The venture capitalist and entrepreneur says he’s pulling the plug on Upwind Medical Partners, which had hoped to raise $6 million to $8 million to commercialize technologies from healthcare/research institutions like the University of Minnesota, Wisconsin Alumni Research Fund (WARF) and Allina Hospitals & Clinics.

O’Reilly said it was “fairly impossible” to raise money. A weak economy and non-existent demand for initial public offerings has prompted investors to avoid new deals and focus instead of exiting current portfolios.

Upwind’s demise is only the latest disappointment to hit Minnesota’s early stage venture community after a promising start in 2010. Affinity Capital Management and Triathlon Medical Ventures abandoned plans to create a $10 million seed fund, citing a lack of interest from investors.

A long promised $1 billion fund from biotech investor Steve Burrill to back the Elk Run BioBusiness Park in Pine Island, Minnesota has yet to materialize. Ditto for Coordinate Capital, a Burrill-affiliated fund in Minneapolis, that had hoped to raise $25 million.

For O’Reilly, explaining Upwind to potential investors proved to be a challenge in itself. For one thing, O’Reilly insisted Upwind was not a “fund” but rather a “new model” for developing startups.

Here’s how Upwind would have worked: the company will create companies based on near market-ready intellectual property that can deliver liquidity in a relatively short period of time (four years) either through a sale or licensing. While venture capital firms will typically fund one or two potential blockbusters over several years, Upwind will generate modest returns from developing many less ambitious companies in a lot less time.

O’Reilly said he’s mulling a few offers from the securities industry but has not made a decision on his future plans. He might even try to launch Upwind again in the future.

But he admits “last year was just a terrible time to do it.”

The company, based in Plymouth, Minnesota, makes specially designed bags to hold materials during the manufacture of biotech-based pharmaceuticals.

While Minnesota has long lacked an industry that creates and develops new drug therapies, the state is home to a mini-cluster of companies that specializes in manufacturing pharmaceuticals, including biotechnology containers and reactors.

DCI International Inc. is one of the world’s largest makers of storage and processing tanks for the pharmaceutical and bioscience industries. The company operates a 100,000-plus square foot headquarters and production facility in St. Cloud, Minnesota. DCI also boasts plants in Missouri and France.

ATMI Inc. (NASDAQ:ATMI), based in Danbury, Connecticut, recently completed a two-year, multimillion dollar effort to establish its manufacturing facility in Bloomington, Minnesota, as its North American hub for making storage, mixing, and reactor tanks demanded by pharmaceutical and lifescience companies.

The University of Minnesota also boasts a respected chemical engineering department that produces graduates competent in reaction processes and chemical synthesis.

Overall, the company, based in Eden Prairie, Minnesota, is seeking $1 million, the documents say.

In September 2010, the U.S. Patent and Trademark Office awarded Nascent executive Dr. Leonard Schultz a patent for a device that can more easily filter and remove smoke during surgical procedures involving lasers, including laparoscopies- operations that require small incisions in the abdomen or pelvis.

“An advantage of the present invention is that it eliminates dependency on a built-in, in wall vacuum source,” the patent says. “It does not require high vacuum suction and the requisite high resistance filters or combination of flow restrictors or reducers and filters. Further, it simplifies smoke evacuation and filtering by eliminating the need for multiple, in-line structures (filters, resistors, etc.) for stepping down or reducing suction.”

The company, based in Plymouth, Minnesota, wants to franchise a laser system that treats peripheral neuropathy, a painful nerve disease. Biolyst, which launches the system this quarter, is targeting 30 chiropractor and podiatry clinics a year, or about 200 clinics in five years, CEO Phil Walter said in a telephone interview.

Peripheral neuropathy is caused by nerve damage resulting from diabetes, trauma, and infections, according to Mayo Clinic. Symptoms include tingling and numbness in the feet and hands that eventually progresses to pain throughout the body. Treatments include pain relievers, anti-depressants, and anti-seizure medications.

Backed by angel investors, Biolyst is marketing a laser that stimulates light sensitive cells to produce greater amounts of ATP, an enzyme that speeds the flow of nutrients into cells. Accelerating such metabolic processes can prompt damaged nerves to heal faster, relieving pain, Walter said.

As part of the franchise agreement, Biolyst will market the technology through a website and license a proprietary software to clinics that calculates specific treatment protocols for each patient.

Walter serves on the board of directors of Twin Cities Angels, ReconRobotics Inc. and ecoEnvelopes LLC.

The company, based in Bloomington, Minnesota, also said the Remote Microphone Technology provides users a more appealing cosmetic look by tucking the microphone in the concha cymba area of the external ear.

“Remote Microphone Technology is a very attractive alternative for hearing aid users that have an aversion to Behind-The-Ear (BTE) instruments,” Dr. Laurel Christensen, Chief Audiology Officer, said in a statement. “The placement of the microphone in the concha cymba not only hides it from view, but also improves acoustic performance.”

ReSound, owned by GN ReSound Group in Denmark, controls 15 to 17 percent of the $1.2 billion wholesale hearing aid market. Last summer, the company introduced technology that can wirelessly stream sound from a television, cell phone, computer, and even iPod to a patient’s hearing aid.

ReSound’s chief competitor is Starkey Laboratories Inc., based in Eden Prairie, Minnesota.

CareFacts makes software that helps homecare, hospice, and public healthcare organizations manage back office and regulatory information. Riverside said CareFacts will bolster its HEALTHCAREfirst business, which provides similar software services through the Internet.

“CareFacts enjoys stellar brand recognition in the Midwest, and will be a highly synergistic addition to the HEALTHCAREfirst family,” Riverside Managing Partner Loren Schlachet said in a statement. “This is a great opportunity to expand product offerings for customers while making HEALTHCAREfirst bigger and even more effective.”

Riverside, which manages over $3 billion in capital, said CareFacts marks its 22nd acquisition last year.

Last year was certainly a year of gains, most notably the passing $60 million angel investment tax credit, the doubling of the state research and development credit, the development of the University of Minnesota Biomedical Discovery District and related Minnesota Science Park, and the creation of Minnesota Science and Technology Authority.

With a $6 billion budget deficit and a new Republican leadership bent on cutting costs, life science leaders are content to mostly play defense in 2011.

Here’s a look at the healthcare related issues likely to surface in St. Paul this year.

Taxes. If there’s one bold initiative that has a solid chance of succeeding this year, it’s reforming the state’s messy tax code, long demanded by the business community, including investors and large corporations like Medtronic.

A bipartisan tax commission appointed by then Gov. Tim Pawlenty recommended the state abolish the corporate income tax. With Democrat Gov. Mark Dayton in office, that’s not going to happen. But expect Republican-led lawmakers to reduce business taxes under the banner of job creation.

University of Minnesota. The school is every political party’s favorite target for budget cuts and this year will be no different. Most vulnerable is the Minnesota Partnership for Biotechnology and Medical Genomics, the research collaboration between the university and Mayo Clinic.

Facing deep state cuts in 2008, the university cut nearly 40 percent from the Partnership’s annual $8 million budget. The following year, the university cut $300,000 from the Partnership, this time with Mayo’s blessing, angering lawmakers who had fought to protect the money.

Frankly, the partnership doesn’t produce the type of immediate economic gains lawmakers like. And the partnership’s proposed $30 million initiative to treat and cure diabetes seems even more irrelevant in era of fiscal restraint.

Not even the $292 million Biomedical Discovery District may be safe even though the state approved funding years ago. Under the unique financing structure, the university issued bonds that the state promised to pay. If the state pulls out, the school is left with the bill.

To make matters worse, medical dean Frank Cerra and president Robert Bruininks, who have strongly backed the partnership and district, are stepping down.

Health services. Last year, Pawlenty fought a bruising battle with Democrats over his plan to eliminate General Assistance Medical Care (GAMC), the state healthcare program for the poor. Though GAMC ultimately survived, Republicans will likely seek similar savings as the party tries to dismantle Minnesota’s traditional focus on social services.

Groups like LifeScience Alley, Minnesota Hospital Association, and Minnesota Medical Association (MMA) will oppose such cuts. MMA wants the state to close the budget deficit with more taxes on alcohol and cigarettes.

Regulation. In 2009, lawmakers introduced a bill that would create a public registry for drug clinical trials and a institutional review board to oversee such studies. The impetus behind the bill was the suicide of Dan Markingson, a mentally ill patient who killed himself after taking an experimental psychiatric drug being tested by the University of Minnesota.

The bill might make another appearance this year. Last month, a group of professors urged the school’s board of regents to appoint an independent outside panel of experts to examine Markingson’s death.

Markingson committed suicide in May 2004 after taking Seroquel, a psychiatric drug developed by AstraZeneca. Mary Weiss, Markingson’s mother, accused the university of of forcibly enrolling her son in the clinical trial even though Markingson was under an involuntary commitment order and may have been mentally incompetent to consent to the treatment.

A recent story in Mother Jones magazine suggested an improper financial relationship between university researchers and AstraZeneca, including incentive payments to recruit and retain patients for the study instead of providing standard therapy.

Authority. The Minnesota Science and Technology Authority will seek $10 million for its operations, including the creation of $2 million Technology Commercialization Fund, $2 million for an Advanced Entrepreneur Program, $4 million to support Small Business Innovation Research grants.

Good luck with that. The authority may get some money but nowhere near $10 million.

A St. Jude defibrillator

For St. Jude Medical Inc. (NYSE:STJ), last year’s blessing may be this year’s curse.

The medical device maker, based in Little Canada, Minnesota, enjoyed a stellar 2010, mostly due to impressive growth in its pacemaker and implantable cardioverter defibrillator business.

But the party may soon be over. Morgan Stanley downgraded St. Jude stock to “underweight,” which essentially means sell, citing a weak ICD/pacemaker market, pricing pressures, and increased competition from Medtronic Inc. (NYSE:MDT) and Boston Scientific Corp. (NYSE:BSX).

In his research report, Morgan Stanley analyst David Lewis says St. Jude faces significant challenges — both big picture and small picture.

First, the most daunting problem: Lewis expects the cardiac rhythm management (CRM) market in the United States to slow to zero growth and even fall two percent by 2013 as hospitals demand steep price cuts.

As a result, Lewis estimates St. Jude, which depends heavily on its CRM business, will generate just a four percent organic sales increase this year, compared to 11 percent just three years ago.

And Lewis doesn’t think St. Jude has the financial strength to buy growth.

“Despite a strong balance sheet and cash flow profile, St. Jude does not have the financial capacity to solve its exposure to the CRM market through acquisitions,” Lewis wrote.

To make matters worse, St. Jude will have plenty of competition for shrinking CRM sales. Last year, St. Jude essentially had the market to itself, racking up sales growth through a slew of product introductions.

But with Boston Scientific and Medtronic about to launch new ICDs and pacemakers, St. Jude will find itself on the defensive, Lewis says.

As of 11:30 EST, St. Jude stock is down 58 cents to $42.16.

While his tenure was relatively short, Hawkins left an indelible mark on the world’s largest maker of new innovative medical devices.

Here’s a look back on the Hawkins era at Medtronic.

August 2007: Medtronic names Hawkins CEO. He previously served as chief operating officer and president of the company’s vascular unit. Prior to Medtronic, Hawkins was president and CEO of Novoste Corp., a firm that specializes in using radiation to treat the reclotting of blood vessels.

October 2007: Medtronic issues a worldwide recall of its next generation Sprint Fidelis wires, which had a faulty design that may have contributed to 13 deaths.

The recall was “probably the toughest decision of my life,” Hawkins later told Chief Executive magazine.

“It was not black and white,” he said. “It was all statistics and probabilities – not that we had had [a significant number] of failures. Plus, we had to consider the risk of people whose lives depend upon the device getting concerned and wanting to have it extracted, which could have a higher mortality risk than leaving it in.”

Sprint Fidelis cast an enormous shadow over Hawkins’ tenure. But the company eventually won a landmark Supreme Court decision that protected medical device makers from liability if the Food and Drug Administration had approved their products.

Medtronic recently announced that it would pay $268 million to settle all Sprint Fidelis-related lawsuits.

December 2008: Medtronic pays $380 million to purchase CryoCath Technologies Inc. The Canadian company makes catheters and balloons that restore normal electrical signals in the heart by freezing the tissue or pathways behind the irregular quivering.

The deal epitomized Hawkins’ “tuck-in” acquisition strategy, which favored smaller deals that could replenish Medtronic’s product pipeline and/or goose sales.

The FDA recently approved CryoCath’s Arctic Front therapy for use in the United States.

Over the next few years, Medtronic paid $700 million for CoreValve, $325 million for Ventor Technologies, $123 million for Osteotech, $370 million for ATS Medical, and $800 million for Ardian.

August 2009: Medtronic reorganizes its business operations, combining cardiac rhythm disease management, cardiovascular, and Physio-Control into one operating unit and spinal and biologics, neuromodulation, diabetes, and Surgical Technologies Group into another.

The reorganization was a key component to Hawkins’ “One Medtronic” strategy that emphasized profitability and cost control through greater integration and cooperation between the company’s traditionally independent business units.

August 2010: Medtronic opens a new patient care center in Beijing, a symbol of the increasing clout of China and the rest of the company’s global operations.

Over 40 percent of Medtronic’s yearly revenue now originates overseas, led by China, which generates about $500 million in annualized sales and an annual growth rate of 20 percent.

APOBEC3F belongs to a family of proteins that defend the body against viruses. The HIV virus, however, has developed an ability to attach itself to the protein and destroy it.

In a study published in the Journal of Biological Chemistry, researchers in the College of Biological Sciences say they can alter the chemical makeup of APOBEC3F so the protein can fend off the HIV virus.

Even more encouraging, the study suggests the method can protect other antiviral proteins from HIV beyond APOBEC3F.

“This suggests that the interaction between [HIV] and these antiviral APOBEC proteins could be blocked with a drug that would shield the [HIV] interaction region,” John Albin, the study’s lead author, said in a statement. “Such an intervention has the potential to allow as many as seven natural antiviral drugs to spring into action and prevent HIV from spreading.”

Albin is a researcher in the laboratory of Reuben Harris, an associate professor of biochemistry, molecular biology and biophysics whose work is supported by the Bill and Melinda Gates Foundation.

Overall, the company, based in Minneapolis, is seeking $5 million to develop a device that treats patients suffering from urinary  incontinence. Founder and president Dr. Gerald Timm did not immediately return a call seeking comment.

The disposable device, called ActiCuf Compression Pouch, helps males manage urine flow by applying pressure on the urethra. ActiCuf, which is worn on the penis, also captures any leaked urine.

GT Urological estimates that 13 million Americans suffer from urinary incontinence, a large market that has attracted considerable interest from Minnesota’s medical device community.

Players include large manufacturers like Medtronic, American Medical Systems, and Coloplast to startups like Uromedica and Uroplasty, which recently won Medicare reimbursement for its neuromodulation therapy.

In February, GT Urological said it raised $1 million from investors, with commitments for $3 million should the startup hit certain milestones this year and in 2011.

Since its founding in 2003, the company has raised  about $11 million, including $9 million in private capital and $2.2 million in Small Business Innovative Research grants from the National Institutes of Health.

The state is home to 20 Fortune 500 companies, a vibrant healthcare economy and some very smart people. Those assets are both its strength and Achilles’ Heel. The latter because Minnesota tends to operate in a bubble, as if the well-defined rules of innovation, entrepreneurship and economic development somehow don’t apply to a state operating in the 21st century.

2010 proved to be a year of such contradictions: one step forward, one (or even two) steps back. So with this context in mind, I offer my list of Vaccine and Virus Awards to local newsmakers that defined this year for better or worse.

I chose Vaccine and Virus because:

1. They’re healthcare-related words
2. They both begin with the same letter and I’m a sucker for alliteration
3. I couldn’t think of anything better

VACCINE – St. Jude Medical Inc. (NYSE:STJ)

2010 is the year when the company, which has long operated under the shadow of Medtronic Inc. (NYSE:MDT) and Boston Scientific Corp. (NYSE:BSX), really got its mojo going.

St. Jude posted double-digit sales gains in pacemakers and implantable cardioverter defibrillators, a category essentially written off by its competitors. The company, based in Little Canada, Minnesota, made several acquisitions, including its $1.3 billion purchase of AGA Medical.

For the year, St. Jude stock is up nearly 14 percent. By contrast, Medtronic and Boston Scientific shares are down 16 percent and 13 percent respectively.

VIRUS – Boston Scientific (based in Natick, Massachusetts but with major operations in Minnesota)

Its shares trade for less than the price of  a movie ticket. ‘Nuff said.

VACCINE - Sen. Kathy Saltzman and Rep. Tim Mahoney

For years, the two doggedly pushed for an angel investment tax credit. The result?  A historic, five-year, $60 million credit to help stimulate early-stage funding in local startups.

VIRUS - Rep. Ann Lenczewski

The soon-to-be  (thank God) former chair of the state’s powerful House Tax Committee did everything she could to derail the angel credit, including commissioning a silly and bizarre report that promoted grants over credits. Good riddance to bad ideology.

VACCINE – Envoy Medical Corp.

The startup, based in White Bear Township, Minnesota, wins Food and Drug Administration approval for its fully implantable Esteem hearing device, raises another $16.4 million, including $10 million from Starkey Laboratories, and gets plugged on Rush Limbaugh’s radio show. Sweet!

VIRUS – The rest of Minnesota’s startup community

It was a tough year to be a young firm. For nine months this year, Minnesota startups attracted $118.1 million in venture capital, a whopping 36 percent decline from the same period in 2008, according to the MoneyTree report by the National Venture Capital Association and PricewaterhouseCoopers based on data from Thomson Reuters.

Affinity Capital and Triathlon Medical Ventures abandoned efforts to create a $10 million early stage seed fund because of a lack of investor interest.

Transoma Medical, Leptos Biomedical, Disc Dynamics and Acorn Cardiovascular all shut down or significantly scaled back operations.

VACCINE – The University of Minnesota’s Biomedical Discovery District

The $292 million research park suddenly makes the university a major player in commercializing promising school-made technologies.

VIRUS – Elk Run BioBusiness Park

$1 billion investment fund? Hundreds of biotech jobs? Dozens of companies? Nope.

Instead, we have endless delays, missed deadlines, and one pissed off real estate executive.

VACCINE – Minnesota healthcare reform

Long before President Obama pushed through his healthcare law, Minnesota was on the cutting edge in healthcare reform.

In 2008, Minnesota passed a law that will eventually allow consumers to compare the cost and performance of all providers in Minnesota, a process known as peer grouping.

This year, Minnesota health officials launched the first stage of that law, an incentive-based payment system for hospitals and ambulatory firms who treat state employees and patients enrolled in the state’s health insurance programs. Providers who compare favorably to benchmarks measuring the quality of diabetes, heart disease and pneumonia care, and who improve over time will receive extra money.

VIRUS – Minnesota Nurses Association

The MNA argued they were fighting  for patient safety by insisting on set staff-patient ratios. But the union’s one-day strike accomplished little other than winning modest pay raises, sniping at gubernatorial candidates, and costing the hospitals millions of dollars.

In a study published in the journal Neuron, researchers say that an early buildup of tau in the dendritic spines, a region of the brain responsible for electrochemical stimulation, can cause memory loss by disrupting communications between brain cells.

Tau has long been considered an early biomarker for the onset of Alzheimer’s. By forging a direct link between tau and a specific brain area and function, researchers could possibly design ways to treat Alzheimer’s before it significantly damages the brain.

“Research has shown that in neurodegenerative disorders such as Alzheimer’s, that more tau is present in the cell body, and that an accumulation of tau proteins can induce neurodegeneration,”  Karen Ashe, a university neuroscientist and the study’s lead author, said in a statement. “But no prior study has addressed how tau diminishes brain function.  Our study was designed to show how tau can impact the decline of brain functioning so that therapies can be designed to combat the trend.”

The study is also significant because it could open a promising new avenue of research into Alzheimer’s. Until now, pharmaceutical makers have mostly focused on reducing amyloid plaques, another protein buildup  in the brain. But clinical trials for such treatments have failed and some scientists wonder if there’s any connection between amyloid and Alzheimer’s.

Alzheimer’s currently affects about five million patients in the United States, a number that’s expected to triple by 2050 as the country’s Baby Boomer generation grows old. There is no cure for Alzheimer’s and very few treatments for it, mostly because the disease has already progressed to the point where drugs are ineffective.

As a result, scientists have been trying to identify biomarkers that could help doctors diagnose the disease earlier. Researchers estimate that it takes a decade or more for patients to exhibit obvious signs of Alzheimer’s, including memory loss.

Unfortunately, scientists don’t even know what causes the disease, though some suspect genetics or lifestyle choices like diets.

The company based in Plymouth, Minnesota, is developing balloon catheter system to treat chronic coronary and peripheral total occlusions, a condition in which clots frequently clog blood vessels. BridgePoint has raised over $10 million in less than two months.

In a brief phone interview, Mike Berman, a prominent local medical device investor who sits on the startup’s board of directors, said BridgePoint will use the money to accelerate commercialization in the United States.

While its device, which received 510(k) approval from the Food and Drug Administration, is available in some hospitals, the company wants to create formal sales and marketing teams to boost sales, Berman said.

BridgePoint also wants to expand overseas. Last year, European regulators approved BridgePoint’s Chronic Total Occlusion (CTO) Crossing System comprised of the CrossBoss CTO Crossing Catheter and the Stingray CTO Re-Entry System.

Investors include Foundation Medical Partners, Polaris Ventures and New Enterprise Associates.

The company, based in Fridley, Minnesota, said the Endurant stent, inserted into the body through a catheter, can prevent sacs of blood from bursting in the body’s midsection by expanding the walls of the artery and relieving pressure on the bulge. Medtronic estimates 1.2 million Americans suffer from AAA, an often fatal disease that displays no obvious symptoms.

The Edurant line has contributed to the 5 percent growth in cardiovascular revenue so far this year, Medtronic said in its latest earnings announcement. It was one of several new products – including the Resolute drug-eluting stent and Integrity bare metal stent – that helped grow revenue.

Last month, the FDA approved Medtronic’s Talent Captiva stent graft system to treat aortic aneurysms, a much smaller market compared to AAA. An estimated 60,000 people in the United States suffer from the disorder in which a dangerous bulge develops in the main artery near the heart.

“With FDA approval of Medtronic’s Endurant stent graft, U.S. physicians now have access to a new-generation device that will allow safe treatment of even more complex AAA patients with [endovascular repair] than was feasible with previous devices,” Dr. Michel Makaroun, professor and chief of vascular surgery at the University of Pittsburgh Medical Center, said in a statement.

“With its innovative design and delivery system, the Endurant stent graft represents another significant advance that expands our toolkit for the minimally invasive management of this dangerous, often deadly, condition,” Dr. Makaroun, who lead the clinical trial, said.

Winston and Maxine Wallin

It’s been that kind of day at Medtronic Inc. (NYSE:MDT).

In the morning, the company in Fridley, Minnesota, announced current CEO Bill Hawkins would retire next year. In the afternoon, Medtronic announced one of its former CEOs had died.

Winston Wallin, who lead Medtronic from 1985 to 1991, died Monday at age 84.  A former president and chief operating officer at Pillsbury Co., Wallin joined Medtronic as a board member in 1978 and was named CEO seven years later.

“We are saddened to learn of Win’s passing, and our thoughts and prayers are with the Wallin family as they grieve the loss and celebrate the life of a dedicated family man and community leader,” Hawkins said in a statement.

“Win’s legacy is part of the very heart of Medtronic,” he said. “Without his contributions, Medtronic would not be what it is today. We are grateful for the opportunity to remember his leadership at Medtronic with pride, and we are inspired to carry out our Mission with the same devotion and passion that he did.”

In retirement, Wallin was an active philanthropist. He founded Wallin Education Partners, an integral partner to the Medtronic Foundation’s Scholars program. Since 1991, the program has awarded more than 3,000 scholarships and more than $25 million to support high-potential students with financial need from Minneapolis, Anoka-Hennepin, St. Paul and North Metro district high schools.

Earlier this year, the University of Minnesota named its new medical biosciences building, a key facility in the school’s $292 million Biomedical Discovery District, after Wallin and his wife Maxine.

“We fondly remember Win for much more than his business record,” Hawkins said. “He was extraordinarily generous and kind, and had a sincerity and dedication to fairness and ethical business practices which we strive to uphold every day at Medtronic.”

One was Michael DeMane, the brash president of Medtronic’s spine business whose aggressive pursuit of growth invited legal and regulatory scrutiny. The other was chief operating officer Bill Hawkins, a steady, stabilizing presence within Medtronic’s senior leadership team.

The COO ultimately prevailed. Yet Medtronic said Monday that Hawkins will retire in April 2011, less than five years after assuming the top job. Given Hawkins’ relatively short tenure as CEO (Collins served six years, William George ten years), the announcement surprised analysts though some believed the move was necessary.

“Today’s news from Medtronic is surprising … in terms of timing, but thematically in line with our expectations and an encouraging signal of the Board’s desire for accelerated value generation,” David Lewis, an analyst with Morgan Stanley, wrote in a research note.

“We expect investors to view this announcement as indicative that a focus on cash flow is likely to become more acute, and this should support positive price movements as a signal of focus on shareholder returns and operational adaptation to the new operating environment,” Lewis wrote.

Hawkins generally was regarded as a smart and capable leader. Under his leadership, Medtronic reorganized its businesses under his “One Medtronic” initiative,  expanded overseas and made several “tuck-in” acquisitions. But Hawkins’ efforts went largely unrewarded on Wall Street.

Since August 2007, the month Hawkins became CEO, Medtronic shares have fallen 30 percent to $37 from $53, though that period also includes the worst economic recession in American history since the Great Depression.

But Medtronic also was hampered by operational missteps, including the Sprint Fidelis debacle and continued problems in its spine business. Medtronic has downgraded its 2011 profit forecast twice this year.

But Medtronic also faces a vastly different industry than in the days of Collins and George. Its core pacemaker and implantable cardioverter defibrillator businesses no longer are growth drivers. Healthcare reform — financed in part by a $20 billion tax on medical device makers — has made Medtronic’s long-term business prospects less certain.

“Hawkins became CEO at a very difficult time for Medtronic, and he will be leaving at a very difficult time for Medtronic,” said Joseph Galatowitsch, president and managing partner for Dymedex Consulting in Woodbury, Minnesota.

Medtronic is transitioning from a high-growth, double-digit growth engine to a more mature business where mid-to-high single digits are the norm, Galatowitsch said.

In response, Medtronic under Hawkins made several small to mid-sized acquisitions. Over the past two years, the company has purchased nine companies: $700 million for CoreValve Inc.; $370 million for ATS Medical Inc.; $123 million for Osteotech Inc., to name a few.

But Hawkins’ “tuck-in” acquisitions never caught fire with Wall Street. In the end, one has to wonder if Hawkins’  inherent caution contributed to his departure. In an industry ripe for consolidation, Medtronic had the cash but not the nerve to pursue big deals.

Which brings us to his replacement. Medtronic said it would pursue a candidate outside of the company — a strong indication it wants new blood to recharge its businesses. George, Collins and Hawkins all were Medtronic executives before the company tapped them for CEO.

In short, Medtronic wants bold leadership. And perhaps nothing says bold more than an industry-changing acquisition or two.

“We are very encouraged the company is so focused on looking externally as we believe external expertise could be helpful given the challenges Medtronic is facing,” Lewis wrote. “We would not be surprised to see additional changes and strategic disruption over the next 12 months given the likely transition to an external candidate could carry an expectation for meaningful changes to strategy and opens the door to additional management changes, acquisitions and divestitures.”

Bill Hawkins might have been the right CEO in 2007.  Not so much in 2011.

The medical device giant based in Fridley, Minnesota, said Hawkins, 56, will leave the company April 2011.

Medtronic will launch an external search for his replacement.

“Bill has made a very significant impact at Medtronic and his service is deeply appreciated,” Ken Powell, lead director on Medtronic’s board of directors and chairman of the board’s corporate governance committee, said in a statement. “We will be working closely with him in the coming months to ensure an orderly transition.

“I am proud of what we have accomplished during my tenure at Medtronic and am confident that we made the right investments in talent, quality and innovation to position the company for long-term growth and future success,” Hawkins said in a statement.  “It has been an honor and a privilege to lead such a talented, committed organization and I will work closely with the board to ensure that the transition to my successor is smooth and effective.”

When Boston Scientific Corp. (NYSE:BSX) hosted its investor meeting in late November — its first in years — the company played Van Halen’s “Right Now” and Jesus Jones’ “Right Here, Right Now” during breaks in its presentation.

However, one Wall Street analyst suggested a different song for BSX’s soundtrack.

“After sitting through the meeting, our review of what was said suggests Van Halen’s ‘Dreams’ would have been a more apt pick,” Matthew Dodds, a Citigroup analyst wrote in a research report. “We just don’t envision a scenario of Boston’s combination of revenue acceleration while aggressively cutting costs as viable.”

Ouch.

Suffice it to say, analysts weren’t too impressed. And now that BSX is reportedly dropping plans to sell its neuromodulation unit, the company’s growth plans are looking even more unrealistic.

During its investors presentation, BSX told analysts it could boost earnings per share growth (EPS) by 11-12 percent annually through 2015, mostly through aggressive cost cutting.

The company based in Natick, Massachusetts, with major operations in Minnesota also said it would use $7 billion in projected free cash flow to pay down debt, pursue acquisitions, and reserve funds against legal and tax liabilities.

Wall Street, though, wondered how BSX could afford to do all of that, especially with sluggish sales growth.

“We question how Boston can acquire growth assets and invest to maintain leadership positions with a depressed balance sheet vs. peers and a stated objective to maintain absolute levels of [research and development] spend,” David Lewis, an analyst with Morgan Stanley, wrote in a research report. “Competition for attractive growth assets is likely to be intense, and competitors continue to invest heavily in internal development programs.”

One thing that might have alleviated that depressed balance sheet: selling off neurmodulation.

In October, BSX said it would sell its neurovascular unit to Stryker Corp. for $1.5 billion. Analysts also had expected BSX to fetch $1.5 billion to $2 billion for neuromodulation, where it lags far behind competitors Medtronic Inc. (NYSE:MDT), based in Fridley, Minnesota, and St. Jude Medical Inc. (NYSE:STJ), based in Little Canada, Minnesota.

But Bloomberg News reported this week that BSX abandoned efforts to sell its pain management business because suitors weren’t willing pay what it wanted.

That could be a big blow to BSX’s long term plans. That $1.5 billion to $2 billion equals approximately one year’s free cash flow over the next five years, according to the company’s projections.

And BSX really can’t count on boosting cash flow through sales growth. Analysts say BSX’s pipeline looks thin. Recent acquisitions like its $193.5 million decision to buy Asthmatx, Inc., a maker of catheter-based systems to treat asthma, and $386 million bet on heart valve maker Sadra Medical Inc. aren’t likely to yield any short term benefits to revenue.

“BSX talked up the opportunity in several cardiovascular, neuromodulation, and general surgery markets, but we believe it is sorely lacking in near-term products that can move the needle vs. the competition,” Dodd of Citigroup wrote. “BSX has made some effort to build out its pipeline with the recent deals for Asthmatx and Sadra, but both deals will take a while to have an impact and the internal programs had little to highlight in the way of clinical [trials].”

May I suggest a new song for BSX’s next investor meeting?

“Living on a Prayer,” by Jon Bon Jovi.

The medical device giant, based in Fridley, Minnesota, said its Arctic Front system is the first FDA-approved technology in the United States to freeze diseased tissue that causes irregular heartbeats or quivering of the heart.

“This technology represents a significant improvement over currently used focal ablation treatment for atrial fibrillation,” Dr. Vivek Reddy, director of Electrophysiology Laboratories at Mount Sinai Medical Center, said in a statement. “This unique ablation approach fills an unmet need in AF ablation by providing a straightforward and efficient approach to pulmonary vein isolation, while giving patients a new, minimally-invasive treatment approach proven to be safe and effective.”

Medtronic is essentially doubling down on the estimated $2 billion global AF market by developing technologies based on radio energy and subzero temperatures.

Medtronic inherited Arctic Front in 2008 when it paid $380 million to purchase CryoCath Technologies Inc. The Canadian company makes catheters (tubes) and balloons that restore normal electrical signals in the heart by freezing the tissue or pathways behind the irregular quivering.

“This next-generation technology demonstrates Medtronic’s commitment to providing physicians with innovative solutions proven to help them efficiently, effectively and safely treat patients suffering from Atrial Fibrillation,” Reggie Groves, vice president and general manager of Medtronic’s AF Solutions division, said in a statement.

In August, Medtronic won approval from Canadian regulators to sell a system originally developed by U.S.-based Ablation Frontiers Inc. to treat AF with radio frequencies.

About 2.2 million Americans suffer from AF, in which the two small upper chambers of the heart quiver instead of beat normally, according to the American Heart Association. When the patient’s heart is not pumping effectively, blood pools clot and get lodged in the brain, causing strokes.

The company, which had abandoned an effort to go public two years ago, netted $3.5 million and $1.5 million in two separate SEC filings.

In 2008, CSI filed an initial public offering (IPO), hoping to raise $86.3 million to help expand sales of its Diamondback 360 device, which removes plaque from peripheral vessels in the pelvis or leg. But given the weak economy and non-existent demand for IPOs, CSI ultimately merged with Replidyne Inc., a publicly traded shell company with $40 million in cash reserves.

The company is conducting a clinical trial, dubbed Orbit II, to see if Diamondback 360 can effectively treat coronary arteries or vessels above the waist. Winning approval from the Food and Drug Administration for such a use would open a significant new market to CSI, CEO David Martin said.

Former Medtronic vice president Dr. Glen Nelson, a prolific local medical device entrepreneur and investor, serves as CSI chairman.

The alternative investment firm and activist shareholder purchased a 12 percent stake in SurModics Inc. (NASDAQ:SRDX) because it saw a clear opportunity to boost the stock and turn a nice profit. In its quest to name three people to the SurModics board, Ramius said it did not want to break up the company or replace the board.

That may no longer be the case.

Earlier this week, SurModics named former Arizant Inc. CEO Gary R. Maharaj as its top executive after pushing out Bruce Barclay in June. More importantly, Surmodics, based in Eden Prairie, Minnesota, said it hired Minneapolis investment bank Piper Jaffray & C0. to explore the sale of its pharma unit.

So how will the investment firm respond? I can’t imagine it’s too pleased. Ramius said it wanted to help choose the next SurModics CEO. SurModics lacked a permanent leader for six months and then named one just a few days after Ramius filed its proxy statement? That’s one heck of a coincidence.

A potential sale of SurModics’ drug business poses a trickier question for Ramius. Ridding pharmaceuticals unquestionably saves SurModics much-needed cash. Ernest Andberg, an analyst with Feltl & Co. in Minneapolis, estimates the company’s new $40 million plant in Alabama requires $10 million a year to run.

Since SurModics said it would explore a sale Tuesday, the company’s stock soared about 20 percent to $12.40 before falling back to $11.50. Andberg thinks Wall Street has now fully priced the value of a potential sale into SurModics stock.

SurModics stock closed at $9.03 per share on November 11, the day Ramius purchased two million shares, according to documents filed with the Securities and Exchange Commission. If Ramius elects to sell now, the firm could walk away with a $5 million profit.

Here’s the big question: is there a reason for Ramius to hang onto its shares? That depends on whether Ramius thinks it can wring more value out of SurModics. With pharma out of the picture, the only way Ramius can push SurModics stock to, say, $20 a share in the immediate future is an outright sale of the company, Andberg believes.

But for Ramius to do that, the firm may have to replace SurModics’ board, which probably would resist selling the company.

Sell or attack? Decisions, decisions.

Stephen Marks Sr., president and CEO, Tower Investments

Oh Steve, Steve, Steve. You didn’t, right?

Oh yes, you did.

When you’re the president and CEO of a major national real estate development firm, it’s best to develop a thick skin. It’s also probably not a good idea to post public comments to a news website when you’re pissed off at 1 o’clock in the morning.

Yet that’s exactly what Steve Marks, CEO of Tower Investments in California did upon reading my story Tuesday on the troubled Elk Run BioBusiness Park his company is developing in Pine Island, Minnesota.

I could summarize them. But instead, read his rant  in all of its uncensored (not to mention grammatically incorrect and misspelled) glory:

I am president and ceo of Tower Investments.  An incredible amount time, money and professional expertise has been spent on this project.  We have massive support from public officials – why, because they see the tremendous addition to the community with a bio-tech park in their community.  Yes, timetables have been delayed and Tower has been under serious confidentiality agreements with prospective users and tenants.  if you believe that there are not seriously interested parties to be part of a new bio-tech park 12 miles from Mayo and less than an hour to Uof Minn, you are badly mistaken.  This is a multi-year project.  The support from the constituients and stakeholders has been overwealming.  Frankly, if the public listened to your negative reports, there would be no growth in SW Minnesota along the line of bio-tech, a very strong field.  We have continuous meetings with top experts in the field, and the stars must align, size, type space, financing, timing and negotiations over the past 3-4 years in Elk Run.  It is my expectation that, unless your goal is roadblocks so you can “i told you so”, why you try to try to support a potential bio-tech park with prospectively several thousand workers over time, then if i were you i would try to help the project, not sandbag it with untrue facts and toal speculation on your part.  Join our groups of hundreds that are enthousiastic about the future,  In a perfect world, we have the precise space of Stanford Research Park in Palo Alto, which took years to develop.  Rather than try to tear Elk Run down (which accomplishes nothing for the citizens), whi don’t you take a common courtesy approach to the hard working developers and stakeholders that have worked tirelessly for several years, and give the some slack.

Actually, upon further review, that’s a pretty coherent and reasonable comment. The same cannot be said for the next one:

if you think we are neophites trying to create something out of nothing, i suggest you review our websites:  www.towerinv.com and burrill company.  burrill is worldrenowned and we are extremely fortunately that he has taken a serious likeing to this project.  Burrill travels worldwide continually, just returning from the middle east, russia and south Korea – you check his bio before you throw him under the bus in your narrative.  Don’t pass us off as lightweights with no credibility.  So it takes longer to get a biotech park right, so be it, would you prefer to run Elk Run off and go back to corn fields?  Have you ever funded and managed such an endeaver.  You have embarassed us both by your article.  This is ludicrous and i feel you owe Steve Marks and Steve Brurrill an apology.  This project may or may not succeed, but wih the team and support in place, it is likely to succeed, which is going to make you look like an ass.

Hmmm. Where to start? I guess I should say that plenty of  people already think that I’m an ass.

But that’s besides the point. Let me offer my response to Marks:

1. Elk Run is in southeast Minnesota, not southwest. If you’re going to defend your project, at least know where the darn thing is.
2. Don’t refer to yourself in the third person. Only Lebron James can do that.
3. Tower and Steve Burrill may have a long and impressive resume. But they have absolutely NO experience in developing a biotech research park, never mind one in a rural community. It’s also worth noting that Tower’s original plans for Elk Run did not include a biotech park. That came once the state offered nearly $2 million in infrastructure improvements.
4. Corn fields at least grow corn. A bunch of dug up dirt and empty shells of buildings don’t do anything.
5. Use your public relations firm. That’s what you pay them for. And if you don’t have one, hire someone fast, preferably someone on retainer at 1 o’clock in the morning.
6. There’s no such thing as a free lunch. You don’t get an “A” for effort. Marks (and Burrill, for that matter) seem to believe that we should “cut them some slack” because they are trying to do something in Minnesota. But if we demand accountability from elected officials, shouldn’t we expect the same from out-of-town, for-profit real estate developers who are benefiting from millions of dollars in federal and state aid? Just saying.

One more point. If Marks thinks that I’m the only one in Minnesota who’s skeptical of Elk Run, then he should think again.

So instead of calling me names from California on the Internet, perhaps Marks’ energy is better spent getting on a plane to Minnesota and making his case to the people of this state.

Rep. Tim Mahoney (D-St. Paul), the former chairman of the now defunct House Biosciences and Workplace Development Committee, supports Elk Run. In fact, Mahoney was instrumental in helping to secure state dollars for the infrastructure improvements.

But Tower should do a better job at updating Minnesota on where Elk Run stands and offer realistic timetables, Mahoney said.

As far as I can tell, this is the first time Marks has publicly commented on Elk Run to Twin Cities media. Normally, he leaves that inconvenient job to Tower senior vice president John Pierce and project manager Geoff Griffin.

Now if you’d excuse me, I need to find out if my friends, colleagues, cats, and parents think I’m an ass.

Just a day after the company based in Eden Prairie, Minnesota, said it would formally respond to Ramius LLC’s efforts to name three people to its board of directors, SurModics announced late Tuesday it had named a new CEO and would explore a sale of its pharmaceuticals business.

SurModics said it appointed Gary R. Maharaj as president and CEO six months after pushing out Bruce Barclay in June. Maharaj was previously CEO of Arizant Inc., which 3M Cos. (NYSE:MMM) recently acquired for $810 million.

SurModics also said it hired Minneapolis investment bank Piper Jaffray & Co. to explore “strategic alternatives,” including a sale, for its pharmaceutical unit. Such a sale would be a tacit admission that its decision to open a $41 million pharmaceutical plant in Alabama just this year was a (very expensive) mistake.

“Our Pharmaceuticals business has compelling long-term growth and profitability prospects and operates a world-class facility for the manufacture of both clinical and commercial pharmaceutical products,” Chairman Robert C. Buhrmaster said in a statement.

“However, our Board determined that the best course of action is to explore alternatives for our Pharmaceuticals business so that we can dedicate more resources and efforts to pursuing growth opportunities and investments in our Medical Device and In Vitro Diagnostics businesses,” he said.

The real question is how Ramius, the alternative investment arm of Cowen & Co., will react. The firm, which became SurModics’ largest investor by recently purchasing a 12 percent stake in the company, asked shareholders last week to approve its three nominees to SurModics’ board of directors.

While critical of SurModics’ performance, Ramius said it wanted to help, not replace, the board.

There really are only two possibilities here. One: Ramius already knew about the new CEO and possible pharma sale and approved it. Or two: SurModics wanted to preempt Ramius by taking action to appease shareholders.

I initially leaned toward to Option One. But now, I’m not sure. Wouldn’t Ramius want a say in such major decisions? Otherwise, why nominate three people to the board?

Ramius partner managing director Jeffrey Smith did not immediately respond to an e-mail seeking comment.

The plot thickens.

Algadi is not a priest or philosopher, at least professionally. Algadi, the city administrator for Pine Island, Minnesota, was referring to the fate of the much maligned, often delayed Elk Run BioBusiness Park.

You really can’t blame Algadi for appealing to the Almighty. Four years after Tower Investments floated the idea of a medical device/biotechnology mecca creating hundreds of jobs in rural Minnesota, the only thing Pine Island has today is construction equipment and some dug-up dirt. A $1 billion fund from San Francisco investor Steve Burrill has yet to materialize. Tower says it’s signed up tenants but has not said who they are.

Tower has delayed (again) construction of the first building to March 2011. But does it really matter? There’s already been plenty of ink spilled (especially from this reporter) about the wishful thinking, the lack of accountability, the broken promises, the missed deadlines.

No, at this point, we should ask ourselves: what’s Plan B?

And that’s the real problem. There is no Plan B. It’s biotech or bust.

“Given the money and time that has [gone] into this project, the only thing we can do is wait,” Algadi said.

Giving up now would be a waste of money, said Rep. Tim Mahoney (D-St. Paul), the former chairman of the now defunct House Biosciences and Workforce Development Committee. Minnesota already has spent nearly $2 million in infrastructure improvements for Elk Run. Another $30 million-to-$40 million in federal highway money and state bonds will build an interchange off Highway 52.

Reasonable people can disagree, but I suspect that face saving, not economic wisdom, is what’s driving Elk Run now. No one wants to admit failure. After all of the posturing, money and effort expended these past few years, we gotta build something.

And something will be built. It just won’t be anything remotely near what Tower and Burrill originally sketched out. A few medical/biotech companies might even move in, though no one outside Tower and the BioBusiness Alliance of Minnesota really knows.

Algadi sounds like he doesn’t even want to know. “As long as it’s not a coffee shop or something like that,” he said.

As long as it’s not a coffee shop? Boy, we’re setting the bar r-r-r-e-a-l-l-l low, these days.

Elk Run has been a major distraction, said former Sen. Kathy Saltzman (D-Woodbury), a major architect of the state’s new $60 million angel investment tax credit.

Instead of focusing on more promising, practical economic development projects, “we’re wringing our hands every time Elk Run is delayed,” she said. “Was Elk Run ever going to work?”

The only one who knows the answer to that question does not live among us mortals.

And He ain’t talking.