifically the AutoLink Blood Glucose Telemonitoring Device. The GlucoCom Blood Glucose Meter and Supplies, which Root described as a "high quality meter," can also be used as a standalone product.

Root said it is the "first time that we've taken one of our devices and linked it to a disease management web site that the patients themselves have access to." The web site gives patients secure login to access data about such things as the patterns of glycemic control or lack thereof.

To interact with care providers, patients can either print out the report for their care provider, email the report, or have a nurse or physician download it during an office visit, Root said. Perhaps even more important, the system also can be used for self-management of diabetes.

Health plans, disease management vendors and other disease management programs can use these tools, Root said. They can provide the device to their members toward the goal of better management of the disease. "The data can go to the nurse case manager who views it and calls the patient and works through a care plan for their physician, as necessary," said Root.

"What our customers told us was that the devices that we currently have ... are great for the high-risk individual with multiple co-morbidities," Root said. "They are just too expensive for the broader diabetic population. We have people who have some high-risk disease, but largely a [diabetic] population that has a many-year chronic disease that needs to have glycemic control."

Home telemonitoring is positioned to become a broad necessity, Root said, because "America is an aging population," with increasing rates of diabetes, heart failure, asthma, COPD and coronary artery disease. "The industry is now understanding" that using these types of devices makes sense, she said, for two reasons: "they are cost-effective because you can use fewer nurses, and you're more efficient, so you can interact with more patients."

WorldHeart to cut 50% of workforce

WorldHeart (Oakland, California), last month unveiled plans to restructure the company — reducing its workforce by half — to control spending and focus on developing its next-generation rotary ventricular assist device (VAD). In a teleconference reporting the restructuring, WorldHeart also disclosed that it expects to receive $14.1 million from several existing investors, some new investors, as well as members of the company's management team.

"The financing and the significant restructuring plan are expected to fund our operations through the start of our U.S. clinical trials and on into [2Q08]," Jal Jassawalla, president/CEO of WorldHeart, said during the teleconference.

The restructuring will include a reduction in WorldHeart's workforce by 50-55 people, about 50% of its total employees, primarily at the Oakland, California and Heesch, the Netherlands, locations. WorldHeart expects to incur initial restructuring expenses of about $700,000, primarily severance-related charges, in the 4Q06. Additional restructuring charges may be incurred and will be reported when available, the company said.

Richard Juelis, vice president, finance and CFO for WorldHeart, told teleconference listeners the company has seen a shift in demand away from first-generation VAD products to next-generation VAD products, which has resulted in a decline in sales of its first-generation Novacor LVAS.

Juelis said the company drew in $1.4 million in 3Q06 revenues compared to $2.2 million for 3Q05, and year to date revenue at nine months was $7.7 million compared with $8 million in 2005.

As a consequence, WorldHeart will reduce manufacturing, selling and administrative costs primarily associated with the Novacor LVAS, although the company plans to continue to support the product. These initiatives are designed to enable WorldHeart to focus its resources on preparing and qualifying the next-generation Levacor rotary VAD for clinical trials in the U.S., which are expected to begin in the second half of 2007, Jassawalla said.

Jassawalla said the restructuring will put the company in a favorable position to address the growing market for next-generation devices. He also said that he believes the trend in the industry toward next-generation technology is positive for the industry overall and for the company.

Hansen files IPO pricing

Hansen Medical (Mountain View, California) a company developing robotic technology for the accurate positioning, manipulation and stable control of catheters and catheter-based technologies, filed a prospectus with the Securities and Exchange Commission for a 6.25 million share initial public offering priced at between $11 and $13 a share. If priced at the midpoint, the deal would be valued at $75 million before expenses.

The company first filed for its IPO back in August but at the time had not determined the actual number of shares and per-share price.

Hansen Medical says robots can help doctors take better care of their cardiac patients. The company's Sensei system, which includes an electromechanical robot, assists in guiding the movement of diagnostic catheters for hard-to-reach places in the heart.

Currently in trials for FDA approval, the Sensei system and Artisan control catheters are designed to help simplify cardiology procedures and decrease treatment time.

Founded in 2002, the company plans to use IPO funds for product development, research, sales and marketing, and administrative activities. Chairman Russell Hirsch owns about 23% of the company through Prospect Venture Partners and affiliates.

In its original filing in August, the company noted that it has experienced substantial net losses since its inception in late 2002. It reported net losses of about $4 million in 2003, $7.1 million in 2004, $21.4 million in 2005 and $11.4 million in the six months ended June 30, and as of June 30, the company had accumulated deficit during the development stage of $44.4 million. The company noted that it anticipates continued losses "for the foreseeable future."

PAD brings $25M for Pathway

Pathway Medical Technologies (Redmond, Washington), a developer of endovascular treatments for peripheral arterial disease (PAD), last month closed a $25 million Series B round of financing, a little more than a year after closing a Series A round of $15 million. According to Tom Clement, president/CEO of the company, Pathway initially had thought it would not seek another round of financing for at least another year, but an excellent opportunity presented itself.

"It was more money available at an excellent valuation," Clement told CDU. "It also gives us the money now to work right through a product launch and well into revenue streams."

Pathway manufactures the Pathway Atherectomy system for treating PAD, and Clement said that Pathway expects to launch the product in the U.S. some time in early 2008, once FDA approval is garnered.

In 2004, the now eight-year-old company was struggling in its development of a device to remove fatty deposits of plaque from arteries in the heart, and had been forced to lay off employees. The company then decided to design the device to treat the arteries in the leg and started attracting capital, including the Series A round in March 2005.

Two new investors joined the financing round: lead investor HLM Venture Partners and Latterell Venture Partners. In addition, existing investors ABN AMRO Capital Lifesciences, Giza Ventures and Oxford Bioscience also participated.

EP MedSystems in two settlements

EP MedSystems (West Berlin, New Jersey) reported executing a settlement with the Bureau of Industry and Security of the U.S. Department of Commerce to close issues related to its shipment of products to restricted countries in 2004 and earlier. The company does not admit or deny guilt, but agreed to pay a fine of $244,000 with no restrictions on commercial or export activities. The company said it has accrued $345,000 for this penalty in its books as of June 30.

The company said also that it has made a settlement offer to the U.S. Department of the Treasury in connection with an investigation of these shipments and is awaiting a response. It said the Treasury Department has indicated to it "orally" that the maximum penalty it might seek would be $44,000.

Given that investigations by the Treasury Department or the Securities and Exchange Commission have not been closed, the company said it could not rule out additional penalties. But it said it has made no provision for any future costs associated with these investigations.

EP MedSystems develops cardiac electrophysiology (EP) products used to diagnose and treat certain cardiac rhythm disorders.

VNUS reports ruling vs. rivals

VNUS Medical Technologies (San Jose, California) reported that a federal judge ruled in its favor on the meaning of several claims in a lawsuit against several rival companies. In October, VNUS filed patent infringement lawsuits against AngioDynamics (Queensbury, New York) and Vascular Solutions (Minneapolis). VNUS already had a standing suit against Diomed Holdings (Andover, Massachusetts). The suits pertain to devices that use lasers to burn away tissue inside veins. The lawsuit asks for an injunction and monetary damages.

The decision by the U.S. District Court for the Northern District of California determined the meaning of certain words and phrases in the lawsuit, VNUS said. The ruling was favorable to the company, according to VNUS.

Diomed had a different take on the ruling. "This claim construction ruling clears the way for Diomed to proceed with its defenses that the VNUS patents are not infringed by Diomed's EVLT methodology and, further, that the VNUS patents-in-suit are deficient and should be struck down," said David Swank, CFO of Diomed Holdings.

Bioheart to expand MyoCell trials

Bioheart (Sunrise, Florida), a developer of cell therapies for damaged heart muscle , reported expansion of its U.S. and European trials of its MyoCell adult myogenic (muscle) stem cell composition and MyoCath needle-injection catheter product candidates.

MyoCell, a clinical therapy for treating damage to the heart in patients in Class II or Class III heart failure, uses myoblasts — precursors to muscle cells, derived from a patient's own thigh muscle — to produce implants placed into the heart via catheter. When injected into scar tissue within the heart, myoblasts can develop into contractile muscle cells and integrate with heart muscle and/or release potentially beneficial proteins.

MyoCath, a catheter delivery system, delivers cell therapy or other compounds directly into the heart muscle via needle injection.

"After more than 19 years of development and testing, large scale clinical studies are being expanded by statistically significant numbers with an additional 450 plus patients," said Michael Brown, MD, PhD, senior clinical scientist at Bioheart.

Bioheart completed enrollment in the U.S. in the fourth and final cohort of its dose-escalation, Phase I clinical trial, known as the MYOHEART trial. In this final cohort, patients received a high-dose injection of 675 million cells, compared to 25 million, 75 million and 225 million cell doses in previous cohorts.

Bioheart then finalized the protocol for its U.S. Phase II randomized double-blind, placebo-controlled MYOHEART II clinical study and has submitted this protocol to FDA for review. This study has been designed to enroll up to 450 patients at roughly 40 centers to confirm the safety and efficacy of adult myogenic stem cell transplantation for heart failure.

W.L. Gore launches AAA resource

W. L. Gore & Associates (Gore; Flagstaff, Arizona) reported the launch of a new patient education resource to help provide information about the causes, symptoms and available treatments for abdominal aortic aneurysms (AAA).

The resource, part of broader content and feature improvements to www.goremedical.com, guides visitors through a "television-like" experience that addresses questions and concerns commonly raised by those affected by AAA. Each year about 200,000 people in the U.S. are diagnosed with AAA.

The company said the Gore AAA Patient Information Resource is designed to educate the public about the condition and its treatment options, which include medication, open surgical repair and endovascular surgery.