Pathway Medical’s Future in Seattle Uncertain as Bayer’s Medrad Lets Lease Option Expire
Pathway currently has a lease on a 50,000 square foot facility, with room for its 170 employees, in Kirkland. Pathway’s lease on the building extends until May 30, 2012, says Paul Barry, president of Aidlid, a property holding company that owns the building. Pathway had an option for a long-term lease extension, which it allowed to expire on Sept. 4, Barry says. Negotiations on commercial leases for life sciences buildings often take nine to 12 months, Barry says, but Pathway hasn’t sought to extend its lease beyond a typical short-term holdover period.
If Pathway were serious about staying in Seattle, I asked, would they be working on a long-term lease extension now? “That’s correct,” Barry says.
Medrad is headquartered in Warrendale, PA near Pittsburgh, and has another U.S. facility in Minneapolis, a top medical device industry cluster. Alicia Cafardi, a Medrad spokeswoman, wouldn’t say whether a move is in the works for Pathway. “There have been no decisions made at this time regarding facility consolidation,” she said in an e-mailed statement.
Pathway Medical became one of the well-known players in Seattle medical devices over the past decade, as it developed a tool that drills and vacuums out blockages in blood vessels of the legs. The company, founded in 1998, won FDA approval for its first device, called Jetstream, in 2008. Pathway raised more than $130 million. It never became profitable, but it did see increasing adoption of its technology by physicians, as sales grew 50 percent in 2010, and it was on pace for another 30 percent boost this year, CEO Paul Buckman said in a June interview. About 15,000 patients in the U.S. had a Pathway procedure done through June, and about 300 doctors were routinely using the device at that time.
The financial terms of the Medrad acquisition weren’t formally disclosed, although Xconomy did review a copy of the merger agreement when we broke the news in August. The terms were controversial because they stipulated that the $125 million acquisition proceeds would go entirely to Series D-2 investors who sunk $42.5 million into Pathway in 2009. That meant that people who got in on the ground floor—angel investors, earlier venture investors, and many employees with stock options—got zero returns. For some of the top Pathway executives and managers, a $6.3 million bonus pool was carved out.
Since the deal was struck, a “handful” of Pathway’s 170 employees have left for other jobs, Medrad’s Cafardi says. Those who remain will have their future roles with Medrad determined by a planning process that’s ongoing now, she says.
“Right now, it is business as usual for both firms while we do some planning,” Cafardi says. “We recognize that an acquisition creates uncertainty, and are doing all we can to support employees, cognizant of important milestones ahead—product advancements, commercial consolidation, and important regulatory filings to name a few.”
She added that Pathway’s technology “strongly complements that of our Medrad Interventional product line and we’re excited about the future. As with all mergers and acquisitions, companies expect to gain operational efficiencies and over time, and with development of the business, jobs may change. However, being part of a larger integrated organization may also present opportunities for employees to continue to grow in their careers.”