Transcend Medical (Menlo Park, California), the first company incubated by ForSight Labs (Menlo Park, California), has received $7 million in Series A funding from investors, including venture capital firms Morgenthaler Ventures and Split Rock Partners.

ForSight Labs was created late last year with $2.4 million of seed money to incubate new ophthalmic device companies in partnership with The Foundry (Menlo Park, California). Morgenthaler Ventures and Split Rock participated in that investment too, along with Versant Ventures (Medical Device Daily, Jan. 9, 2006).

The $7 million round will allow Transcend to move forward in the development of an anti-glaucoma device, the leading cause of adult blindness in the U.S., the company said.

“It will allow us to continue on the clinical path and expand the clinical studies internationally and in the U.S.,” Mitch Campbell, the newly appointed president/CEO of Transcend, told MDD.

“I’m very excited, it’s always nice to not have [fundraising] be one of your key focuses when you come into a new position,” Campbell acknowledged.

Transcend is developing a device that would treat glaucoma through a “safe, simple and effective way” using a needle-stick approach to reduce intraocular pressure —high pressure within the eye — known to cause the disease, Campbell said.

Though glaucoma is commonly treated today with medicine, Campbell said the advantage of using a device to treat the disease is that the patient would not be able to miss doses.

“Most people start to drop off and don’t take the medicine when they should so the effectiveness starts to diminish,” Campbell said. “The nice thing about it is, it can be performed right there in the doctor’s office, so it’s a comfortable setting and only takes about five minutes.”

The new technology is so early in the regulatory process that the company has not even opened up clinical trials in the U.S. for it yet, Campbell said. Because of that, he was unable to say when the device might hit the U.S. market, but he estimates that would be “years down the road.”

Robert “Robin” Bellas, a general partner with Morgenthaler Ventures, told MDD that the investment in Transcend is consistent with the firm’s previous medical device investments related to “graceful aging” because eye problems are often associated with aging. Morgenthaler Ventures also funded The Foundry about 10 years ago, he said.

Bellas said Transcend has seen promising results from First In Man clinical trials in Latin America.

Dave Stassen, managing director of Split Rock, said the firm is also interested in the ophthalmology field.

“We believe that ophthalmology is particular ripe for the kind of minimally-invasive device design that The Foundry has pioneered for other medical specialties,” Stassen said.

Campbell said the treatment Transcend is developing could be repeated in a patient if necessary.

“It also does not limit you from being able to do one of the other procedures out there,” Campbell said. “We’re excited about continuing the progress that has been made and building on the early results.”

Previously, Campbell was president/CEO and chairman of Refractec through the research and development, clinical trial, FDA approval and market launch of a vision correction device designed to eliminate the need for baby-boomers to wear reading glasses.

According to Transcend, more than 2 million people in the U.S. are afflicted with glaucoma, and the numbers are expected to grow to 3 million by 2020.

In other finance news:

• Osiris Therapeutics (Baltimore), a stem cell therapeutic company focused on the inflammatory, orthopedic and cardiovascular areas, reported raising $20 million of newly issued convertible debt led by Friedli Corporate Finance (Switzerland).

On Oct. 30 Osiris issued $20 million in convertible promissory notes to several Swiss investors. The notes were placed in Switzerland by Friedli Corporate Finance; Peter Friedli, the chairman of the board of directors and largest stockholder of Osiris, is the president and owner. The notes bear interest at a rate of 10% per year, with semi-annual payments of accrued interest due April 30 and Oct. 30 of each year, until maturity on April 30, 2009.

The $20 million in notes issued on Oct. 30 are convertible at the option of the respective holders at any time after Feb. 9, 2007 into shares of common stock at an initial conversion price of $18 per share. The notes automatically convert into shares of common stock at the same conversion price, if at any time after Feb. 9, 2007 and before repayment, the closing price of the common stock for 10 consecutive trading days on the Nasdaq Global Market equals $25 a share or more. Each note is redeemable in whole at any time at the option of the company upon 30 days prior written notice to the holder.

Friedli, individually, bought $4.5 million of the notes, and New Venturetec , a Swiss publicly traded company about 3% owned by Friedli who serves as its president, bought $4 million of the notes.

• Guardian Technologies (Herndon, Virginia) reported completing the first of two closings of a private placement of its securities under a securities purchase agreement with a group of investors. Investors have agreed to buy $5.1 million of securities, $2.6 million of which were purchased at the first closing and $2.6 of which will be purchased upon effectiveness of a registration statement to be filed by the company with regard to shares underlying the securities. Midtown Partners & Co. acted as the placement agent for the private placement.

At the first closing, Guardian issued an aggregate of $2.6 million in principal amount of Series A 10% senior convertible debentures due Nov. 7, 2008, and warrants to purchase 4.5 million shares of its common stock at an exercise price of $1.2 per share. The debentures are convertible into shares of Guardian common stock at any time at a conversion price of $1.2 per share. The debentures bear interest at 10% per annum due on the first day of each quarter or upon conversion or redemption of the debentures as to the principal amount so converted or redeemed.

Guardian develops imaging technologies for early detection of threats of diseases.

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