Medical Device Daily
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Cytori Therapeutics (San Diego) is bringing in $21.5 million in gross proceeds, by way of a registered direct offering of common stock and warrants, largely to push product development and commercialization of its cell-processing system.

In particular, the company plans to use the funds primarily for clinical trials of its Celution System, a stem and regenerative cell-producing technology, for cardiovascular disease. It also plans to begin making commercialization plans for Europe, where its launch is expected early next year for reconstructive surgery applications.

Cytori also expects to apply its new money to preclinical R&D and for general working capital to further its therapeutic-through-a-device business model.

"Looking ahead" to those upcoming clinical trials and commercial launch, CFO Mark Saad told Medical Device Daily's sister publication BioWorld Today, "to have a little more money on the books made sense now to strengthen our position." In addition, he said the timing of such catalysts in the coming months presented an opportunity to broaden the company's institutional investor base.

The new backers were not disclosed, though.

The Celution System is used to separate and concentrate stem and regenerative cells from a patient's adipose tissue — harvested via a small volume of liposuction — and then re-administer them to the patient about an hour later. Saad said such cells, which are concentrated in high volume in fat, include adipose-derived stem cells, endothelial and endothelial progenitor cells, smooth muscle and smooth muscle progenitor cells, as well as other growth factor-producing cells.

Collectively, they are thought to work principally through angiogenesis, along with secondary mechanisms such as immune modulation, anti-apoptosis and differentiation.

A "significant" body of evidence supports the use of these cells in reconstructive procedures, in which they are used to supplement soft tissue that is to be transferred from one part of the body to another, leading to what Saad termed a "super-charged," cell-enhanced tissue transfer.

The Celution System, which is regulated as a device, already has been cleared for use in Europe, along with specific therapeutic claims.

Early clinical data from an investigator-initiated study in Japan demonstrated a positive safety profile for adipose-derived stem and regenerative cells in breast reconstruction following a lumpectomy, and more studies are planned in Europe.

That data and the European clearance will allow the company "to drive" toward a launch there in about a year, Saad said.

"If you put that all together," he added, "we see a great foundation for a meaningful launch into a completely unmet need."

In the U.S., Cytori expects to receive product clearance by the end of this year. So "on the heels of" these regulatory advancements, Saad said, "we've significantly accelerated our estimate of a commercial product from the end of 2009 to the beginning of 2008."

To broaden the Celution System's uses into cardiovascular applications, clinical testing is under way. A 36-patient study has begun to evaluate the safety and feasibility of using adipose stem and regenerative cells for chronic ischemia, and a 48-patient trial to test them as a treatment for heart attacks is scheduled to begin soon.

In these applications, the cells are delivered through a catheter into the coronary artery or directly into the heart muscle, where they work to revascularize bruised cardiac tissue and "bring it back," Saad said. Both studies will follow patients for six months before evaluation, and full results are expected next year.

In the longer term, additional applications for the Celution System include any ischemic disease, such as acute renal failure, Saad said, as well as urology, gastrointestinal disorders and orthopedic conditions.

In the financing transaction, Cytori entered definitive agreements to issue 3.75 million common shares at $5.74 apiece, along with 50% warrant coverage representing up to an additional 1.87 million shares. The five-year warrants, which are immediately exercisable at $6.25 each, represent the first such securities issued by the company.

Prior to the deal, Cytori had about 18.7 million shares outstanding and about $18 million in cash reserves, through Sept. 30. Its burn rate had been about $2 million per month ahead of that date. The new money, coupled with existing capital, "definitively gets us into commercialization," Saad said.

Cytori offered its securities pursuant to a $50 million shelf registration statement, which has been exhausted with this financing and another last summer, and the latest deal is expected to close on or about Wednesday.

Piper Jaffray & Co., of Minneapolis, served as the transaction's sole placement agent.

In other financing activity:

• Endovalve (Princeton, New Jersey), a cardiovascular company developing a percutaneous valve-replacement system to treat mitral regurgitation, said it has reached early milestones and is now raising $8 million in a Series B financing round that would fund the remainder of its preclinical development program.

Battelle Ventures and its affiliate fund, Innovation Valley Partners, were responsible for spinning the company out of the University of Pennsylvania (Philadelphia) in the spring of 2006 with a $2.5-million investment, and Battelle Ventures has been acting as an incubator for the startup.

Dr. Robert Wilkins, described as Battelle Ventures "entrepreneur in residence," was named company president/CEO, and the firm provided access to engineering and project management talent through its relationship with Battelle Memorial Institute (Columbus, Ohio), from which Endovalve VP of R&D, Todd Tomba, was recruited.

Wilkins said, "We have successfully completed the first stage of developing the Endovalve mitral valve replacement system, with critical performance criteria achieved with a 4x-scale functional model of the valve and anchor design. Now, in the second stage of development, we are creating a to-scale functional model of the complete system and will demonstrate critical performance criteria via benchtop tests. "

• LMS Medical Systems (Montreal) reported closing a private placement undertaken through Griffin Securities (New York).

The placement, made up of 2,375,229 common shares generating $2,615,898 in gross proceeds, was substantially subscribed for by U.S.-based institutional investors, LMS said.

The company said that the proceeds will be used for general corporate and working capital purposes.

LMS is a developer of advanced mathematical modeling and neural networks for medical use. Its CALM Decision Support Suite provides physicians, nursing staff, risk managers and hospital administrators with clinical information systems and risk management tools designed to improve outcomes and patient care for mothers and their infants during labor and delivery.

• DaVita (El Segundo, California) reported amending its Senior Secured Credit Facilities to lower the applicable interest rates and modify certain financial covenants.

Amended interest rates on the term loan B are LIBOR plus 1.50%. The interest rates on the outstanding term loan A and revolving credit facility remain unchanged.

The company said it used the proceeds of the recently completed senior note offering to repay $400 million of the outstanding term loan B. The outstanding balances under the amended credit facility include $279 million on the term loan A and $1.706 billion on the term loan B.

With these transactions DaVita said it will be writing off about $4 million of deferred financing costs in the first quarter.

DaVita provides kidney dialysis services at centers and home dialysis programs domestically in 42 states, as well as Washington, D.C.