VentureBeat

TODAY’S HEADLINES:

• TransEnterix gets $21M for minimally invasive GI surgery (release)
• Stem-cell developer Bioheart’s IPO postponed (Forbes.com)
• Medical-practice software provider AdvancedMD acquired by Francisco Partners (release)
• Peptimmune draws $8.2M for MS drug trials (release)
• Drug-delivery co. Talima Thera names Martin Babler CEO (release)
• Alimera Sciences aims for autumn IPO to fund diabetic eye-disease drug (VentureWire, sub req’d)

TransEnterix gets $21M for minimally invasive GI surgery — TransEnterix (no Web site), a Research Triangle Park, N.C., device maker developing tools for “natural orifice” gastrointestinal surgery, raised $21 million in a first funding round. Investors included SV Life Sciences, Parish Capital Advisers and Synergy Life Science Partners.

According to the Web site for Synecor, a North Carolina incubator that founded TransEnterix, the company is at work on tools and devices for minimally invasive “trans-oral” surgery using an endoscope passed through the mouth and down the esophagus. This procedure is designed to enable surgeries through the stomach wall and other unspecified “natural entry points,” potentially in a way that could supplant minimally invasive laparoscopic procedures that require entry through the abdominal wall. Patients would be consciously sedated during the procedure.

The funding will allow TransEnterix to “deliver” its first-generation tools, presumably for use in clinical trials, and to fund development of next-generation devices.

Stem-cell developer Bioheart’s IPO postponed — Bioheart, a Sunrise, Fla., developer of a stem-cell-based heart therapy, has postponed its troubled IPO. Although the company doesn’t seem to have officially yanked it yet, odds are now good that it will.

Bioheart’s woes started last October, when it abruptly slashed its offering price and fired its underwriters. The company’s IPO has lingered on life support ever since. We gave readers some good reasons to be skeptical about Bioheart — which, notably, is backed by former football great Dan Marino, among others — as long ago as last July.

Medical-practice software provider AdvancedMD acquired by Francisco Partners — AdvancedMD, a Salt Lake City provider of Web-based medical-practice management software — now there’s a mouthful — announced that it was acquired by the private-equity firm Francisco Partners. Financial terms weren’t disclosed.

AdvancedMD, founded in 1999, sells a series of Web-based products designed to handle administration, billing and electronic medical records for physicians. The company had previously raised venture funding from Dominion Ventures, Windward Ventures and Hunter Capital. Francisco has already named a new CEO, and said that it intends to “leverage” the company’s success with “additional resources” to accelerate its growth.

Peptimmune draws $8.2M for MS drug trials — Cambridge, Mass.-based Peptimmune, a biotech at work on drugs for autoimmune and metabolic conditions, raised $8.2 million in the first stage of its fourth funding round. The company anticipates closing a second tranche in the second quarter. Investors included New Enterprise Associates, MPM Capital, Hunt Ventures, Boston Medical Investors and Silicon Valley Bank Capital.

Peptimmune is focused on using protein fragments known as peptides to disrupt or otherwise modulate immune-system reactions associated with disease. Its lead candidate, PI-2301, is a “random sequence” peptide similar in certain respects to the approved drug Copaxone, which Peptimmune is currently testing against multiple sclerosis in early-stage human tests.

Alimera Sciences aims for autumn IPO to fund diabetic eye-disease drug — Alimera Sciences, an Alpharetta, Ga., biotech focused on eye disease, is contemplating an IPO this fall, VentureWire reports (subscription required). The funds will ideally support the launch of the company’s first innovative product, a treatment for a blinding complication of diabetes known as diabetic macular edema.

Alimera, which started life as a specialty pharma that resold over-the-counter eye products, began development of its current candidate, Medidur, in 2005. The treatment, co-developed with the nanotech company pSvidia, is a tiny structure designed to be injected into the back of the eye, where it steadily emits a corticosteroid called fluocinolone acetonide. The idea is to provide the smallest possible quantity of the steroid directly to the back of the eye, where a fluid buildup in the retina steadily obscures vision. Many ophthalmologists currently treat the condition with steroid injections, although no drugs are approved for the disease.

Medidur is currently in late-stage, phase III human tests. Alimera expects data from that trial in late 2009 and could file for approval in 2010.

Featured companies: Allozyne, Arteriocyte Medical Systems, Arthrosurface, Bay City Capital, EnteroMedics, OncoVista, Novotech, Power Medical Interventions, Reliant Technologies

UPDATED: Expanded items on Allozyne, Reliant Tech, Power Medical and Bay City Capital.
UPDATE REDUX: Added item on EnteroMedics IPO.

Seattle’s Allozyne draws $30M for new interferon — Allozyne, a Seattle biotech focused on tweaking existing protein-based drugs to improve their properties, raised $30 million in a second round of financing. Investors included MPM Capital, OVP Venture Partners, Amgen Ventures, ARCH Venture Partners and Alexandria Real Estate Equities.

Allozyne’s twist on improving protein-based drugs — i.e., most biotech drugs — is to substitute “non-natural” amino acids into the proteins themselves. (Recall that a protein is essentially just a long chain of amino acids.) By swapping out natural amino acids with synthetic versions at key points in the protein, Allozyne hopes to improve the effectiveness and safety of protein drugs. The company’s description of it’s approach is here.

The company’s first drug candidate is a modified version of interferon beta, which is currently used to treat multiple sclerosis. The funding will support the first early-stage human trials of the drug, and will also “accelerate” development of a second candidate.

In addition, Allozyne will prepare to exit Accelerator, a Seattle biotech incubator connected with the Institute for Systems Biology. We previously wrote about Accelerator here.

Med-device maker Reliant Tech sets IPO terms, aims for $86M take — Not to be confused with Reliant Pharmaceuticals, which set its IPO terms yesterday, Mountain View, Calif.-based Reliant Technologies set its price range today and now hopes to raise up to $86.5 million in an offering of as many as 5.4 million shares. Reliant hopes to price those shares between $14 and $16 apiece.

Reliant makes medical lasers for “skin rejuvenation” treatments. Our previous coverage of the company is here.

Power Medical IPO falls short, raises up to $49M for robotic-surgery systems — Power Medical Interventions, a Langhorne, Pa., maker of computer- and power-assisted surgery tools, fell short of its IPO hopes and now stands to raise no more than $49 million from its offering. Its latest SEC filing is here.

The company priced its shares at $11 apiece, well under the $12 to $14 range it previously established. (Our coverage is here.) Power Medical could sell as many as 4.4 million shares in the offering.

The result is a sharp disappointment for Power Medical, which had originally hoped to raise as much as $100 million in its offering. The company’s lackluster start contrasts with the soaring welcome spinal-implant maker TranS1 received earlier this month (our coverage here). If it’s any consolation, though, Power Medical shares staged an early recovery, rising 60 cents, or 5.5 percent, to $11.60 in early trading today.

Bay City Capital closes $500M life-science fund — The San Francisco-based VC firm Bay City Capital, which focuses on life-science investments, closed a $500 million fifth fund, VentureWire reports (subscription required). The fund is significantly larger than its predecessor, which closed at $350 million in 2004.

Bay City intends to back 15 to 20 biotech, medical-device and diagnostics companies with the fund, which suggests it will tend to favor later-stage deals — now a long-standing VC trend. The firm told VentureWire that it will invest at all stages, including “seed-stage bets on start-ups launched in-house and structured investments in publicly traded companies.”

EnteroMedics sets IPO terms, looks for $92M to support obesity-control implants — St. Paul, Minn.-based EnteroMedics, a device company developing a neuromodulation implant designed to regulate appetite, set its IPO terms and now aims to offer up to 5.75 million shares at a price of $14 to $16 apiece. The offering could value the company at as much as $261 million while raising up to $92 million.

EnteroMedics is one of several companies angling to introduce new obesity treatments that don’t rely on drugs or invasive surgery. Although its technology is still being tested to assess its effectiveness, EnteroMedics has launched a spiffy new Web site with lots of pictures and animations to illustrate how it believes its implant will work. For our previous coverage of the company, see here and here.

OTHER HEADLINES OF NOTE:

• Arteriocyte Medical Systems spins out, gets $10M for med devices(release)
• Arthrosurface raising $5M for knee implants (VW)
• Contract researcher Novotech raises $8M for expansion(release)
• OncoVista goes public via reverse merger (release)

Featured companies: Cyntellect, Lectus Therapeutics, NeoMatrix, Nexstim, Pearl Therapeutics, Proteon Therapeutics, SupplyScape

(UPDATED at 10am PT: See below.)

Airway-disease specialist Pearl Therapeutics raises $15.5M — Redwood City, Calif.-based Pearl Therapeutics, a drug-formulation company focused on respiratory disease, raised $15.5 million in a first funding round. Investors included New Leaf Ventures, Clarus Ventures and 5AM Ventures.

Pearl doesn’t appear to have a working Web site yet, but according to its release, the company aims to treat unspecified airway diseases using “particle technologies” it has licensed from Nektar Therapeutics. Nektar, of course, is the company that spent years co-developing the inhalable insulin Exubera with Pfizer, only to see it flop in the marketplace — not least because the bulky inhaler resembled nothing so much as a bong.

In fact, Pearl’s ties to Nektar run deep. In addition to licensing its basic technology from Nektar, the company was founded in 2006 by two former Nektar executives, Adrian Smith and Sarvajna Dwivedi. Pearl most likely also aims to reformulate existing drugs into a better inhalable form — and presumably hopes for better luck in doing so.

Proteon Therapeutics sucks in $12M for vascular drug — Proteon, a Waltham, Mass., biotech, raised $12 million in a follow-on to its first funding round. Investors included TVM Capital, Skyline Ventures, Prism VentureWorks and Intersouth Partners.

Proteon’s main drug candidate, PRT-201, aims to do something new by permanently enlarging blood vessels at the site of administration. The technology is based on elastases, a type of protein-cutting enzyme, which supposedly modify the “extracellular matrix” of blood vessels in order to enlarge them. The company expects the drug might be useful for kidney-dialysis patients, who now often have to undergo surgery to create blood vessels large enough for a connection to the blood-filtration devices, and in peripheral arterial disease.

Brain scanner Nexstim beams in €8M — Nexstim , a Helsinki, Finland-based developer of brain-imaging techniques, raised €8 million ($10.9 million) in a private placement. Investors included HealthCap, LSP (Life Sciences Partners), Finnish Industry Investment and Sitra.

Nexstim is working on a new brain-imaging technique it calls “navigated brain stimulation.” The details are pretty hairy — check out the company’s release if you’d like to know more — but it essentially combines several different electromagnetic-imaging techniques with a movable coil that can be guided wherever the operator would like. The system isn’t approved for clinical use, although Nexstim said the funding would allow it to obtain the necessary regulatory approval.

Health software company SupplyScape raises $10M, names new CEO — SupplyScape, a Woburn, Mass., developer of supply-chain software for life-sciences companies, raised $10 million in a third funding round. Investors in the latest round included IDG Ventures Boston, North Bridge Venture Partners, Pilot House Ventures, Bethesda Partners, and Pfizer Strategic Investments Group.

The company also named Mark O’Connell, former CEO of MatrixOne, as its chief executive.

The average person, however, could be forgiven for having no clue what SupplyScape actually does. According to the company’s press releases, it makes software to “maximize product integrity and create business value for pharmaceutical, biotech, medical device companies.” Its Web site promises “collaborative pharmaceutical value chains” that improve “security and profitability.” As it turns out, the company’s software helps track and trace drugs from their point of manufacture through various distribution channels in order to guard against counterfeits, at least so far as I can tell from its Web site.

Cancer screener NeoMatrix raises $9.6M — San Diego’s NeoMatrix, a company focused on early detection of breast cancer, raised $9.6 million in a third funding round. Private investors provided the funding, the company told me. (Its release doesn’t include these details.) Out of sheer coincidence, two southern California businessmen — Anthony Ciabattoni and Richard Franco Sr. — also just joined the company’s board (see the release for details).

Founded in 2000, NeoMatrix sells a screening test that detects pre-malignant or malignant cells in “nipple aspirate fluid,” which is extracted from the breast using a “gentle” suction device. The company said the new funds will allow it to hire its first sales reps, expand its marketing efforts and to convert or retire remaining debt the company used to finance development of its test.

Lectus draws in £3M for MS drugs — Cambridge, England-based Lectus Therapeutics, a biotech focused on a class of drugs known as ion-channel modulators, raised £3 million ($6.1 million) in funding from the Wellcome Trust. The investment is intended specifically to fund development of drugs for multiple sclerosis. Lectus had previously identified its primary disease interests as urinary bladder disorders, pain and angina.

Cell imager Cyntellect adds $3M in funding — Cytellect, a San Diego developer of cell imaging and manipulation systems, raised an additional $3 million in a fourth funding round, bringing the total for the round to $18.1 million. Bru II Venture Capital Fund, based in Reykjavik, Iceland, provided the additional funding.

Cyntellect’s laser-based equipment makes it possible to fluorescently image cells, isolate and destroy unwanted cells in a sample, and to “optoinject” various molecules directly into cells. See our previous coverage here.

UPDATE (10am PT): Added items on Cyntellect, Lectus Therapeutics, NeoMatrix, Nexstim, Pearl Therapeutics, and Proteon Therapeutics.

The thirteenth edition of Gene Genie, a biweekly collection of the blogosphere’s best posts on disease genetics, is up at the Genetic Geneologist, courtesy of proprietor Blaine Bettinger.

The roundup includes posts on:

• the Personal Genome Project, George Church’s effort to sequence the genomes of ten volunteers;
• the neurophysiological importance of ApoE4, a protein related to Alzheimer’s disease;
• the potential involvement of viral infection in the development of multiple sclerosis;
• a list of seven ways to stay up-to-date on developments in genetics;
• and the genetics of left-handedness.

As an added bonus, it also features two HIV-related posts by yours truly. Check it out.

Patients, patients everywhere, yet not a doc to treat – From Massachusetts to Colorado, there’s an increasingly acute shortage of primary-care physicians. In Massachusetts, where the nation’s only universal healthcare plan is gearing up, hundreds of thousands of newly insured individuals are having trouble finding doctors. According to this report, new patients wait an average of 52 days to see an internist or family doctor for a routine visit, and with up to 500,000 people set to get insurance this year, the head of the Massachusetts Medical Society is predicting a crisis of healthcare access. There’s more here and here, just for starters. Google “Massachusetts doctor shortage” for much more.

Things aren’t much better elsewhere across the country. In Colorado, a new report finds that close to a third of the state’s primary-care docs are 55 and over, and that relatively few younger docs are entering the field to replace them. (See the PDF report itself here.) Meanwhile, those on the lowest rungs of the economic ladder are also finding it increasingly difficult to get treatment because so many doctors have either stopped accepting Medicaid patients or severely limited their numbers. The WSJ Health Blog has more, including another post about two Illinois clinics sued by the state for allegedly colluding to stop seeing new Medicaid patients.

The reason for the doctor shortage is actually pretty simple: Salaries are much, much higher in specialties such as surgery and radiology than they are for your workaday general practitioner — sometimes by a factor of two or more, the NYT reports — and the workload is often less. Primary-care physicians also perform fewer complex medical procedures, which limits the reimbursement they can seek from insurers or Medicare.

The rest is pretty much just supply and demand — and a useful reminder that real fixes for the nation’s busted healthcare system are going to demand some fairly dramatic changes. Some radicals like Alan Garber, a Stanford healthcare expert quoted in the NYT, would like to see doctors paid fixed salaries and bonuses based on how healthy they keep their patients, which would level the playing field among physician specialties and create incentives to treat and prevent illness instead of just treating it with the most expensive procedures available. Just imagine how excited the American Medical Association would be about that.

States can’t do healthcare reform alone – While we’re on the subject, this piece by Ezra Klein in the Washington Monthly makes a compelling argument that states can’t provide universal healthcare on their own. It’s a complex argument, but much of it boils down to the fact that states typically can’t sustain the heavier healthcare costs brought on when recessions throw more people out of work and the health insurance they get from employers. Klein notes the “cruel irony” that state healthcare spending typically gets cut during downturns, just when people tend to need government help the most. Only the federal government, he suggests, has the resources to maintain and even expand healthcare programs when times get tough. (For the internecine warfare that broke out among liberal progressive bloggers shortly after Klein’s article was published, see here, particularly the comments.)

First thing, we kill all the ad salesmen – Although free-market types like to talk about drug advertising as providing a “useful source of information” to consumers, the reality is a lot more complex. Advertising essentially creates demand for many drugs, leading patients to visit their doctors waving magazine ads or asking about “the little purple pill” (a fantastically effective campaign earlier this decade for the heartburn drug Nexium). Needless to say, very little of this has anything to do with keeping people healthy, and quite a lot to do with boosting drug sales.

Over at BrandweekNRX, Jim Edwards pens a farewell post offering 10 drug-advertising reforms that would do a lot to make pharmaceutical-marketing programs more informational and less manipulative. With Congress having apparently passed on letting the FDA regulate drug ads more thoroughly, though, the odds of any of these idea passing into law seems remote at best.

Additional oddball note: Jim’s replacement at BrandweekNRX is none other than Peter Rost, former Pfizer marketing exec-turned-scathing critic of the industry that once paid him. Rost has an odd sense of humor and can certainly carry on at times, but he’s entertaining, muckraking, and always worth a read.

Hospitals as charity cases? – One of the tradeoffs involved in running a hospital as a nonprofit entity, a status that grants some pretty hefty tax breaks, involves providing charity care to the indigent. It turns out, though, that many hospitals are pleading poverty themselves. A recent IRS report, noted in the WSJ Health Blog, found that nearly a quarter of nonprofit hospitals spent less than one percent of their revenue on care for the disadvantaged, while half spent less than three percent. Now moves are afoot in Congress to require nonprofit hospitals to devote at least five percent of revenue to charity care. For more, follow the link.

Briefly noted:

• Congress is struggling to increase funding for a federal program that insures poorer kids, against a veto threat from President Bush. The NYT and the WSJ Health Blog have more.
• A severely brain-damaged man regained his speech after treatment with pulses of electric current, the NYT reports.
• Medicare relaxed proposed guidelines that would limit the use of anemia drugs like Amgen’s Aranesp in cancer patients, after safety problems emerged; Amgen promptly challenged the watered-down guidelines.
• Researchers reported finding a genetic link to multiple sclerosis; surprisingly, there’s also one for “restless legs syndrome,” which some cynics considered a pharmaceutical-company invention.
• Older docs square off with their younger colleagues — and academics, patients, and others — over whether it’s a good idea to limit the work hours of notoriously sleep-deprived residents in comments at the WSJ Health Blog.

At a first glance, San Francisco’s Nuon Therapeutics looks like any other specialty-pharmaceutical company that aims to pick up cast-off or failed drugs and try to squeeze some new life out of them. That sort of business model is frequently dull as dishwater, however lucrative it may turn out to be for the investors involved.

Unlike many specialty pharmas, however, Nuon — a recently renamed biotech transplant from Australia that just raised $5 million in a first round of funding — may actually have something scientifically interesting going on. The company, founded in 2002 as Angiogen Pharmaceuticals, does aims to find new uses for marketed drugs. But its first candidate, an old drug called tranilast that Nuon hopes to develop as a new kind of treatment for autoimmune diseases such as multiple sclerosis and rheumatoid arthritis, has a fascinating history that serves to illustrate how some older drugs might really provide unexpected medical benefit to large numbers of people.

Tranilast is one of those also-rans of the pharmaceutical world, notable mostly because a small Japanese pharmaceutical company sells it in Japan and South Korea as an asthma treatment. Several years ago, a unit of what later became GlaxoSmithKline tested the drug in a trial involving more than 11,000 patients, based on early evidence that it might prevent restenosis — the scar tissue that can re-block an artery after doctors wedge it open using balloon angioplasty or stents. Yet the trial failed earlier this decade, and tranilast slipped back into obscurity.

Until 2005, that is, when a team of Stanford researchers demonstrated that the drug could reverse paralysis in mice with a simulated form of multiple sclerosis. Tranilast, it turns out, bears a strong resemblance to a derivative of tryptophan — an amino acid found in turkey that was briefly (and wrongly) thought to encourage post-Thanksgiving sleepiness. These tryptophan relatives, however, did seem to have interesting effects on the immune system, which led a German postdoctoral student with funding from Angiogen to contact Stanford MS expert Lawrence Steinman and suggest that they test tranilast and other tryptophan derivatives against the disease in mice.

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