VentureBeat

The battle of the brain games is underway. Nintendo set this trend in motion when it launched “BrainAge” for the Nintendo DS in 2006. Since then, a number of startups have sprung up and launched additional games aimed at improving the cognitive abilities of gamers with puzzles and brain teasers.

Research suggests that older adults in particular can benefit from playing games that improve memory, concentration and problem solving. Today, Lumos Labs is announcing it has raised $3 million in venture capital from Pequot Ventures, Norwest Venture Partners and existing investors. The money will go to its brain game web site, Lumosity.com.

Michael Scanlon, CEO of Lumos Labs, says that gamers now play 50,000 games a day on the site. Each of the games (one pictured left) has been built in conjunction with scientists who study cognitive training. The site launched in its free beta form in January, 2007, and then it moved to $10-a-month paid subscriptions in July, 2007. When you play games on the site, you can compare your performance against everyone else’s with the “brain performance index.”

Lumos Labs has 10 employees and is based in San Francisco. Scanlon said that his company emphasizes the science, but he acknowledged that no one has yet done a conclusive study that brain-oriented games can ward off cognitive diseases such as Alzheimer’s disease.

Scanlon said that subscriptions are growing about 25 percent each month. The company previously raised its first round of capital of $400,000 from angels in October, 2006.

Also, in a separate announcement, Vivity Labs will launch its Fit Brains site (pictured left) today. Back in March, Vivity raised $1 million in angel money. Vivity has nine casual games on the site now. You can follow a “brain circuit” by completing the games one after another or just play randomly. The site’s metrics tell you whether your performance is getting better or worse. You get trophies for certain achievements and can vy to be the best on 11 different leader boards. The site says the games are “guilt free” because they’re good for you.

The competition is heating up. Michael Cole, CEO of Vivity Labs in Vancouver, Canada, said that brain games got a huge boost from Nintendo, which sold 26 million copies of BrainAge and Big Brain Academy. The Fit Brains site has 10,000 beta testers. The average session is 25 minutes. About 125,000 games have been played to date since March. The company has nine employees.

Before running Vivity, Cole worked at Happy Neuron, another brain game company. Another competitor is Posit Science, which targets assisted-living residents with CD-ROM based games. All of these gaming companies try to strike a balance between entertainment and science-based education. Cole says his company has hired professional game developers so that it can ensure that its games are fun.

A new portal for trading virtual goods called Live Gamer announced its first funding today, promising to add some structure and protections to online transactions.

As massively multi-player online games (MMORPGS) like World of Warcraft have gained popularity, real-world markets have sprung up for everything from online currency and items, to favors, to entire player accounts. For the most part, players buy and sell with no oversight or regulation, a situation Live Gamer promises to change.

Live Gamer will stay on the good side of game publishers by only allowing trades according to the rules of the game, and spending time preventing strategies like “gold farming,” in which some players use the game only to accumulate gold or items in the virtual world then sell them for real-world currency.

Several entrenched competitors to the company already exist, part of the unapproved “gray zone” of trading that publishers find undesirable. Two of the largest are GamePal and IGE, which appear to make much of their income from gold farmers based in the developing world.

If gamers decide to follow the rules and trade through Live Gamer, they’ll receive the bulk of the sales price. Some 10 percent of each sale will be split between Live Gamer and the publisher, with the remainder going to the seller — making it roughly as profitable as using Amazon or eBay to sell goods.

The company already has some clients on board, including Funcom and Sony. However, Vivendi, the publisher of the current most-popular online game World of Warcraft, has said it will not work with Live Gamer.

Charles River Ventures, Kodiak Venture Partners, and Pequot Ventures provided the $24 million funding, the company’s first.

Featured companies: Bravo Health, InfraReDx, MedAssets, Prestwick Pharmaceuticals

Prestwick Pharma raises $20M for neuro drugs — Specialty pharma Prestwick Pharmaceuticals, a Washington, D.C., firm that acquires cast-off drug candidates to treat neurological conditions, raised $20 million from existing investors, VentureWire reports (subscription required). Among those participating in the funding were Atlas Venture, Sofinnova Ventures, Vivo Ventures, Scale Venture Partners, Warburg Pincus and Pequot Ventures.

Prestwick said it raised the funds to acquire additional drug candidates. The company filed to go public in 2005, but pulled its filing in December of that year.

InfraReDx aims for $40M to detect artery plaque — Burlington, Mass.-based InfraReDx aims to raise $40 million in a “mezzanine” financing to launch its artery-plaque diagnostic system, VentureWire reports. The company is talking to existing and potential new investors, including VC firms and hedge funds.

InfraReDx is developing a near-infrared spectroscopy system for the detection of arterial plaque, which can rupture and create blood clots that could lead to a heart attack. The company expects to complete a clinical trial in October that could lead to approval of the device.

Bravo Health raises undisclosed sum for acquisition — Bravo Health, a venture-backed provider in the Medicare prescription-drug coverage plan formerly known as Elder Health, raised an undisclosed sum in an eighth funding round, VentureWire reports. The funding covers the company’s recent acquisition of a Philadelphia Medicare provider called Senior Health.

Investors included all backers from the company’s previous funding round, a group that includes New Enterprise Associates, Frazier Healthcare Ventures, CCP Equity Partners, Salix Ventures, Alpha Partners, Coleman Swenson Hoffman Booth, Franklin Venture Capital, Frontenac Co., GE Capital, Norwest Venture Partners, Riggs Capital Partners, Sprout Group, Wasatch Venture Fund and Woodbrook.

MedAssets, healthcare IT provider, aims for $230M IPO — MedAssets, an Alpharetta, Ga., provider of healthcare IT and consulting services, filed to raise up to $230 million in an initial offering. The company aims to help community hospitals increase “revenue capture” and “cash collections” and to manage “non-labor expense categories.”

Oddly, MedAsset doesn’t appear to have yet maximized its own revenue capture, as it posted a net loss of $23.8 million last year on revenues of $177.9 million.

Palo Alto, Calif.-based Horizon Therapeutics, a biotech that aims to combine existing generic drugs to fight pain, raised $30 million in a third funding round. The company’s lead drug candidate, known only as HZT-501, is a “proprietary” combination of the generic drugs ibuprofen and famotidine, the latter of which is better known by its brand name Pepcid. It’s aimed at providing pain relief without gastrointestinal discomfort or injury, which is the same claim made by Cox-2 inhibitors such as Merck’s withdrawn pain drug Vioxx.

Horizon’s basic idea, which is both interesting and risky, is that packaging together existing drugs like these into a single pill may ameliorate side effects. Famotidine, for instance, suppresses the production of stomach acid, so by combining it with ibuprofen, Horizon hopes to reduce the likelihood of ibuprofen-related ulcers.

That’s the interesting part. The risky part is that patients and their doctors can usually just take the existing generic drugs together for the the same effect. Horizon hopes that its combination pill will prove more convenient for patients than the separate drugs. Would-be competitors to HZT-501, for instance, have different dosing schedules — two to three times a day for ibuprofen, but only once or twice a day for famotidine. (Hat tip to Lou Bock, a VC at Scale Venture Partners, who described Horizon’s strategy in the course of a longer conversation nearly two weeks ago.)

Will that be enough for Horizon to fend off generic competition? It’s hard to say, but Horizon’s backers clearly want to believe it will be. The latest round was led by Essex Woodlands Health Ventures, who was joined by existing investors Scale Venture Partners, Sutter Hill Ventures and Pequot Ventures.

Horizon has previously raised $21 million in equity funding. The company said the latest round will allow it to push HZT-501 through its current late-stage trials and potentially into an approval filing with the FDA, while also advancing a second drug candidate, HZT-602, into late-stage trials. HZT-602 combines another painkiller, naproxen, with famotidine. Naproxen is better known by its over-the-counter name Aleve.

Ablation Frontiers, a Carlsbad, Calif., developer of devices for treating irregular heartbeats known as cardiac arrythmias, raised $21.8 million in a third funding round. The Novartis Venture Fund led the round, joined by Affinity Ventures, Hexagon Investments, Trellis Health Ventures, Versant Ventures, Aberdare Ventures, and Pequot Ventures.

Ablation Frontiers apparently aims to use radio energy, directed by a catheter, to burn away malfunctioning heart tissue that contributes to arrythmia. The company’s Catheter Ablation System has been approved in Europe, but is still undergoing trials in the U.S.

(UPDATED: See below.) Paracor Medical, a Sunnyvale, Calif., startup developing a mesh restraint designed to support failing hearts, raised $44.35 million in a fourth round of funding. The company is vying with another device startup, Acorn Cardiovascular, to prove that this sort of device works and to bring it to market.

The idea behind Paracor’s device, which it calls HeartNet, is simple. In heart failure, a general term for a variety of similar conditions with different causes, the heart muscle grows progressively weaker and loses the ability to pump enough blood through the body. In many cases, the heart reacts to its reduced pumping strength by enlarging, which temporarily makes it possible to contract more strongly. Over time, however, the enlarged heart tires again, triggering a new cycle of enlargement and weakness.

Paracor’s HeartNet is an elastic metal-alloy mesh designed to wrap around the heart and support it, theoretically improving its efficiency and slowing or stopping failure-related expansion of the muscle. (See the photo above.) Doctors stretch this mesh over a still-beating heart via a less-invasive form of the surgery known as a thoracotomy, which Paracor calls a “mini-thoracotomy.” (For some mildly gory photos, see this research abstract, which is a PDF file.)

In early clinical trials, heart-failure patients who received the mesh were able to walk farther, reported fewer symptoms and witnessed improvement in a variety of heart-related measurements such as oxygen transport and utilization. Paracor is currently enrolling volunteers in a large, randomized study of the device in 272 patients, which company officials hope will allow them to apply for FDA approval by 2010, according to VentureWire (subscription required).

Acorn’s experience, however, provides a cautionary tale. The St. Paul, Minn., company is developing a similar polyethylene mesh wrap called CorCap, which it already markets in Europe (see its PDF brochure here). CorCap requires a full open-chest surgery (see slide #8 in this PowerPoint deck) and can complicate subsequent heart surgeries.

In a 300 patient trial, CorCap appeared to improve a variety of outcomes for patients who received it. Last December, however, an FDA dispute-resolution panel said the company would need to conduct an additional clinical trial before the agency would consider U.S. approval, after an FDA advisory panel recommended against approval in 2005. Some panel members called the study a “quagmire” because of its poor design and statistical anomalies. Acorn hovered on the brink of dissolution until this May, when it reached an agreement with the FDA to conduct a 50 patient confirmatory trial for which it is currently raising $15 million, the company told VentureWire.

Paracor’s funding round was led by Aberdare Partners, joined by Montagu Newhall Associates and existing investors Delphi Ventures, Pequot Ventures, InterWest Partners, Alta Partners, De Novo Ventures, Saratoga Ventures, and Palo Alto Investors. The company said the new funds will support its pivotal trial of HeartNet.

UPDATED: Expanded and rewritten throughout.