DePuy's AOX Antioxidant Polyethylene on the Sigma knee replacement

DePuy Orthopaedics launched several new surgical products this week for knee, shoulder and hip revisions.

The Johnson & Johnson (NYSE:JNJ) subsidiary accounted for $5.8 billion in sales in 2011, but those sales were offset by $521 million in costs associated with the 2010 recall of its metal-on-metal ASR hip replacement system. That line of products had such a high failure rate that it was pulled from the market and even more costs were racked up with a slew of lawsuits filed against DePuy.

Presumably the company hopes to regain consumer confidence by continue producing out new technology for its implants. The following products were launched at the 2012 American Academy of Orthopaedic Surgeons meeting this week.

Knee surgery

The newly released AOX Antioxidant Polyethylene is a new formulation of polyethylene, which is a material commonly used as a bearing surface in joint replacements. When exposed to oxygen, it creates free radicals that can weaken the implant. This new formulation includes antioxidants to provide wear resistance in DePuy’s Sigma rotating platform total knee replacement and LCS complete mobile bearing knee systems.

The technology received premarket FDA approval in December of last year and is similar to fellow Indiana orthopedics company Biomet’s antioxidant infused technology for knee bearings.

Another new product, Trumatch Personalized Solutions technology for use with SIGMA Fixed-Knee Bearing Knee System, aids implant positioning and can reduce procedure time by up to 35 minutes. It uses CT scans and computer software to guide the personalized development of femoral and tibial cutting blocks that match the bone surfaces of each patient.

Hip surgery

Cleared by the FDA last February, the Reclaim Modular Revision Hip System includes novel instrument technology to improve intraoperative handling, flexibility and efficiency, the company says.

Another hip system, the Gription TF Acetabular Augment System, uses commercially pure titanium foam, a strong, corrosion-resistant metal with high surface roughness and elasticity that’s similar to bone, and fills the gap between the acetabular bone and cup in patients with severe bone defects. Its advantage, the company says, is that it’s engineered to provide numerous options and configurations for customization.

“The new DePuy hip and knee implants are produced using a new, never-before-used titanium foam. Their effectiveness will hopefully prove more successful than the recalled DePuy ASR XL Acetabular System and ASR Hip Resurfacing system hip implants,” said David Floyd, DePuy’s worldwide president who resigned last March, in an article from 2011.

Shoulder surgery

A unique feature of the Global Unite Platform Shoulder Arthroplasty System is that it can easily be converted to a reverse shoulder arthroplasty later for treatment of arthritis with a torn rotator cuff. It is also supposed to help improve healing, the company says.

Finally, the Global Steptech Anchor Peg Glenoid is designed to correct excessive retroversion caused by posterior glenoid bone loss and minimize the removal of healthy bone.

This post is sponsored by BioCrossroads.

According to a report recently released by BioCrossroads, the medical devices industry is one of Indiana’s most valuable economic assets employing over 20,000 people, and generating more than $10 billion of annual economic output. The first of its kind report, From Hearts to Hips: Indiana’s Leadership in Medical Devices, was compiled by FaegreBD Consulting and BioCrossroads to shed light on the current landscape of the sector and to identify challenges on the horizon.

Today, the medical devices sector accounts for more than 40 percent of the jobs in the state’s life sciences industry placing Indiana as the fifth largest state in percentage of medical technology industry employment. And in 2010, Indiana’s medical device companies manufactured more than $2 billion worth of exports, or approximately $100,000 per employee. The industry provides high-paying jobs with the average employee earning $60,000 annually, more than 56 percent higher than the state’s average private sector worker.

“From small towns to larger cities, the economic impact of the medical devices industry is significant and is well-distributed throughout the state,” said David Johnson, president and CEO of BioCrossroads. According to the report, the geographic diversity of the sector spans Warsaw and Indianapolis to Bloomington, Spencer and West Lafayette.

A recognized leader in the field, Indiana’s medical devices sector is highly diversified and offers a broad depth of products used throughout the world. Major companies such as Biomet, Boston Scientific, Cook Medical, DePuy, Medtronic, Roche Diagnostics and Zimmer are either headquartered or maintain major operations within the state and develop a wide variety of medical devices from cardiovascular to urological to diagnostics and orthopedics.

“This report is proof that Indiana’s medical devices sector is robust and resides on a solid foundation that positions us well for future growth,” added Johnson. “There are still many external factors like the economic, regulatory and health care reform environment that pose real challenges for this industry.”

The report delves into external challenges the industry faces today. In addition to the current economic conditions that have lowered the demand for some medical devices, the industry faces even bigger challenges to overcome in the next decade including:

• A rapidly changing health care market
• Tax policies that discourage innovation
• Increasing regulatory uncertainty
• A shift to overseas production and expansion to overseas markets
• Technological changes requiring more worker education
• Increasingly competitive global market

“Indiana’s medical device industry is a cornerstone to the state’s life sciences sector and the state’s economy overall,” said Dave Zook, Chair at FaegreBD Consulting. “There are several looming challenges that, if unaddressed, will significantly weaken the industry and the state’s economy.”

The full report is available at www.biocrossroads.com.

But nursing schools are slow to change, and in order to graduate successful nurses who are prepared to enter the rapidly changing digital world of healthcare, there needs to be some changes in how nurses are trained and transitioned, says Beth Ulrich, Ed.D., R.N., FACHE, FAAN.

Ulrich is the editor of Nephrology Nursing Journal and a national thought leader on nursing education and workforce issues. Her new book, Mastering Precepting: A Nurse’s Handbook for Success, was published by the Honor Society of Nursing, Sigma Theta Tau International (STTI), out of Indianapolis, Indiana late last year.

She offered up her thoughts on the current nursing shortage, how healthcare reform is changing the field and what the rise of digital health will mean for the future of nursing.

We’ve heard a lot about a current nursing shortage — is there one, isn’t there one? What’s the deal?

There are two different things when we talk about a nursing shortage: a shortage of nurses and a shortage of nurses in hospitals. Over 40 percent of nurses don’t work in hospitals. There are nurses disguised in a lot of other job titles at insurance companies, pharmaceutical companies, nursing homes, etc. Most often when we’re talking about a nursing shortage, it’s in hospitals because it’s a very hard job with a lot of strange hours and it’s very intense.

I think we will need more nurses. What we’ve seen is that anytime unemployment goes up, nurses come back to hospitals. So a number of new grads haven’t been able to find jobs because more experienced nurses lost their jobs and went back to hospitals. Nurses who came back into hospitals during the recession are likely to leave as national employment goes up.

How is the supposed shortage being addressed?

Beth Ulrich

Hospitals that are really foresighted are putting new graduate nurses through a residency program with a preceptor. It’s hard to get over the gap between nursing school and working in a hospital, and we were losing a lot of new nurses when hospitals weren’t doing that. Increasing numbers of hospitals have the residency program and the National Council of State Boards of Nursing has done research showing that “transition to practice” slows down turnover and gets them engaged.

It seems that more specialized-care nurses are in higher demand these days. Why is that?

With accountable care organizations, the concept is different than that you only take care of the patient when they’re in the hospital. Now you have to worry about them more before they come in and when they go home — there has to be continuity of care, which means more nurses with different sets of skills. Home health nurses, visiting nurses and public health nurses are becoming more needed.

At the same time, patients are sicker. As reimbursement has decreased, you’ve tried to make the patient’s stay as short as possible, so you’ve compressed their care. With ACOs, they can go home sooner, but that’s going to compress it yet again. So a higher severity of sickness means even more specialized nurses.

With schools of nursing, it takes them a while to change their curriculum. I don’t think a lot of the stuff that we need for ACOs these days is being taught in nursing schools. It’s one of those things where you teach them when they get to the hospital. That’s what the residency is for.

What challenges to electronic medical records pose for nurses?

There are a number of schools that are starting to do some simulation of EMRs. If they’re in a hospital with EMRs, they have “plays pace” where you can document things, but it doesn’t really go into the chart. Some of the schools use human-patient simulators that can be connected to EMRs.

How has the role of the nurse changed as hospitals integrate more digital health measures?

Nurses have to have a broader knowledge base because they can’t just know about acute care nursing. The place where we have the most problems with communication is in hand offs, from different units or home. And it works from both sides — it’s also how you take the patient from the community. That’s why there’s the big push to get everyone on EMRs, so that everyone has the same information.

The insurance companies have really stepped up — when data comes in with drugs that shouldn’t be taken with each other, they say ‘no, no’. Some of the pharmacies have gotten better, too, but that assumes that you go to the same place every time. Those are the kinds of things where there’s no real captain of the ship

I think nurses are very well positioned to do that. They’re very holistic; they’re taught to take care of the whole patient. That knowledge base is a very good foundation for all the changes that are going on in healthcare.

[Photo from Flickr user salforduniversity]

An Indiana neuroscience pharmaceutical company hopes it can gain entry into the market for Alzheimer’s disease treatment with experimental drugs it thinks could prevent the progression of the disease in the growing population of seniors.

Based on the work of Dr. Michela Gallagher of John Hopkins University, AgeneBio of Indianapolis is working to slow the progression of memory loss and Alzheimer’s disease in aging adults.

For its lead product, the company is repurposing an existing anti-seizure medication to prevent the progression of amnestic mild cognitive impairment (aMCI) to Alzheimer’s disease. It’s using the drug as a neural stabilizer to normalize excess neural activity, which the company’s proof of concept trial results released last summer showed contributes to brain dysfunction associated with memory loss.

According to the Alzheimer’s Disease Drug Discovery Foundation, aMCI affects 3 million Americans, 15 percent of whose condition progresses to Alzheimer’s disease each year.

A recent filing with the U.S. Securities and Exchange Commission reveals that AgeneBio is seeking fresh capital for its next move. It has already raised $3.7 million from 27 investors in a $5 million offering. So far, the startup formed in 2008 has been supported heavily by grants; it was awarded more than $316,000 in 2009 and 2010 from the state of Indiana’s Qualifying Therapeutic Discovery Program, $240,000 from the Alzheimer’s Drug Discovery Foundation and $300,000 from Indiana’s BioCrossroads.

Its second product is a novel approach to a GABA target, according to its website.

AgeneBio is just one of hundreds of companies looking to capitalize on the growing market for Alzheimer’s treatment, which is forecast to more than triple from $4.3 billion in 2009 to $13.3 billion in 2019 in seven major markets, according to Decision Resources.  As baby boomers age, the race is on to advance treatment from traditional therapies that address Alzheimer’s symptoms to new treatments that can slow, stop or even prevent the disease.

AgeneBio CEO Robert Postlethwait is a 30-year Eli Lilly alumnus who served as president of the pharma giant’s Neuroscience Product Group. He told Inside Indiana Business earlier this year that the company’s next challenge is finding a biomarker that shows its drug is improving patients’ memory. A call requesting an interview was not returned.

I thought it would be a good time to rerun my post from earlier this year about conflict of interest problems with Xigris:

An Archives of Internal Medicine article (Conflicts of Interest in Cardiovascular Clinical Practice Guidelines) is getting a lot of notice today. In essence, many of the physicians who develop guidelines that influence practice patterns and payment decisions have conflicts. The authors recommend only allowing those without conflicts to write the guidelines.

This isn’t a new issue. In 2006 I wrote a piece (Another dirty little secret is out in the open) and am reposting it below because it’s timely:

A year ago in Time to deal with medicine’s dirty little secrets?, I wrote about a variety of practices that are relatively well-known in the health care field but would be shocking to outsiders. Industry often takes the blame for “aggressive marketing tactics,” and no doubt some of that is deserved. But physicians are also culpable.

The open secrets include the ghostwriting of journal articles by industry sponsors, physicians and academic medical centers holding ownership stakes in companies whose products they are researching, the clinical role sometimes played by orthopedic sales reps, and perhaps the most egregious example: physicians who set guidelines having financial relationships with the companies that benefit from how those guidelines are set.

Now we have a new example, which is even more serious than usual. A recent New England Journal of Medicine article blames Eli Lilly for overzealous promotion of Xigris. According to the Boston Globe:

Eli Lilly and Co. funded medical guidelines created for the treatment of [sepsis] in an effort to boost sales of a drug with questionable benefits. The allegation was made by senior scientists at the National Institutes of Health. [They] said Lilly tried to shape the guidelines for use of the drug Xigris by sponsoring a three-pronged marketing campaign

The first two phases are by now almost standard practice in the industry:

1. Lilly paid a task force to spread the word that hospitals were rationing Xigris because of its cost, which forced docs “to decide who would live and who would die”
2. Lilly “orchestrated” the development of practice guidelines to treat sepsis that called for early use of Xigris (an example of the phenomenon I have described before)

But then Lilly allegedly took a third step, which was a little shocking even to me:

Now, Lilly is sponsoring lobbying efforts to turn the guidelines into quality standards. Hospitals that follow such quality measures receive higher payment from insurers.

What’s happening here? Basically, an influential group of doctors is being lazy and greedy, and Lilly is enabling their behavior. The doctors put their fingers in the cookie jar and Lilly keeps restocking it. The public is paying for the cookies –in the form of higher product sales and sub-optimal health care– and should get fed up!

I have no problem with companies using legal means to promote their products, even if their tactics are “aggressive.” They owe it to their shareholders to maximize return on investment. But it isn’t in their long-term interest to push things as far as the medical profession often lets them.

Industry leans on the reputations of individual physicians (aka “key opinion leaders”), medical societies (aka guideline writers), and journals to legitimize their marketing messages. It’s up to the medical profession to scrutinize industry claims and issue independent guidelines and quality standards. Sometimes these claims hold up and deserve to be propagated. Sometimes they don’t. If the docs and journals don’t do their jobs they deserve to lose credibility.

It’s hard to know the extent to which medical guidelines are already corrupted. The situation is a bit like the incident when the Chinese President’s plane was refitted. In the process of fixing up the plane someone inserted a bunch of listening devices (presumably at no extra charge). When the Chinese checked out the plane and realized it was bugged they had to rip the whole thing up. That’s something like what is going on within the major payers. They’ve stopped treating journal articles and guidelines as objective and have started doing their own analyses. But do we really want to leave health care decisions just to them?

Here’s some free advice to the different players in health care:

• Industry: Feel free to market your products and services aggressively, but don’t take things too far. If you do you’ll end up killing the goose that lays the golden eggs. No one will trust doctors, guidelines or journals anymore
• Physicians: Remember that pharma and device companies are not stupid. If they spend money supporting your research or sending you to conferences or sponsoring continuing medical education it’s because they expect to get a return on their investment. It’s awfully hard to remain objective in such instances. Your job is to adopt the best medical practices and put the patient first –sometimes that requires expensive new treatments and sometimes old, cheap standbys are better
• Payers: Go ahead and challenge the objectivity of journal articles and guidelines. On the other hand, don’t pretend that low cost is always synonymous with best treatment. Expect physicians to keep you in line on that.
• Patients: You need to look out for yourself. Find a good, honest physician. Take a look at who’s sponsoring the educational materials you receive. Ask your physician about alternative treatments and do some research yourself

The author, David E. Williams, is the co-founder of MedPharma Partners who writes regularly on the Health Business Blog.

Cook Medical's Evolution Duodenal Controlled-Release Stent

A gastrointestinal stent from Cook Medical now has 510 (k) clearance from the U.S. Food and Drug Administration for use in patients suffering GI obstructions caused by cancer.

Bloomington, Indiana-based Cook said that its Evolution Duodenal Controlled-Release Stent will be available for patients experiencing gastric outlet obstruction (GOO), a late-stage complication of GI-related cancers. Pancreatic cancer is the primary cause of GOO, though other cancers can cause the condition. Symptoms and complications of the obstruction include abdominal pain, vomiting and constipation.

Bypass surgery is one option to treat GOO, though surgery comes with risks and not all patients who undergo surgery report sufficient relief of their symptoms. Stents offer an alternative and work by alleviating obstructions in the duodenum, the part of the small intestine that connects to the stomach.

Cook’s new stent will compete with other stents on the market. But Cook, which has its GI unit in Winston-Salem, North Carolina, said that its stent can give doctors greater control and maneuverability within the curvature of the duodenum. The stent is also designed to better stay in place, reducing the risk of perforating the intestines.

Cook aims to back up its claims with data. In a European study, the company said 21 of 23 patients experienced “significant improvement” with its stent. A separate study of 110 patients has enrolled and analysis of data is under way.

When the topic of the 2.3 percent medical device excise tax arises, Cook Medical‘s Scott Sewell is quick to frame the discussion around jobs.

Of Bloomington, Indiana-based Cook’s roughly 10,000 employees, 6,000 work in the United States; 525 in the company’s endoscopy unit in Winston-Salem, North Carolina. Sewell said that although the company has two new plants in Illinois and Indiana, in the last year the company has halted capital investments because of the cost uncertainty presented by the tax. Sewell said that the tax hike to the company comes to $23 million a year. Privately held Cook’s annual revenue is about $2 billion. Half of that comes from the United States.

I caught up with Sewell, vice president of technology acquisition and development at Cook, after the annual meeting of the North Carolina Biosciences Organization this week in Research Triangle Park, North Carolina. Sewell spoke up at the meeting and afterward he was eager to talk more about the tax’s impact.

The medical device excise tax, included in federal healthcare legislation passed last year, goes into effect in 2013. Supporters of the measure say that the addition of people to insurance company rolls as a result of healthcare reform will lead to more sales of medical devices. The higher sales will offset the impact of the new tax, according to a report from the Urban Institute. The spending and tax changes “are simply too small relative to the overall size of the economy to have much of an impact,” the report says.

Sewell disagrees with projections of higher medical device sales. Just because more people are insured doesn’t mean more medical devices will be sold. He adds that device makers will have a new tax without a way to pay for it. In order to pay for it, companies will cut from R&D, among other places. Sewell said that Cook has never had a layoff. But instead of leading to hiring, the tax could lead to the first job cuts in the history of the company.

A report from medical device industry group AdvaMed projects the tax will lead to 43,000 jobs lost from the more than 400,000 medical device company jobs in the United States. And here’s where it could impact Cook in North Carolina. Sewell said 70 percent of the gastrointestinal products produced at Cook’s Winston-Salem plant go to the world market. But if taxes make it cost prohibitive to manufacture in the United States, that work could go to a lower tax Cook operation, such as the company’s Ireland facility.

“Companies have a choice of where they’re going to manufacture,” Sewell said.

The debate continues. Legislation has been introduced in Congress to leave federal healthcare reform intact but repeal the tax. Stay tuned.

Ekdahl will replace David Floyd, who resigned in March amid a damaging recall of one of DePuy’s hip replacement lines that’s already cost the company nearly $1 billion in legal expenses. The 20-year veteran of the company’s orthopaedics, trauma, sports medicine, neurosciences and spine units was the franchise vice president for DePuy Europe, Middle East and Africa.

Ekdahl’s experience should serve him as he looks to clean up nagging legal troubles from the massive recall of DePuy’s ASR hip replacement system and a daunting integration of orthopedic trauma colossus Synthes, which JNJ bought for $21 billion in April.

Ekdahl’s predecessor Floyd was named president of DePuy in Sept. 2007, after coming over from Abbott’s (NYSE:ABT) spine division. His arrival was accompanied by some fanfare, due to his connections to Warsaw — Floyd was an executive at Warsaw-based Zimmer Holdings (NYSE:ZMH) and went to college in the area, according to a 2007 article in the Journal Gazette.

“I think he’s going to be one of those truly charismatic leaders and he’s going to rally the troops,” George Grobe III, DePuy’s former vice president of research, told the newspaper at the time.

Although the company performed well during Floyd’s tenure, its fortunes began to change in August 2010 after it recalled the ASR device after receiving reports that a higher-than-normal number of patients required surgeries to correct or remove defective implants.

The company said it pulled the ASR XL Acetabular and ASR Hip Resurfacing systems from the market “due to the number of patients who required a second hip replacement procedure, called a revision surgery.”

Since then, numerous product liability lawsuits have piled up against DePuy, alleging that the company knew of design problems with the implants but failed to adequately warn physicians. DePuy introduced the ASR in the U.S. in 2005 after winning 510(k) clearance from the FDA.

Johnson & Johnson officials said the company paid nearly $1 billion in legal costs and settlements in 2010 related to the hip implant recall.

Initial funding of $11.25 million for the institute will be provided by the IU School of Medicine, the school’s Department of Medicine, Indiana University-Purdue University Indianapolis, the Indiana Physician Scientist Initiative and the Indiana University Melvin and Bren Simon Cancer Center. The institue’s members will be drawn from the IU schools of medicine, informatics and nursing.

Dr. David Flockhart, Director of the institute, said [1]:

Much of the future of health care is in personalized medicine, meaning more precise targeting of the right medication to the right patient at the right time. We believe it should lead to cost benefits — it clearly will be better for patients.

The mission of the Indiana Institute for Personalized Medicine will be to conduct research, train new specialists in personalized medicine and promote the translation of scientific discoveries into new more precise therapeutics for patient care. To help move scientific discoveries to patient bedsides, the institute will have a panel of IU scientists that will assist researchers moving their research beyond the laboratory stages. Initially, the advisory panel will have 21 members and be chaired by Wade Clapp, M.D., chairman of the Department of Pediatrics.

Mathew Palakal, Ph.D., associate dean for graduate studies and research at the School of Informatics said [1]:

Research in personalized medicine spans a broad spectrum from systems biology to nanomedicine to gene therapy. Our research in such areas as systems biology, biological network analysis and proteomics, along with our graduate programs in health informatics and bioinformatics, will enable informatics and the School of Informatics to play a significant role in the success of the institute.

Personalized Medicine and Systems Biology

Institute members will include staff from the IU school of Informatics,  some of which may also be affiliated with the Indiana Center for Systems Biology and Personalized Medicine (CSBPM). Founded in 2008, the CSBPM works to bring new discoveries in biology to clinical applications. The center’s mission is to cultivate “systems biology” approaches to address translational biomedical research problems.

Researchers who examine complex biological systems often feel frustrated because they are unable to put all their data together, in many cases tens of thousands of individual measurements. CSBPM co-director Sunil S. Badve, director of the translational genomics core at the IU School of Medicine and a primary pathologist for breast cancer research, understands the frustrations of both clinicians and basic science researchers. In a 2009 story about the CSBPM, Badve said [3]:

Until recently, cancer was cancer. Technology has advanced, and now we look at hundreds of markers, thousands of markers, at a time. We know the whole genome. So the question is, are there differences in tumor A versus tumor B when it is the same kind of cancer? And, can we exploit those differences for therapy purposes? Is type A cancer more responsive to a certain type of chemotherapy? That is the basis of personalized medicine. Each person has an unusual tumor regardless of whether it is breast or colon or lung cancer, and each unusual tumor needs to be treated according to the characteristics of that tumor.

Personalized Medicine is Promoting Collaboration

A recent first-of-its-kind study from the Tufts Center for the Study of Drug Development to measure the pharma/biotech industry’s progress in developing personalized medicines found that it is “occupying a growing role in the clinical pipelines of drug developers, and is leading companies to change their R&D paradigms, including how they make go/no-go decisions” [4]. One of the most important findings from the Tufts study revealed that drug developers are teaming with external partners, including academic medical centers and diagnostics developers, to advance the science of personalized medicine. This demonstrates that the process of achieving personalized medicine is dependent on industry-academia and industry-physician collaboration and relationships.

References

1. IU Personalized Medicine Institute to Develop Targeted and Individualized Treatments. Indiana University School of Medicine News. 2011 Feb 8.
2. The New Science of Personalized Medicine: Translating the Promise into Practice. PricewaterhouseCoopers LLP. 2009 Oct.
3. Reassembling the Elephant. Research & Creative Activity. Indiana University Office of the Vice Provost for Research. Volume XXXI Number 2. 2009 Spring.
4. Personalized Medicines Are Shaping the Way R&D Is Done, According to Tufts Center for the Study of Drug Development. Tufts Center for the Study of Drug Development. 2010 Nov 16.

At the end of 2010, Aarden reloaded with nearly $750,000 in grants and private investment, including money from Indiana’s BioCrossroads seed fund, President and CEO Gary Noonan said. That money is roughly the same amount the company raised in 2009. Clinical trials for the company’s tuberculosis drug are likely two years away, Noonan said.

Aarden spent 2010 developing a more potent version of its tuberculosis drug. Its technology inhibits protein tyrosine phosphatases, a step which scientists have long believed will unlock new treatments for an array of afflictions.

Aarden also hopes to advance two other treatments, one for cancer and the other for diseases including diabetes and lupus. But both are about a year behind the tuberculosis drug, Noonan said.

A statement from Riverside didn’t reveal the purchase price for Franklin-based G&H Wire Company. G&H sells springs, wires, bonding products and other orthodontics equipment.

G&H operates out of a single facility that’s used for production and distribution, as well as a corporate office.

Riverside has made 48 healthcare acquisitions since its founding in 1988, but the G&H deal marks its first foray into orthodontia, according to the statement. The company has announced eight healthcare transactions in 2010.

Last month, a Riverside portfolio company purchased a developer of smartphone applications that feature emergency care instructions.

Here are some of the top stories at MedCity News this week:

– Minnesota Sens. Amy Klobuchar and Al Franken along with Rep. Erik Paulsen have championed the medical device industry’s fears about upcoming changes to the FDA’s 510(k) approval program. I doubted the campaign would do much. But with the FDA close to recommending its changes, a bipartisan group of 15 senators sent a letter to FDA Commissioner Dr. Margaret Hamburg urging her agency, among other things, to adopt a more deliberate, cautious approach to amending 510(k).

– Orthopedics company Stryker Corp. (NYSE:SYK) has agreed to sell a product line including the bone growth putty that has caused the company so much legal grief to Olympus Corp. for $60 million. Kalamazoo, Michigan-based Stryker plans to record a loss on the sale of its OP-1 product line — which includes OP-1 implant, OP-1 putty, Opgenra and Osigraft — as well as a manufacturing plant in Lebanon, New Hampshire, of between $75 million and $80 million. That would erase between 19 cents and 20 cents a share from the company’s fourth-quarter earnings.

– A group of University of Minnesota professors want the board of regents to investigate the suicide of a patient enrolled in a university-run drug study. Led by Dr. Carl Elliott, the professors demand the regents appoint an independent outside panel of experts to examine the death of Dan Markingson, a mentally ill patient who killed himself after taking an experimental psychiatric drug developed by AstraZeneca. The professors accuse the school of several ethics violations, including financial conflict of interest and enrolling Markingson even though he may have been too sick to consent.

– Medical device startup NeuroWave Systems Inc. has received its first regulatory clearance from the Food and Drug Administration to begin selling a brain-activity monitoring system. The Cleveland Heights, Ohio-based company’s NeuroFAST Monitoring System is intended for use in hospital operating rooms, emergency departments and intensive care units, plus for clinical research.

– Neoprobe Corp. (OTCBB:NEOP) continues to take steps down the regulatory path to restart development efforts for its RIGScan cancer-detecting technology. The Dublin, Ohio-based company has been granted a first-quarter meeting with the Food and Drug Administration to discuss its plans to begin clinical testing that would lead to an Investigational New Drug application for RIGScan, which works by attaching itself to cancerous cells in the body, making them identified by a hand-held radiation-detection device.

Hopkinton, Mass.-based Stryker Biotech, former president Mark Philip and the sales reps — national sales director William Heppner and regional managers David Ard and Jeff Whitaker — were indicted last year for allegedly promoting the off-label use of a pair of bone-growth products and lying to the Food & Drug Administration. Stryker and Philip were also charged with making false statements to the FDA.

Federal prosecutors last month declined to produce evidence the defendants claimed could clear them of the charges. Now they’re ripping into the defendants’ arguments, filed in September, that 12 of the 16 charges should be dismissed.

The indictment alleged that the defendants were part of a scheme to promote the combined use of a pair of separate bone-healing products, each granted a narrow, provisional “humanitarian device exemption” by the FDA. Combining the treatments and devices — the OP-1 Implant, OP-1 Putty and the bone void filler Calstrux — caused adverse effects in patients ranging from minor irritations to infections requiring follow-up surgeries. The indictment also charges that Stryker and Philip lied to the FDA about the number of patients treated each year with OP-1 Putty.

Under the terms of the HDE granted for the putty, no more than 4,000 units per year are permitted to hit the market. The defendants had argued that a count against Philip for allegedly concealing the fact that more than 4,000 units of the putty were used annually should also go by the board.

“Philips motion labors under the misapprehension that neither he (nor Stryker Biotech who employed him as its president) had a duty to the FDA, the government agency that regulated Stryker Biotech’s medical devices, to make truthful disclosures and/or keep truthful documents regarding the number of patients treated with OP-1 Putty,” the prosecutors retorted. “Stryker Biotech had such a duty, and [broke the law] by taking steps, including procuring a bogus legal opinion, to cover up the falsity of Stryker Biotech’s 2007 annual report to the FDA regarding OP-1 Putty, and conceal facts in connection with the to-be-filed 2008 annual report.”

The defendants had also moved to have a pair of wire fraud charges (over emails allegedly sent as part of the alleged scheme) dismissed because the emails “merely bounced off a Massachusetts-based computer server while in transit,” according to court documents.

The feds countered that “venue is proper in any district where any part of the criminal conduct took place,” according to court documents.

“Venue is proper wherever the crime was begun, continued, or concluded,” the prosecutors wrote. “E-mails cross this country routinely over wire communication, and there is no good reason why they would be any less subject to the federal government’s wire fraud laws than older forms of communication.”

The defendants had also argued that another nine counts should be dismissed because the statute cited by the feds to back up the charges is too vague. Federal law requires that statutes be written clearly enough so that “men of common intelligence must necessarily guess at its meaning and differ as to its application.”

On the contrary, according to federal prosecutors.

“[N]ot only would a reasonable person of ordinary intelligence understand that the [Food, Drug &Cosmetic Act] prohibited the defendants’ conduct,” they wrote, “but each of these sophisticated defendants worked in a highly regulated industry and specifically knew and understood that distributing widely varying recipes for mixing OP-1 and Calstrux constituted misbranding and would subject them to criminal prosecution and punishment, a prohibition they willfully chose to ignore.”

In August, Stryker Biotech agreed to pay $1.35 million to settle Massachusetts attorney general Martha Coakley for alleged false marketing and fraud over its bone growth products — less than 24 hours after the charges were filed.

The tracing agent, florbetapir F 18 — which last week topped the Cleveland Clinic’s Top 10 Medical Innovations list for 2011 — is coupled with a PET scan to allow doctors to see inside patients’ brains to detect beta-amyloid plaques, the tell-tale signature of Alzheimer’s.

The acquisition of florbetapir, for which Avid is expected to file a New Drug Application with the Food and Drug Administration by the end of the year, could help Lilly step back from the patent cliff and associated revenue dropoff it faces over the next five years as its patents on blockbuster drugs expire.

The Avid acquisition also would gain Lilly entree to the fast-growing market for radiopharmaceuticals that can diagnoses diseases in earlier stages and help doctors better monitor treatment. And it would provide Lilly with a diagnostics development platform covering several disease areas, including Parkinson’s disease and diabetes, the Indianapolis company said in a release.

“The acquisition of Avid Radiopharmaceuticals aligns well with Lilly’s innovation-based strategy, offers a potential near-term revenue opportunity, leverages our neuroscience expertise and will immediately bolster our diagnostics capabilities,” John Lechleiter, Lilly chairman and chief executive officer, said in the release.

The combination offers Avid the deep pockets of a strategic partner to push florbetapir into the market.

“We are very excited to join the great scientific team at Lilly and continue our work to develop new molecular imaging agents capable of changing the medical management of significant chronic human diseases,” Dr. Daniel M. Skovronsky, Avid’s founder and chief executive officer, in the release. “We’ve had a productive and long-standing relationship with Lilly, and believe in their approach to providing improved outcomes for individual patients.”

Avid was spun out of the University of Pennsylvania, according to the Philadelphia Business Journal. Wayne, Pennsylvania-based Safeguard Scientifics Inc. owns 13 percent of Avid, investing $12 million since May 2007, the business journal reported.

Safeguard (NYSE:SFE) said it expects to receive at least $36 million from Lilly’s upfront payment of $300 million for Avid, the journal said. Safeguard could get a lot more if Avid meets performance milestones, for which Lilly has agreed to pay an additional $500 million.

The Avid Radiopharmaceuticals announcement even has an Ohio connection: Drug and medical products distributor Cardinal Health Inc. (NYSE:CAH) in Dublin and its nationwide network of radiopharmacies have partnered with Avid over the last two years (pdf) to help develop florbetapir.

Arcadia Resources Inc.

Under the brand name Arcadia Health Care, the Indianapolis, Indiana, company sells DailyMed medication and supplement packages to home care clients, provides medical staff to home care clients and institutions, and sells home care products through its catalog.

During the last three years, Arcadia has exited unprofitable businesses, cut jobs, closed or consolidated executive and support offices, and reduced professional fees to regain profitability, according to a regulatory filing. It expects to narrow its operating loss to $2.8 million in the quarter ended Sept. 30, an improvement from a $3.2 million loss (pdf) a year ago, but still not a profit.

In May and June, 2009, Arcadia sold its home healthcare equipment, industrial staffing and retail pharmacy software businesses for nearly $11 million to refocus on the increasing demand for home health care. The company’s recently adopted vision is “Keeping People at Home and Healthier Longer.”

Arcadia’s DailyMed medication management program, which packages 30-days’ worth of a patient’s medications and vitamins by date and time of dosage, is the fastest growing part of the company’s pharmacy business. It is designed to help patients better follow complex or chronic drug regimens, improve the quality of life for patients living at home and reduce costs for payers.

Medication-related problems like taking the wrong medications or not taking them at all creates more than $200 billion a year in avoidable medical expenses, according to the American Society of Consultant Pharmacists.

Arcadia acquired DailyMed in 2007 with the company’s $24 million purchase of PrairieStone Pharmacy LLC of Plymouth, Minnesota. Retail pharmacy entrepreneur Marvin Richardson, who was co-founder, CEO and president of PrairieStone, became Arcadia’s chief executive and president in January 2007.

Arcadia launched DailyMed in Indianapolis shortly after relocating its corporate headquarters there from Michigan in late 2007, promising to create hundreds of jobs in exchange for hefty tax incentives.

This May, Arcadia announced another job spurt after lining up customers like WellPoint for its DailyMed program — up to 930 (pdf) managers, pharmacists, pharmacy technicians, account managers and sales jobs for its headquarters. Those additional jobs could spur $13.5 million more in job-creation incentives from the state.

The company’s shares are trading for about 37 cents apiece on the NYSE AMEX Equities market, down nearly six-fold from more than $2 in January 2007.

SonarMed's Airway Monitoring System

Medical device company SonarMed Inc. has raised $1 million to help launch its first product — the Airway Monitoring System.

The Indianapolis, Indiana, company has been perfecting its system — which uses sonar waves, sensors and software to display information about ventilator breathing tube position — for market.

“You only get one chance at a first impression,” Andy Cothrel, SonarMed’s president, told MedCity News in July. “More than one company has foundered on the rocks of premature launch and we don’t want to be one of those.”

Cothrel said his six-employee company would use its fund-raise for a go-to-market strategy that included building a sales team and establishing partnerships with third-party companies that also would sell its device. The company raised $1,027,389 from 11 investors, according to a Securities and Exchange Commission filing.

SonarMed has raised about $7 million since its founding in 2005 by licensing technology developed by three Purdue University scientists, the company’s founders. The has come from the National Heart, Lung, and Blood Institute, the state-supported Indiana Seed Fund and Spring Mill Venture Partners of Carmel, Indiana.

SonarMed’s Airway Monitoring System (AMS) comprises a disposable adapter that contains acoustic sensors connected by cable to a hand-held monitor. The technology works by sending audible sound waves down the breathing tube and into a patient’s lungs. The device then analyzes the returning echoes to determine if the breathing tube is properly positioned and if anything is obstructing it.

Using a breathing tube and ventilator to force air into a patient’s lungs can come with a host of problems. The ventilator can be less-than-effective if the breathing tube is incorrectly positioned or its end becomes clogged with lung secretions.

These problems  typically are managed by visual checks, chest X-rays and blood-oxygen monitors — all of which are reactionary and incomplete, Cothrel said. SonarMed’s AMS device, which was cleared by the Food and Drug Administration (pdf) in April, aims to notify healthcare providers so they can correct problems before they get serious.

“They’ve got a product approved,” said Dr. Ken Green, managing partner with Spring Mill. “Now their challenge is to get people to use it.”

The company that develops small-molecule drug “conjugates” to treat cancer and inflammatory diseases this evening filed a statement with the Securities and Exchange Commission to register its IPO shares. RBC Capital Markets and Leerink Swann LLC would manage the proposed offering, and Wedbush PacGrow Life Sciences and Baird would co-manage it, Endocyte said in a release.

It would use proceeds of the offering to pay for ongoing clinical trials, repay debt and develop its drugs. Many start-up drug companies have turned to IPOs to take their products to market, but the U.S. IPO market has been rocky with some companies cutting their prices or delaying their offerings, according to Dow Jones Newswire.

Endocyte’s small-molecule drug conjugates “actively target receptors that are over-expressed on diseased cells,” the company said in its registration statement. This targeting enables patients to be treated with highly active drugs or high doses of drugs more frequently and over longer periods of time.

The company also is developing companion imaging diagnostics for its conjugates that could identify patients who are more likely to benefit from targeted treatments. The combination of drug and imaging diagnostic is a kind of drug-guidance system and an example of personalized medicine, which business consultancy PricewaterhouseCoopers says will transform the healthcare industry.

Endcyte’s lead conjugate, EC145, targets the folate receptor, which often is over-expressed in solid-tumor cancers that are hardest to treat, such as ovarian, non-small cell lung, breast, colorectal, kidney and endometrial. The company has done clinical trials for EC145 in ovarian and non-small cell lung cancers.

Endocyte is still developing its drugs, so the company’s revenues come solely from licensing fees, milestone payments and government grants. The company had no revenue in the first six months of both 2010 and 2009. In all of 2009, the company had $3 million in revenue and lost $15.7 million from operations. On June 30, Endocyte had assets of $11.8 million and liabilities of $6 million.

In October, the company raised $26 million to complete a study of its ovarian cancer treatment for women who are resistant to chemotherapy. At that time, Endocyte had nine cancer drugs in development.

Sanderling Ventures, Burrill & Co., American Bailey Ventures, Blue Chip Venture Co. and Triathlon Medical Ventures were joined by Clarian Health Ventures in the October round. A year ago, the company said it received a milestone payment from a partnership with Bristol-Myers Squibb.

Endocyte has raised about $90 million in equity, thus far.

In a July 27 warning letter, the FDA warns the Warsaw, Indiana-based firm that the system, which uses MRI and CT scans to develop a pre-operative plan for implanting Biomet’s Vanguard knee replacement, does not have pre-market approval, an investigational device exemption or 510(k) clearance from the watchdog agency.

“The Signature Personalized Patient Care system is adulterated … because you do not have an approved application for premarket approval (PMA) in effect … or an approved application for an investigational device exemption (IDE),” according to the warning letter. “The device is also misbranded … because you did not notify the agency of your intent to introduce the device into commercial distribution, as required by sections 510(k).”

Biomet said it replied to the warning letter August 3, “explaining why the company believes that the Signature Personalized Patient Care system, which is manufactured by Materialise NV, has been appropriately marketed under a 510(k) premarket clearance.”

Materialize won seven 510(k) clearances between 1996 and 2009, for devices ranging from a “CT-modeller system” in April 1997 to its Mimics device and implant design software in 2008. Late last year, the company won a 510(k) nod for Zimmer Holdings Inc.’s (NYSE: ZMH) Patient Specific Instruments system, which is nearly identical to the Biomet offering.

“We certainly intend to work with the FDA to resolve this and are awaiting their response to our August 3 letter,” Biomet vice president for government affairs, public affairs and corporate communication Bill Kolter told MassDevice.

SonarMed's Airway Monitoring System

SonarMed Inc. celebrated the biggest milestone in its nearly five-year history earlier this year when its breathing-tube-monitoring device was cleared by the U.S. Food and Drug Administration.

Now it just needs to start selling the device, which is used for patients on ventilators. But before the company rolls it out, Indianapolis-based SonarMed wants to ensure that it’s ironed out any potential problems with its device, called the Airway Monitoring System (AMS), president Andy Cothrel said.

“You only get one chance at a first impression,” he said. “More than one company has foundered on the rocks of premature launch and we don’t want to be one of those.”

To avoid those figurative rocks, SonarMed is making small tweaks to the device’s design as the company readies for a fourth-quarter launch. For example, the company has begun using a stronger resin for the device’s monitoring screen, after some fears that the previous iteration would struggle to stand up to the rigors of being dropped in a bustling intensive care unit, Cothrel said.

Also high on Cothrel’s priority list is rounding up some venture capital, though he declined to say how much since the company is in the midst of fundraising. “Like all companies at this stage, we’re seeking to finance our go-to-market strategy,” he said.

The six-employee company plans to use the funding to help build a sales team and establish partnerships with third-party companies that will also sell the AMS device.

SonarMed has raised about $6 million since its founding in 2005 by licensing technology developed by three Purdue University scientists, the company’s founders. (Cothrel joined in late 2008 after about 20 years in the medical industry, including stints with drugmakers Roche and Abbott Laboratories.) The company’s funding so far has come from the National Heart, Lung, and Blood Institute; the state-supported Indiana Seed Fund and Spring Mill Venture Partners of Carmel, Indiana.

“They’ve accomplished a lot on not much money,” said Dr. Ken Green, managing partner with Spring Mill.

SonarMed’s AMS device consists of a disposable adapter that contains acoustic sensors connected via cable to a handheld monitor.  The monitor contains software that interprets signals from the adapter to display information about the breathing tube’s position and possible obstruction.

The technology works by sending audible sound waves down the breathing tube and into a patient’s lungs. The device then analyzes the returning echoes to determine if the breathing tube is properly positioned and if anything is obstructing it.

Placing a patient on a ventilator involves snaking a tube down her trachea, and pushing air into through the tube into her lungs. A host of difficulties can arise during the process and its aftermath, including the tube becoming dislodged from the trachea, the tube getting pushed down too far into the trachea, or the tube being obstructed by lung secretions from the patient.

Those problems are now typically handled by visual checks, chest X-rays or monitoring blood-oxygen levels–all of which are reactionary and incomplete, according to Cothrel. SonarMed’s AMS device, which was (pdf) cleared by the FDA in April,  aims to notify health providers so they can correct the complications before they get too serious.

“They’ve got a product approved,” Green said. “Now their challenge is to get people to use it.”

Cook, the world’s largest privately held medical device maker, had similarly humble origins. Founders Bill and Gayle Cook started their company out of one of the two bedrooms of their Bloomington, Ind., apartment in 1963. Rob Lyles, vice president and global leader of Cook Medical’s Peripheral Intervention unit, told us that the company today employs about 11,000 people around the world and posted sales of about $1.7 billion last year.

In a wide-ranging chat, Lyles filled us in on the company’s start, the impact of gift bans, 510(k) reform and the medical device excise tax and what’s new for his division.

MassDevice: Can you give us a bit of background on how Cook Medical got its start?

Rob Lyles: Bill and Gayle Cook started the company in Bloomington, Ind., in 1963, so they have been in business for 47 years. It’s actually a really cool story, very much an American business success story that became a global success story. Bill had been involved in some dental needles and some other things working up in Chicago and they decided to move back to Bloomington. He had a brother in law that told him about this technique called the Seldinger technique, which was a catheter-based, wire-guided needle technique being done in Europe. Physicians here in the States were starting to do it, but they didn’t have any place to buy the tools. There weren’t really any companies that were making that stuff. So he and Gayle moved to Bloomington and in a two-bedroom apartment — one bedroom was the company and the other was where Bill and Gayle were raising their family — they started making the tools, the catheters, wire guides and needles.

Forward to today, from one bedroom in Middle America, we’re a very globalized company. We have about 11,000 employees globally, we did just about $1.7 billion in revenue last year, we have nine different business units that serve 42 different specialties of medicine, a very broad offering.

My division is the peripheral intervention division, one of the largest divisions in the company, with about 6,500 products. Cook overall sells about 15,000 medical devices. We do business in 135 countries or so, we have to work our way through about 35 or 36 different regulatory regions globally to get our products on the market in various places.

Today we’re the largest privately held medical device manufacturer in the world, still owned by the Cook family: Bill, Gayle and their son Carl are still the owners and Bill, even though he’s been retired for a number of years, he still comes into the office every morning.

MassDevice: What’s your background and how long have you been with the company?

RL: I’ve been with Cook for seven years. My background came out of some different industries. I’d worked in the medical business for a number of years on the strategic and marketing and consultancy side. My first entry into healthcare came when I spent several years working with hospitals on their strategic planning, a lot of their marketing and PR efforts. I got to know the Cook organization during that time. Then I left that and went outside of healthcare for a few years, was most recently with Royal Dutch Philips on the consumer side of the business. Then I came back and joined Cook about seven years ago and have been riding that rocket ever since. It’s been a wonderful experience.

MassDevice: What do you think is the most pressing issue facing the industry overall?

RL: Without a doubt in my mind, it is innovation. Obviously there is call for change from all quarters. We all see the need to make sure that healthcare is something we can all afford, our children can afford and our grandchildren someday. So we see the need to make it better for patients, with better outcomes, to be more effective and to either limit the cost and/or better utilize the healthcare dollar. It may not even be spending less money, but for the money we are spending, ensure that we can treat more patients and get better outcomes for those patients.

Those are the goals that are starting to create all these pressures in healthcare reform, in looking at conflicts of interest and all of that. What I deeply worry about is what’s getting lost in the conversation, what’s getting caught in the crosshairs is the innovation itself. A story like Cook, especially, a 47-year-old company started in a two-bedroom apartment, now has gone on to create the jobs its created, but more importantly to create the things that have helped patients in the last 47 years and the technologies that have come from that. That’s what I think is the biggest challenge for all of us. The regulatory burden is necessary — we need to make sure that the things coming out of an industry like this are safe and effective, but do so in a way that doesn’t completely squash innovation.

Innovation can be a fragile and tender process. You need the space to be able to do it and you need to let the great thinkers in these areas do the things they do and come up with interesting solutions. When it gets over-controlled and over-regulated, when every time you’re trying to do something you’re staring down the barrel of another five years and another clinical trial, I’m afraid were going to stifle innovation.

MassDevice: What about the looming changes to the 510(k) program? Are those a major concern for Cook?

RL: Absolutely. Although we’re one of the big guys now, we have never lost our sensitivity to being that company that started small and that was and continues to be very entrepreneurial. The observation that we make in this whole thing is that the 510(k) process in general, like any piece of legislation of course, is not perfect. But in general it seems to give the regulators the tools they need. The challenges I hear are that more complicated devices are being put through the 510(k) process. That’s not a failure of the process — the people who administer that process have the ability to demand more data from us, so I don’t know that overhauling it is going to help. Could a Cook Medical start again in 2010? Could you have that entrepreneur and that doctor coming together and figuring it out and then dial forward four-and-a-half decades later to this robust organization that’s created a lot of good health for patients and created a lot of good jobs? The answer, I’m afraid, is ‘no.’

Some people have said to me, “You guys are probably all for it, because it’s a barrier to entry into the market, right?” And the answer is for us is. “No, no, this is about helping patients.”

This is about solving a problem. If this had existed in 1963, we wouldn’t have been able to do all the good stuff we’ve done in the last four-and-a-half decades. In general I would say it’s not a perfect piece of regulation. If they need to look at certain elements of it, sure, but the idea of either throwing it out or doing some radical, radical changes is going to squash innovation and ultimately create a situation in which patients lose.

This is ultimately about patients. We’ve got to get good technology through a process and get it to where it’s safe and effective, absolutely, but if you quell the innovation medicine will slow down. It will not advance at the pace that it can now, and there are so many problems out there still to solve. We want a process that reflects that and can keep up with that.

MassDevice: Is the 2.3 percent medical device tax that’s baked into the healthcare reform act on your radar?

RL: Oh yeah. Like a lot of folks, the impact of that is very real. The most direct line I can connect is that the bill will absolutely cost jobs. It’s very real to us, when you look at a company like ours you’re looking at a $20-million- or $30-million-a-year tax bill that we didn’t have before. And again, the big guys are lucky in that we’re at least big enough that we can navigate something like that. But where it starts to come out is there are some very direct correlations to jobs and the ability to expand and the ability to go and build a new facility in a community that needs jobs.

We do operate a little differently in that we are privately held. At the Cook organization we are very attuned to the communities that we exist in, not only because we all live and work in those communities. For example, Canton, Ill., is town over in the middle part of Illinois, three or four hours from our current facility. It’s a little town that used to have an International Harvester plant years ago. They pulled out and the local economy and the town in general has been kind of devastated since then, it’s literally been in a slump for 20 or 30 years. We just built a new facility in that town.

Why Canton, Ill.? Well, it just happens to be Bill Cook’s hometown. He went back and said, “I want to do something that’s good for this place. We need the manufacturing capacity, we’re healthy, we’re growing.” It’s the ability to go into these places and not just build the plant, but revamp the downtown — which is what he did in Bloomington as well — really take these communities and provide jobs so they can really rebuild themselves and be robust, growing, driving communities again.

How many other Cantons just got pulled off the payroll because now we’ve got to go pay a tax bill of $20 million or $30 million a year? That directly translates into the ability to create jobs, to help set up and foster additional communities that could desperately use the jobs and the help. So yeah, it is a very real impact and a direct-line impact for us. The math shakes out and it just costs you jobs and the ability to expand. It’s just a shame, especially in this economy, because the one thing we need is jobs.

MassDevice: Based on Dr. Dotter’s legacy of never taking a dime from Cook, what’s the company’s policy toward contact with physicians?

RL: We certainly are a company that believes that inventors can be and should be rewarded for their innovation and their invention. In the case of Dr. Dotter, it just happened that he had no interest in that and it was such early days for the industry that it just wasn’t a part of the conversation yet. It was just two good friends changing medicine together and probably not even realizing they were in fact changing medicine.

Dial forward today: Is it appropriate to pay royalties to an inventor for their idea? Sure. We have absolutely no problem with that. It happens in every other industry and there’s certainly no reason that it can’t happen in medicine as well. Obviously it gets challenging, especially for outsiders, both society and regulators and legislators, when they look inside and say, “Wait a minute, that sounds nice in concept but now you’re talking about physicians benefiting from their ideas in medical devices.”

And the answer is, “Sure, yeah.” If we were working on a problem and you need a catheter that can get into an artery where no catheter has ever been able to get to, and the doctor is the one who says, “If you put a tip on it like this, or if you made it out of a material like this so I could twist it just at the last second, it would allow me to get in there better.” Well yeah, that’s his idea and if we can bring that through and make it better for patients and it becomes a product, it’s fair that he would receive a royalty in compensation. Paying inventors for their invention through royalties or any other mechanism, no problem as long as its appropriate and is done to recognize their invention.

The other part of it, in terms of how we interact with physicians, that’s undergoing a tremendous amount of change. Things are changing in that side of the business, obviously with laws in states like Massachusetts and Vermont — and we’re also seeing it on an institutional level in places like Stanford, the University of Wisconsin has a stringent policy these days. Being a private company, we’ve always tried to hold a pretty high bar relative to ethics. We’re not part of AdvaMed, our codes have always been stricter than AdvaMed’s, so in terms of behavior itself it’s not that much of a shift for us. What it does do, though, when you’ve got Massachusetts, that’s one set of rules; Vermont, that’s another set of rules; Stanford, there’s another set of rules: If we’re going to come up with a set of rules, let’s come up with one set of rules, because administering 50 different sets of rules is really expensive. That adds to the administrative burden on us, which adds to the cost of healthcare, ultimately. Rather than having 50 different states making 50 different codes, if in fact this is a pathway where everybody wants to go, let’s just go there once. Get one set of rules that applies to everybody in all states. That way, from an administrative perspective, we can live under one set of rules.

That’s not to say that I or we think the rules ought to be changed as they are. We certainly comply with them. So in a state like Massachusetts that has laws on the books, our reps are very explicitly trained, they absolutely follow those rules. We have an internal corporate code that mandates that and we absolutely comply. We don’t play around the edges on that in any way, shape or form.

Having said that, do we agree that there’s a problem in going out to dinner with a doc to talk about a device? No. I don’t think there’s an inherent problem with that. The relationship that we as device companies have with physicians is unique. I think a lot of people look at it and want to draw a parallel between pharma and medical device. The medical device conversation is about innovation, but it’s also about iteration. It’s about ideas and about solving a problem: “Here’s the problem and here’s a potential solution,” and as you’re talking about the solution it morphs into two or three other solutions that you weren’t thinking about before. It’s an incredibly iterative, interactive dialogue that goes on over the course of weeks and months and years. So the venue for that, a lot of times, is at a meeting: “Let’s go sit down and have lunch and talk about that idea.” Inherently in itself, that doesn’t create any problems, because the exchange of ideas is what creates innovation. Pharma doesn’t necessarily have that level of dialogue, because you’re talking about 18 or 20 years to bring a drug to market and huge, huge clinical trials. What they’re doing is a different animal than devices, where we’re iterating all the time and making adjustments constantly to improve these devices.

It’s been assigned ulterior and poor motives by outsiders, and, honestly, some other companies have acted poorly in this space. But I know the company that I work for and that I stand for has always played it very straight.

MassDevice: What’s new in peripheral intervention for Cook?

RL: It’s just a blossoming market. Estimates in the space, ballpark, it’s a $3 billion to $3.5 billion space right now, growing anywhere from 10 percent to 20 percent a year, depending on whose numbers you look at. Which puts it at an $8 billion to $10 billion market in the next eight years or so. It’s a space with a lot of financial opportunity. That’s because of some key diseases that are really now coming to the forefront in terms of our ability to treat them.

First and foremost there’s peripheral arterial disease. Between the U.S. and Europe, PAD affects almost 27 million people. It is a very serious condition. Your five-year survivability with PAD is worse than several cancers, including colon cancer. It’s actually worse than if you have a heart attack. If you survive a heart attack, your chance of living if you just have coronary disease is longer than it is with peripheral artery disease. So there’s tremendous patient need here.

What that’s colliding with is the Baby Boom generation, which is now reaching its mid-60s. It’s a generation where, and this is true across all of the generations now, diabetes is absolutely at epidemic proportions. Advancing age and diabetes are two key precursors of peripheral artery disease. So you have a populational dynamic that’s hitting right now and then all the other lifestyle factors — obesity is another significant warning factor for PAD; smoking is definitely one of the issues. So all of these things that we wrestle with as a society collide on this issue. PAD is a big deal and it’s going to continue to be a big deal for years to come, unfortunately.

The way it expresses itself is people have disease in their arteries and their legs. It starts with leg pain when they exercise and will advance to where they have leg pain all the time. As it progresses, it will get to the point where they develop ulcers as their leg is essentially starved of oxygen. The muscles literally get cell breakdown.

What we see as the opportunity is to develop minimally invasive devices to treat that. If you had peripheral artery disease problems in your leg 20 years ago, and even 10 years ago in many cases, the only thing they could do for you was to do bypass surgery. Open surgery, highly invasive, with all the pain and hospital stays and risk of infection. In the last five to 10 years or so, especially in the last three or four years, companies like Cook have developed an entire set of minimally invasive tools and specifically tailored them to the periphery. So they’re purpose-built for the periphery. We’re not just taking tools for the heart and trying to use them for the leg.

The procedure kind of breaks into three chunks, if you will. There’s the part where you access the vessel, then where you go in and actually target the part of the vessel where the disease is and then where you actually apply some sort of treatment. That treatment could be balloon angioplasty, it could be a stent, it could be a number of different things. What we’ve done is tailored unique tools.

A specific example is below the knee, in the tibial vessels. Reaching the tibial vessels has always been something that there weren’t really good tools to do. If you had something wrong below the knee five years ago, doctors really struggled to be able to help you, because they couldn’t get minimally invasive tools down below the knee. They weren’t small enough, they didn’t push well enough, they couldn’t navigate. Now we’ve got a set of devices where a physician can literally go up and over the arch where the iliacs start, all the way down to the feet. They can even get into the arteries of your toes now. So opening up those options for physicians allows them to treat patients in a way they never have before, which is a really exciting advance.

The second piece is, once you’re there, treating it. That can take the form of simpler tools, like balloon angioplasty; the stent technologies have improved dramatically in the last several years. Although it’s not approved for use in the U.S., but is in clinical trials, our Zilver PTX is a drug-eluting stent for the superficial femoral artery. We ran the largest clinical trial ever conducted on this space, with a single-arm study with about 791 patients and a randomized trial with another 480 patients. Some of the early work just came out and what that study is showing is that the device is producing better results in the superficial femoral artery than other technologies that have been available to date.

It’s about giving doctors a toolbox because a doctor doesn’t know what they’re going to get into with a leg case. They’re often very complicated cases, they can be very challenging. Several years ago we said, “Let’s develop all the tools a physician would need.” When they go to that case they can’t know everything they’re going to face. It’s just the nature of leg cases, they’re very challenging. There are unexpected twists and turns. So the idea was to have all these tools so that once they come to a challenge, say they’re having trouble getting across the diseased area, they still have other tools they can go to.

MassDevice: You just filed for pre-market approval for the Zilver PTX. What’s the outlook on the timeline for US. approval?

RL: It’s hard to know. We’re hopeful that by this time next year we would have that FDA approval. The submission itself was 43,000 pages. We have a picture of our regulatory folks standing behind a regular table and the two stacks of paper are up to their shoulders. It looks like they’re standing between two skyscrapers.

The Warsaw, Ind.-based orthopedic device giant reported net earnings of $166 million, or 82 cents per diluted share, on sales of $1.06 billion during the three months ended June 30. That’s a 21.2 percent earnings drop, despite the 3.7 percent top-line uptick. Zimmer posted earnings of $210 million, or 98 cents per diluted share, on sales of $1.02 billion during Q2 2009.

The hit to the bottom line stemmed from a $75 million charge to cover mounting lawsuits over Zimmer’s Durom hip implant, which it pulled from the market in July 2008 (PDF). At least 10 more lawsuits were added to a slew of existing suits this week, according to Health Law 360, as many patients receiving the device complained of persistent pain and other problems requiring additional surgery to correct. Absent the $75 million set-aside, Zimmer’s Q2 earnings were up 14.5 percent.

The company also dropped $85.4 million in cash on a stock buyback, re-acquiring 1.4 million shares under a $1.25 billion repurchasing program. There was another $32.2 million to spend buying back its own stock at the end of the quarter, good until the end of the year; Zimmer’s board added $1.5 billion to that kitty for further share repurchases through December 2013.

Zimmer also said it agreed to acquire Beijing Montagne Medical Device Co. Ltd., a Chinese orthopedic implant maker, for an undisclosed amount. That deal is expected to close late this year or in early 2011.

Full-year sales are expected to rise between 3 percent and 5 percent, the company said, with adjusted diluted earnings per share of between $4.15 and $4.35.

A mass spectrometry machine

Stealthy mass spectrometry company Perfinity Biosciences has raised $2.3 million in equity, just over a month after it pulled in nearly the same amount, according to regulatory filings.

Perfinity was created as by West Lafayette, Indiana-based Quadraspec Inc., which makes DVD-like discs that can hold up to 272 biological samples and be analyzed by reading machines. Quadraspec has raised more than $20 million in outside capital, and its shareholders will remain Perfinity’s owners, the Indiana Business Journal reported.

Perfinity has filed a patent for a new method of preparing biological samples for mass spectrometry, an analytical technique to identify and quantify the chemical structure of molecules. The patent is based on work done by Fred Regnier, a Purdue University faculty member and co-founder of Quadraspec.

Neither Perfinity nor Quadraspec appear to have websites.

In Perfinity’s most recently filed regulatory document, the company said it raised $2.33 million in equity from 26 investors. In the regulatory document filed in May, the company said it raised $2.33 million in equity from 156 investors.

The company recently hired Steven Plump, a former Eli Lilly & Co. executive, to be its interim president. Plump wasn’t available for comment.

Photo from flickr user nayukim

The company sells a procedure kit for surgeries for patients suffering from trigger finger, a painful  condition in which a finger catches and sometimes locks in a bent position. The kit includes Del Palma’s Advansor TF surgical device, needles, a scalpel, sponges and other surgery-related products.

Del Palma’s fundraise was sourced from four investors, with the first sale coming on June 14. The company was incorporated in 2008. It’s aiming to raise $2 million, according to the filing with the Securities and Exchange Commission.

The company is one of four startup tenants in a newly opened incubator in Columbia City, Ind. called the OrthoVation Center. The incubator was started by MicroPulse Inc., an orthopedic implants and surgical instruments maker that’s based in the city. MicroPulse “will get first shot” at manufacturing products for the incubation center’s tenants, the Fort Wayne Journal-Gazette reported.

Columbia City is near Warsaw, an Indiana city that bills itself as the “orthopedics capital of the world.” The small city and surrounding area is home to a cluster of orthopedic device companies such as Zimmer Holdings Inc., DePuy Orthopaedics Inc., Symmetry Medical and Biomet Orthopedics Inc.

Del Palma CEO Rod Mayer didn’t return a call.

The company’s device can provide a measure of the kidney’s function, or glomerular filtration rate (GFR), in 15 to 30 minutes, according to an earlier press release. Current methods of determining GFR either provide a rough estimate or require collecting a patient’s urine samples over a 24-hour period.

The Indianapolis-based company is a spinoff of Indiana University’s Center for Biological Microscopy and was incorporated in 2006.

“There is a big clinical need for this in the hospital,” Center Director Dr. Bruce Molitoris said in the release. “We can’t tell the kidney function of a patient during acute kidney injury in a rapid fashion that would allow us to make diagnostic and therapeutic decisions.”

The fundraise comes from 20 investors, with a $5,000 minimum investment amount, according to the regulatory document. PharmacoPhotonics received the funding commitments over about a year, with the first sale occurring in June 2009.

Without an apparent website, it’s tough to know more than that about PharmacoPhotonics.

CEO Joe Muldoon didn’t immediately return a call.

Three principals from Blue Chip, the well-established early stage investing company in Cincinnati, opened for business as Allos Ventures in the Indianapolis area of Indiana about six weeks ago.

By then, managing directors Don Aquilano and John McIlwraith, and director Dov Rosenberg had raised about $20 million to invest in early stage “software and technology-enabled business services, but also specialty healthcare providers, medical devices and diagnostics, and advanced manufacturing,” according to the Allos Web site.

“We started fundraising for Blue Chip V in the spring of 2008,” Rosenberg said about Blue Chip’s fifth fund. About six months later, the world economy collapsed, sending fund investors into hiding.

Even after institutional investors started to come back toward the middle of 2009, they still were nervous about the economy, Rosenberg said. And they wanted to see more company exits from previous Blue Chip funds before they put more money in the firm’s latest fund.

“So we put Blue Chip fundraising on hold,” Rosenberg said.

“But there were a lot of investors, primarily in Indiana, but scattered around, as well who were eager to invest behind” Aquilano and McIlwraith, he said. So the three Blue Chip directors put the Blue Chip money they had raised into Allos I L.P., which is based in Carmel, Ind.

Some of the top technology entrepreneurs in the Indianapolis area have invested in Allos, which means “different” in Greek. That includes members of its advisory board: David Becker is chairman and CEO of First Internet Bank; Scott Dorsey co-founded ExactTarget; Mark Hill is a managing partner of Collina Ventures; Scott Jones is a serial inventor and entrepreneur who is chairman and CEO of ChaCha Search and Precise Path Robotics, and chairman and co-founder of Gracenote.

Jack Wyant, the managing partner who co-founded Blue Chip in 1992, also is an adviser.

The Allos directors expect to invest an initial $1.5 million to $2 million in up to eight companies with a reserve for follow-on investments in those companies, Rosenberg said. The Allos fund likely will last for three years instead of the usual five or six.

“The goal is to be the bridge between angel investors and the other investors in the region,” Rosenberg said.

That’s no different from the strategy behind Blue Chip investing done by Aquilano and McIlwraith. “They are hands-on investors,” Rosenberg said. “They partner with the entrepreneurs rather than just invest in them.”

But Allos will have a more narrow investment target. “We won’t do investments in any pharmaceutical or biotech companies, but we might do one device company,” Rosenberg said. Blue Chip funds have invested in many healthcare service, specialty provider and clinical-stage drug and device companies.

Two Blue Chip investments already have been rolled into Allos — WebLink International and Scale Computing, both in Indianapolis.

WebLink is a Web technology company that helps organizations such as chambers of commerce and convention and visitors bureaus promote their communities. It raised $3.5 million in June 2008 from investors that included Blue Chip. Scale, which develops and makes clustered storage solutions for mid-sized companies and organizations, raised $9 million from Blue Chip and others in March.