By Karen Young

Advanced Tissue Sciences Inc. entered a collaboration with Medtronic Inc. to explore how the companies¿ technologies can work together. An affiliate of Medtronic cemented the partnership with the purchase of $20 million of ATS¿s common stock.

ATS and Medtronic will test ATS¿s technology in cardiovascular, neurological, endocrinological and spinal areas. In return for an equity investment of $20 million in new ATS shares, Medtronic will receive a right of first refusal to participate in the continued development of ATS¿s epicardial angiogenesis therapy; a right of first refusal to pursue programs in the four outlined areas in the event that ATS chooses not to pursue them internally; and a limited nonexclusive license to ATS intellectual property in the four therapeutic areas.

Medtronic Asset Management paid $3.72 per share, equal to the average closing price for the 12 days prior to the signing of the agreement. As a result, Medtronic Asset Management will own 7.72 percent of the outstanding shares of ATS. Its stock (NASDAQ:ATIS) gained 67 cents Thursday, or 15.5 percent, to close at $5.

¿The collaboration is an exciting one for us because it endorses our approach to tissue engineering and also is in alignment with their desire to couple biological solutions with their already existing devices,¿ Gail Naughton, president of ATS, told BioWorld Today.

Naughton said there really are two parallels that will occur in the collaboration. First, in the instance of Medtronic¿s right of first refusal, Naughton said ATS hopes Medtronic will choose to participate in the commercialization of ATS epicardial angiogenesis therapy, paying up-front and milestone payments, with Medtronic becoming a global marketing partner. Naughton said ATS already has a product, Anginera, that has proven effective in preclinical studies on rodents and pigs with ischemia using ATS¿s fibroblast-based tissue.

¿It¿s been shown that this patch model can increase both capillaries, as well as arterials and venules,¿ Naughton said. ¿This is unique because individual growth factors usually make just one type of blood vessel.¿

Another area of ATS¿s technology Medtronic will consider is human collagen, a product that is about to be launched by partner Inamed Corp. for wrinkles, but could serve as a good coating for a coronary stent, for example, Naughton said.

¿Also down the line in the area of their spinal work, they can look at our cartilage and bone technology, which we¿re developing in another collaboration, to see if it could provide a benefit in spinal fusion,¿ she said.

Secondly, there are short-term parallels in each one of the four areas for product development combining existing products from both companies.

¿Longer term, there is additional potential in utilizing our ability to grow other tissues and even whole organs,¿ Naughton said.

For example, ATS is doing very early work on the pancreas, which could be of value in the area of endocrinology, although the company has not identified specific programs in the areas of neurology or endocrinology.

¿It¿s going to take time for us to develop programs in [those areas],¿ said Julie Reynolds, corporate communications manager for ATS, noting that early on the work is going to focus in the cardiovascular area.

Thus far, Medtronic is aware of ATS¿s data, but the collaboration only began in earnest with the announcement.

The collaboration with Medtronic is another step in the shift from mechanical devices to bioactive devices, as well as gene therapy substances.

¿This is the next step in a trend that has shown itself to be an exciting one,¿ Naughton said.

It¿s one step forward, she said, to use biological substances, but if companies can make them biointeractive, ¿you are then providing the potential for real product improvement,¿ Naughton said.

Earlier this week ATS gained approval of its product Dermagraft for diabetic foot ulcers. (See BioWorld Today, Oct. 2, 2001.)