[Update:8:25 am PT] Pathway Medical Technologies, the Kirkland, WA-based maker of a device that clears out blood vessel blockages in the legs, has agreed to be acquired for $125 million by Medrad, a Warrendale, PA-based medical device unit of Bayer Healthcare, Xconomy has learned.

The acquisition hasn’t yet been announced by either company, and the deal is still pending, awaiting final regulatory and shareholder approval, sources say. The deal also includes a bonus pool of $6.3 million to retain certain members of Pathway’s senior management team after the deal closes, according to a merger document reviewed by Xconomy.

Pathway CEO Paul Buckman declined to comment about the deal, as did chairman Tom Clement and director David Auth, when reached by e-mail. [Updated comment from Medrad.] Medrad spokeswoman Alicia Cafardi said “this transaction is pending and we cannot provide detail or comment at this time.”

The deal appears to offer up a mixed bag of returns, depending on your point of view. All of the buyout returns will go to the Series D-2 preferred stockholders, while the holders of other classes of stock will not get any returns, according to the merger document. Pathway raised its Series D financing, worth $42.5 million in May 2009, from Forbion Capital Partners, Giza Venture Capital, HLM Venture Partners, Latterell Venture Partners, Oxford Bioscience Partners, WRF Capital, and individual investors. The company, according to the most recent tally Buckman offered in a June interview, had raised a total of about $130 million since its founding in 1998—meaning that a $125 million purchase price by definition doesn’t offer much of a return for the total investment.

Tom Clement, Pathway Medical founder and chairman

Still, Pathway has been one of the bigger success stories of the Seattle medical device cluster of the past decade. The company, founded by Clement, originally intended to drill out plaque and clot buildups in vessels around the heart. But as the cardiology market showed a clear preference for stents, the tiny mesh devices that prop open clogged arteries, Pathway briefly shut down in late 2004 and early 2005. Clement went back to the drawing board to reinvent the device, and raise more money, to go after a more promising market niche of blockages in leg vessels—what’s known medically as peripheral artery disease. That new opportunity was attractive for a couple reasons. About 2 million Americans are estimated to seek treatment every year for this condition, which causes leg pain when people walk. And stents don’t work well in the legs, because they have a tendency to twist and break.

Pathway’s current device, marketed under the trade name Jetstream, uses a tiny stainless-steel drill mounted on a catheter that slides inside clogged leg arteries, where it cuts through and vacuums out hard plaque blockages and squishier clot-like substances.

Pathway persevered through its lean times, and got its first device cleared for sale by the FDA in the summer of 2008. It showed some promising early signs in the market, signing up more than 100 physician customers in the first few months, and getting them to use it … Next Page »

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Selling expensive new medical equipment to doctors today, no matter how good it may be, is no easy thing. Just ask Pathway Medical Technologies.

Almost three years have passed since the Kirkland, WA-based company won FDA approval for its first device, which drills through and sucks out tough-to-treat blockages in leg arteries. The company, founded in 1998, has raised $130 million of investment capital for this feat of engineering, and has a staff of 170 employees today.

Yet Pathway, stung once before by setting its own overly aggressive sales goals, has carefully watched its budgets the past couple years, and is taking a grind-it-out approach to get to the next level—sustained profitability.

“It’s not about growth at any cost. It’s about pursuing growth we feel we can afford,” Pathway CEO Paul Buckman said when I visited his office in Kirkland a couple weeks ago.

Pathway has had a lot of success with winning a series of FDA approvals for various versions of its device, which it markets under the Jetstream name. For those new to the story, Pathway’s device uses a tiny stainless-steel drill mounted on a catheter that slides inside clogged leg arteries, where it cuts through and vacuums out hard plaque blockages and squishier clot-like substances. 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, partly because there aren’t many good options for treatment.

The company showed some early signs of breakout potential in its first few months on the market, and raised $40 million in March 2009 during one of the worst stretches of the recession. But just a couple of months later, Pathway made a public admission that it had set overly aggressive sales goals, and had to cut 20 percent of its workforce to conserve cash, with an eye toward reaching break-even in mid-2011.

Paul Buckman

It’s mid-2011 now, and when I stopped by Buckman’s office for an update a few weeks ago, he said the company still isn’t profitable. Even though Pathway vowed two years ago that it wouldn’t raise more capital, Buckman now says the company will likely have to raise money next year.

Even though Pathway is falling short on those predictions, if there’s a word to sum up the company’s performance, it might be “stable.” The company still has 170 employees, the same as it did two years ago. Under constrained resources, it grew revenues by 50 percent in 2010, compared to the prior year, Buckman says. This year, Pathway expects to grow sales by another 30 percent, he says. About 15,000 patients in the U.S. have had a Pathway procedure done, and about 300 doctors are routinely using the device, Buckman says.

The hurdles here are numerous. Pathway doesn’t like to disclose what its drill sells for on average, but Buckman says all devices in its class sell for about $3,000 per procedure, and Pathway’s sells for a premium. This comes at a time when many hospitals and insurers are increasingly wary about adding costs. There are strong competitors like Dublin, Ireland-based Covidien and St. Paul, MN-based Cardiovascular Systems. And there is the inertia that comes from treating a form of cardiovascular disease in the legs that hasn’t traditionally been treated … Next Page »

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This week we covered a lot of news about cancer, and some of it came from a surprising new source.

—Gilead Sciences (NASDAQ: GILD), the Foster City, CA-based company that made its name with drugs that turn HIV into a chronic disease, has placed a big new bet for the future on cancer and inflammation. Gilead agreed to pay as much as $600 million to acquire Seattle-based Calistoga Pharmaceuticals to obtain its pipeline of oral pills that it hopes will turn certain cancers and inflammatory conditions into more manageable, chronic diseases like HIV. I got the skinny from Gilead’s chief scientist, Norbert Bischofberger, in this follow-up interview.

—The controversy about whether to use Genentech‘s hit antibody, bevacizumab (Avastin) for treating breast cancer is far from over. The South San Francisco-based unit of Roche said this week that the FDA has agreed to let the company make its case on June 28 & 29 for why the drug should continue to be cleared for sale as a treatment for breast cancer, after the FDA said in December it planned to revoke the breast cancer clearance. If the FDA decision to yank breast cancer off the approved prescribing label, Genentech stands to lose hundreds of millions in future sales, analysts say.

—Redwood City, CA-based Pearl Therapeutics, the developer of treatments for lung diseases, said this week it has hired a new CEO, Charles (Chuck) Bramlage, from healthcare giant Covidien. Pearl raised $69 million in venture capital last fall, and soon after, showed its drug beat a multi-billion dollar blockbuster for chronic obstructive pulmonary disease in a head-to-head study of 118 patients.

—Here’s one angle you don’t see every day: A life sciences-focused VC firm moving away from the Bay Area. Thomas, McNerney & Partners, which has $600 million under management, said it plans to move its West Coast office from San Francisco to San Diego.

—Speaking of moves to San Diego, we reported on another big one this week. UC Berkeley chemist Michael Marletta was formally introduced as the new president of The Scripps Research Institute in San Diego. Xconomy was the first to report, back on Jan. 31, that Marletta would soon be named the top guy at Scripps, a major center for biomedical research.

—We also has the scoop last week about San Francisco-based Jennerex Biotherapeutics, which has produced some intriguing (albeit quite preliminary) data which suggests its cancer-fighting virus treatment is prolonging lives of patients with severe forms of liver cancer. Jennerex plans to present more detailed results later this year, with more time for follow-up, at the American Association for the Study of Liver Diseases.

—BayBio CEO Gail Maderis offered up a guest editorial this week with her view of how the federal government, if it wants to spur more entrepreneurship, could do some specific things with the people on the ground making it happen in the Bay Area.

—Unfortunately, I wasn’t able to personally make it into town this week for a cool event at UCSF Mission Bay which celebrated the 10th anniversary of QB3. Former Gov. Gray Davis, and Lt. Gov. Gavin Newsom were there, along with QB3′s founding director Regis Kelly. You can check Ron Leuty’s recap on this for the San Francisco Business Times. I’m working on some related themes for another big Xconomy event, with help from the folks at QB3 and BayBio, which will explore the 20-year outlook for the life sciences industry in the Bay Area. I hope to see you there at UCSF Mission Bay on March 16.

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Pearl Therapeutics, the Redwood City, CA-based developer of treatments for lung diseases, has named Charles (Chuck) Bramlage as its new CEO. Bramlage was most recently the president of pharmaceutical products for Covidien (NYSE: COV). Pearl, which raised $69 million in venture capital in October, was previously led by Howard Rosen. I wrote a feature in December about how the company beat a blockbuster drug for chronic obstructive pulmonary disease in a head-to-head study of 118 patients.

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Ocular Therapeutix has found a new investor and a fresh round of capital to advance its hydrogel-based treatments for the eye, CEO Amar Sawhney told me yesterday. The Bedford, MA-based startup is raising $14 million in a Series D round of venture capital.

Ascension Health Ventures, the investment unit of the largest Catholic hospital chain in the country, Ascension Health, is the new investor in Ocular’s fourth round of financing. The round also includes previous investors, including Polaris Venture Partners, SV Life Sciences, and Versant Ventures. The 35-person company has now raised $41.2 million from investors.

Last month Ocular, formerly known as I-Therapeutix, took in $6 million from its previous backers as part of its third-round financing. Now with about $20 million in fresh capital from that raise and its latest round, the company has some ambitious plans to advance its hydrogel-based drug delivery products into mid-stage clinical trials for pink eye and glaucoma as well as to begin a human study that the FDA is requiring the firm to do in order to gain U.S. market approval for a hydrogel eye bandage that’s been approved in Europe since early 2009, Sawhney said.

To deliver drugs to the eye, Ocular has developed tiny plugs that are inserted into the tear ducts. The plugs are designed to release treatments over a period of weeks or months without the patient having to remember to take his medicine. They are also made mostly of hydrogel, a synthetic polymer that is supposed to be completely absorbed over time with minimal discomfort to the patient, according to Sawhney. The firm plans to begin Phase II clinical trials of its treatments for conjunctivitis, or pink eye, as well as one for glaucoma this year and begin to show data from the trials at the end of 2011.

In October, the company reported promising data from a 10-patient, initial clinical study in which its plugs delivered a commonly used antibiotic called moxifloxacin to kill the bacteria that cause some pink eye infections. The patients in the study received the treatment after cataract surgeries. There were no adverse events reported or discomfort as a result of the firm’s therapy, according to Ocular. The next trials will offer more data on how well the firm’s therapies treat eye conditions in larger pools of patients.

Ocular, founded in 2006, is also developing the same technology to deliver treatments for dry eye and allergies, though those programs are in earlier stages of research.

Existing methods to get treatments onto the eye such as drops typically don’t last very long and require patients to remember to apply them to get the desired effects. The tear duct inserts might be able to overcome those challenges. But Ocular isn’t alone in this game. Vancouver-based QLT is in mid-stage development of tear duct plugs that offer sustained release of drugs for eye illness such as pink eye and glaucoma, for example. Sawhney said that his firm’s technology might be able to provide better comfort, retention in the eye, and greater drug loading than silicon-based plugs like those under development at QLT.

As I’ve previously reported, Sawhney has prior success in other applications of the same hydrogel technology. His previous company Confluent Surgical, where he developed hydrogel sealant for cranial and spine surgeries, was acquired by healthcare products powerhouse Covidien (NYSE:COV) in 2006 for $245 million. Covidien now markets the FDA-approved product under the brand name “DuraSeal.”

Sawhney and his partners have founded Ocular Therapeutics, Confluent Surgical, and more recently Waltham-based Augmenix to commercialize the same basic hydrogel technology for different markets. Ascension Health Ventures, the newest investor in Ocular, has backed Sawhney previously at both Confluent and Augmenix.

We’ll see whether Ascension’s confidence in Sawhney and his versatile technology pay off this time.

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Molecular Insight Pharmaceuticals, which shares a floor with Xconomy in the building at 101 Rogers Street, is in financial trouble.

The Cambridge, MA-based company, a developer of molecular medicines for cancer founded in 1997, has been in Chapter 11 since December 9. The company, which defaulted last year on a $150 million bond, has been unable to come to new terms with its bondholders. Since December 2009, the firm has more than halved its staff from 70 employees to about 30 workers today, said interim chief financial officer Mark Attarian.

Molecular Insight had total debts of $198.8 million and assets of $36.5 million, according to federal bankruptcy records. The lion’s share of the firm’s debt stems from the bonds it issued in November 2007 and accrued interest from them.

Nevertheless, Molecular Insight is trying to pull through this rough patch. There are at least two competing proposals to replenish the company’s coffers, including one from San Francisco-based private equity firm Savitr Capital and another from an informal group of Molecular Insight’s bondholders, according to court documents. Each of those parties is jockeying for a controlling stake the company in return for their money.

Still, Molecular Insight—which has four oncology products and one cardiac imaging drug at various stages of human clinical development—faces an uncertain future.

“We just don’t know who the new owner is going to be… [and] where will those new owners want to take the company,” Attarian said.

Attarian, a partner at the executive consulting firm Tatum, was part of a major leadership shakeup at Molecular Insight that the company announced at the time of its bankruptcy filing in December. That shakeup included the resignations of former CEO Daniel Peters and former CFO Charles Abdalian. Harry Stylli, a long-time board member, took the job of president and chief of restructuring. And Attarian was named to his interim post.

Also, the company said its common stock was de-listed from the NASDAQ in December and moved to the OTC Marketplace. The stock was trading around … Next Page »

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Take a fast-food loving culture, mix in a sedentary lifestyle, and, not surprisingly, you get a lot of heart disease in the U.S.

The trend doesn’t appear to be changing anytime soon, as the Baby Boomers get older, and an estimated 18 million U.S. adults are living with some form of cardiovascular disease. So if you’re a medical device entrepreneur, it generally means there’s a lot of demand if you invent something great that treats cardiovascular conditions and you can get it past regulators. And the place to be to spot many things new and innovative for the treatment of heart disease is the Transcatheter Cardiovascular Therapeutics conference, which runs from Sept. 21 to 25 in Washington DC.

This is a huge confab, expected to draw more than 12,000 cardiologists, medical device entrepreneurs, venture capitalists, and sales and marketing reps for all the major med device makers, including many from the San Francisco Bay Area. Take a glance at the sponsor list, and you’ll see who has a stake here—Abbott Laboratories (NYSE: ABT), AstraZeneca (NYSE: AZN), Boston Scientific (NYSE: BSX), Johnson & Johnson’s Cordis unit (NYSE: JNJ), Edwards LifeSciences (NYSE: EW), Medtronic (NYSE: MDT), and The Medicines Company (NASDAQ: MDCO).

The companies market products aimed at addressing at least part of the problem with heart disease. An estimated 6.5 million diagnostic and therapeutic interventional cardiology procedures were performed in the U.S. in 2008, which added up to a $4.7 billion market for corresponding products, according to Huntington Beach, CA-based market research firm LSI.

I won’t be on site this year, so I sought out the view of an expert observer will be there, Steve Salmon of San Francisco-based Latterell Venture Partners. Here are four big trends Salmon says will be watched at this year’s TCT conference.

Steve Salmon

—Percutaneous valve replacement. This is a hot field in which interventional cardiologists seek to thread a catheter through the femoral artery of the leg, up into the chest to repair the heart’s aortic valve without cracking open the chest and doing surgery. Medtronic agreed to pay $700 million upfront, plus milestones, in February 2009 to acquire Irvine, CA-based CoreValve to get its technology in this field, in which Edwards is also a significant player. The technology is attractive because it’s a new market, in which elderly people generally considered too frail for heart surgery can become candidates for a minimally invasive valve repair procedure.

Santa Rosa, CA-based Direct Flow Medical and Los Gatos, CA-based Sadra Medical are a couple of interesting Bay Area companies focused on percutaneous aortic valve repair that will be closely watched at the TCT conference, Salmon says. There are other “skunk works” ideas out there, but new technologies still face a lot of science and technical risk, as well as risk of being turned down by regulators. These companies are seeking to repair beating hearts, with squishy tissue, in frail patients, without causing more harm than good. Many companies also have to follow the expensive and arduous pathway through FDA known as … Next Page »

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Mark Corrigan, the chief executive of the biotech Zalicus (NASDAQ:ZLCS), has been shuttling back and fourth from Boston to New York this week as part of the Cambridge, MA-based firm’s effort to gain greater visibility on Wall Street. In fact, last Friday he was due to ring the closing bell at the NASDAQ stock market in Times Square.

Founded in 2000, the company, known for most of its history as CombinatoRx, has burned through more than $230 million to develop its drugs. It was one of the high-flyers in the local biotech scene until its lead treatment for arthritis faltered in a mid-stage clinical trial two years ago. Now the company, with a new name and a new FDA-approved drug, is out to reinvent its image in the investment community.

Last week the company changed its name from CombinatoRx to Zalicus (and no, the firm didn’t name itself after Zalicus, the armored character from the video game World of Warcraft). While name changes aren’t typically news, this company’s renaming deserves special attention because it relates to the December 2009 merger of CombinatoRx and Vancouver BC-based Neuromed Pharmaceuticals. By acquiring Neuromed, the new company obtained a long-lasting opioid pain reliever (Exalgo) that has been available on the U.S. market since April. It’s the first marketed product for Zalicus, and it changes the complexion of the company quite a bit.

Before the merger with Neuromed, Zalicus’s business was built entirely on its system that seeks synergistic combinations of compounds to form new treatments for diseases. That technology has helped the firm gain its research and development deals with the Swiss drug maker Novartis (NYSE:NVS) and Thousand Oaks, CA-based biotech giant Amgen (NASDAQ:AMGN). Neuromed, like the name used to suggest, developed neurological drugs like the long-lasting opioid pain reliever. The product (Exalgo) is marketed by health products giant Covidien (NYSE:COV). Zalicus has also chosen to maintain a research operation in Vancouver that is focused on discovering drugs that block proteins called calcium channels to treat pain.

Still, the company’s lead clinical candidate is an arthritis treatment called Synavive. It’s a combination of a cardiovascular drug and a corticosteroid that resulted from the firm’s original combinatorial drug-screening technology.

The name change gives the company an excuse to tell its story to investors and regain faith among stock buyers on Wall Street. Investors bolted from the firm’s stock after it reported in October 2008 that … Next Page »

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Cambridge, MA-based drug developer CombinatoRx announced today that it has changed its name to Zalicus to better reflect its assets and focus, following its merger last year with Vancouver-based Neuromed Pharmaceuticals. The company garnered its first drug approval earlier this year for the pain treatment hydromorphone HCL (Exalgo), which is being marketed by healthcare products company Covidien (NYSE: COV). “Our new name reflects the Company’s transformation into a biopharmaceutical company with product revenues, two powerful and differentiated drug discovery platforms, a pipeline of product candidates and proven drug development expertise focused on the treatment of pain and inflammation,” announced Mark Corrigan, president and CEO of Zalicus (NASDAQ: ZLCS), which started trading under its new stock symbol today.

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There were fewer life sciences headlines this week than we’ve seen lately, but the news covered an array of biotech companies fighting everything from baldness to skin disease to stubborn bacteria.

—Watertown, MA-based Tetraphase Pharmaceuticals pulled in a $45 million Series C round that was led by new investor Excel Venture Management and also included some of the biotech company’s existing backers. Tetraphase is using proprietary technology to develop tetracycline antibiotics, which can allow for more alterations than traditional antibiotics developed through fermentation, and as a result better combat pathogens that have built resistances to existing treatments.

—SynapDx, a Waltham, MA-based developer of diagnostics for early detection of autism, snagged $9 million in Series A funding, from Bain Capital, General Catalyst Partners, and North Bridge Venture Partners. The quiet startup was founded by Stanley Lapidus, the life sciences entrepreneur known for launching companies such as Helicos BioSciences (NASDAQ: HLCS) and Exact Sciences (NASDAQ: EXAS).

—Healthcare products company Covidien said it will buy ev3 (NASDAQ: EVVV), a Plymouth, MN-based medical devices firm, for $22.50 per share, or a total of $2.6 billion in cash. Ev3 is known for products that treat vascular diseases. Mansfield, MA-based Covidien (NYSE: COV) (which is legally incorporated in Ireland) expects the purchase to be finalized by July 31.

—Follica, the stealthy biotech company that has generated plenty of buzz on our site for its work in developing drugs to fight male pattern baldness, hit our radar screen again with $7.5 million in equity-based funding. Company co-founder Daphne Zohar of PureTech Ventures said the financing represents part of Follica’s Series B round. Follica hasn’t said how close its technology, which is designed to stimulate the growth of hair follicles, is to hitting the market.

—Constellation Pharmaceuticals, a Cambridge, MA-based company that’s developing drugs that target diseases by turning DNA on and off, grabbed a $22 million Series B round, led by GlaxoSmithKline’s venture investing arm, SR One. Boston-area life sciences force Christoph Westphal became president and head of Glaxo’s (NYSE: GSK) SR One earlier this spring, and was involved in the financing. Constellation’s technology aims to block enzymes that make it harder for tumor-suppressor genes to do their job. Previous Constellation backers Altitude Life Sciences, The Column Group, Third Rock Ventures, and Venrock Associates also contributed to the second-round funding.

—Ryan took a look at MoMelan Technologies, a stealthy Cambridge startup that’s out to fight the physical effects of skin diseases by developing a device that can stretch skin to cover a larger area than a traditional skin graft could. The science for the company comes from Harvard dermatologist and MoMelan co-founder R. Rox Anderson. It could help treat disease like vitiligo, which causes the irregular formation of white spots on the skin. MoMelan raised more than $1 million in convertible debt funding in March.

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Monday may have been a holiday, but New England’s tech and life sciences companies haven’t slowed down their deal making. We’ve had plenty of headlines of acquisitions, an IPO, and venture funding rounds for companies we’ve covered before and other not-so-familiar names.

—Expressor Software, a Burlington, MA-based integration software provider, raised $4.5 million in expansion capital funding. The money comes from existing Expressor investors Commonwealth Capital Ventures, Globespan Capital Partners, and Sigma Partners.

—Waltham, MA-based Xkoto, a maker of database virtualization software for businesses, confirmed that it had been acquired by business intelligence giant Teradata (NYSE: TDC). Xkoto, which raised a $3 million Series C round last year from GrandBanks Capital and GrowthWorks Canadian Fund, said the companies don’t plan to disclose the financial terms of the acquisition.

—OzVision Global, a maker of remote video platforms for surveillance and telecommunications companies, raised $4.9 million of a planned $6.7 million offering of debt that can be converted into equity. The Woburn, MA-based company is backed by Aviv Venture Capital and Kardan Communications.

—Tesaro, a new Boston biotech company that plans to develop and acquire cancer drugs and other oncology products, said it has pulled in $20 million in a Series A financing. The money comes from the company’s founders and New Enterprise Associates, which has reserved another $40 million to support Tesaro over time.

—Waltham-based drug developer Logical Therapeutics announced it had wrapped up a $16.9 million Series C financing, led by SV Life Sciences. Burrill & Co., Novo A/S, and Novitas Capital participated in the round, which we first covered when an SEC filing showed that the company pulled in $10 million.

—Thermo Fisher Scientific said it will acquire Fermentas International, a Canadian maker of life sciences research materials and diagnostic tools, for $260 million in cash. Waltham-based Thermo said it expects to … Next Page »

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Covidien (NYSE:COV), a healthcare products company, says today it has inked a deal to buy the medical devices firm ev3 (NASDAQ:EVVV) for $22.50 per share in cash or a total of $2.6 billion. Plymouth, MN-based ev3, founded in 2000, specializes in medical devices for treating vascular disease in certain parts of the body outside of the heart, such as the arms, legs, and brain. Last year the company recorded $41.9 million in profit on revenue of $449.1 million, according to its annual report. Covidien—which is incorporated in Ireland but has its global headquarters in Mansfield, MA—expects to close on its purchase of ev3 by July 31.

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Some 800,000 people in the U.S. are diagnosed each year with obstructive sleep apnea, in which the tongue relaxes during the onset of sleep to the point of physically blocking much of the upper airway. The condition often causes repeated interruptions of sleep, which can lead to increased blood pressure, coronary problems, and diabetes.

The established treatment is a respirator-like gadget that a patient is supposed to wear while sleeping. But nearly half of the people who are directed by their doctors to use these “continuous positive airway pressure,” or CPAP, devices simply can’t or won’t comply, according to Terry Davidson, a professor of head and neck surgery at the UC San Diego School of Medicine. Davidson says he also is pessimistic about surgeries that are intended to move the tongue forward and away from the throat.

A San Diego medical device startup where Davidson is Chief Medical Officer is now testing a new approach, which uses an implanted electronic device to transmit low-current neurostimulation to the tongue. The steady electric current causes the tongue muscle to tighten, so it pulls away from the upper airway. The company, ImThera Medical, announced in December that it had implanted its technology in two obstructive sleep apnea patients in Belgium.

Marcelo Lima, ImThera’s founding chairman and CEO, tells me he views the non-compliant CPAP patients as an ideal market for ImThera’s technology. The company is in clinical trials only in Europe, and intends to implant devices in 10 more patients as part of those studies. In the European trials, a surgeon implants ImThera’s pacemaker-like device in the upper chest, just under the skin, and extends a wire to a multi-contact electrode in the jaw. From there, the surgeon attaches the electrodes to the hypoglossal nerve, which controls multiple muscles of the tongue. The company has posted a YouTube video that explains it all here.

The implanted electronic device is programmed a couple of weeks following the surgery to send just enough electricity to the nerve to deliver what Lima calls “awake muscle tone to the sleeping tongue.” A handheld radio-frequency wand is used to turn … Next Page »

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Stories of drugmakers, deals, health IT companies, and even some nonprofits made it a busy life sciences news week for us.

—Waltham’s Avila Therapeutics is on a quest to outdo well-known Boston drugmaker Vertex Pharmaceuticals when it comes to treating hepatitis C, Luke wrote last week. The company’s drugs rely on forming covalent bonds to shut down targets on virus-infected cells, preventing the virus from mutating and escaping, which could give it an edge on the Vertex drug that has varying degrees of effectiveness on different mutations of hepatitis C, Avila’s CEO said.

—Dossia, a Cambridge, MA-based nonprofit electronic health records provider, rolled out its system to another two of its founding companies. Computer chip maker Intel and mail system provider Pitney Bowes will offer some of their workers the Dossia system, which is sustained by subscription fees and is designed to lower overall healthcare costs for corporate clients.

—Speaking of electronic health records, Athenahealth is looking for some opinions on the matter and announced a partnership with Cambridge’s doctors-only social networking site Sermo to get just that. Financial terms of the partnership between Sermo and Watertown, MA-based Athena (NASDAQ:ATHN), a maker of Internet healthcare software, weren’t revealed.

— Millipore shook things up this week when it announced plans to accept a bid from Germany’s Merck KGaA, which offered to buy the company for $107 a share, or $7.2 billion. Thermo Fisher had previously made an unsolicited $6 billion bid for the Billerica, MA-based life sciences equipment supplier, according to media reports.

—Stealthy Guilford, CT and San Francisco-based startup Ion Torrent Systems opened up a bit to discuss its digital DNA readout technology, leaving plenty of genomic science bloggers buzzing. And the machine from Ion Torrent, which is advised by a Harvard genomics pioneer and supported by a Seattle partner, costs … Next Page »

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CombinatoRx has garnered its first drug approval. It’s a milestone for the Cambridge, MA-based drug developer, even if the path the company took to reach this point isn’t the one its founders had mapped out when they launched the company in 2000.

The FDA has approved the pain drug hydromorphone HCL (Exalgo), which is an extended-release tablet taken once a day for people with moderate to severe aches and pains, the company (NASDAQ:CRXX) reports today. The firm took on U.S. development of the drug through its December merger with Vancouver-based Neuromed Pharmaceuticals. In other words, the pain tablet is not a product of CombinatoRx’s own drug-discovery system, which uses computers to find novel treatments based on synergistic combinations of other drugs.

The approval has earned CombinatoRx—which still has a Vancouver office—a $40 million milestone payment from the healthcare products giant Covidien (NYSE:COV). Covidien, which has its corporate offices in Mansfield, MA, acquired U.S. rights to the pain treatment from Neuromed last year and is handling all marketing of the drug through its Mallinckrodt unit. CombinatoRx will get royalties on drug sales from Covidien, which plans to begin selling the product in the first half of this year.

CombinatoRx’s work on this pain drug is largely over, since Covidien is now responsible for all marketing and post-approval studies of the drug. Also, the ALZA unit of Johnson & Johnson (NYSE:JNJ), which licensed U.S. rights to the drug to Neuromed in 2007, is in charge of manufacturing supplies of the product that will be sold by Covidien in the U.S. CombinatoRx’s next closest drug to the market is its combination therapy for arthritis, which is in mid-stage clinical development.

The approval has given CombinatoRx’s stock a shot in the arm. According to Google Finance, the stock was up 45 cents, or 40.5 percent, to $1.56 per share in pre-market trading this morning.

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When Don Kiepert became chief executive of Lantheus Medical Imaging about two years ago, he says, he took over a business that was looking down the barrel of a generic threat to one of its top-selling products—and whose operations had been largely overlooked by its previous owner, the drugmaker Bristol-Myers Squibb (NYSE:BMY).

Kiepert has attacked the first problem, generic competition to the firm’s technetium Tc99m sestamibi (Cardiolite) injections for medical imaging, by securing supply agreements with key customers and investing in marketing the product’s well-known brand. And last month, the North Billerica, MA-based company launched its latest imaging product, gadofosveset trisodium (Ablavar), a contrast agent used in diagnosing cardiovascular diseases, after paying $28 million for certain rights to the technology last May to the now defunct biotech firm Epix Pharmaceuticals, of Lexington, MA.

Yet Lantheus still faces major challenges. While the business’s roots date back to 1956, Lantheus is only a two-year-old company, and its name isn’t as well known among key physicians as Bristol-Myers is. (The company name was changed from Bristol-Myers Squibb Medical Imaging to Lantheus in January 2008, when private equity firm Avista Capital Partners, of New York City and Houston, purchased the business for $525 million from Bristol-Myers in a leveraged buyout.) Generic competition to the sestamibi product has eaten into the company’s revenue stream, but the CEO says that the total number of workers at the company today is about 740, just 10 fewer workers than  when Avista bought the business.

Lantheus does not publicly reveal its financial records, so it’s tough to know exactly how the business is performing. Like many companies purchased through LBOs, Lantheus must use a portion of its revenues to pay down the debt used to finance Avista’s purchase of the business. However, Kiepert says that the company is almost two years ahead of schedule in paying down its undisclosed debts from the buyout. And despite those debts, Avista has supported efforts at the company to invest in brining new products to market.

“We’re investing nearly … Next Page »

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Ekos is on a quest to change the way doctors think about how to best dissolve blood clots. Like a lot of bold visions, this hasn’t happened overnight or without some bumps along the way. But even in a very tough year for new medical devices, the Bothell, WA-based ultrasound company has been gradually increasing sales, and has put itself on a trajectory to break even for the first time by the second half of 2010.

That’s according to Ekos CEO Bob Hubert, who I caught up with by phone a couple weeks ago while he was in New York at a medical meeting. He was there for the VEITHsymposium, which gathers vascular surgeons, interventional radiologists, and interventional cardiologists looking to keep up with state-of-the-art tools for treating all kinds of variations of cardiovascular disease.

Ekos started 2009 with a bang, when it raised $12.5 million in venture capital in January to support its push to make a commercial splash. The company’s tool uses ultrasound pulse vibrations, along with clot-busting drugs, to loosen up the clots and dissolve them faster than the drugs can do it alone. The technology first reached the market in January 2007, and this fall, Ekos has refined it into a third-generation product, called EkoSonic Mach4e. The big advance has been to get rid of clots in patients with deep vein thrombosis in as little as one day (sometimes in an outpatient procedure), compared with two to four days with previous versions, Hubert says. About 300 medical institutions in the U.S. have adopted the Ekos technology, and most of them are looking to upgrade to the latest version, he says.

“We did a lot of listening to our customers and came out with a new product that’s easier to use, faster, and allows them to use lower doses of the drug,” Hubert says.

It all sounds good, but it isn’t quite as rosy a picture as Ekos envisioned at the start of this year. Ekos isn’t immune from the tough environment for devices: As unemployment has climbed, people are losing their employer-sponsored health insurance, and postponing elective medical procedures. That means hospitals and government payers are tightening their budgets, and like President Obama, they are increasingly looking for comparative effectiveness studies that would add time and expense to device development.

Ekos doesn’t disclose its sales numbers, but even in this tough climate, sales are up about 20 percent year-over-year, Hubert says. Instead of reaching the break-even point in early 2010, as Hubert said when I interviewed him in January, the company now expects to reach that milestone in the second half of 2010, he says. Ekos will probably raise a little more capital soon to tide it over until it reaches break-even, Hubert says. The company cut about 30 jobs shortly after it closed the financing, leaving it with a staff of about 100.

“The economy has thrown everybody for a loop,” Hubert says. Essentially, even when doctors want a new medical technology, hospitals are slowing down … Next Page »

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As has been the case in recent weeks, M&A news featured prominently in this week’s New England tech and life sciences deals.

—Harvard spinoff Tetraphase Pharmaceuticals of Watertown, MA, raised $10 million out of a planned $29.6 million equity financing round, the company indicated in an SEC filing. Tetraphase is developing new antibiotics to treat drug-resistant infections.

—Norwalk, CT-based Xerox (NYSE: XRX) said it will acquire Dallas, TX-based business process outsourcing firm Affiliated Computer Services (NYSE: ACS), a, for $6.4 billion in cash and stock.

—Software maker Egenera of Marlborough, MA, raised $3 million in new equity financing. Existing investors including Austin Ventures, Crosslink Capital, Kodiak Venture Partners, Pharos Capital Group, and Technology Crossover Ventures contributed to the round, according to Mass High Tech.

—Aspect Medical Systems (NASDAQ:ASPM) of Norwood, MA, agreed to be acquired by Irish healthcare products giant Covidien (NYSE:COV) for some $210 million in cash. Aspect’s brain monitoring equipment will become part of Covidien’s Oximetry and Monitoring product line.

—Acton, MA-based Blackwave, a provider of Internet-video servers, took in $3.5 million of a planned $9.1 million round of equity financing from undisclosed investors. Flybridge Capital Partners, Globespan Capital Partners, and Sigma Partners have participated in previous funding rounds for the company.

—Taiwan’s Prime View International (PVI) sweetened the deal in a proposed merger with E Ink, and shareholders of the Cambridge, MA-based firm complained that PVI’s initial offer of $215 million in cash was too low. Under the terms of the new deal, E Ink shareholder would get 120 million shares of preferred stock in the combined company, in addition to the $215 million.

—Cambridge-based Vertex Pharmaceuticals (NASDAQ:VRTX) inked a pair of debt deals related to European commercialization of its hepatitis C drug, telaprevir, that will bring in $155 million in cash. Ryan has the details on the deals and the drug’s prospects.

—Google Ventures led a Series D financing round for Lebanon, NH-based Adimab, which is developing a fast and powerful platform for discovering new antibody drugs. Other investors in the deal, the value of which was not disclosed, include return backers Polaris Venture Partners, SV Life Sciences, OrbiMed Advisors, and Borealis Ventures.

—Merrimack Pharmaceuticals of Cambridge, MA, inked a deal with French pharmaceutical giant Sanofi-Aventis giving Merrimack $60 million up front, plus as much as $470 million in potential milestone payments, in return for rights to co-develop and co-market MM-121, an experimental antibody drug for cancer.

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There were a wide variety of developments in the Boston-area life sciences sector over the past week. Companies in the headlines included big ones like Genzyme and Covidien as well as smaller startups such as Humedica and Tetraphase Pharmaceuticals. Here are some highlights:

—We got an early look at Cambridge, MA-based Humedica’s strategy for developing next-generation clinical analytics systems, as well as some insights into why Bain Capital Ventures, General Catalyst Ventures, North Bridge Venture Partners, and Leerink Swann have pumped $30 million into the young company. Company CEO Michael Weintraub talked about how the firm could become a U.S. Census of sorts for healthcare.

—Genzyme faced more setbacks due to previously tainted bioreactors at its Allston, MA, plant. The Cambridge -based biotech powerhouse (NASDAQ:GENZ) revealed that it’s going to take longer than expected to resume full production of its enzyme-replacement drug agalsidase beta (Fabrazyme) for Fabry disease. Also, the company is anticipating lower sales than previously estimated for both agalsidase beta and imiglucerase (Cerezyme).

—Sirtris CEO Christoph Westphal gave Xconomy the first media interview about a new nonprofit group that he and his colleagues are launching in the Boston area to promote longer healthy lives. Can the red wine chemical resveratrol really help people live longer? Westphal talked about how his new group, the Healthy Lifespan Institute, plans to answer that big question and more.

—After a period of poor stock performance for Cambridge-based biotech Alkermes (NASDAQ:ALKS), company Chairman Richard Pops has jumped back into everyday operations as CEO—a post he left in … Next Page »

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Irish healthcare products giant Covidien (NYSE:COV) has reached an agreement to purchase Aspect Medical Systems (NASDAQ:ASPM), a Norwood, MA-based company specializing in braining monitoring technology, for approximately $210 million in cash, Covidien announced today. Aspect, founded in 1987, will become part of Covidien’s Oximetry and Monitoring product line inside the Medical Devices segment, according to a statement.

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