Waltham, MA-based Avedro, a medical tech startup, said yesterday it has completed a $25 million Series C financing led by SCP Vitalife and Aperture Venture Partners. Existing investors Prism VentureWorks, De Novo Ventures, Flagship Ventures, Borealis Ventures and Echelon Ventures also participated in the round. Avedro said the money will be used to expand commercial operations internationally and to seek FDA clearance in the U.S. The company is commercializing a vision-correction technique that uses a pulse of microwave energy to flatten the cornea to treat myopia and other conditions, as an alternative to Lasik surgery. The technology has its roots in research done at Dartmouth College in the early 2000s.

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In October, New York-based investment firm Miller Tabak launched the Health Care Transformation Fund (MTHFX), which invests in managed care, biotech, pharmaceuticals, and medtech companies. Its top holdings include New York area pharma giants Bristol-Myers Squibb (NYSE: BMY) and Merck (NYSE: MRK), as well as Boston-based biotech Momenta Pharmaceuticals (NASDAQ: MNTA).

The fund’s manager, Les Funtleyder, is the author of the book Health Care Investing (McGraw Hill 2009), which is part of the curriculum at Columbia and other universities. Funtleyder isn’t shy about predicting that investors in 2013 are going to look back and wish they had invested more in healthcare today.

Funtleyder took some time recently to talk with Xconomy about why he believes the upsides in healthcare outweigh the downsides.

Xconomy: Why the name “Health Care Transformation?”

Les Funtleyder: The overlying theory of this fund is that we want to invest in companies that can improve quality, lower costs, increase access, or innovate in healthcare. That’s what we’re looking for on the long side. On the short side we’re looking for companies that do the exact opposite of that. Anybody who causes damage to the system—like increasing costs or making me-too drugs—we’re looking to short.

X: In what sectors of healthcare have you increased your presence recently?

LF: The action this year in terms of upside has been in biotech, and in particular in the anti-infectives like drugs to treat hepatitis. And there has been a little action in oncology, too. Investors are moving back into healthcare in general, but they seem to be a little bit more optimistic about biotech companies, whereas in the last two or three years they really hadn’t been.

X: What are some off-the-radar companies in biotech you like?

LF: I point to Opko (AMEX: OPK) and BioCryst (NASDAQ: BCRX). BioCryst is in gout, Opko is in a number of areas. They haven’t worked yet. They’re going to take time to develop. But we go and look at asset values. We’re looking for a collection of assets that’s trading below what we call the private market value. So if we wanted to go out and … Next Page »

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Boston-based medtech startup Myomo has cut its staff by 66 percent and adopted a more virtual business model over the past year, due to slower-than-expected initial sales of its highly acclaimed robotic elbow brace for stroke victims, company co-founder and interim CEO Steve Kelly tells Xconomy.

Kelly says that the angel-funded startup “hit a wall” financially toward the middle of last year, prompting the company to trim its ranks from a dozen to four full-time employees last spring and summer. Also, past company CEO Thomas Glover—a former executive at medical products giant Johnson & Johnson (NYSE:JNJ)—resigned from his post at Myomo last summer, at which time Kelly took over as interim chief executive. Nearly two years since the FDA cleared Myomo’s robotic elbow brace for use in hospitals, only three medical centers have purchased the devices, Kelly says. He adds that the devices are in use at clinics in the Boston and New York markets, and the firm plans to add Hartford to that list in the near future.

“I’m a little disappointed—I thought we would be in more metropolitan areas right now and we’re not,” Kelly says. “That’s partly a function of the economy and the fact that [healthcare] is a conservative industry where things don’t get adopted quickly.”

Myomo‘s technology, initially developed at MIT, is indeed new to healthcare practitioners. The firm’s first and highly acclaimed product, called the “e100 NeuroRobotic System,” is an elbow brace equipped with electrodes that pick up electrical signals on the skin when a patient is trying to move a partially paralyzed limb. The system translates the signals into movements. And even though the technology has brought the startup awards from MIT and Popular Science magazine, rehab clinics that the company has initially targeted for sales have been slow to adopt the device. The $7,500 cost of the system has not yet garnered U.S. insurance reimbursement, and clinics that purchase the FDA-approved device don’t necessarily get reimbursed more for providing therapy with the product than they would without using it.

Still, Kelly says he is pleased that his company chose to reduce its expenses and adapt to a virtual model with outsourced manufacturing and engineering before the economic meltdown in late 2008, when many companies were forced to abruptly lower costs and adjust to operating with fewer employees. (He says that Myomo has raised less than $5 million from himself and other angel backers, but he declined to provide further financial details.)

Myomo has ambitious plans to … Next Page »

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Gelesis, a Boston-based biotech startup focusing on obesity, announced this morning that it has raised $16 million in its first institutional financing.

The round was led by healthcare investment giant OrbiMed Advisors of New York and joined by Australia’s Queensland BioCapital Funds and others. It comes on top of a $900,000 seed investment from PureTech Ventures, a Boston life sciences venture firm, and PureTech partners John Zabriskie (via Lansing Brown Investments) and Ronald Cape (via the Cape Family Fund). The company also has a $1 million grant from the BIRD Foundation, whose mission is to encourage cooperation between U.S. and Israeli companies.

Eric Elenko, a principal at PureTech and a member of the Gelesis team (the company’s CEO and co-founder, Yishai Zohar, is also a former PureTech partner), says that the startup plans to use the new funding to advance a new therapy for obesity. With more than 190 million overweight and obese people in the United States alone, Elenko says, “it’s clearly an area that’s growing.”

Gelesis has been remarkably stealthy since it was founded in 2006 by PureTech and ExoTech Bio Solutions, an Israeli R&D company focused on novel chemistry, and the company is still remaining mum on the exact nature of the treatment it’s developing. I’m always skeptical when it comes to would-be weight-loss products, but Gelesis was formed with the help of some top-shelf medical, scientific, and regulatory experts. Local notables include Massachusetts General Hospital gastroenterologist Lee Kaplan, who directs the hospital’s Weight Center and studies the effects of bariatric surgery, and cardiologist Elazer Edelman, director of the Harvard-MIT Biomedical Engineering Center. The list of experts also includes FDA veteran David Feigal, whose positions at the agency included director of the Center for Devices & Radiological Health.

For all the big-name advisors and its big target market, Gelesis’ staff is still quite small, totaling only four full-time equivalents, Elenko says. The company plans to hire just another four to five people in the next year.

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Waltham, MA-based Inverness Medical Innovations (AMEX: IMA) has agreed to pay $170 million in stock for BBI Holdings, a UK company that specializes in lateral-flow tests, such as those used for fertility monitoring or pregnancy tests. Inverness has been on buying spree, which appears likely to continue.

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Myomo, the privately held Boston-based startup, has a lot to be thankful for this holiday season. The company won FDA approval in July for its first product: the “e100 NeuroRobotic System,” an elbow brace that helps stroke victims recover use of their arms by detecting tiny electric signals from the skin’s surface. Earlier this month, Popular Science cited Myomo’s brace one of the top technological innovations of 2007. And the company recently announced that it has brought on board, as CEO, Thomas Glover, a veteran manager with more than 25 years of experience marketing medical devices, most recently as CEO of New York-based Vasomedical (a leading provider of non-invasive cardiovascular technologies), and formerly an executive at Johnson & Johnson. Now the question is: can Myomo make the leap to build distribution to reach the millions of patients who could potentially benefit from its product?

Steve Kelly, Myomo board chairman and founding CEO, says the key to the company’s technology is that it is “the first personal robotic wearable device controlled by the patient.” The concept was central enough, he says, that it feeds into the firm’s name, which is short for “my own motion.” With technology covered by MIT patents garnered by its founding inventors John McBean and Kailas Narendran, Myomo uses electrodes to detect subtle electrical signals on the skin to determine when a patient is trying to move. Then, much like power steering in a car, the company’s brace assists the effort. Myomo’s initial elbow brace has been shown to help patients move their arms whether 10 days or 10 years following a stroke.

Most remarkably, though, Myomo’s technology has also shown promise in helping stroke victims regain independent use of their so-called hemiparetic, or partially paralyzed limbs, taking advantage of so-called “neuroplasticity” whereby the brain essentially re-wires itself to recapture at least some mobility. Much more clinical work is needed, but early studies offer hope that Myomo’s technology can allow at least some stroke victims’ neurologic pathways to be strengthened enough that they can ultimately regain unassisted use of their formerly incapacitated arms.

Myomo’s initial FDA clearance for its brace is only for hospital or clinic-based use with arm dysfunction caused by stroke (Myriad other applications of the technology may be possible; more on that in a bit.) But even the arm application represents a remarkably big market. Stroke is the leading cause of long-term disability in the U.S. with some 5.7 million current stroke survivors. Roughly half of these patients have some one-side paralysis that often impairs their use of their arms. And, with some 78 million baby boomers approaching retirement, the numbers are sure to grow.

Myomo is the first out of the gate with a noninvasive, straightforward device with the potential to help a large number of patients. But the fields of neurological research and robotics are burgeoning. Scores of research groups around the world are now working on similar devices and robotically assisted therapies to treat stroke patients and others with brain or neurological disorders. Myomo, meanwhile, has just 17 employees and, despite is promise and positive press, the effects of its sole product have only been documented in two tiny clinical studies to date. The market may be big, but there is no doubt that incoming CEO Thomas Glover will have his work cut out for him.

Step one, Kelly says, is to build distribution channels by selling Myomo braces to rehabilitation hospitals and clinics. Then, next year, Myomo spokesperson Maureen Liberty adds, the company hopes to work toward approval for home use.

But Kelly’s also thinking beyond that. “We’re at the very beginning,” he says. “We see Myomo as a kind of foundational platform technology.” In addition to helping stroke patients, he says, Myomo’s technology could potentially be useful for people with spinal cord injuries, or even degenerative conditions like multiple sclerosis. “With all the medical breakthroughs to come for people with paralysis,” Kelly says—whether stem cell injections to treat spinal cord injuries or other treatments as yet unimagined—”rehabilitation will play a central role and Myomo devices could help patients make the most of their treatments.” Without too much prompting, Kelly envisions an entire system of Myomo devices, with “patients being wheeled in and, depending on their situation, regaining enough function to ultimately walk away unassisted.”

Kelly’s vision might even sound too good to be true—and it still may prove to be so—but the company’s strong track record to date bodes well. The fact is, Myomo’s path from idea to startup could hardly have been smoother. The company began as a graduate student project at MIT in 2002 and even then it won awards, bagging top honors in MIT’s well-known “50K” competition (now the 100K) for its initial business plan. Early development occurred on campus in the so-called MIT Active Joint Brace Research Group with two rounds of “ignition grants” from MIT’s Deshpande Center to help it spin out as a privately held firm in 2004. (The company is fairly tight-lipped about what capital it has raised since then.) Now, with a strong patent portfolio, swift and trouble-free FDA approval and a new CEO, Kelly seems right when he notes that, so far at least, “this has been a project blessed with serial good luck.”

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Fast on the heels of a $806.4 million stock sale, Waltham-based diagnostics maker Inverness Medical Innovations (AMEX: IMA) today announced it has agreed to acquire Upper Saddle River, NJ-based ParadigmHealth for roughly $230 million in cash. Bent on growth, Inverness has already announced about a dozen acquisitions this year alone.

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I pride myself on having an extraordinarily high tolerance for medical gore, but I have to admit that the phrase “bone saw” always gives me the willies. Which is probably why I was intrigued when I first heard that there was a company out in Burlington, MA, that makes a new kind of implant for knee surgery—one that can be installed with none or little of what orthopedists so demurely call “bone resection.” That, and the fact that, given family history, I fear that one of these days I’m going to be one of the hundreds of thousands of people in the U.S. each year who winds up having a knee or two replaced.

Indeed, it turns out that the implants that ConforMIS is making offer alternatives to standard total knee replacement. Several of them fall into an emerging category of “resurfacing devices” that cover bone damaged by arthritis or trauma with smooth pieces of plastic or metal—while leaving the bulk of the joint intact. ConforMIS’s trick for minimizing the slicing and dicing that needs to be done to implant these devices, explains Philipp Lang, the company’s chairman and founder, is to tailor each one to precisely fit the patient’s existing anatomy.

“The fundamental challenge is that a joint is a complex 3-D structure, and it has tremendous variability between patients,” says Lang, who in his day job is the director of musculoskeletal radiology at Boston’s Brigham and Women’s Hospital and associate professor at Harvard Medical School. Traditional knee implants are not fitted to a particular patient, so surgeons must cut bone “to fit the patient to the implant.”

What ConforMIS does instead is use data from MRIs or CT scans taken before surgery to generate a 3-D model of a patient’s knee and design an implant to conform exactly to the area in need of repair (hence the first part of the firm’s name—the second part is for Minimally Invasive Surgery). The company then uses computer-driven machining or prototyping tools to fabricate the implant, a process that takes four to six weeks, as well as custom surgical tools for implanting it.

From the patient’s perspective, preserving bone is important for a couple of reasons, Lang says. For one thing, it makes for much faster short-term recovery. Though a central aim of the surgery is to relieve pain, conventional knee replacement leaves a notoriously painful aftermath. Lang says that hard data on recovery is difficult to come by, but one study showed that it took an average of seven weeks for patients to get back to their pre-operative levels of pain. In a clinical trial of ConforMIS’s smallest implant, which doesn’t require any bone resection, patients already showed improvements over their pre-op pain levels at the time they were discharged from the hospital, he says. (ConforMIS’s larger implants do require a little bit of bone cutting, but not nearly as much as a conventional device.)

The other consideration is that orthopedic implants don’t last forever, and many patients wind up needing repeat surgeries down the road. Each time a surgeon cuts the bone to fit it to an implant, “that’s bone you’ve lost for future surgeries,” Lang says. “You’re burning bridges.”

The made-to-order approach has a business advantage as well: it eliminates the need for the company … Next Page »

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In a town like Boston, where so many new companies are churned out, assembly-line style, by the same universities, serial entrepreneurs, consulting firms, and venture investors, it’s refreshing to find a startup that hews more closely to the classic (if largely mythical) formula of lone inventor plus fortuitous discovery plus cash from some wealthy individuals equals new tech company. That’s essentially the arithmetic that produced Nomir Medical Technologies, a medical-device firm founded in 2003 by a young dentist named Eric Bornstein (the inventor in this equation) and David Blumenthal, a consultant who had worked in plastic-parts manufacturing and was a friend of Bornstein’s from synagogue.

I skirted Tuesday’s Red Sox parade traffic to visit Nomir’s headquarters in a surprisingly swanky office complex just off I-95 in Newton. There I met with the firm’s CEO, Richard Burtt, a veteran of IBM, Medtronic, and a handful of startups who was brought in by Ernst & Young in 2004 to help Nomir raise money. (Hey, nobody navigates the Boston-area tech scene without crossing one or two of the conventional pathways, do they?)

Pulling up a chair in Bornstein’s Star Trek-paraphernalia-packed office, Burtt describes a technique Bornstein had developed during his years as a dentist to battle the bacteria that can wreak havoc on teeth and gums by essentially cooking the offending microbes with laser light. I’ll resist the urge to draw the connection between healing laser beams and Star Trek, except to say that even when he’s not actually in the office, as was the case on Tuesday, Bornstein generates a powerful mad scientist/inventor/tinkerer/geek vibe (in a good way).

The dental technology is definitely on the list of products Nomir aims to commercialize, as a noninvasive alternative to periodontal surgery, but it’s another platform the company’s working on that Burtt seemed really excited about—and that’s where the fortuitous discovery comes in. In the course of trawling though the scientific literature (from Burtt’s description, this sounds like a habit of Bornstein’s) Bornstein came across a Princeton physics dissertation in which the author warned scientists studying bacteria with lasers to avoid two particular wavelengths of infrared light, because they would kill the microbes. Bornstein, of course, was a big fan of killing microbes, and set about investigating and patenting the idea that these wavelengths could be used to kill bacteria—and fungi, it turns out—for a host of applications. (Unlike the dental technique Bornstein had developed, this process does not involve heat but rather a mechanism that Burtt declined to describe which evidently kills microbial cells while leaving human cells untouched.)

A few years and some $6 million dollars in angel financing later (half of it convertible debt, half of it a Series A round that should close in the next couple of weeks) Nomir is poised to commercialize its first products, according to Burtt, who describes 2008 as “our coming out year.” (Bornstein, now in his early 40s, sold his dental practice in 2006 to work at Nomir full time.) First up is an infrared-light-based device for treating oncychomycosis, the fungal infection that turns toenails into thick crusty yellow eyesores for some 35 million U.S. patients. By the end of November 2008, Burtt says, Nomir expects to have FDA clearance for a device capable of wiping out the infection in three six-minute sessions in a podiatrist’s or dermatologist’s office over the course of a month.

A little further back in the pipeline is a perhaps more serious application of the infrared-light technology as a means of zapping methicillin-resistant Staphylococcus aureus (MRSA)—an increasingly notorious bacterium responsible for thousands of deaths a year in the U.S. In December, Burtt says, Nomir will launch a trial in New York City of a device to kill MRSA in the nose, where many people carry the microbe without knowing it. If that works, he says, the company will pursue additional anti-MRSA applications, such as preventing infection by eliminating the bug from a surgical field before closing the patient up and treating established infections.

As we start to wrap up our conversation, Burtt alludes to one more, intriguing, application of Nomir’s two wavelengths of infrared light—what the company calls “aesthetic reshaping.” Turns out that the light boosts fat cells’ rate of fat breakdown, or lipolysis, Burtt says. He doesn’t want to say more than that on the record, but this patent application contains a few more hints about how Nomir believes the process works and what the company might do with it. (Think clothing or a wrap rigged with LEDs that beam infrared light through the skin to help reduce the fat in the tissue beneath. Sounds a lot more appealing than liposuction.)

For his part, Burtt says that Nomir is the most exciting of the startups he’s been involved with—and that it will be his last. Nine out of 10 medical device companies wind up being acquired, he says. Nomir’s aim is to be one of the nine.

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Inverness Medical Innovations (AMEX: IMA), a diagnostics maker in Waltham, MA, announced that it it will acquire Reno, NV’s Alere Medical, for $302 million. By my count that’s the ninth acquisition agreement Inverness has forged this year.

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In a move that will create one of the largest life sciences companies in Massachusetts, shareholders of both Hologic (NASDAQ: HOLX) and Cytyc (NASDAQ: CYTC) today approved Bedford, MA-based Hologic’s $6.2 billion cash-and-stock acquisition of the Marlborough diagnostics and device maker.

The match seems a good one. When it was announced in May, analysts were raving, dubbing the new company “a premier women’s health franchise” and even “a women’s health empire,” according to the Wall Street Journal‘s Health Blog. Hologic specializes in imaging equipment, particularly for mammography. Cytyc, meanwhile, is best known for its cervical cancer screening tests and a device for treating excessive menstrual bleeding.

Both companies have been on a growth track. Last quarter Cytyc’s revenues were up 26 percent (at $188.8 million) compared to the same period last year, while Hologic saw a 60 percent increase in revenues (to $191.5 million). Combined, the two companies will have a market cap of approximately $10 billion and anticipated revenues of $1.7 billion in the first post-merger year. The new company, which will retain the Hologic name and its headquarters in Bedford, will have more than 3,300 employees and operations in 20 countries.

Despite the analyst raves, the market had a mixed reaction when the deal was first announced, with Hologic stock tumbling about 10 percent and Cytyc moving up about 20 percent. But over the last few months each company’s stock has crept steadily up, with Cytyc’s rising proportionally much higher. Some pundits predicted there would be other suitors for Cytyc, but none emerged.

While the two companies expect to save about $30 million in costs by merging, Hologic CEO Jack W. Cummings, who will retain his title, has repeatedly said that the deal is about growth, not cost savings. (According to company press releases, there are no plans for layoffs in association with the deal.) That growth is supposed to come mainly from having a combined sales and service force of approximately 1,200 people; cross-selling opportunities (which the companies expect to “enhance revenue growth by more than $75 million within the first three years after the merger closes”); and increased international sales, according to a release.

So, what’s there not to like about this deal? Well, there’s always a gadfly or two floating around. For example, in that earlier-mentioned post, Wall Street Journal blogger Jacob Goldstein also noted that “The tie-up of a manufacturer of capital equipment and a maker of high-end lab tests (none of which run on Hologic’s machines) would be unusual.” Even more skeptical, not surprisingly, was George Gutowski, whose own blog is called The Financial Skeptic. In a post at Seeking Alpha made right after the deal was announced, Gutowski pointed out how little discussion there has been about growth from new products. “Hologic sees the play as a market dominance move,” he wrote. “Not one word about the strength of R&D and what the future holds. Today’s drum beats too loudly and drowns out anything about tomorrow.”

Shares of each firm held pretty steady today, with Hologic down $0.17 to $67.73 and Cytyc off $0.21 at $51.46.

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In a much-anticipated move, Natick, MA’s Boston Scientific Corporation (NYSE: BSX) announced after the market closed today that it will cut some 2,300 jobs.

The move, which will begin this month and should be largely completed by the end of next year, is part of the company’s effort to cut its operating expenses by about half a billion dollars in 2008 and by another $25 million to $50 million in 2009; the company’s 2007 expenses are about $4.1 billion. In addition to the staff cuts announced today, the company expects that some 2,000 employees will leave Boston Scientific as it completes already announced business divestitures. The company also plans to restructure several of its businesses in order to “leverage resources, strengthen competitive positions, and create a more simplified and efficient business model.”

In the face of weak sales of its defibrillator and stent products, as well as a host of regulatory and legal snarls, Boston Scientific has been hinting for months that cuts were coming. In a great story from yesterday’s Boston Globe, Todd Wallack lays out the various pressures coming to bear on Boston Scientific, whose stock has fallen some 40 percent since the beginning of 2006. The cuts announced today fit with the predictions of the analysts quoted in the piece, who foresaw the elimination of some 2,000 to 3,400 jobs. (If you see wildly different estimates of the percentage of Boston Scientific’s workforce represented by the 2,300 jobs whose elimination was announced today, it’s because many media outlets peg the company’s overall size at 28,000 employees, whereas the company in its announcement puts it at 18,000—I’m pretty sure it’s a typo on Boston Scientific’s part and will update if and when I get any clarification on that.)

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Product-design and technology-consulting firm Cambridge Consultants (the other Cambridge) announced late last week that it was moving its U.S. headquarters and its previously U.K.-based CEO, Brian Moon, to Kendall Square. The company’s U.S. staff, which was until now based in Boston’s Fort Point Channel, is set to quadruple in size in three to five years.

Moon’s Cambridge-to-Cambridge move is part of the company’s effort to expand its role as a U.S. technology incubator and to shift from launching startup companies based strictly on internally generated IP (previous spinoffs include Bluetooth chip maker CSR) to partnering with academic or venture partners for some launches. Hiring and acquisitions in the coming months will focus on the medical technology and wireless sectors.

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