VentureBeat

TODAY’S HEADLINES:

• Defibrillator maker Cameron Health takes in $14M (VBLS exclusive)
• Miramar Labs gets $20M for “aesthetic” devices (VBLS exclusive)
• Nellix raises $6.5M for aneurysm grafts (VBLS exclusive)
• Vessel-clog remover Chestnut Medical pulls in $7.8M (VBLS exclusive)
• Consumer genetics tester DNA Direct receives $7M (PDF release)
• Precision Thera again prowling for venture funding (VentureWire)
• Cancer-drug maker ChimeraCore raises $4.3M (VentureWire)
• Kai Sensors pulls in $2.2M for radar-based sensors (VentureWire)
• ProNAi raises $6M for DNA drugs, seeks $20M more (VentureWire)

(NOTE: Items on Cameron Health, Miramar Labs, Nellix and Chestnut Medical went up over the weekend as separate items; click the links above for details.)

Consumer genetics tester DNA Direct receives $7M – Talk about hiding your light under a bushel. The San Francisco startup DNA Direct, which offers a-la-carte gene tests directly to individuals over the Internet, announced on Feb. 27 that it raised $7 million in a second round (PDF link) of funding.

Oddly, though, I haven’t seen the announcement picked up anywhere. I only learned of it from DNA Direct’s own in-house blog, which I happened across while searching for something else entirely.

In any case, Lemhi Ventures and private investors from the startup’s first round provided the funding. The company said it will use the money to help expand its efforts to “integrate” its genetic tests into doctors’ offices and clinics. DNA Direct’s first project in that regard is a Web-based guide to prenatal genetic testing called Prenatal Primer, which pregnant women can access after a referral from their doctor.

Precision Thera again prowling for venture funding – Surprise, surprise — Precision Therapeutics, the Pittsburgh cancer-diagnostics company that lost both an IPO and a potential merger in short order, is apparently once again looking for venture funding, VentureWire reports. No kidding. As I noted earlier this month, Precision had more debt than cash and a still-significant burn rate as of last Sept. 30, and things can’t have gotten much better since then.

The VentureWire story doesn’t offer many additional details, except for the fact that Precision CEO Sean McDonald hopes to close the deal by this summer. McDonald won’t even say how much the company is looking for, however, which doesn’t exactly inspire confidence. Existing investors in the company are also close-mouthed about its fundraising prospects.

For what it’s worth, McDonald also hinted that Oracle Partners, a hedge-fund affiliate of the presumably now-unwinding blank-check company that was going to acquire Precision, may be involved in the funding.

(UPDATED: See below.)

Another one bites the dust.

The saga of Precision Therapeutics, a Pittsburgh biotech developing what struck me last August as a particularly crude type of cancer-chemotherapy diagnostic, continues apace. In a tersely worded press release, the special-purpose acquisition company, or SPAC, Oracle Healthcare Acquisition said it has terminated its planned merger with Precision. The release blamed “currently prevailing market conditions” for the decision, which carries some fairly ominous consequences for both sides.

Oracle’s plight is fairly simple: The blank-check company will now dissolve itself and return the money it raised, minus expenses, to investors. For Precision, however, the outlook is much starker. The merger would not only have taken the company public, it would have left Precision with $120 million in cash, ample resources to bolster sales of its ChemoFx test and to develop new potential products.

Now, after getting jilted at the altar by Oracle and withdrawing its IPO, the startup is most likely almost out of cash. As of September 30, Precision had only $15.6 million in cash and cash equivalents and a working-capital deficit of $1.1 million against debts of $17 million — plus a burn rate of roughly $3 million a quarter. Those numbers don’t look good by any measure

The first real sign the merger was in trouble came just about two weeks ago, when Oracle and Precision effectively cut the overall size of the deal by 15 percent — never a good sign. Oracle’s decision to walk away remains murky to me given the complexity of the deal, and external market events might have somehow triggered provisions that made the acquisition untenable. But I can’t help wondering if the buyers may have simply concluded that Precision’s prospects weren’t at all what they once thought.

For more on these special-purpose acquisition outfits and their adventures in life science, see our coverage here.

UPDATE: Tom Salemi at the In Vivo blog has more:

A majority of the investors who buy into the SPAC through an initial public offering must approve of the merger. In deciding how to vote, investors must weigh whether or not they’d be better off cashing out now rather than letting their bets ride on a company like Precision Therapeutics.

In fact, according to Oracle’s annual filing, any shareholder that voted against the merger stood to receive roughly $8 for each of their shares if they were outvoted and the deal went through. To us, the question would appear to be simple. Were investors better off taking the $8 for their share or rolling the dice with shares in the new Precision Therapeutics shares?

Given the recent performance of IPOs, IN VIVO Blog is guessing the $8 was looking pretty good to Oracle investors.

TODAY’S HEADLINES:

• Precision Thera merger with “blank check” Oracle Healthcare collapses (release)
• Sleep Solutions takes in $21M for sleep-apnea diagnostics (release)
• Trevena takes in $24M for drugs targeting G-proteins (release)
• “Specialty biotech” PanGenetics gets €23M for antibody drugs (release)
• Cancer-drug maker Unibioscreen pulls in €5M (release)
• Danish contract manufacturer CMC Biologics raises new funding (PDF release)
• Healthcare investor EDF Ventures postpones fourth fund (VentureWire)
• Global TB-drug alliance names former Sanofi-Aventis exec Jerome Premmeurer as CEO (release)
• Liquidia Tech names Neal Fowler as CEO (release)

(NOTE: Sorry for the minimal posting yesterday — I was at the Health 2.0 conference with extremely limited Internet connectivity. Normal posting resumes today.)

Precision Thera merger with “blank check” Oracle Healthcare collapses – This item is now a standalone post here.

Sleep Solutions takes in $21M for sleep-apnea diagnostics – Sleep Solutions, a Pasadena, Md., developer of diagnostic devices for sleep apnea, raised $20.5 million in a new funding round. Investors included TPG Biotechnology, MedVenture Associates, Emergent Ventures and Lava Ventures.

Sleep Solutions has developed a home-use diagnostic device for identifying sleep apnea, which are breathing difficulties during sleep. Diagnosing apnea has traditionally required patients to spend the night in a sleep laboratory. Left untreated, apnea can increase the risk of more serious problems, including stroke and heart attack.

Trevena takes in $24M for drugs targeting G-proteins – Trevena (no Web site), a Berwyn, Penn., biotech focused on a new area of drug discovery, raised $24 million in a first funding round. Investors included Alta Partners, Healthcare Ventures, New Enterprise Associates and Polaris Venture Partners.

Like many biotechs, Trevena plans to develop drugs that attack a particular biological mechanism rather than any particular disease. In this case, the company is targeting a class of proteins known as G-protein coupled receptors, or GPCR, which according to the company are affected by close to 40 percent of all drugs on the market today. The company didn’t describe its plans in any detail.

Healthcare investor EDF Ventures postpones fourth fund – EDF Ventures, an Ann Arbor, Mich., VC firm specializing in early-stage healthcare, has delayed a planned fourth fund, VentureWire reports. The postponement is related to the departure last year of managing director Beau Lasky, who left for Steamboat Ventures.

The firm intends to begin talking to potential investors again in several months. EDF didn’t say how much it hopes to raise in the new fund; its third fund closed in 2005 with $55 million in commitments.

TODAY’S HEADLINES:

• HemCon Medical acquires Alltracel Pharma (release)
• Transoma Medical, implantable wireless device maker, withdraws its IPO (Edgar)
• Oracle Healthcare cuts Precision Thera acquisition price by roughly 15 percent (release)
• MedBillManager adopts change:healthcare name, aims for March 3 relaunch release

Another slow news day, as yesterday we covered most of the fundings other sites are writing about today. I’ll update if anything else crops up. In the meantime, feel free to check out yesterday’s briefing or any other items here.

HemCon Medical acquires Alltracel Pharma – This item is now a standalone post here.

Transoma Medical, implantable wireless device maker, withdraws its IPO – Transoma Medical, a St. Paul, Minn., maker of implantable wireless diagnostic sensors, formally withdrew its $77.6 million IPO. Transoma postponed its IPO earlier this month; unsurprisingly, the company cited “unfavorable market conditions” as the reason for its withdrawal.

Transoma is one of several startups working on ways to monitor the vital signs of sick or at-risk patients in ways that don’t require invasive procedures or constant visits to the doctor’s office. The company’s devices, which received FDA approval last October, involve an implantable recorder that monitors a patient’s heartbeat and a handheld wireless device that records the data and regularly transmits it to a physician’s office via a home-installed base station.

The company has raised just over $25 million in three funding rounds since its founding in 1984, when it was known as Data Sciences International. Although Transoma generates close to $40 million a year from sales of its older diagnostic products, it is still burning cash at a rate of roughly $4.3 million every quarter. As of Sept. 30, 2007, Transoma held $26.1 million in cash, equivalents, and working capital, so its cash situation isn’t yet dire; if those trends hold, it will be down to about $17 million by the end of March. Don’t be surprised if Transoma hits the fundraising hustings again before long.

MedBillManager adopts new name as parent company change:healthcare aims for March 3 relaunch – MedBillManager, a site that helps people sort through complex medical expenses, will adopt a new name and Web site as it relaunches on March 3. Its parent company, Nashville, Tenn.-based change:healthcare, is consolidating its various Health 2.0 properties under its own name; these will now be available at www.changehealthcare.com.

The company announced the changes in an email; for a Web version, see here. A screenshot of the new site suggests that change:healthcare will now be emphasizing social networking as part of services for medical-bill management, finding and rating doctors, and comparing prices across various healthcare providers.

Oracle Healthcare cuts Precision Thera acquisition price by roughly 15 percent – Back in December, the “blank check” acquisition company Oracle Healthcare Acquisition agreed to buy the Pittsburgh diagnostic biotech Precision Therapeutics in a transaction that was virtually impossible to value at the time. Only later did the companies indicate that the acquisition would cost Oracle around $150 million (based on the issuance of 19 million Oracle shares at a price of $7.90 apiece detailed in this prospectus).

Not any more, apparently. The two companies just agreed to reduce a key variable in the calculation that establishes how many shares Oracle will issue to Precision’s owners, cutting the deal’s value by approximately 15 percent to roughly $127.5 million. The details, however, remain a bit murky: The deal’s participants haven’t done anyone a favor by describing the ratio at which Precision shares will convert to Oracle shares in a dense, wordy paragraph. Complex calculations like this should be set out in an equation with clearly defined variables, dammit.

In addition, the proposed amendment to the merger deal will cause founders of Oracle to forfeit shares of the special-purpose acquisition company, or SPAC, currently worth $14.8 million. It will also eliminate a “top-up” provision that would have handed Precision shareholders extra Oracle stock if the SPAC’s share price declined.

What does all this add up to? It sure looks like everyone involved in the deal is getting a haircut of some kind, although why this is happening now isn’t remotely clear. I’m certainly tempted to think that Precision is turning out less of a bargain Oracle thought, but at this point, it’s impossible to know for sure.

For more about SPACs, see our coverage here.

UPDATE: The merger is dead.

(UPDATE: The merger is dead.)

Pittsburgh’s Precision Therapeutics, a biotech working on diagnostics designed to identify the best chemotherapy for cancer patients, appears to have dropped its planned IPO and instead went public via a reverse merger with Oracle Healthcare Acquisition — a “blank check” acquisition firm that appears to be no relation of the database-software giant.

I was pretty hard on Precision when it filed its IPO, since its cancer diagnostic test not only struck me as fairly crude and simplistic, it also lacks compelling data suggesting that it should do much good. IPO investors apparently weren’t overly enthusiastic either, although for some reason the Oracle acquisition folks seem to have jumped at the opportunity.

Financial terms of the deal aren’t entirely clear, but the release notes that the combined company — which will retain the Precision name — will have $120 million in cash. That amounts to a substantial cash infusion, given that Precision reported only about $19 million on hand in cash and working capital as of June 30. So either the Oracle guys are idiots, which seems unlikely, or they’re seeing something here that didn’t jump out the last time I went through the S-1. Or perhaps they’re just willing to bet the farm on the possibility — slim though it may seem — that Precision’s diagnostic tests will somehow emerge as blockbusters. It certainly wouldn’t be the first time in this industry.

Featured companies: AgraQuest, BridgeHealth, CardioMems, Collegium Pharmaceutical, Emergin, Entegrion, gDiapers, Precision Therapeutics, PregLem

UPDATED: Expanded items on Entegrion, Collegium, and gDiapers. Added CardioMems item. New items posted on AgraQuest (link), BridgeHealth (link) and Precision Therapeutics (link).

Entegrion draws $4.7M for bleeding control — Entegrion, a Research Triangle Park, N.C., biotech focused on products that stop bleeding, raised $4.7 million in a second funding round, VentureWire reports (subscription req’d). Investors included BD Ventures, Catalysta Partners and unnamed individuals.

Entegrion’s main product is Stasix, a formulation derived from human platelet cells that promote blood clotting. Those cells are processed and freeze-dried into a powder, which can be applied directly to wounds or reconstituted and infused throughout the body. The U.S. military has picked up the tab for much of the product’s development, courtesy of congressional earmarks arranged by the North Carolina delegation.

Specialty drug maker Collegium Pharma nets $2.5M — Collegium Pharmaceutical, a Cumberland, R.I., specialty pharma developing drugs for neurological, respiratory and skin disorders, raised $2.5 million from insiders, VentureWire reports. Westfield Life Sciences Fund and Boston Millennia Partners provided the funding.

Like most specialty pharmas, Collegium licenses cast-off or failed drugs from other companies and pushes them through clinical testing. The company, which already markets drugs for acne and wound healing, said it may seek a fourth funding round depending on its 2008 sales. Collegium hopes to request marketing approval for a new allergy early next year.

CardioMems closes $33M funding for wireless heart sensors — Atlanta’s CardioMems, a device maker focused on wireless heart sensors, raised $33 million in a fifth funding round. Investors included Arcapita Ventures, Boston Millennia Partners, Medtronic, Easton Capital Partners, Foundation Medical Partners, Arboretum Ventures, Deerfield Capital Management, Vision Capital Advisors, Aperture Venture Partners and Rockport Venture Securities.

CardioMems’ first product is a sensor that can detects the pressure within an aneurysm, a weakened section of an arterial wall that is susceptible to rupture. We previously covered the company here.

Eco-friendly gDiapers pulls in new funding — Portland, Ore.-based gDiapers, a maker of biodegradable, flushable baby diapers, raised a second funding round. The company didn’t disclose how much it raised. 2x Consumer Products Growth Partners provided the funding. (For the amusing tale of a columnist who tried these diapers — complete with a mildly panicked online comment apparently from the gDiapers CEO — see this NJ Star-Ledger piece.)

HEADLINES OF NOTE:

• AgraQuest raises $20M for biotech pesticides (release)
• Precision Thera drops IPO, goes public via reverse merger (release)
• Women’s health co. PreLem raises CHF 36M (release)
• Entegrion draws $4.7M for bleeding control (VentureWire, sub req’d)
• Specialty drug maker Collegium Pharma nets $2.5M (VW)
• Medical tourism firm BridgeHealth raises $1M+ (release)
• Eco-friendly diaper co. gDiapers raises funding (VW)
• Wireless hospital-alarm co. Emergin acquired by Philips Electronics (release)

(UPDATED at 11am PT on Sunday, 8/26/07: See below.)

Featured companies: Clinical Data, Epidauros Biotechnologie, Precision Therapeutics, UMD, Zars Pharma

UMD to close $8M for menstrual pain and osteoporosis — Cincinnati’s UMD, a developer of vaginal drug-delivery technologies, expects to close up to $8 million in a fifth funding round, VentureWire reports (subscription required). The company has backing from an undisclosed new investor, and expects former investors Charter Life Sciences and Asset Management to join the round.

UMD is developing a new version of an off-patent anti-inflammatory drug called ketorolac that can be administered on the end of a tampon for menstrual pain, and hopes to begin mid-stage human tests this year. It plans a similar delivery formulation for the active ingredient in Merck’s osteoporosis drug Fosamax, which loses patent protection this year. The company doesn’t have a Web site.

Precision Therapeutics aims to raise $81M in IPO for personalized cancer tests — Pittsburgh’s Precision Therapeutics, a developer of diagnostic tests that aim to predict patient response to chemotherapy, filed to raise $80.5 million in an initial offering. The company’s tests use biopsied tumor cells to assess the likelihood that a given drug or drug combination will be effective.

This is a fairly low-tech sort of diagnostic — as its filing makes clear, Precision basically just removes tumor cells and then starts hitting them with various drugs in the laboratory to see whether they live or die. The company has only been marketing its current test, which it calls ChemoFx, for the last year or so; although it has had ChemoFx on the market since 1997, it ceased sales activity in 2003 and didn’t resume it until last year. Revenues have been predictably anemic, as until recently Precision didn’t have an active sales force, and last year the company managed the feat of posting a gross loss, in which its cost of sales in terms of lab expenses exceeded incoming revenue.

There’s other bad news, too. Precision notes that two respected organizations — the technology-evaluation center of the Blue Cross and Blue Shield Association and a working group of the American Society of Clinical Oncology — concluded in 2004 that “chemosensitivity/chemoresistance assays” such as ChemoFx lacked supporting data that would justify their routine use.

The company also parses several complex reimbursement decisions in a fairly convincing illustration of the risk that relatively few insurers may actually want to pay for its test. It further notes that clinical data supporting use of its test is “limited,” and although it cites the results of three studies carried out between 2002 and 2006, none of them look particularly convincing. In one of the few bright spots in its filing, Precision says it is currently conducting five additional studies, some of which appear to be fairly rigorous “prospective” studies of the diagnostic.

Zars Pharma sets IPO price target — Zars Pharma, a Salt Lake City specialty pharmaceutical company that reformulates pain drugs for delivery via skin patches, set a price range for its IPO and now seeks to raise as much as $92 million in the offering. (See our previous coverage here; the company has apparently changed its name to “Zars Pharma” from “Zars.”) The company plans to offer up to 5.75 million shares at a price of $14 to $16 apiece.

Clinical Data acquires Epidauros Biotechnologie for $11.8M — Clinical Data, a publicly traded diagnostics and personalized-medicine company in Newton, Mass., agreed to pay $11.84 million (€8.75 million) to acquire Epidauros Biotechnologie of Germany. Founded in 1997, Epidauros studies genetic factors that may determine how individuals respond to drugs.

UPDATE (11am PT on Sunday, 8/26/07): Added Clinical Data/Epidauros item.