A federal court last month laid the groundwork for a trial concerning claims by Medinol (Tel Aviv, Israel) that its former partner, Boston Scientific (Natick, Massachusetts), secretly established a factory in Ireland to manufacture Medinol stents in violation of previous agreements between the firms. Judge Alvin Hallerstein of the U.S. District Court for the Southern District of New York, in an opinion on the ongoing dispute between the two companies, said that Boston Scientific had shown "bad faith" and "stealth" in establishing the alternate manufacturing operation. And he set Jan. 13 as the time for a meeting between the companies to negotiate a settlement. Without a settlement, the next likely step is a trial on key issues.

Establishment of the allegedly "secret" operation has been Medinol's contention for more than three years. Its charges stem in part from a failed attempt by Boston Sci to purchase the Israeli firm. Medinol was originally a supplier of stents to Boston Scientific, but the U.S. company then sought to purchase Medinol, in an attempt, it said, to better control its supplies. But Medinol rejected the proposed buyout, saying Boston Scientific never made an offer matching its true value. Boston Scientific then circumvented the supply agreement, Medinol said, by establishing the Irish operation.

In his ruling, Hallerstein essentially dismissed a variety of claims and counterclaims the firms had made against each other, narrowing them to some key issues, primarily Medinol's contentions that Boston Scientific's sale of Express and Taxus coronary stents represents a breach of contract and that Medinol is entitled to royalties on those sales. He also expressed frustration with the companies' delays, saying they were increasing expenses and serving to put off judgments by other litigants.

Medinol originally entered into its relationship with Boston Scientific in 1995, agreeing to manufacture and provide its stents to the U.S. firm, and Boston Sci agreeing to market and distribute those products. It has claimed that James Tobin, CEO of Boston Scientific, revealed to it in April 2000 that his firm had established a project called BBD for "Bring a Better Deal" and "Project Independence," under which Boston Scientific, it alleged, "appropriated Medinol's designs for stent-making machinery and had built a copy of the [manufacturing] machinery in Ireland." Tobin, Medinol said, made the revelation because the U.S. Justice Department had discovered the copy.

For its part, Boston Scientific asserted that it was permitted to engage in Project Independence because it believed that Medinol might delay or cut off delivery of stents. Hellerstein, Medinol said, "found [that] Boston Scientific's actions in Project Independence were taken in bad faith."

In responding to Hallerstein's ruling, Boston Scientific said in a statement that the court "granted in part and denied in part both Medinol's and Boston Scientific's motions for summary judgment" and that it "dismissed Medinol's claims against the two Boston Scientific officials named in the case." It did not comment, however, on the judge's finding that the trial would move forward.

Paul Donovan, spokesman for Boston Scientific, said in the statement: "As the ruling states, this is essentially a breach of contract case, which alleges 'grandiose estimates of damage' that are unlikely to succeed. Perhaps most significantly, there is nothing in this ruling that interferes with our ability to continue to sell our Taxus Express2 paclitaxel-eluting coronary stent system."

Judith Richter, CEO of Medinol, said of the judge's decision, "I am gratified that Medinol now will have an opportunity to seek justice at trial."

CABG Medical, Conor in late-2004 IPOs

CABG Medical (Minneapolis), a cardiovascular technology firm focused on the treatment of coronary heart disease via improvements to conventional heart bypass surgery, last month raised net $27.8 million through an initial public offering (IPO) of 5.5 million shares of common stock at $5.50 a share. CABG also granted to the underwriters an option to purchase up to another 825,000 shares of common stock to cover over-allotments.

Founded by med-tech entrepreneur Manny Villafana, CABG is developing a system designed to treat blockages in multiple coronary arteries from a single graft. The major benefit of the Holly Graft system is the elimination of a surgery, secondary to a heart bypass, which frequently is required to harvest healthy vessels from the chest, legs or arms for use in the bypass, the company said. The system consists of a flexible, thin-walled vascular graft made of expanded polytetrafluoroethylene and attached to the coronary arteries via connectors coated with a drug combination to reduce the risk of blockage and thrombosis. CABG says system benefits to patients include elimination of scarring on the legs and arms where the traditional vessel harvesting is done; reduced wound-related post-operative care and readmissions; reduced time to ambulation and faster release from the hospital; and elimination of wound pain and surgical complications in the legs and arms.

For the surgeon, the system's benefits include reduced surgical time and thus reduced time in the operating room; the flexibility to perform bypass surgery either on the heart/lung bypass machine or off-pump; and the availability of reliable bypass grafts, regardless of the condition of the patient's autologous arteries and veins. The company says that the system, "measured through tests performed to date, promises to restore blood flow as effectively as traditional vessel grafts."

Villafana previously founded mechanical heart valve manufacturer ATS Medical (Minneapolis). He launched that company to compete in the mechanical heart valve sector with St. Jude Medical (St. Paul, Minnesota), which he also had founded and for a time served as its president and chief executive.

In another cardio sector IPO, stent manufacturer Conor Medsystems (Menlo Park, California) offered 6 million shares of common stock, the initial price of $13 per share potentially bringing it $78 million. Conor and the selling stockholder granted the underwriters a 30-day option to purchase up to 900,000 additional shares of common stock at the IPO price to cover over-allotments.

Conor is focused on using stents for improved drug delivery. Rather than retrofitting a bare-metal stent with a drug coating, Conor says that its stent design is specifically designed for the drug-delivery process. Its design features hundreds of small holes, each acting as a reservoir into which drug-polymer compositions can be loaded. Through this design, the company says it believes it "can greatly enhance control of the rate and direction of drug delivery, enable a wider range of drug therapies and potentially increase the effectiveness and range of clinical applications of drug-eluting stents."

Conor's clinical efforts are focused on development and commercialization of the Costar stent, a cobalt chromium paclitaxel-eluting stent, for the treatment of restenosis. The company also is investigating the potential applicability of its stent technology to the treatment of an acute myocardial infarction.

MedicalCV exits mechanical valve sector

MedicalCV (Inver Grove Heights, Minnesota) has exited the mechanical heart valve and pyrolytic carbon businesses, confirming a pathway that it had hinted at earlier in 2004. Best known for its Omnicarbon 3000 and 4000 heart valves, the company reported in September that as a result of its expanded efforts in the atrial fibrillation (AF) sector, it was "re-evaluating the long-term strategic implications and alternatives for its mechanical heart valve and pyrolytic carbon platforms," a statement that suggested that it was pursuing the possible spin-off of the technology. At the same time, the company said that Adel Mikhail, PhD, its founder and a director, had resigned from the MedicalCV board, citing "disagreements over the company's strategic direction." In a resignation letter filed with the Securities and Exchange Commission in September, Mikhail expressed disapproval with the "new direction" of the company, saying that it "indicates loss of interest in our Omnicarbon heart valve business," adding that this "loss of interest will ultimately diminish the value of the business."

Early last year, MedicalCV rolled out a restructuring of operations to reduce its costs in the heart valve division and, obviously, to lay groundwork for its new AF focus. The restructuring also resulted in the departure of Blair Mowery, who had been president and CEO of the company since 2001 and at the time of his departure held the title of president of the Heart Valve Division, and also of Allan Seck, vice president of business development.

"After an exhaustive evaluation of MedicalCV's mechanical heart valve business, we have decided in the best interest of the shareholders to discontinue all valve-related operations and exit the business," said Marc Flores, president and CEO. "It is our intent to support our customers in the near-term. We will take action to divest all heart valve assets as opportunities arise." Flores concluded that the company has appropriately "right sized," adding that it would continue to take action "to ensure that all ... resources are focused on providing better products for better outcomes in the high-growth atrial fibrillation market."

In lieu of valves, the company is developing a new soft-tissue ablation system called Atrilaze. The treatment uses a laser device to ablate soft tissue, including cardiac tissue, thus intended to treat AF and reduce the incidence and severity of congestive heart failure. The company acquired the technology when it bought LightWave Ablation Systems (Mooresville, North Carolina) last year. The company recently filed a 510(k) submission with the FDA for a general tissue ablation indication and is awaiting word on the status of that application from the agency.

Hemosol drops Hemolink effort

Hemosol (Toronto) in mid-December reported that it is dropping further clinical development of its oxygen therapeutic product, Hemolink, and that it will instead put its "efforts and resources" into development of three therapeutic protein products. As previously disclosed, Hemosol conducted a series of non-clinical studies on Hemolink (hemoglobin raffimer) to determine the mechanism that caused certain adverse cardiovascular-related events in an earlier U.S. clinical trial. And it said that, based on the data from these studies, it believes "certain relatively simple modifications related to eliminating low-molecular-weight components of Hemolink may be effective." It added that "at this time" the resources needed for further clinical development of a modified Hemolink product would be better directed to what it called the "more immediate plasma-based therapeutic protein opportunity."

Hemosol said it continues "to believe that the market opportunity for Hemolink and its broader oxygen therapeutics portfolio is significant and will continue to pursue avenues for their development, including potential partners." And it noted the "considerable intellectual capital" invested in the Hemolink products, saying they still have "potential value creation in the longer term."

As for the protein development effort, Hemosol said that the initially identified agents Intravenous Immunoglobulins (IVIG), Alpha 1 Proteinase Inhibitor (A(1)PI), and von Willebrand Factor/Factor VIII (vWF/FVIII), a product used by hemophiliacs "collectively represent the best market opportunity for products isolated using the Cascade," a process used to extract therapeutic products from plasma for which Hemosol is the exclusive North American licensee. Cascade involves passing plasma through a series of affinity chromatography columns, each specific and selective for a different plasma protein. The proteins of interest are captured on each of the different resins, while the unbound plasma components flow through the column and form the feed to the next affinity column. This process allows the individual proteins of interest to be eluted off the affinity columns for subsequent viral inactivation and downstream processing and polishing.

Lee Hartwell, president and CEO of Hemosol, said that Cascade "significantly increases protein recovery, which greatly reduces processing time, production costs and provides us with a competitive advantage. By using the Cascade to augment our expertise in blood protein development and manufacturing, we look to become a significant supplier of these valuable products." Hemosol said its staff has completed training at an American Red Cross (ARC; Washington) facility on the Cascade technology and is implementing the technology at Hemosol's facility, originally designed for the asceptic processing of blood products. It reported the facility having the capacity to process 500,000 liters of plasma annually using Cascade at commercial scale, "with room for expansion."

Bioheart tech key to muscle cell therapy

The American Cardiovascular Research Institute (ACRI), in conjunction with St. Joseph's Hospital (Atlanta), last month reported becoming the first center in the Southeastern U.S. to perform a new procedure for the treatment of chronic heart failure. In the procedure, a muscle biopsy from a patient's thigh was sent to a laboratory controlled by Bioheart (Weston, Florida), where specially selected immature skeletal muscle cells were isolated, purified and cultured to a pre-determined dosage. The cells were then suspended in a proprietary solution, transported back to the hospital's catheterization lab and transplanted into the patient's damaged heart via Bioheart's MyoCath, a minimally invasive needle-tipped catheter system.

Receiving the therapy through a minimally invasive catheter system via a small puncture in the groin allows for a quicker recovery than with an open-heart procedure. If successful, the procedure will give tremendous promise to treat the nation's 5.3 million heart failure patients, according to Bioheart. The company said that this was the first patient to undergo this procedure in Atlanta as part of a nationwide clinical trial that began in 2003 and includes other U.S. sites, such as Mount Sinai Medical Center (New York), the Cleveland Clinic (Cleveland), the Minneapolis Heart Institute (Minneapolis) and the Mayo Clinic (Rochester, Minnesota).

Nicolas Chronos, MD, chief scientific officer and medical director of the American Cardiovascular Rese- arch Institute at St. Joseph's Hospital, performed the transplantation with two physician colleagues. "With the greatly increasing numbers of patients suffering from congestive heart disease," said Chronos, "the possibility that a patient's own cells can be harvested, cultured and injected into the heart muscle to improve heart function is truly exciting. These studies are part of the earliest phase of clinical development of this potential therapy, and we must be cautious as to the interpretation of the previous encouraging results." He added: "To date, there have been no approved therapies for heart failure that rebuild the damaged heart and, as a cardiologist, I can tell you there would be great enthusiasm for a therapeutic strategy that would repair the damage that occurs to a patient's heart following a heart attack."

The patented cell composition, MyoCell, was processed by Bioheart, which also developed the MyoCath catheter. In early clinical trials in Europe, initiated by the company in May of 2001, the myoblast cells, when implanted in the damaged heart tissue, showed an ability to convert to contractile muscle and release beneficial proteins, thus augmenting the performance of the heart.

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