The leading edge of innovation in medical devices is often concentrated on nifty implantable tools that a doctor can insert without a scalpel, as a less-invasive alternative to surgery. But now we’re seeing more startups, like Bothell, WA-based QuantumCor, designing devices to fix what’s broken in the body without even leaving any sort of implant behind at all.

QuantumCor’s vision is to change the way a common type of heart failure is treated, called mitral valve regurgitation. The idea is to allow doctors to heat up and tighten the loose, leaky tissue around the mitral valve that makes it hard for the heart to vigorously pump blood. CEO Vern Dahl told me about this plan, and how the company has secured the lead investor in a $10 million Series B financing, when we met the other day near the Xconomy office on Seattle’s First Hill.

The problem QuantumCor is trying to solve is the same as Kirkland, WA-based Cardiac Dimensions, so that sets up some friendly cross-town competition. Dahl insists there’s plenty of room for new contenders in this space. An estimated 3 million people in the U.S. have a loose mitral valve that allows blood to backflow into the heart. It’s a chronic condition that makes people tired and short of breath, making it hard to climb stairs, but rarely rises to the level of requiring open heart surgery.

Because the problem is so widespread, startups like Cardiac Dimensions have long sought ways to create a minimally invasive alternative like an implantable clamp or cinching device around the valve to make it pump correctly. None of these devices are currently available in the U.S., but the market for such alternatives could exceed $1.6 billion in the U.S. by 2016, according to the Millennium Research Group. While minimally invasive has traditionally been defined as catheter-guided tools like stents that prop open clogged arteries, or the Cardiac Dimensions’ wire clamp, QuantumCor wants to leapfrog ahead by shrinking tissue without implanting anything. This is the same concept driving a couple other device companies that have raised capital this year, Seattle-based Uptake Medical, and Redmond, WA-based CoAptus Medical.

Vern Dahl

“Anytime you can do a procedure and not leave something behind, it’s a plus,” Dahl says.

QuantumCor hasn’t started clinical trials of its device yet, and it still needs to raise more money to pursue its plan, so this isn’t going to appear in a hospital catheterization lab near you anytime soon. The company was formed in 2002 around some patents for using radio-frequency energy (RF), loaded on the tip of a catheter, which is aimed at the collagen tissue around the mitral valve. By using radio-frequency energy to heat up this collagen, the idea is that it will naturally shrink, causing the valve to seal properly and prevent blood from flowing back into the heart, Dahl says.

By naturally shrinking the tissue and not implanting anything, the QuantumCor device won’t create future complications for a doctor who might want to do surgery, it won’t get in the way of other devices, and it leaves open the possibility of future re-treatment, Dahl says.

Dahl has had a long career on the business side of big medical device players …Next Page »

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People who make a living creating innovative medical devices—whether it’s an ultrasound diagnostic tool, a stent to prop open clogged arteries, or an MRI machine—are an unhappy bunch these days.

Let us count the ways, as described in the second annual medical device industry analysis being released today by Ernst & Young. Because unemployment is up, people are losing their employer-sponsored health insurance. That means patients are postponing elective medical procedures, and hospitals and government payers are tightening their budgets. A powerful U.S. Senator, Max Baucus, wants to raise $40 billion in taxes on the medical device industry; healthcare reformers like President Obama are talking about comparative effectiveness studies that would add time and expense to device development; and lawmakers are considering whether to require companies to disclose all gifts and payments to doctors who help develop and buy their products.

Those are the megatrends medical device companies have to deal with in this recession, but what does the data say about how they’re being affected? Here are some highlights that caught my eye in this 60-page report:

—Despite the recession, revenues of publicly traded medical technology companies in the U.S. and Europe actually climbed 11 percent to $289 billion (although the growth was only about half that much when factoring out foreign-exchange rate fluctuations and acquisitions).

—While Johnson & Johnson, Medtronic, and Boston Scientific appear to be performing fine, that’s not so much the case for the smaller players that create most of the innovations the big boys acquire to keep growing. U.S. and European medical technology companies saw total industry financing drop 38 percent in 2008—although when E&Y subtracted two big European deals, the numbers looked a lot worse, with financing down 44 percent in Europe and 53 percent in the U.S. “One area where the growing chasm between medtech’s haves and have-nots is most visible is in fundraising,” the report says.

—Mergers and acquisitions, which are usually the only way medical device startups can make returns for their investors, showed a big-time decline in 2008. There were just 79 deals in 2008, down about 41 percent from the prior year.

—The IPO market was basically flat-lining, with medical device companies raising a puny …Next Page »

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New England has a deep pond with many of the very biggest fish in the global life sciences industry, but it also has its share of minnows, and they are getting eaten alive in the downturn.

That finding leaped out at me after I scoured through financial data on 85 publicly traded life sciences companies in greater Boston, Seattle, and San Diego as part of our regular Biotech Survival Index feature. The final numbers aren’t pretty for Boston. Just 15 of the 46 public life sciences companies we follow in Massachusetts had more cash on their balance sheet at the end of June 2009 than they did on New Year’s Day, based on a review of the most recent round of quarterly financial filings with the Securities and Exchange Commission. (Companies were included if they were listed on the NASDAQ or NYSE, and had market capitalization of at least $100 million).

Even though jobs have been cut, drug candidates have been shelved, and some last-ditch partnerships have been struck, all that frenzied activity didn’t really add up to a strengthened financial future for a majority of the region’s money-losing companies. The cash crunch has prompted a couple of Massachusetts companies to fold this year (Altus Pharmaceuticals and Epix Pharmaceuticals), a couple more to sell out for a pittance (Targanta Therapeutics and NitroMed), and one company that actually improved its financial position to move to Wisconsin (Exact Sciences).

While those companies were vanishing, there was some good news to be found in the filings. Some of Boston’s anchor tenants took advantage of their financial strength to beef up their cash balances, pay down debt, or otherwise tidy up financial matters. Essentially, the rich (Biogen Idec, Genzyme, Thermo Fisher Scientific, and Millipore, to name a few) got richer.

But what really shocked me the most was how poorly Boston’s life sciences companies have coped with the downturn compared with peers in the two other cities where Xconomy follows life sciences—Seattle and San Diego. Granted, neither of those cities has anywhere near the number of profitable life sciences companies that Boston does (18). And many of the little biotechs in those cities were backed into a corner in the first half of 2009, and either had to do or die—and things don’t appear quite that dire yet at many companies in Boston. But a majority of companies in Seattle (7 of 12) actually strengthened their balance sheets during the first half of the year. The same pattern emerged in San Diego, where 15 of the 27 companies built up their cash reserves in the same period.

If you combine those two hubs into a West Coast cluster that has a sample size similar to Boston’s (39 companies versus 46), the Bay State doesn’t look so resilient in comparison. About 56 percent of companies on the West Coast (22 of 39) strengthened their financial position in the first half of the year, while just 33 percent of the companies in Boston (15 of 46) did that well.

Read on for a complete rundown of the financial position for all 46 Massachusetts companies, listed in alphabetical order. To purchase a much expanded version of this report, in PDF format, click the “Add to Cart” button below. The expanded version, available for $95,* includes an assessment of each company’s financial position at the end of June compared to six months earlier, the projected length of time it can survive on its existing cash reserves, and an analysis of the strategic moves it has made to stay afloat in the current environment. Click here to see a sample entry. *Price is subject to change without notice.

We intend to repeat this analysis regularly to monitor the financial health of the life sciences companies we follow in San Diego, Seattle, and Boston. Please send feedback to editors@xconomy.com.

Abiomed (NASDAQ: ABMD)
Cash on hand: $54.5 million
Related Xconomy coverage:
“Abiomed Wins FDA Approval of Heart Pump”

Alkermes (NASDAQ: ALKS)
Cash on hand: $380.4 million
Related Xconomy coverage:
“Alkermes Knocks on Door of Biotech Big Leagues, Aims to Make Drugs of its Own”
“Alkermes, Swinging for the Fence, Touts New Anti-Addiction Drug”
“Alkermes’ Ambitious Builder, Richard Pops, Grabs Reins to Re-Ignite Growth Phase”

Alnylam Pharmaceuticals (NASDAQ: ALNY)
Cash on hand: $473.8 million
Related Xconomy coverage:
“Alnylam Takes Time to Mull Over RSV Game Plan”
“Alnylam, With Tekmira and New Northwest Firm Alcana, Look to Push Borders of RNAi Delivery”
“Alnylam Pushes First RNAi Drug That Circulates Through Body Into Human Test”
“Alnylam’s In the Money, Expects $500 Million in Bank At Year End”
“Alnylam Looks to Spinoffs to Unleash RNAi Technologies for Stem Cells, Vaccines“ …Next Page »

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Boston Scientific has agreed to pay $716 million to Johnson & Johnson to settle 14 lawsuits related to patent disputes in the field of interventional cardiology. Both companies make products in that field that seek to be less invasive alternatives for patients with cardiovascular disease, who otherwise might be headed toward open-heart surgery.

Natick, MA-based Boston Scientific (NYSE: BSX), said the money for the settlement will come out of its existing cash reserves, which stood at $1.19 billion at the end of June, when the company issued its most recent quarterly report with the Securities and Exchange Commission. The legal disputes go at least as far back as 1997, according to company filings. Despite the size of the payment, Boston Scientific didn’t get rid of all its legal issues with one fell swoop.

“We are pleased we have been able to significantly reduce the amount of outstanding litigation we have with Johnson & Johnson,” said Ray Elliott, Boston Scientific’s CEO, in a statement. “We continue to work with them to resolve other outstanding matters.”

Boston Scientific has been bracing itself for a big legal payout for some time. The company accumulated $1.27 billion as of June 30 for its estimated legal payments, after it lost a court ruling this year to J&J for an estimated $237 million and a $50 million settlement payment to inventor Bruce Saffran. Both of those disputes were related to stent products.

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MooBella was having no trouble finding people willing to try out its make-your-own ice cream machines last week at MIT. If only designing market-ready versions of the machines—which are now more than a decade in the making—were as easy. Xconomy got the inside scoop recently on how MooBella has spent the last couple of years reengineering the machines to overcome some major design and functionality flaws that have blocked the commercial rollout of the ice cream factories on wheels.

The Taunton, MA, firm showcased test versions of its machines—which enable people to use a computer touch screen to order up to 96 different ice cream varieties made fresh within 40 seconds—at the Emerging Technologies Conference at MIT in Cambridge, MA last week. (And yes, I saw in person how the machine whipped up my own scoop of low-fat cake batter ice cream with crushed cookies and cream. It was tasty.)

The company, which is planning a full commercial launch either late this year or in early 2010, has been busy lately. It announced the closing of an $18 million Series A round of financing from W. Health LP, a venture fund managing by Inventages Venture Capital, last week. (The deal was classified as a first-round financing, even though MooBella has raised previous rounds of capital, because the business was recently reincorporated.) The plan is to use the money to manufacture 100 of its machines for places such as university and hospital cafeterias in New England over the next six months.

While stand-alone machines have made soft-serve ice cream for a long time, machines that can churn out fresh scoops of hard ice cream haven’t become mainstream—and MooBella has been working to change that since the business was founded by entrepreneur Paul Kateman under the name Turbo Dynamics in 1992. After a couple of bumps in the road, perhaps most notably a failed joint venture with General Mills in the mid-1990s, the business appears to be finally closing in on a commercial launch.

The proof was on display at the MIT conference. The company’s Ice Creamery machines, which are about the size of a large refrigerator, appeared to be working as advertised by MooBella. Chief technology officer Steven Moysey, who last spoke with Xconomy in August 2007, shortly after his hiring, filled me in on the engineering overhaul the machines have undergone to be ready for the market.

While MooBella had already been testing prototype machines for years prior to his arrival at the company, “The design was not sufficiently robust for volume production,” says Moysey, a former engineer and executive for firms such as Bose, Boston Scientific, and Gillette. “It employed too many custom built circuit boards, too many air cylinders, too much wiring, and it really wasn’t a scalable design in terms of its approach. We essentially scrapped [the previous design] and started again.”

The current design came together through a confluence of engineering and marketing expertise over the last couple of years, Moysey says. A key factor was the beginning of a partnership between MooBella and …Next Page »

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One of Seattle’s medical device industry pioneers has a beautiful view of Lake Washington from his home office in Kirkland, but a few minutes after I arrived, he was steaming mad.

“Our government rewards dummies and punishes geniuses,” says David Auth, the inventor of a less-invasive way to clear out blockages in arteries, called Rotablator. “GM is a dumb company, and has been for 35 years, and yet they get a bailout. The medical device industry in this country is one of the absolutely most competitive industries we have. All the great medical devices have come from U.S. companies. And so we tax them $4 billion a year?”

I had kicked this hornet’s nest by asking Auth straight-up about his thoughts on the recently proposed $40 billion tax increase on medical device companies. The industry was horrified last week by a proposal from Montana Democrat Max Baucus, the influential chairman of the U.S. Senate Finance Committee, that calls for taxing medical device companies for $40 billion over the next decade.

Boston Scientific’s CEO, Ray Elliott, called it “nonsensical,” and joked that he planned to throw tea bags into Boston Harbor in protest. Bernstein Research analyst Derrick Sung estimates that the proposal could cut the industry’s earnings per share by 5 to 10 percent a year.

Auth,68, has an influential point of view, because he’s something of a godfather in the Seattle medical device industry, as an inventor and an angel investor. He’s a former University of Washington professor who founded Redmond, WA-based Heart Technology, took it public, and sold it to Boston Scientific for $500 million in 1995. Since then, he’s donated millions to the UW, and put more of his own money into other local device companies, like Kirkland, WA-based Pathway Medical Technologies and Redmond, WA-based CoAptus Medical. He was elected to the National Academy of Engineering earlier this year, and serves on the boards of nine different medical device companies along the West Coast.

The proposal by Sen. Baucus compounds what has been an agonizing year for medical device companies, both locally and nationally. The FDA has been gradually becoming more demanding that device companies do larger, more expensive clinical trials than in the past, Auth says. More and more often, he’s seeing examples of the FDA saying one thing to a company about requirements for FDA approval, waiting for the desired data to roll in, and then telling companies it’s not enough.

This means that it is taking longer, and costing more money, to get a medical device approved in the U.S., Auth says. It’s causing venture capitalists to …Next Page »

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The economic climate these days reminds me of the famous line about the weather at the “Crosby Clambake” golf tournament (now the AT&T Pebble Beach National Pro-Am) held each February on California’s Monterey peninsula, in unpredictable conditions that shift quickly from sun to cold and rain: “There’s plenty of it.”

So it seemed a good time to get out a barometer and ask what the &!#@* an entrepreneur/startup should do in today’s climate? Is the economy really on the rebound? If so, is it time to change strategy? Should companies, say, get more aggressive about hiring people or expanding? Maybe they should court a suitor or investors because deal terms are improving? Or maybe not—maybe you should just stay the course.

[The X Factor is a mostly weekly column featuring conversations with local innovators, entrepreneurs, and investors that mostly runs on Tuesdays. This is an exception.]

I put my queries to four Xconomists, all experienced and highly successful investors, entrepreneurs, and business executives. No one pretended to have figured out whether the economy is rebounding or not. As serial entrepreneur-turned-VC Carmichael Roberts, now of North Bridge Venture Partners, put it: “It is impossible to tell what the heck is going on right now and whether we’re starting to recover or not.” The market, he says, is “too sideways.”

But that didn’t mean Roberts et al didn’t have some valuable advice and insights about what entrepreneurs should do in the current weather. All felt that for the foreseeable future, the climate would be fundamentally different than in recent years—and so should a company’s business strategy. As Boston Scientific co-founder John Abele says: “If you think the same strategy that worked before the meltdown is going to work now, you’re not living on earth. This is a different world, probably similar to the what this was 30 to 40 years ago, and it requires a different mindset.”

Their advice and insights, laid out below, focused largely on how to change your mindset. The ideas run from being extremely flexible about business models to asking tough questions about your business and its value to customers—and about your customers and investors and their value to you. Much of their advice has to do with entrepreneurs raising money in this climate, but parts are also relevant to executives of established companies.

John Abele, co-founder and director, Boston Scientific:

Be willing to make hard assessments—and be flexible with your own models.

“You got to do some slicing and dicing,” says Abele. “Some things are going to be more valuable in a constrained environment,” he says of today’s climate. “A number of things are going to be less valuable.” This includes your own products and your customers, and you must be prepared to adapt your model and offerings to take advantage of what will be most valuable. “A lot of people get trapped in their model and seem to have difficulty moving beyond that,” he says.

For instance, Abele is the owner of the Kingbridge Conference Centre & Institute outside Toronto, which is focused on better ways to conduct meetings and conferences to facilitate collaboration and education, among other things. “So one of the categories we focused on was infrastructure, for example power companies, that will have to do a lot of education to accommodate changes in regulation and technology,” Abele says. “They will be even more valuable to us, particularly if we have special education packages.”

Similarly, a medical company might look at its customers and prospective customers to determine which will be best off in the current climate and then ask whether those customers will …Next Page »

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Shareholders of Cambridge, MA-based Biogen Idec (NASDAQ: BIIB) will have their say today on whether or not they want billionaire investor Carl Icahn’s nominees to shake things up in the boardroom.

The votes will be tallied at the company’s annual meeting being held at 9 am Eastern time today at the American Academy of Arts & Sciences in Cambridge. This election puts four of Biogen’s 13 director slots up for grabs, between nominees from Icahn and the company. Winners will get a three-year term.

This year’s proxy contest has been a rematch of sorts, after Icahn failed in his bid to gain seats on the board at last year’s election. This time around, Icahn delivered a much more hard-hitting case about the need for change, accusing the company of “failed leadership” and suggesting it ought to consider splitting in two to gain greater focus. Icahn cited a number of flaws he sees in the company’s current operation, including: Biogen’s rising expenses; botched marketing of its top multiple sclerosis drugs; inability to develop any new drugs since 2004; and a stock performance that has lagged its peers. This argument helped sway the most influential firm that advises investors on proxy elections—RiskMetrics Group—to recommend two of Icahn’s four nominees, Alex Denner and Richard Mulligan.

That was the biggest victory of the contest for Icahn so far, but Biogen has scored its points as well. The company’s slate of nominees won recommendations from the two other main proxy advisory firms—Glass Lewis & Co. and Proxy Governance. Biogen shot back quickly at Icahn’s ideas in its presentations to investors, disclosed with the SEC last month. It said that physicians are regaining confidence in its fastest-growing MS drug, natalizumab (Tysabri) after some safety scares last year, that its pipeline is full of promising drugs, and that splitting the company in two would actually raise expenses and make it more difficult to develop drugs with broad potential for both cancer and autoimmune diseases. Icahn’s ideas, the company said, “would destroy shareholder value.”

Dissidents in elections like these always are fighting an uphill battle, because many companies like Biogen stagger their election terms in a way that makes it impossible for a majority of directors to be voted out in a single election. But not many investors have the kind of bully pulpit or famous name recognition of Icahn, which enable him to tackle highly-skilled corporate PR head-on.

But it’s difficult even for Icahn, so he’s supporting a second proposal to make the company reincorporate in North Dakota instead of Delaware—partly because he helped craft new laws in North Dakota that make it easier for activists like himself to mount successful proxy fights, as described in this interesting Bloomberg News feature.

One thing that certainly helps dissidents in any proxy fight is shareholder resentment over the fact that a stock has been dragging down their portfolio.

On that score, Biogen would have to be considered favored to win heading into today. The company’s stock price closed yesterday at $52.32, down 14 percent from the same day a year ago. That’s nothing to write home about, but …Next Page »

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New England Patriots linebacker Tedy Bruschi suffered a stroke back in 2005, because he had a hole in his heart that allowed a blood clot to pass to his brain. State-of-the-art treatment at the time was for doctors to do surgery, patching it up with an implantable metal-and-fabric device.

If Redmond, WA-based CoAptus Medical is successful, then a few years from now people like Bruschi will have a new option: a non-invasive way to seal up these heart defects without any implant. This week, the Redmond, WA-based company raised $3 million to pursue tests to see if it can make this idea work. CoAptus is led by president Joe Eichinger, and is backed by David Auth, the founder and former CEO of Heart Technology, who sold that company to Boston Scientific for more than $500 million in 1995.

CoAptus is seeking to solve a fairly common defect called a patent foramen ovale, which is a flap-like opening between upper chambers of the heart, Eichinger says. It usually closes up naturally after a baby is born, but doesn’t for many people. The defect, found in 20 to 25 percent of the U.S. population, is normally not a big problem, but it has been linked to higher risk of severe migraine headaches and stroke, he says. If this passageway remains open, even a relatively healthy person like an NFL linebacker can form blood clots while sedentary on a long flight, leading clots to travel to the brain and cause trouble. Something like 40 percent of the 750,000 strokes suffered in the U.S. each year are from unknown causes, and heart defects are one possible culprit, Eichinger says.

Of course, not everyone with the defect will seek out a procedure to prevent a stroke. But CoAptus hopes patients might be more inclined to get the procedure if it can seal up the defect without leaving behind an implant that might someday cause complications, like heart perforations, blood clot formation, or make it more difficult to have open-heart surgery if needed.

“Our whole claim is that we don’t leave anything behind in your heart,” Eichinger says.

Here’s how it’s supposed to work: CoAptus is using radio-frequency (RF) waves to heat up the tissue near the flap in the heart, which he described as being like a shirt pocket. The company’s device is mounted …Next Page »

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In case you haven’t noticed it, the recovery is underway. The economy is affecting all aspects of business, of course. But every day here at Xconomy we write about the unrelenting pace of innovation and see firsthand how, if anything, the pace has picked up during the recession—nothing like hard times to get the creative juices flowing, it seems. The current outpouring of new products, ideas, and companies spans many fields, from biotech to computing, mobile devices, robotics, energy, and more—with the potential to affect all aspects of our lives. And it’s this torrent of innovation, not any bailouts or stimuli, that will drive us out of recession and ensure future U.S. competitiveness.

Because New England is a world leader in high-tech innovation, we’ve decided it’s high time to move past all the doom and gloom surrounding the economy and highlight and celebrate innovation in the region in a new, and bigger, way. To that end, we are extremely pleased today to announce XSITE 2009—the Xconomy Summit on Innovation, Technology, and Entrepreneurship, a full-day event that will be held on June 24 at Boston University. We have partnered with BU’s Office of Technology Development to hold XSITE 2009, the first of what will become an annual conference focused on innovation in New England. The event will take place at BU’s School of Management on Commonwealth Avenue. And we are honored that BU President Bob Brown will be giving the welcoming address.

XSITE will bring together innovators from every sphere of the innovation community—across all the disciplines I mentioned above and more, and across institutions including universities, venture firms, startups, and the biggest public companies operating in the region.

We are thrilled with how well the idea of this summit has resonated with leaders in all these areas and institutions. Just a sampling of the many luminaries who will be taking part in XSITE includes: Juan Enriquez of Biotechonomy, who will deliver a keynote address; Nobel Laureate Phil Sharp of MIT; Jeff Nick, chief technology officer of EMC; Reed Sturtevant, managing director of Microsoft Startup Labs; Alnylam Pharmaceuticals CEO John Maraganore; Boston Power CEO Christina Lampe-Onnerud; Boston Scientific co-founder John Abele; Mohamad Ali, IBM’s senior state executive for MA; Yet-Ming Chiang, co-founder of A123Systems; and Mick Mountz, CEO of industrial robot maker Kiva Systems.

Startup aficionados, meanwhile, will have lots to love about XSITE, which will feature some of the coolest and most promising young companies in New England. In addition to Kiva, these include black silicon developer SiOnyx, fat-busting firm Zafgen, “roadable” airplane maker Terrafugia, Web video audience tracking firm Visible Measures, and Satori Pharmaceuticals, which is developing a pill to fight Alzheimer’s disease. We will also lift the curtain on several stealth-mode startups at the summit (of course we aren’t naming them yet).

And summit attendees will have a chance to share their own ideas about innovation in a variety of ways, including during the XSITE Xpo, a dynamic session in which a dozen of New England’s most promising startups will tell their stories and audience members will pick which firms will likely be the most transformative in the years to come.

We will be revealing more about the event in the next few weeks. On Twitter, follow us at @XconomyXSITE (hash tag #xsite09) and see our current lists of speakers and get registration details at www.XSITE2009.com. We look forward to seeing you on June 24.

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In the race to develop a fully dissolvable cardiac stent, San Diego’s Reva Medical is clearly second. And to CEO Robert Shultz, that’s a good place to be, especially for a startup that had to restart development of its stent technology.

The cost of establishing a big new market, Shultz says, is better left to the drug and medical device giant Abbott Laboratories, which is on pace to launch its dissolvable stent nine months to a year ahead of Reva. “The important thing is to be in the race, not who is one or two,” Shultz told me when I caught up with him by phone to discuss the company’s plans.

Dissolvable, or bioabsorbale, stents are seen as the next big thing in cardiac care. They represent an advance over metal stents — tiny mesh tubes that are used to prop open previously clogged arteries. Some existing stents are coated with drugs to prevent a build up of scar tissue, a complication that can cause the blood vessel to become re-blocked. But drug-coated stents slow the healing process and carry a higher risk of blood clots that also can block the vessel.

Reva and others are betting that dissolvable stents can avoid these complications, and research in the Lancet in March suggests they may be right. As Abbott reported, the 30-patient study found that Abbott’s corn-derived stent was safe after two years. There were no cases of blood clots forming inside the stents and the stents were fully absorbed. “Abbott made a lot of progress and we want that to occur,” Shultz said. “They helped everybody by demonstrating the stents are safe.”

Shultz believes Reva’s stent has several advantages. When the stent is implanted, a series of stent elements slide open and lock into place, a unique design that helps the stent retain its shape inside the vessel. And because the stent contains iodine — unlike the Abbott stent — it is completely visible using X-ray fluoroscopy, a common form of clinical …Next Page »

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GI Dynamics made a lot of noise late last year about the ability of its gut-lining device to help patients struggling with weight problems and Type 2 diabetes to drop pounds while reducing their blood sugar. The device, called the EndoBarrier, is a 2-foot-long flexible sleeve that is placed in the small intestine. Recently the Lexington, MA-based startup began talking about an additional device that significantly boosted weight loss in pigs when combined with the gut liner.

The second device is a plate, made of a Teflon-like material, with a small whole that restricts the flow of partially digested food into the intestine, Andy Levine, chief technology officer at GI Dynamics, tells me. Appropriately named the “Flow Restrictor,” the device showed it could nearly double the rate of weight loss when used with the EndoBarrier, compared with using the EndoBarrier alone. The restrictive plate is intended to slow the rate at which the partially digested food empties from the stomach into the small intestine. Levine says that the devices, which are put in the body through the mouth in a 20-minute procedure, could be less invasive option than the cutting and stapling required for gastric bypass.

“It’s actually very exciting because what it starts to do is really help us to understand how these devices are working,” Levine says.

Despite showing in small studies that its gut-lining device alone could help patients drop an average of 30 pounds in three months in earlier studies, GI Dynamics does not know for sure why those patients lost weight. Levine says that the company believes but is not positive that the EndoBarrier interferes with hormonal signals that control appetite.

With the addition of the plate, the company adds a new element to induce weight loss: restriction. Restriction is a well-known means of controlling weight, and it makes patients feel full more quickly than without it. Two common ways to provide restriction are gastric bypass and gastric banding. (Gastric banding involves the use of a band that is wrapped around the intestine to slow the flow of food into the stomach.) Yet both gastric banding and gastric bypass require surgical incisions while the EndoBarrier and Flow Restrictor are inserted into the intestines through the mouth.

The plan is to seek regulatory clearance for the Flow Restrictor after the firm garners the right to market the EndoBarrier, Levine says. The EndoBarrier is now being tested in a human study to prove that it can be useful in the body for a year. Both the devices are intended to …Next Page »

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It was a relatively quiet week for New England’s life sciences firms, but with earnings reports from several key players due at the end of this week I’m guessing the next roundup will be a doozy.

—Cambridge, MA-based Cerulean Pharma named Oliver Fetzer, a former executive at Lexington, MA-based Cubist Pharmaceuticals (NASDAQ:CBST), as its new CEO. Fetzer takes over the post from Alan Crane, a venture partner at Polaris Venture Partners in Waltham, MA, and the founding CEO of Cerulean, which is developing nanoparticle-based drugs for cancer and other diseases.

—Ryan chronicled the transformation of Lisa and Eric Chamberlain from special effects experts to medical model makers. Now with the help of their growing company, The Chamberlain Group in Great Barrington, MA, the wife-and-husband team use a combination of imaging, computer-graphics, 3-D printing, and materials technologies to make beating hearts, sinuses, and a host of other highly realistic simulacra for the likes of Boston Scientific (NYSE:BSX), Medtronic (NYSE:MDT), and Brigham and Women’s Hospital.

—Xconomist David Resnick, the team leader of the Biotechnology/Chemistry team at Nixon Peabody in Boston, urged vigilance as patent reform legislation wends its way through Washington. A Senate version of the bill now excludes a controversial provision that could damage the life sciences industry, he writes, but the House may reinstitute it when it comes up with its own version of the bill.

—Branford, CT-based Marinus Pharmaceuticals raised $20 million in a Series B round of financing from Canaan Partners, Domain Associates, Foundation Medical Partners, Sofinnova Ventures, and other return investors. Marinus will use the money to develop its lead drug candidate, ganaxolone, as an additional treatment for refractory partial seizures and other conditions.

—Luke took inventory of the facts and rumors surrounding billionaire investor Carl Icahn’s latest attempt to gain control of Cambridge, MA-based Biogen Idec (NASDAQ: BIIB), and analyzed the context in which Icahn is nominating four people for election to Biogen’s board, urging the company to reincorporate in North Dakota, and attempting to freeze the board size at 13.

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Before computer animation took hold of the movie industry, spaceships, exploding cities, dislodged body parts, and other scene-stealing special effects were crafted by highly skilled model makers. But after decades spent in entertainment, Lisa and Eric Chamberlain have taken their skills in the entertainment and special effects businesses and applied them to provide realistic anatomical models of human organs and tissues for the medical market.

In fact, the wife-and-husband team are running a growing western Massachusetts company, The Chamberlain Group, which counts among its customers medical devices powerhouses Boston Scientific (NYSE:BSX) and Medtronic (NYSE:MDT) as well as respected teaching hospitals like Baystate Medical Center in Springfield, MA, and Brigham and Women’s Hospital in Boston. The firm, which serves the medical market exclusively, deftly blends traditional model-making techniques with advances in imaging and computer-graphics technology to make models for surgical training and product demonstrations.

Take the company’s sinus trainer, which consists of a head and neck model with replaceable sinuses. Entellus Medical, a Maple Grove, MN, medical devices firm, began using the models last summer to train surgeons how to use its catheter-based surgical tool for treating chronic sinusitis.

“It’s extremely real in terms of the sinus anatomy,” says Dick Cassidy, vice president of sales at Entellus. Training with the surgical models takes about an hour in the surgeon’s office—much cheaper and more convenient than flying surgeons from around the country to be trained on the device in a central lab with real human cadavers, he notes.

How is it done? The Chamberlain Group, which began making surgical models in the late 1990s, has perfected a technique that …Next Page »

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Richard Anders, a veteran Boston-area entrepreneur and investor, has long shown an interest in life sciences through his affiliations with the Museum of Science in Boston, the Dana-Farber Cancer Institute, the Harvard-MIT Health Sciences and Technology program, and other organizations. Along the way, he’s seen a major problem: many promising life sciences inventions never reach the market. So after spending more than a year thinking about how to solve this problem, he led the formation of an angel investment group called Mass Medical Angels (MA2).

“I had been frustrated,” says Anders, “I wondered what can we do to bring more cash and innovation into life sciences.”

Mass Medical Angels, which held its first meeting in December, is to Anders’ knowledge the only angel group in Massachusetts dedicated solely to investments in life sciences. The angel group aims to help entrepreneurs in the biotech, medical devices, and other science-related fields raise enough money to make sure that their great ideas for products don’t die on the vine. And though the challenge of raising seed money for life sciences startups predates the financial meltdown, the formation of the angel group could be extremely timely because the down economy has forced many venture firms to reduce their bets on seed-stage companies.

However, there’s a reason why there are so few angel groups focused only on life sciences. Life sciences startups, particularly those developing drugs, often need to raise huge sums of money before they reach a liquidity event such as an acquisition where investors see a return on their investments. That spooks some angel investors, who prefer to make bets on firms in the Web or software industries that require less money than life sciences startups. Yet Mass Medical Angels plans to invest in capital-efficient life sciences firms such as medical devices and healthcare IT startups, or even in fledgling biotechs that require relatively small amounts of money to do research that will lead to a larger institutional round of financing with VCs, Anders says.

Part of the strategy at Mass Medical Angels, Anders says, has been to stack its ranks …Next Page »

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Pathway Medical Technologies, the Kirkland, WA-based maker of a device that clears out blockages in clogged leg arteries, has raised $40 million in new venture capital, Xconomy has learned.

The investing group was led by Amsterdam-based Forbion Capital Partners, and joined by HLM Venture Partners, Oxford Bioscience Partners, Latterell Capital Management, Cooperative AAC, and Giza Venture Fund, according to a regulatory filing. Pathway hasn’t issued a press release, although CEO Paul Buckman confirmed today that the company has completed the $40 million financing, as the first part of an ongoing $55 million round.

Pathway has been on a roll since July, when it won FDA approval to begin marketing its first commercial product, which it calls Jetstream. This is a tiny stainless-steel drill mounted on a catheter that slides inside clogged leg arteries, where it cuts through and vacuums out blockages. It’s approved for patients with peripheral artery disease, a condition related to cardiovascular disease that has caused 2 million Americans to seek treatment, complaining of pain when they walk. Most people go undiagnosed now, partly because there aren’t many good options for treatment. Pathway plans to use the new cash to beef up its marketing effort to make doctors aware of this new tool.

This is also a big deal locally, the biggest financing for a biotechnology company that we’ve covered since Xconomy launched its Seattle site last June (and the second-biggest overall behind the $83 million for Big Fish Games in September). Pathway has now raised $120 million since its founding in 1998.

“The Jetstream technology really has the capability to transform how we treat peripheral artery disease,” Buckman says. “It’s always hard to predict revenues, but we think we’re going to be profitable in 2011, and the intent with this financing is to get us from here to there.”

Pathway has lots of competitors fighting for a piece of this market, although each uses a significantly different technology. Plymouth, MN-based ev3 (NASDAQ: EVVV) markets the SilverHawk and RockHawk that slice through and scrape out blockages in the legs. Colorado Springs, CO-based Spectranetics uses a laser-based system. St. Paul, MN-based Cardiovascular Systems has a high-speed diamond-tipped cutting tool.

The Pathway device is different in that it’s the only one …Next Page »

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The executive suites of several New England’s biotech and medical device companies saw new faces this week.

—Cyberkinetics Neurotechnology Systems (OTC:CYKN), a Foxborough, MA-based developer of devices to treat and aid patients with spinal injuries, revealed to the Boston Globe that it is shutting down. Earlier this year Cyberkinetics sold the rights to its Andara Oscillating Field Stimulator to Waltham, MA-based NeuroMetrix for $350,000.

—The board of diagnostics maker Exact Sciences (NASDAQ:EXAS) replaced the Marlborough, MA-based firm’s CEO and CFO with veterans of another diagnostics firm. Kevin Conroy, Exact’s new chief executive, and Maneesh Arora, its new CFO, previously held those roles at Madison, WI-based Third Wave Technologies, which was acquired last year by Bedford, MA-based Hologic (NASDAQ:HOLX) for $582 million.

—Boston-based MedAptus raised $6 million to support the expansion of its medical-billing-software business. Previous investor Boston Millennia Partners led the deal.

—Former Wyeth executive George Vlasuk was named president and head of Sirtris, a Cambridge, MA, unit of British drug behemoth GlaxoSmithKline (NYSE:GSK). Vlasuk will head Sirtris’ efforts to develop treatments for Type 2 diabetes and other diseases of aging.

—Natick, MA-based Boston Scientific (NYSE: BSX) settled a lawsuit filed against it by Bruce Saffran, a doctor who alleged that two of Boston Scientific’s stent products infringed on patents he owns. As a result of the settlement, the Natick device maker will record a pre-tax charge to earnings of $50 million this quarter.

—Claros Diagnostics reportedly raised $4 million in a second round of financing. Previous investors in Woburn, MA-based Claros, which is developing point-of-care diagnostic tests for prostate cancer and other ailments, include Oxford Bioscience Partners, Bioventures Investors, Accelerated Technologies Partners, and Commons Capital.

—Two Cambridge, MA-based biotechs, Aveo Pharmaceuticals and Biogen Idec (NASDAQ:BIIB), both based in Cambridge, MA, inked a development deal around Aveo’s effort to discover antibody drugs targeting ErbB3, a cellular receptor found in abundance on several types of cancer cells. Financial terms of the agreement were not disclosed.

—Robert “Duffy” DuFresne was appointed as CEO of Ischemix, a developer of drugs for preventing tissue damage after heart attacks and other cardiac events. The Maynard, MA-based firm expects to begin mid-stage trials of its lead drug by the middle of this year.

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Back in February 2008, a Texas jury told Natick, MA-based Boston Scientific (NYSE: BSX) it would have to pay $431 million in damages to Dr. Bruce Saffran, who alleged that the company’s Taxus Express and Taxus Liberte drug-eluting stents infringed on patents he owns. Boston Scientific appealed the ruling, and a Federal Circuit panel reviewed the case in early March. In a late-afternoon filing with the SEC today, Boston Scientific said it settled the case with Saffran on March 16, and that as a result, it will record a pre-tax charge to earnings of $50 million this quarter.

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When I last crunched the numbers on the financial health of the Boston area’s public life sciences companies, back in November, I noted that 15 of them had more than $100 million stockpiled. These firms, I reasoned, were likely in a decent position to weather the economic storm. Now with quarterly financial reporting through December now in the books for most of the firms in the sector, I came to a surprising conclusion. There are now even more companies, 19, in that position of relative financial strength. Infinity Pharmaceuticals, Momenta Pharmaceuticals, Hologic, and Bruker are all newcomers to the $100 million club as of December 31.

Then again, in my review of the new numbers I also spotted 16 companies that likely had less than $50 million in the bank at year’s end (I say “likely” because three haven’t reported their numbers). That sign of thin reserves suggests those companies will face tough choices ahead.

Here’s the full rundown, in alphabetical order, of the 44 Boston-area life sciences companies for which I tracked down end-of-year financial figures.

—Abiomed (NASDAQ: ABMD). The Danvers, MA-based medical device company had $63.8 million in cash and investments at the end of December, and a $7.7 million net loss in the quarter. That’s more cash than it had socked away at the end of September—$50.6 million.

—Acusphere (OTCBB: ACUS). This biotech company has cut about two-thirds of its workforce, or 40 jobs, and consolidated all its facilities in a manufacturing plant in Tewksbury, MA. It has avoided making a formal financial report to the SEC, although it says the cuts will help it stretch its cash into the third quarter of 2009, which it hopes will buy enough time to come up with “financing alternatives.” The stock is down to 3 cents. Acusphere is a newcomer to the list, which I overlooked last time.

—Alkermes (NASDAQ: ALKS). This Cambridge, MA-based company has maneuvered itself into position of financial strength, with $423 million in cash and investments at the end of the year, and with a $112.3 million profit in the quarter. As I mentioned last month, Alkermes has potential for revenue growth this year if Eli Lilly and Amylin Pharmaceuticals win FDA approval for once-weekly exenatide for diabetes, which is based partly on a technology license from the Massachusetts firm.

—Alnylam Pharmaceuticals (NASDAQ: ALNY). This Cambridge, MA-based biotech company doesn’t have to worry about cash, with $512.7 million at the end of 2008, and a relatively skinny net loss in the quarter of $9.4 million. It expects to burn through no more than $77 million of its cash this year, ending 2009 with more than $435 million. Indeed, rather than fretting over finances, CEO John Maraganore is thinking about how to prioritize opportunities, as he told me last month.

—Altus Pharmaceuticals (NASDAQ: ALTU). Alarm bells must be going off at Waltham, MA-based Altus. This company used almost $90 million of its cash reserves in 2008, and closed the year with $48.6 million left in the bank. Even after cutting 107 jobs, or three-fourths of its workforce, Altus still expects to spend $50 million to $60 million for operations this year. It says it has enough cash to run “into the fourth quarter” and that it will try to raise more capital in the next three to six months. …Next Page »

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HeartWare International (ASX:HIN), a small Framingham, MA-based developer of an implant used to keep the heart beating, has agreed to be sold to Pleasanton, CA-based medical devices firm Thoratec (NASDAQ:THOR) in a half stock, half cash deal valued at $282 million, according to Thoratec. The deal is expected to close in the second half of 2009. HeartWare CEO Doug Godshall, a former group president at Natick, MA-based medical devices giant Boston Scientific (NYSE:BSX), moved HeartWare’s main corporate office from Australia to Massachusetts after he took the reigns at the firm in 2006.

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