Until recently, Cytyc (Marlborough, Massachusetts) has been known primarily for its diagnostic offerings in cervical cancer. But with a deal adding therapeutic oncology to its offerings, the company is positioning itself to be a major player across women's healthcare. Cytyc said in early February that it will purchase Proxima Therapeutics (Alpharetta, Georgia), a developer of delivery systems for cancer treatment, for $160 million, along with a two-year earnout, based on incremental sales growth in breast-related products.

Patrick Sullivan, chairman, president and CEO of Cytyc, in a conference call, characterized Proxima as "an exciting company that continues our expansion into a diversified women's health company." He compared Cytyc's planned purchase of Proxima to its addition of the NovaSure Impedance Controlled Endo- metrial Ablation System, via the acquisition of Novacept (Palo Alto, California) last year. That acquisition, valued at $325 million, then led to the development of Cytyc Surgical Products as a wholly owned Cytyc subsidiary.

Sullivan said that Proxima's technologies serve key unmet medical needs and that its products "continue our relationships with breast surgeons and breast centers." That relationship was established largely with development of the FirstCyte Breast Test for breast cancer risk assessment, with Cytyc's purchase of Pro-Duct Health (Menlo Park, California) in 2001. Proxima's lead product, the MammoSite Radiation Therapy System (RTS), is a single-use brachytherapy technology for treating breast cancer. The system positions radiation sources directly into the post-lumpectomy site to optimize radiation treatment delivery while minimizing damage to healthy tissue. MammoSite RTS is designed to reduce treatment time to five days compared to 30 to 35 days for traditional whole-breast external beam radiation therapy, according to Proxima.

Proxima also markets its GliaSite RTS system, a site-specific radiation treatment for brain tumors that received FDA clearance in April 2001. GliaSite is comprised of a balloon catheter that is inserted into the cavity created by the surgical removal of a malignant brain tumor, then filled with Iotrex, a proprietary liquid radiation source. Over three to seven days, GliaSite delivers radiation directly to the tissue surrounding the cavity, where tumors are most likely to recur, while reducing radiation exposure to healthy brain tissue.

Sullivan said that the addition of Proxima's products "enables us to expand our product offerings into cancer treatment while leveraging our existing infrastructure and expertise in women's health and oncology. In addition, we will be further strengthening our formidable sales force with the addition of Proxima's oncology-focused sales team." Proxima launched the MammoSite RTS following FDA clearance in May 2002. The company reports, to date, more than 7,000 breast cancer patients treated with the system. While there are no specific FDA patient restrictions on the use of MammoSite, current medical society guidelines recommend use with patients at least 45 years old with tumors less than 3 cm with negative lymph nodes.

MammoSite revenue in 2004 was about $12.6 million, representing 50% growth over the previous year. Cytyc said it believes the overall annual market opportunity is in the $300 million range. Cytyc expects sales related to the Proxima acquisition in the last three quarters of 2005 to be from $15 million to $17 million, and for the transaction to be 1 cent to 2 cents dilutive to earnings in 2005, break-even to earnings in 4Q05 and accretive in 2006. The Proxima purchase is expected to close by the end of the first quarter, subject to customary closing conditions.

Cytyc terms its ThinPrep System "the most widely used method" for cervical cancer screening in the U.S. Sullivan reported strong growth for the ThinPrep Pap Test system and ThinPrep Imaging System during the year just past.

WorldHeart, MedQuest merge in VAD field

WorldHeart (Oakland, California) reported last month that it planned to acquire MedQuest Products (Salt Lake City), thus bringing together, in complementary fashion, heart support devices that beat and those that whir. MedQuest is developing the Heart-Quest ventricular assist device (VAD), a magnetically levitated centrifugal rotary blood pump. WorldHeart, in its efforts, is developing the pulsatile Novacor LVAS essentially a system that pulsates somewhat like a beating heart. Thus the merger adds an advanced rotary pump to WorldHeart's VAD platform.

"Our industry needs both pulsatile and rotary pumps to treat the full spectrum of clinical needs of end- and late-stage heart failure patients," said Jal Jassawalla, president and CEO of WorldHeart. "We believe that pulsatile devices are best suited for end-stage patients with poor ventricular contractility, who require full support, or functional 'replacement.' Rotary devices are better-suited for late-stage patients, with some contractility, who require only partial support, or 'assist.'" Thus, he said, WorldHeart now will be the only company with "small, silent, next-generation pulsatile and rotary systems under development, as well as having the most durable and reliable current-generation pulsatile device in the market today."

Pratap Khanwilkar, co-founder, president and CEO of MedQuest, will lead the combined firm's rotary pump activities and also head business development for the company. Khanwilkar said, "We believe that our HeartQuest VAD is the most technologically advanced rotary pump under development. Our magnetically-levitated rotor results in a pump with no moving parts subject to wear, resulting in a small device expected to provide multiyear support over a wide range of flows." He called combination of the two systems "critical in expanding the destination therapy market."

With the acquisition, WorldHeart's product platform will include the Novacor LVAS, currently sold for a bridge-to-transplant indication in the U.S., Canada, the European Union and Japan; the Novacor II, a small, bearingless, pulsatile VAD under development and expected to begin animal trials this year, the company said; and the HeartQuest VAD, a small rotary pump in pre-clinical animal and bench testing, with an initial feasibility clinical trial expected to be initiated by the beginning of next year.

To facilitate the purchase, WorldHeart said it will raise up to $23 million in a combined private placement and warrant exercise. In addition, all existing debentures will be converted to common shares of the company. WorldHeart has entered into a private place- ment with Maverick Venture Management, and with deal close, Maverick will invest $12 million in WorldHeart by purchasing about 8.9 million common shares at $1.35 a share. Maverick, a majority shareholder of MedQuest, has previously invested around $14 million in that company. WorldHeart will issue 9.3 million common shares to MedQuest in connection with the acquisition.

Other companies in the ventricular assist device sector include A-Med Systems (West Sacramento, California), Arrow International (Reading, Pennsylvania), MicroMed Technology (Houston), Thoratec (Pleasanton, California), Vascor (Pittsburgh) and VentraCor (Sydney, Australia).

Varian forms new neurosurgery unit

Varian Medical Systems (Palo Alto, California), known for its leadership position in radiation oncology products, has formed a new unit focused on the esti- mated $250 million neurosurgery market. The Varian Surgical Sciences organization initially will develop and market the company's advanced X-ray imaging and treatment technologies for radiosurgical solutions in the neurosurgery sector. Lester Boeh, a Varian Medical vice president who will manage the new organization, said, "We will offer a clinically effective and more cost-efficient alternative to dedicated radiosurgical devices that are limited in functionality and flexibility."

He added: "We have advanced our technology to the point that it now can be used for non-invasive, painless, radiosurgical treatments of tumors and vascular malformations as well as certain functional and 'inoperable' conditions."

The new organization's radiosurgical solutions are built around Varian's new Trilogy linear accelerator and On-Board Imager device, introduced last year, which for the first time make it possible to treat small areas in the brain and other parts of the body rapidly, with powerful, precisely-placed beams. "This is the most powerful, precise and versatile treatment mach-ine ever developed," Boeh said. Varian said the Trilogy accelerator already is being used for radiosurgical treatments at several centers. Since treatments are usually delivered on an outpatient basis in just one or a few sessions, Boeh said the appeal of the technology to doctors, patients and insurers "will be obvious in the many cases that will benefit from it."

Varian Medical is a leader in integrated cancer therapy systems, as well as a major supplier of X-ray tubes and flat-panel digital subsystems for imaging in medical, scientific and industrial applications, with some $1.2 billion in sales in its most recent fiscal year.

Other new units established

Other companies expanding operations with new med-tech units are ACMI (Southborough, Massachusetts), focused on endoscopic systems, and diagnostics firm NeoGenomics (Fort Myers, Florida).

ACMI reported establishment of a Gynecology and Surgical Specialties (GSS) business that will concentrate on new opportunities in women's health and other surgical specialties. The company also said it has realigned its sales and marketing organizations to better position it for growth. The unit will incorporate ACMI's line of endoscopic and minimally invasive products for gynecology, general surgery and anesthesia sub-specialties, including flexible and rigid endoscopes, laryngoscopes and laparoscopic instruments, as well as fluid management and suction irrigation systems.

NeoGenomics reported receiving the necessary regulatory approvals to offer flow cytometry testing services and that it has formally entered that market. Flow cytometry uses laser-based equipment to analyze cell surface markers, so is effective at diagnosing certain types of cancer. Flow testing also is complementary to the company's current cytogenetic and fluorescence in situ hybridization (FISH) testing services and is generally performed on the same samples as these other tests, it said. NeoGenomics offers genetic and molecular diagnostic testing to the oncology and perinatology markets.