Drugs, Devices And Diagnostics For The Heart:
Significant Venture Funding Devoted To Cardiovascular Space

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Some companies are working on cardiovascular applications for wireless technology. Among these is CardioMEMS, which was launched in 2000 and has a technology platform that centers on improving the management of severe chronic cardiovascular diseases, such as aneurysms, congestive heart failure and hypertension. Backed by Arcapita Ventures, Boston Millennia Partners, Medtronic (NYSE: MDT), Easton Capital Partners and other investors, CardioMEMS announced a $33 million Series E financing, as well as the appointment of a new CFO, at the end of 2007. Just a few months ago, the Atlanta-based company announced the closing of a $2 million loan from the Georgia Department of Community Affairs’ Life Sciences Facilities Fund. CardioMEMS is using the funds from the loan to purchase high-tech lab equipment for its new research and headquarters facility, being built in Atlanta’s Technology Enterprise Park, across from Georgia Tech.

The sensors provided by CardioMEMS are designed and manufactured using microelectromechanical systems (MEMS) technology, which enables the fabrication of millimeter-scale devices with internal features in the nanometer to micrometer range, and allows the creation of sensors with measurement stability and energy efficiency. The miniature wireless sensors are designed to be permanently implanted in a minimally-invasive manner and transmit critical data, such as cardiac output, blood pressure and heart rate. The sensors utilize radiofrequency energy to transmit data in real time to external electronic readers, which then communicate the information to the patient’s physician. CardioMEMS’ sensors have already been successfully implanted in more than 3,500 patients.

In January 2007, CardioMEMS filed for an $86 million IPO, but withdrew that filing by early May, because of unattractive financing terms in the public market. One year later, we doubt the idea of going public has gained any favor at the company.

One company working in this space did successfully complete an IPO, just recently, in March. CardioNet (NASDAQ: BEAT), a provider of wireless mobile cardiac outpatient monitoring solutions, is focused on helping physicians diagnose and treat patients with arrhythmias. Before going public, CardioNet raised nearly $200 million in private debt and equity over seven years, from investors including Hambrecht & Quist, Sanderling Ventures, Guidant Corporation and Biofrontier Corporation. CardioNet’s initial public offering raised a total of nearly $83 million, including about $47 million in net proceeds to the company (selling shareholders were responsible for a portion of the IPO).

CardioNet has developed an integrated technology and service: mobile cardiac outpatient telemetry, which enables heartbeat-by-heartbeat ECG monitoring, analysis and response, all the time, anywhere. Two significant events for the company occurred in March 2007, including the publication of a 300-patient randomized clinical trial finding that the CardioNet System detected clinically significant arrhythmias nearly three times as often as traditional loop event monitors in patients who had previously experienced negative or non-diagnostic Holter monitoring. Also that month, CardioNet acquired PDSHeart, a provider of monitoring services to approximately 150,000 patients in 49 U.S. states. By mid-2008, the company expects to have substantially executed integration plans to eliminate redundant operations, overhead and facilities resulting from the acquisition.

Patients who are prescribed CardioNet wear a device that basically consists of three leads attached to a sensor, for up to 21 days of monitoring. Patient activity is automatically transmitted to CardioNet’s monitoring center for analysis and response, and the data is sent on to the physicians via fax or the Internet. Pennsylvania-based CardioNet believes it has achieved around 5% penetration of an estimated $2 billion market.

Another company that Guidant Corporation invested in is Evalve, a California-based developer of devices for the percutaneous repair of cardiac valves. Guidant was the sole investor in a $15 million round announced about four years ago. In late 2007, Evalve raised $60 million in Series D financing from BBT Fund, New Enterprise Associates, Split Rock Partners, Abbott Laboratories (NYSE: ABT) and other investors.

Evalve was founded in 1999 and is currently focused on mitral valve repair. The company reports that an estimated 4 million people in the United States have significant mitral valve insufficiency, with an annual incidence of 250,000, and approximately 50,000 of these patients undergo surgery each year. Untreated valve insufficiency is associated with chronic volume overload, which ultimately leads to atrial fibrillation, heart muscle dysfunction, symptoms of congestive heart failure and an increased risk of sudden death. At a scientific conference in April, Evalve unvealed preliminary data from an ongoing study that indicates percutaneous mitral repair using its MitraClip device may successfully reduce mitral regurgitation (MR) in patients suffering from functional MR over a two-year period.

Companies that are developing pharmaceutical treatments for various cardiovascular indications took in about $788 million in venture capital during the five years ended December 31, 2007. Among these is Cardiokine, which is focused on the development of pharmaceuticals for the treatment and prevention of heart failure and cardiovascular issues. In 2004, investors led by Perseus-Soros Biopharmaceutical Fund committed $34 million in Series A financing to Cardiokine, and simultaneous with the closing, Cardiokine in-licensed Wyeth’s (NYSE: WYE) lixivaptan. In 2006, the company raised an additional $50 million to continue developing the drug for the treatment of hyponatremia (an electrolyte disturbance, marked by low sodium levels in the blood, that occurs most frequently as a complication of another disease including heart failure) and water retention in heart failure patients.

Together with Biogen Idec (NASDAQ: BIIB), in February 2008 Cardiokine announced the initiation of a phase III multi-center, randomized, placebo controlled, double-blind study of lixivaptan for congestive heart failure patients who suffer from hyponatremia. It is expected that lixivaptan will be jointly developed by Cardiokine and Biogen Idec, which paid $220 million for the co-development rights as part of an agreement announced in July 2007. BIIB will be responsible for global commercialization and Cardiokine will have an option for co-promotion of the drug in the United States.

Speaking of companies that have made deals with big pharma, Amira Pharmaceuticals announced in February that it granted rights to GlaxoSmithKline (NYSE: GSK) to develop and commercialize certain early-stage compounds for the treatment of respiratory and cardiovascular disease. GSK is paying up to $425 million if all development and regulatory milestones are met, as well as royalties on drug sales. California-based Amira had raised $40 million in Series A venture funding from Novo A/S, Avalon Ventures, Versant Ventures and Prospect Ventures in March 2007. The company is focused on the discovery and early development of compounds to treat diseases and disorders triggered by inflammation, including asthma and cardiovascular disease.

As we were going to press, Amira announced that under the terms of the Feburary agreement, GSK had exercised its right to a second compound. The decision followed the successful completion of a phase I study by Amira that demonstrated the compound’s potential as a once-daily 5-lipoxygenase activating protein (FLAP) inhibitor for the treatment of respiratory and cardiovascular disease.

Of the biotechnology companies working on products for the cardiovascular market, almost one-fifth are developing some sort of diagnostic platform. Just a few months ago, diaDexus received FDA clearance for an automated version of its proprietary test for identifying the risk of heart attack and stroke. The company raised $40 million from Baker Brothers Advisors, Scale Venture Partners, Brookside Capital and other investors in 2007 and is expected to become profitable this year.

Another biotech in this space is XDx, which is bringing to market AlloMap, a molecular expression testing product that non-invasively monitors the immune system and allows physicians to determine a heart transplant patient’s risk of rejecting the organ. XDx raised almost $47 million in two transactions announced in 2004 and 2006, from investors including Sprout Group, Burrill & Company, Bay Area Equity Fund, Duff Ackerman, Texas Pacific Group and Kleiner Perkins Caufield & Byers. In October 2007, the company filed for an $86 million IPO, but (surprise, surprise) it has not yet been priced.

Among other companies working on diagnostic products with cardiovascular applications, Astute Medical announced in May that it raised $6.3 million in Series A financing from De Novo Ventures. Astute is focused on identifying and validating protein biomarkers for potential diagnostic applications in therapeutic areas including abdominal pain, acute coronary syndrome, acute kidney injury, congestive heart failure, sepsis and cerebrovascular disease.

Already in 2008, through May 31, this therapeutic area has produced 11 deals totaling $241.3 million, including three deals in May. In addition to Asute Medical, two biopharmas intent on developing cardiovascular products, Esperion Therapeutics and Miragen Therapeutics, raised $22.8 million and $8 million, respectively.

The specialty has not been immune to the economic forces that have slowed the economy and the flow of venture capital over the past year. At this point, it appears likely that 2008 will end with less total capital invested in cardiovascular companies than in the previous year—but, the pace of venture capital investing in general has slowed this year, too. For the cardiovascular specialty, if dealmaking at least continues for the rest of the year at the same rate as the first five months, 2008 should end with more dollars invested than in 2005.