CD&D

Boston Scientific (Natick, Massachusetts) reported that it has signed an agreement to sell its fluid management and venous access businesses for $425 million in cash to private equity firm Avista Capital Partners, thereby, it said last month, completing its program for spinning off what it termed “non-stategic” assets.

The company in July uneiled its plan to divest five units that it termed not core to its primary business goals. In a statement, Jim Tobin, company CEO, said that the spin-offs were completed and that the company was “well under way” with its cost cutting and head count reduction plan. As part of its restructuring, the company in October said that it would eliminate about 2,300 positions worldwide, or about 13% of an 18,000-person, non-manufacturing workforce baseline, by June 30 of next year. In addition, the company said it expects another 2,000 employees to leave the company in connection with the five divestitures.

The other three units spun off were its cardiac surgery, vascular surgery and auditory businesses. In August, the company reported plans to sell the cardiac and vascular surgery units. Earlier that month, it reported the sale of the auditory assets of Advanced Bionics (Valencia, California), though retaining the pain management assets of that company, after a protracted legal struggle with that company's management.

Collectively, these businesses represented about $550 million in 2007 sales for Boston Scientific.

Avista said the combined fluid management and venous access businesses will operate as an independent company under a new name when the deal closes. Revenue for the two divisions is expected to be about $170 million in 2007.

Ron Sparks, an Avista healthcare industry advisor, will become CEO and chairman of the new company. Dave McClellan, president of Boston Scientific's oncology business, will become the new company's president.

The fluid management franchise, formerly named North American Medical Instruments Corp., produces a range of products used to manage fluid and measure pressure during angiography and angioplasty procedures. The fluid management franchise employs about 750 people in its Glens Falls, New York, manufacturing facility.

The venous access franchise, whose products are also manufactured in Glens Falls, offers a portfolio of implantable devices designed to provide access to the blood stream for patients requiring intravenous antibiotics, nutrition, chemotherapy and blood sampling. It is part of Boston Scientific's oncology business, and employs about 150 people in locations around the U.S.

Boston Scientific has struggled with its finances since its $27.2 billion acquisition of Guidant (Indianapolis) last year. As a result of that transaction, the company is carrying more than $8 billion in debt, a financial issue compounded by downturns in product sales.

Tobin said the divestitures, coupled with the headcount reduction "should help us further our overall goals of restoring profitable growth, increasing shareholder value and continuing to strengthen Boston Scientific for the future."

According to analyst Rick Wise at Bear Stearns, the divestiture of the five non-core businesses could generate around $1.3 billion in net proceeds that should cover the company debt payments. He issued a research note saying that the company has no obligation in 2008 and that the 2009 debt has largely been prepaid ($300,000 remaining).

Wise said he believes the $1.3 billion in proceeds will help the company "cover its $1.7 billion and $3.5 billion mandatory payments in 2Q10 and 2Q11."

Medtronic in $95 million settlement of Marquis ICD problems

Medtronic (Minneapolis) reported late last month that it had entered into an agreement to settle lawsuits relating to its Marquis line of implanted cardiac defibrillators (ICDs) that were the subject of a field action announced in February of 2005.

Medtronic agreed to settle 2,682 cases for $95.6 million, plus $18.5 million in attorney fees. The parties will file joint requests to the court for termination of the Multi-District Litigation (MDL) proceedings related to the Marquis devices, as well as requests for dismissal of the cases. The settlement can be terminated by either party if the MDL proceedings are not terminated.

The cases in the settlement are those arising from the Marquis device field action, including cases currently filed either in the MDL or in state courts and claims that could have been filed. All settling plaintiffs must satisfy any insurance claims and subrogation interests of Medicare or Medicaid from their settlement payments. No additional sums for these cases will be paid by Medtronic for third-party claims or attorney fees.

The settlement is a compromise of disputed claims, and the parties have not admitted any liability or the validity of any defenses in the litigation.

Medtronic will reflect the Marquis device settlements as a one-time charge in its third fiscal quarter, ending in January 2008.

“We are pleased to settle these cases and put the matter behind us,” said Pat Mackin, senior VP and president of Medtronic Cardiac Rhythm Disease Management. “We prefer to focus our resources on areas that are beneficial to physicians and patients, rather than prolong this litigation. We know the Marquis line of defibrillators continues to provide life-saving therapy for thousands of people around the world, and they remain among the most reliable ICDs ever manufactured by Medtronic.”

Cordis wins latest ‘stent wars’ battle

The “stent wars” are being waged on at least three levels: on the research side, via studies with competing conclusions concerning their safety; in physician’s offices, with patients and doctors attempting to determine whether to use these devices or not, given the clinical debate; and in the legal venue.

In the most recent battle in the legal arena, the Court of Appeals for the Federal Circuit in Washington, D.C. has upheld two separate 2005 jury verdicts which found that Medtronic (Minneapolis) and Boston Scientific (Natick, Massachusetts) infringed the patents related to coronary stents held by Cordis (Miami Lakes, Florida), a business of Johnson & Johnson (New Brunswick, New Jersey).

“We affirm the judgments against [Medtronic] and [Boston Scientific], and on Cordis’ cross-appeal we reverse the invalidity ruling,” the appeals court said in a 45-page decision.

Cordis issued a statement saying that it intends to ask the U.S. District Court in Delaware to reinstate the damages judgments of $271 million against Medtronic and $324 million against Boston Scientific, plus interest.

“We are very pleased that the Court of Appeals has recognized the validity of the prior verdicts,” said Todd Pope, worldwide president for Cordis. “We will urge the U.S. District Court to move expeditiously to reinstate the two previous damages judgments, along with the interest that has accrued during the appeals process.”

Injunctive relief is not at issue because the infringing Medtronic and Boston Scientific stents are no longer on the market.

In March of 2005, separate juries found that Medtronic’s GFX and Microstent II infringed Cordis’ Palmaz (762) and Schatz (984) patents, and that Boston Scientific’s NIR stent infringed the Palmaz patent. The Palmaz and Schatz patents relate to the fundamental design of the first coronary stent developed and introduced by Cordis.

Both patent infringement cases were originally tried in 2000, with Cordis receiving jury verdicts ruling in its favor. After a series of procedural rulings and appeals, both cases were retried in March of 2005, with Cordis prevailing again.

“We affirm the judgments against [Medtronic)] and [Boston Scientific], and on Cordis’ cross-appeal we reverse the invalidity ruling,” the appeals court said in its 45-page decision.

The case was sent back to the district court to determine damages.

Cordis said in a statement that it intended to ask the U.S. District Court in Delaware to reinstate the damages set in 2005 of $271 million against Medtronic and $324 million against Boston Scientific, plus interest.

“We are very pleased that the court of appeals has recognized the validity of the prior verdicts,” said Todd Pope, worldwide president of Cordis.

Athersys, Angiotech begin MultiStem safety trial for AMI

Athersys (Cleveland, Ohio) and Angiotech Pharmaceuticals (Vancouver, British Columbia) reported that Athersys has received authorization from the FDA to begin a Phase I clinical trial evaluating the safety of MultiStem, Athersys’ non-embryonic stem cell platform technology, in the treatment of acute myocardial infarction (AMI). The companies said they believe this represents the first clinical study of a scalable, allogeneic cell product injected directly into and around the zone of myocardial injury from an intra-coronary approach.

MultiStem cells are proprietary adult stem cells derived from bone marrow, which have the ability to form a range of cell types. A primary mechanism of MultiStem appears to be the production of multiple therapeutic molecules produced in response to inflammation and tissue damage, Athersys said, adding that MultiStem represents a unique “off-the-shelf” stem cell product based on its ability to be used without tissue matching or immunosuppression and its capacity for large-scale production. Based on research conducted by Athersys and its manufacturing partner, Lonza (Visp, Swizerland), the company said that material from a single qualified donor may be used to produce hundreds of thousands or even millions of clinical doses.

Angiotech and Athersys entered into an agreement in 2006 to co-develop and commercialize MultiStem for use in the indications of AMI and peripheral vascular disease. Upon completion of the Phase I trial, Angiotech will assume lead responsibility for further clinical development. Angiotech also owns commercial rights for this product.

University of Michigan attracts heart-rhythm research group

More than 25 heart researchers will leave the State University of New York Upstate Medical University (SUNY; Syracuse) to join the University of Michigan Health System (Ann Arbor) and help form a new heart-rhythm center, the Michigan institution reported last month.

“At least” 25 scientists, physicians, students and research staff will begin arriving in Ann Arbor this month to start new jobs in the U-M Division of Cardiovascular Medicine. The university said the appointment of some faculty still requires approval from U-M’s Board of Regents.

The SUNY group is led by Jose Jalifé, MD, and Mario Delmar, MD, PhD, and U-M said their addition “will boost [our] already strong basic research efforts on heart rhythm conditions, and work closely with U-M doctors to turn their research findings into better care for patients.”

The group represents a broad range of disciplines, from medicine and cellular biology to mathematics, genetics and engineering. The group’s members will begin to move their laboratory equipment early next year into to space leased by U-M in Ann Arbor, which will become the first home of the newly established U-M Center for Arrhythmia Research.

Robert Kelch, MD, executive VP for medical affairs and CEO of the U-M Health System, said, “The fact that this entire team saw such benefit in moving to Michigan speaks volumes about our medical school’s research climate and the potential to turn research into new diagnostic and treatment options.”

Cardiac Dimensions adds ‘D’ round of $35 million

Cardiac Dimensions (Kirkland, Washington) reported that it has closed $35.5 million in new venture capital. This Series D financing was co-led by Johnson & Johnson Development Corp. (JJDC) and Lumira Capital, and included Mitsubishi UFJ Capital, West River Capital, and Montgomery & Co. Also participating were existing investors Frazier Healthcare Ventures, Interwest Partners, MPM Capital, and Polaris Venture Partners.

The company said the funds will be used to execute clinical trials in the U.S. and Europe supporting the Carillon mitral contour system.

The Carillon system is a percutaneous treatment of functional mitral regurgitation (FMR) and is currently under evaluation in pilot studies in Europe, South America, and Australia.

The Carillon combines an implantable device and delivery system. The implant is designed to be positioned, adjusted, and gently anchored in the coronary sinus/great cardiac vein to reshape the annulus around the mitral valve to reduce mitral regurgitation.

Acorn raises $22 million for further development of CorCap

Acorn Cardiovascular (St. Paul, Minnesota), a private medical device company developing therapies for the treatment of heart failure, has completed a $22 million financing. Lead investors Cardinal Partners and Fidelity Biosciences, together with Thoratec (Pleasanton, California), joined existing investors Credit Suisse, New Enterprise Associates and SightLine Partners as the principal participants in the financing.

The financing will fund product development, clinical, and regulatory activities of the company. As part of the financing, Charles G. Hadley of Cardinal Partners and Robert Weisskoff of Fidelity Biosciences will join Acorn’s board of directors.

The CorCap CSD is a mesh wrap that is placed around the heart to support and relieve stress on the heart muscle. As heart failure progresses, the heart enlarges and becomes increasingly less efficient at pumping blood. The CorCap CSD is intended to improve the heart’s size, shape and function. More than 500 patients worldwide have received the new treatment. The CorCap CSD received CE Marking in Europe in 2000.

Lower numbers, larger expenses reduce Bioheart IPO

Bioheart (Sunrise, Florida), a company working to commercialize cell therapy for regeneration of the heart, has reduced the number of shares and lowered the pricing of its initial public offering, moves that greatly trim its original prospects for the offering.

Bioheart is offering 1 million shares at a price of $6 to $8 a share. The estimated proceeds assume an offering price of $7 a share. And it has granted the underwriters a 30-day option to buy up to another 150,000 shares to cover over-allotments.

It said the net cash proceeds from the IPO would be about $5.5 million, and another $1 million if the over-allotment option is exercised in full. But the company said that because of the prior payment of another $2.8 million and other offering expenses, as of Jan. 1, it will only see proceeds of about $2.7 million, or $3.6 million with the over-allotment sale.

Overall, the new offering terms represents a huge drop from the $46.9 million it had hoped to raise when it first filed for the IPO last October. In that filing the company reported filing with the SEC to raise $46.9 million after expenses from an IPO of 3.6 million shares at an assumed price of $15 a share.

The company said $3.1 million from IPO proceeds, plus about $3.5 million of cash on hand, should be enough to fund enrollment, randomization and treatment of about 130 of the 330 patients in the MARVEl trial. Bioheart said it needs to raise at least $9.7 million more to finance the completion of the trial.

The company's lead product candidate is MyoCell, a clinical therapy designed to populate regions of scar tissue within a patient's heart with living muscle tissue for the purpose of improving cardiac function.