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SALE OF UPTAKE MEDICAL, INC.

Gerbsman Partners has been retained by Uptake Medical, Inc. to solicit interest for the acquisition of all, or substantially all, Uptake Medical Corp’s (“Uptake”) assets.

Headquartered in Tustin, California,Uptake is a leader in developing bronchoscopic thermal ablation for the treatment of emphysema.

Please see attached the detail Uptake Sales Letter pdf, Exhibit A – Uptake NDA, Exhibit B – IP Summary and Uptake Medical Company Overview.

Uptake Medical Company Profile
Founded in 2005 in Seattle, Washington,Uptake is a private, revenue stage medical device company. Over the past 10 years, Uptake has raised approximately $75mm in equity and debt from blue-chip global private equity and venture capital investors including Affinity Capital, Arboretum Ventures, Crescent Group, GBS Venture Partners, Maverick, Onset Ventures and WRF Capital.

Uptake is a leader in developing innovative, therapeutic bronchoscopic devices to treat advanced heterogeneous emphysema and lung cancer.

Uptake’s InterVapor system is for patients whose lungs are hyperinflated due to emphysematous destruction. By targeting and ablating the most diseased lung segments, space is opened up for the healthier segments to expand and improve the overall lung function and quality of life.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to Uptake Medical’s Assets has been supplied by Uptake. It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Uptake’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the Uptake Medical Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Uptake Medical and Gerbsman Partners. Without limiting the generality of the foregoing, Uptake and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the Uptake Medical Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

Uptake believes its assets are attractive for a number of reasons:

1. Uptake’s Intellectual Property, comprising 8 issued US patents, 7 pending US patent applications, 19 issued international patents and 9 international pending patent applications, and exclusive license of 23 patents and 14 applications, covers all aspects of steam ablation for lung volume reduction of emphysema and steam ablation of lung cancer tumors. IP includes method of action, treatment planning, and devices. Some of Uptake’s claims for novel steam ablation devices may apply to other ablation approaches elsewhere in the body.

2. The company’s InterVapor system is CE marked.

3. Uptake has a modest base of international business with 15-30 sites in various states of clinical activity.

4. Uptake has completed the multi-center, multi-national randomized study (STEP-UP) for the targeted, vapor ablation of the most diseased lung segments in patients suffering from emphysema. In addition, Uptake has 10 years of meaningful clinical science and validation of vapor ablation in emphysema.

5. The STEP-UP study 6 month manuscript has been published by The Lancet and the 12 month supplement is being submitted to The Lancet and is awaiting review.

6. Uptake has developed and begun positive initial human studies ablating lung cancer tumors.

7. InterVapor is the only therapy:

· Resulting in clinically meaningful improvement, while allowing for repeated patient improvement over time. This claim is based on the STEP-UP RCT results published in the Lancet RM March 2016. Clinically meaningful improvement (> 12% FEV1) in pulmonary function and quality of life.

· Without significant risk of life threatening pneumothorax or hemoptysis. Competitive therapies on the market use implants which create pneumothorax (a hole in the lung that can result in death from suffocation) and hemoptysis (excessive bleeding in the lungs that can result in death).

· That can effectively treat the entire population of patients with severe upper lobe emphysema. One competitor (valve implants) is only effective and recommended in patients with complete fissures, and the other competitor (coil implants) failed to show clinically meaningful improvement in pulmonary function and did not meet its primary endpoint.

8. Leading pulmonologists actively support and used InterVapor.

9. OPS procedure reimbursement codes have been established in Germany and applied for in Switzerland.

Impact of Technology on the Market

The positive impact of bronchoscopic volume reduction has attracted the attention of leading physicians worldwide. Patients with emphysema represent a large and growing market with an unmet clinical need. Accessing Uptake’s intellectual property is critical for any successful endeavor into this very attractive market. Publication of Uptake’s patient data sets has providedphysicians with a one-of-a kind look into how reshaping therapy compares to other, more traditional, high-risk valve and coil implant procedures. Commercialization of its products could provide high returns in this large and fast-growing market.
Uptake Medical’s Assets

Uptake has developed a portfolio of assets critical to the bronchoscopic treatment of emphysema with thermal ablation. These assets fall into a variety of categories, including:

· Patents, Patent Applications and Trademarks
· Prospective, Randomized Patient Data Set for Treating Heterogeneous Emphysema
· Generator and Disposable Product Inventory
· Manufacturing, Design and Calibration Equipment
· CE Mark for InterVapor
· Modest International Revenue
· Intellectual Capital and Expertise

The assets of Uptake will be sold in whole or in part (collectively, the “Uptake Medical Assets”). The sale of these assets is being conducted with the cooperation of Uptake. Uptake and its employees will be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership. Notwithstanding the foregoing, Uptake should not be contacted directly without the prior consent of Gerbsman Partners.

Key Personnel

· King Nelson — President & CEO
· Robert Barry — Founder, Chief Tech Officer
· Krista Mann — Chief Financial Officer
· Carol Holt — VP, Clinical Marketing and Operations
· Erik Henne — VP, Lung Cancer

Uptake Medical, Inc. Board of Directors

· Carl Simpson, Chairman of the Board: – Los Altos Hills, CA

· Geoff Brooke, GBS Venture Partners – Melbourne, Australia

· David Singer, Maverick Capital – San Francisco, CA

· Rob Kuhling, Onset Ventures – Menlo Park, CA

· King Nelson, Uptake Medical – Tustin, CA
The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the Uptake Medical Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Uptake Medical Assets. Sealed bids must be submitted so that the bid is actually received by Gerbsman Partners no later than Friday, July 8, 2016, 3:00pm Pacific Standard Time (the “Bid Deadline”) at 1173 Warner Ave, Tustin, CA 92780 Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way. The attached Uptake fixed asset list may not be complete and Bidders interested in the Uptake Medical Equipment must submit a separate bid for such assets. Be specific as to the assets desired.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable. All bids must be accompanied by a refundable deposit check in the amount of $200,000 (payable to Uptake Medical, Inc.). The winning bidder will be notified within 3 business days after the Bid Deadline. Non-successful bidders will have their deposit returned to them. Uptake Medical reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.

Uptake will require the successful bidder to close within 7 business days. Any or all of the assets of Uptake will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Uptake Medical Assets shall be the sole responsibility of the successful bidder and shall be paid to Uptake at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman
(415) 456-0628
steve@gerbsmanpartners.com

Kenneth Hardesty
(408) 591-7528
ken@gerbsmanpartners.com

Dennis Sholl
(415) 377-1952
dennis@gerbsmanpartners.com

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San Francisco, September, 2015
Successful Acquisition of Medical Device Intellectual Property/Patents by Gerbsman Partners for a Coronary Vascular Medical Device Company
Steven R. Gerbsman, Principal of Gerbsman Partners, announced today his success in acquiring Intellectual Property/Patents in vascular technology for a coronary/vascular medical device company. The IP/Patents focus on an external support device for saphenous veins that is used as bypass conduits in coronary artery bypass grafting (CABG) surgery.

Gerbsman Partners provided Financial and Strategic Advisory leadership to its Client, facilitated the sale of the Intellectual Property/Patents and closing of the sale. Due to market conditions, Gerbsman Partners Client made the strategic decision to seek to acquire certain Intellectual Property/Patents. Gerbsman Partners provided leadership to the company with:

  1.  Business Consulting and Investment Banking domain expertise in developing the strategic action plans for the strategy to acquire Intellectual Property/ Patents;
  2. Proven domain expertise in acquiring and Intellectual Property/Patents;
  3. The ability to “Manage the Process” among Acquirers, Seller, Lawyers, and Management;
  4. Communications with the Client’s Board of Directors, senior management, sthe seller and parties in interest.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 91 Technology, Medical Device, Life Science, Solar, Fuel Cell, Cyber/Data Security and Digital Marketing companies and their Intellectual Property and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception in 1980, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in San Francisco, Boston, New York, Washington, DC, McLean, VA, Europe and Israel.

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GERBSMAN PARTNERS
Phone: +1.415.456.0628
Email: steve@gerbsmanpartners.com
Web: www.gerbsmanpartners.com
BLOG of Intellectual Capital: blog.gerbsmanpartners.com

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Gerbsman Partners (www.gerbsmanpartners.com) has been retained by Palyon Medical Corp. (www.palyonmedical.com) to solicit interest for the acquisition of all, or substantially all of Palyon Medical Assets.

Headquartered in Santa Clarita, California, Palyon Medical was in the process of developing the P1005 Programmable Implantable Drug Delivery System and the M21 Constant Flow Implantable Drug Delivery System, drug delivery systems primarily for the treatment of spasticity and intractable pain. The company has identified applications of the technology for other medically important and commercially attractive conditions where chronic, localized drug delivery address unmet medical need. The core technology platform was originally developed and acquired from Fresenius Medical in Germany. Palyon Medical has a small wholly owned subsidiary in Bad Homburg, Germany that has been involved the development aspects of the pump and is in the process of being shut down.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to the Palyon Medical Corp. Assets has been supplied by Palyon Medical Corp. It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Palyon Medical Corp.s’ or Gerbsman Partners’ negligence or otherwise.

Any sale of the Palyon Medical Corp. Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Palyon Medical Corp. and Gerbsman Partners. Without limiting the generality of the foregoing, Palyon Medical Corp. and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the Palyon Medical Corp. Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

Company Profile

Palyon Medical develops and manufactures implantable drug delivery systems for the treatment of unmet medical needs where chronic, localized delivery is required. The initial applications of the technology are in the fields of chronic pain and spasticity. Other potential indications include pulmonary hypertension, diabetes, lysosomal storage disorders and other neurodegenerative diseases. Spun out in 2003 from Fresenius Medical, the technology has been proven in over 100 patients. Palyon has an extensive patent portfolio with 21 US issued, 20 pending, 11 issued Europe and 2 active EP patents.

In 2009, Palyon Medical raised $21 MM in Series A funding. The proceeds were targeted to complete the transformation of Palyon’s constant flow pump into a programmable pump for the US market. Baird Venture Partners led the round with Hambrecht & Quist Capital Management, Fountain Healthcare Partners, BB Biotech Ventures, Cross Atlantic Partners and Arcus Ventures also participating in the transaction. In 2013, the company raised an additional $17 million in Series B funding, from the current investors and one additional individual investor to facilitate EU registration and initial commercialization.

In 2013 Palyon conducted a single center clinical pilot study in Austria. See Regulatory and Clinical Assets section, below. The trial, scheduled for 10 patients was closed after 7 patients were enrolled due to suboptimal delivery accuracy. Palyon has identified what it believes is the root cause of this flow rate issue and has implemented design and controls to mitigate such an occurrence in the future.

In December of 2014, the Board of Directors of Palyon Medical made a strategic decision to maximize value at Palyon Medical and as such, have retained Gerbsman Partners to do a “Date Certain M&A Process”.

Value Proposition

Palyon Medical believes its assets are attractive for a number of reasons:

1.  Manufacturers in this market segment have dominated the implantable pump industry but have experienced recalls and other challenges related to device design. In our opinion, there is a need for a safer more consistent pump which leads to a significant commercial opportunity. To the best of our knowledge, other competitors in this field have made incremental advances but lack the safety and performance advantages that Palyon’s core technology provides.

2.  Palyon is able to offer a flexible platform that supports both constant flow and programmable pump products based upon a common core technology. Palyon has also demonstrated the viability of its implantable pump technology for insulin delivery.

Intellectual Property Assets

Palyon Medical has a strong and broad patent portfolio, which initiated through transfer of assignment from Fresenius Medical and subsequently grew through internal innovation management process. Palyon also has significant international patent coverage, with protection extending in various countries including US, Germany, Austria, France, Great Britain, Japan, Canada and Mexico.

Palyon patents provide a broad coverage for the core aspects of Palyon technology focusing on drug propulsion, safety, flow control, and key design and clinical features. We believe the following are some of the key areas where Palyon patents strength is unmatched:

· Only device that is capable of monitoring and accordingly adjust the flow rate with use of two sensors, providing a safe and accurate delivery

· Broad coverage on dual reservoir systems, which address a long-standing unmet clinical need for simultaneous delivery of two independent drugs

· Application for implantable insulin delivery using Palyon core technology, as a potential entry into the large diabetes market

U.S. Registered Trademarks

· Palyon (US) – 86/014,915

· Palyon (Community Trademark) – 005373774

U.S. Patent Portfolio

· 21 issued patents

· 20 pending US Patents

OUS patent Portfolio

· 11 issued patents, with varying coverage in Germany, France, GB, Spain, Italy, Japan etc.

· 2 active EP cases

o WO2013097956 – Implantable infusion pump capable of constant and variable flows, and with ability to adjust flow based on sensor input

o WO2014159866 – Dual rate implantable insulin pump with basal and bolus capability using Palyon core technology

Potential acquirers:

· Manufacturers and developers of implantable drug delivery systems

· Medical device and pharmaceutical companies developing targeted drug delivery systems

Core Technology Platform

Unknown

Palyon utilizes a common core of unique and proven technology across a platform of implantable drug-delivery systems

Advanced Safety Features

Unknown

P1005 Programmable Implantable Drug Delivery System Assets

The Palyon P1005 Programmable Implantable Drug Delivery System is based upon Palyon core technology

* Unparalleled accuracy from 100ul/day to 2000 ul/day due to flow monitoring and feedback control.

* The target 20 ml refill volume is modular and extensible to 40 ml.

* Propellant driven system provides laminar flow and long battery life (target 10 years)

* Able to detect catheter occlusion and pocket fill events.

* Palyon pump’s pressure sensors provide capabilities unique among implantable pumps.

t Real-time in-line flow control; pump self-adjusts to maintain programmed flow rate countering any changes in elevation or day-to-day variances in atmospheric pressure

t Maximum refill safety – sensors confirm presence of needle in refill port, avoid risk of potentially fatal “pocket fills”.

t Generates alert if catheter patency is compromised.

* Highly Accurate Laminar Flow

t Propellant drive and resistor capillary produce laminar flow, improved accuracy and stability of drug delivery.

Unknown

Delivery Device assets

· Design History File

· SolidWorks CAD models and detailed drawings

· Engineering documentation, test and analysis reports

· Embedded Software Code, Requirements and Test Procedures for Implantable Pump and RF Wand

· Software Code, Requirements and Test Procedures for Clinician Programmer

· Electronics System Design including schematics, PCB layout and component specifications for Pump and RF Wand

· Assembly fixtures and molds for injection molded components

· Manufacturing process layout and documentation

· Detailed assessment of the device design and requirements for transferring from clinical to commercial production

· Component Inventory for key parts

M21 Constant Flow Implantable Drug Delivery System Assets

The Palyon M21 Constant Flow Implantable Drug Delivery System is based upon Palyon core technology

* Modular with common design elements with Programmable Pump.

* Current target is 20 mL refill volume; modularity allows expansion to 40 mL.

* Unique flow regulator to prevent large fluctuations in flow resulting from environment changes

* Propellant and resistor technology ensures non-pulsating flow.

* Lightest and smooth contours with use of either Titanium or Polymeric material.

* Safety guard and radio-opaque catheter access port.

* Inherent low-pressure feedback on refill port to avoid pocket fills.

Delivery Device assets

· SolidWorks CAD models and prints

· Prototype parts

Unknown

Marketing Assets

The marketing assets of Palyon Medical provide detailed business intelligence for companies developing competitive technologies for the treatment of spasticity and intractable pain.

· Implantable Pump EU Market Analysis

o List of EU Markets that accept CE Mark

o Market Regions Overview

o Competitors – Medtronic, Flowonix Medical Inc, Medallion Therapeutics, Tricumed Medizintechnik GmhH, Codman (J&J)

o Differentiating Constant Flow vs Programmable Pumps

o Business opportunity for Constant Flow Pumps

Potential Acquirers:

· Companies developing technologies for the treatment of intractable pain and spasticity

· Companies focused on developing therapeutics for localized delivery to specific regions in the body – e.g. liver, brain, spinal cord, pulmonary veins etc.

· Drug delivery companies seeking to broader their technology offerings and product development capabilities.

· Orthopedic / Neurostimulation companies seeking to broaden their product offering to their target customers.

Manufacturing and Physical Assets
Palyon Medical has applied a strategy to combine internal engineering resources for product development, in collaboration with external contract manufacturing. Hence Palyon physical assets reside at both locations, at Palyon facility in Santa Clarita as well as at Palyon Contract Manufacturer in San Jose, California. These equipment are used in manufacturing, testing and product development.

A partial list of physical assets used in manufacturing includes two autoclaves, two large incubators, highly accurate scales with isolation chambers, environment chambers/ovens, packaging and forming machine from Medipack, ultrasonic cleaners, UV curing equipment, pressure sensors, pressure controllers, vacuum pumps and chambers, microscopes, syringe pumps etc.

A partial list of physical assets used in product development includes multiple pressure sensors and controller, National instrument equipment, soldering equipment, ovens, Sensirion flow measurement, various lab tools and gages, large glove box, multimeters, sound pressure meters, ultrasonic cleaner, various injection molds, sensors and actuators, microscope with built-in camera, test fixtures etc.

Regulatory and Clinical Assets

Clinical Study

Palyon Medical sponsored an open label, prospective, pilot study on the use of the Palyon Model P1001 Programmable Pump System to deliver preservative-free morphine sulfate, for the treatment of patients with chronic pain that has not responded to other types of treatment. Through this study Palyon Medical planned to characterize the safety and performance of this drug delivery platform.

The proposed study was performed at a single site in Austria:
Kabeg Klinicum Klagenfurt
Feschnigstrasse 11
A-9020 Klagenfurt am Wöthersee
AUSTRIA
Prim. Univ. Prof. Dr. Rudolf Likar MSc, Principal Investigator

The study enrollment plan included of up to ten patients. The primary study endpoint was the proportion of subjects free of serious adverse events at six months after implant of the P1001 implantable drug delivery system.

Enrollment started in June 2013; seven subjects were enrolled. Of these, three received a pump implantation. In addition to the three enrolled patients who received a pump implantation, three observational patients (not enrolled in the study) were implanted with Palyon pumps prior to the start of the study. A total of six patients were implanted with a Palyon pump.

Five Serious Adverse Events (SAEs) were observed in enrolled subjects. Three of the SAEs in enrolled subjects involved over-delivery of medication to the subject. As a result of over-delivery, the pump reservoir became empty sooner than expected, causing the subject to experience withdrawal symptoms. One observational patient also experienced this event. In all cases, medication successfully resolved the issue. The other two Serious Adverse Events in enrolled subjects were also successfully resolved. No adverse events were observed in the four subjects who were enrolled but did not receive a pump implantation.

All enrolled subjects with implanted pumps received drug therapy from the device. Subjects typically experienced expected drug-related adverse events, such as restlessness, dizziness, headache, nausea, and other symptoms, that are commonly seen in patients who are just starting therapy with a drug pump.

No subject or observational patient experienced an unexpected adverse event. All refill procedures were completed successfully. No life-threatening events of any kind were observed. However, device-related problems caused pump explant in all cases where a pump was implanted. These device-related problems included premature battery depletion in each of the three observational patients. This technical issue was successfully addressed by the time the next three subjects were implanted.

Because implanted pumps did not perform as expected, Palyon stopped the study on 26 Sep 2013. By the end of September 2013, all implanted subjects were explanted. All subject participation was withdrawn. All subjects and observational patients continued to receive alternative therapy at the study site.

The study is closed. All filings associated with study closure have been completed. Palyon believes that the technical issues observed during the clinical study are well addressed in the improved pump design and quality system procedures represented by the P1005 system. Over 1.5 years of real time test data demonstrated that the solutions put in place to solve the premature battery depletion were effective.

Regulatory

Palyon Medical implemented a full Quality Management System per EN ISO 13845:2003. In 2013, Palyon received certification of compliance to this standard from LNE/GMED, a French Notified Body. As a cost-savings measure, Palyon allowed this certificate to expire. Palyon believes that re-certification could be easily achieved following a Quality System audit by a Notified Body.

Achieving CE-mark for Palyon’s next-generation pump system, such as the P1005, will depend critically on completing the device design and testing, which is in progress. Following completion of the device technical file, examination of the technical file by a Notified Body will be required for CE certification.

Potential Acquirers:

· Companies developing technologies for the treatment of intractable pain and spasticity

Key Personnel (Palyon Medical Corporation.):

· Mike Sember-President and CEO

o Mike has more than 40 years of comprehensive experience working with public and private pharmaceutical, biotech and medical device companies in the U.S. and Europe. He has experience in the areas of R&D, business development, and corporate finance, including involvement with over 100 licensing transactions and corporate acquisitions. Previously, Mike served in senior positions with Marion Laboratories (now called Marion Merrell Dow) and Elan Corporation. He has served on the Boards of 14 public and private companies and also on the Advisory Boards of several venture capital firms.

· Manish Vaishya, PhD -Chief Technology Officer/ VP of R&D, Manufacturing

o Manish has over 20 years of experience in a broad range of industries, with organizations including Palyon, Advanced Bionics and Siemens. His role spans technical leadership, program management and manufacturing. He has successfully led many innovations, with 3 issued and 15 pending patents in fields of digital control, acoustics and implantable insulin pump. While leading the research and development teams, his particular focus has been on design, analysis, manufacturability and reliability.

· Jay Yonemoto – VP of Program Management / Business Development

o Over 25 years of experience in the medical device industry, developing both Class II and III devices; serving in engineering leadership and program management roles at companies such as Medtronic Minimed and St Jude Medical as well as smaller companies such as Palyon Medical and Chad Therapeutics. He has experience in electrical/software driven devices such as surgical generators, oxygen conserving devices, implantable cardio defibrillators and external as well as implantable pumps.

· Chris Reiser, PhD – Director of Clinical, Regulatory and Quality Affairs

o Chris has worked in medical device companies for over 20 years, applying his technical expertise to all aspects of the product life cycle. He developed state-of-the-art quality systems covering all aspects of quality and regulatory functional deployment, and has directed pivotal device trials in the USA and EU. His expertise includes Class II/III devices in multiple medical specialties, covering surgical tools, disposables, active and passive implantables, and medical electrical equipment. He has served as VP/Director extensively in start-ups (Palyon, Spectranetics, Lasertechnic, Cymer) and in large companies (Boston Scientific, J&J).

Board of Directors: (previous and current)

Michael Sember , Chairman and CEO *

Nicole Walker, Robert W Baird- Chicago *

Dan Omstead, Tekla Capital Management (formerly H&Q)-Boston

Aidan King –Fountain Healthcare Partners-Dublin *

Juerg Eckhardt, BB Biotech-Zurich

Alfred Scheidegger, PhD- Nextech Invest Ltd-Zurich

* indicates current board member

The Bidding Process for Interested Buyers
Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the Palyon Medical Corp. Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Palyon Medical Corp. Assets. Sealed bids must be submitted so that it is actually received by Gerbsman Partners no later than Friday, March 6, 2015 at 3:00 p.m. Central Daylight Time (the “Bid Deadline”) at Palyon Medical Corp.s’ office, located at 28432 Constellation Road, Santa Clarita CA . Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable. All bids must be accompanied by a refundable deposit check in the amount of $200,000 (payable to Palyon Medical Corp., Inc.). The winning bidder will be notified within 3 business days of the Bid Deadline. Unsuccessful bidders will have their deposit returned to them within 3 business days of notification that they are the unsuccessful bidder.

Palyon Medical Corp. reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all of the assets from sale. Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.
Palyon Medical Corp. will require the successful bidder to close within a 7 day period. Any or all of the assets of Palyon Medical Corp. will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Palyon Medical Corp. Assets shall be the sole responsibility of the successful bidder and shall be paid to Palyon Medical Corp. at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman

Gerbsman Partners

(415) 456-0628

steve@gerbsmanpartners.com
Kenneth Hardesty

Gerbsman Partners

(408) 591-7528

ken@gerbsmanpartners.com

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Gerbsman Partners (http://www.gerbsmanpartners.com) has been retained by Venture Lending & Leasing VI, Inc. and Venture Lending & Leasing VII, Inc. (together “WTI” http://westerntech.com), the senior secured lender to AxioMed Spine Corp., (“AxioMed”), (http://www.axiomed.com) to solicit interest for the acquisition of all or substantially all of AxioMed’s assets, including its Intellectual Property (“IP”), in whole or in part (collectively, the “AxioMed Assets”). Please be advised that the AxioMed Assets are being offered for sale pursuant to Section 9-610 of the Uniform Commercial Code. Purchasers of the AxioMed Assets will receive all of AxioMed’s right, title, and interest in the purchased portion of WTI’s collateral, which consists of substantially all of AxioMed’s assets, as provided in the Uniform Commercial Code.

The sale is being conducted with the cooperation of WTI and AxioMed. AxioMed has advised WTI that it will use its best efforts to make its employees available to assist purchasers with due diligence and assist with a prompt and efficient transition at mutually convenient time.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to the AxioMed Assets has been supplied by third parties and obtained from a variety of sources. It has not been independently investigated or verified by WTI or Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by WTI or Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing (the “information”), as a statement, opinion, or representation of fact. Please further note that all information provided herein relating to the operations of AxioMed’s business and its market positions relates to periods on or prior to August 31, 2014. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

WTI and Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of WTI’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the AxioMed Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of, WTI and Gerbsman Partners. Without limiting the generality of the foregoing, WTI and Gerbsman Partners, and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the AxioMed Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum is not to be supplied to any other person without Gerbsman Partners’ prior consent. The information contained herein is not subject to the Non-Disclosure Agreement, however any additional requested information will require execution of the attached NDA attached hereto as Exhibit A. Also attached is a detail sales letter, Exhibit B, AxioMed Fixed Asset List (a portion of the fixed asset list is subject to a secured lien by the Ohio Department of Development- Innovation Loan Fund), and Intellectual Property and Trademark summary.

Headquartered in Cleveland, Ohio, AxioMed is a medical device company that has developed innovative, next generation technology for restoring function in the Cervical and Lumbar Spine. The Freedom® Technology platform is a next generation elastomeric based Total Disc Replacement (TDR), which is projected to represent a multi-billion dollar market opportunity. Currently, with minimal marketing efforts the Freedom platform is on track to achieve over $1MM during the next 12 months in the EU.
To date, the Company has received investments from a number of sources totaling over $70,000,000. The Company’s equity investors are led by Thomas McNerney & Partners, Investor Growth Capital, MB Ventures and Primus.

Company Profile

Founded in 2001 AxioMed® Spine Corporation, developed Freedom with the goal of restoring spinal function to patients by adhering to the natural biomechanics of the spine. While current generation discs can provide unconstrained motion and restore disc height, they cannot replicate function, lordotic curve and viscoelastic properties native to a healthy intervertebral disc.

Shown In figures 1 and 2, Freedom Cervical Disc (FCD) and Freedom Lumbar Disc (FLD) are one-piece viscoelastic artificial discs consisting of elastomeric cores bonded to titanium alloy retaining plates. The patented designs include proprietary polymer-metal bonding and morphometric characteristics for optimized fit. Freedom’s design philosophy is to re-establish the function of the spinal segment, working in conjunction with the surrounding anatomy to mimic the biomechanics of a healthy spinal segment.
The FLD was the first elastomeric technology to complete a multi-center study in Europe and receive U.S. Investigational Device Exemption (IDE) approval for a pivotal study. The technology will benefit from a significant time-to-market advantage over competition as it has enrolled more than 400 patients in the randomized pivotal U.S. study and can achieve FDA approval in 2016/2017. As a result, FLD could be the first next generation elastomeric disc approved in the U.S. Combined with CE Mark for FCD, which was received in May 2012, AxioMed’s Freedom is the most complete TDR platform in a potential multi-billion dollar market opportunity for cervical and lumbar TDRs.
AxioMed believes its assets are attractive for a number of reasons:

As a result of concerns related to clinical efficacy and lack of compelling comparative cost effectiveness data, fusion procedures have recently faced mounting reimbursement challenges, which have led surgeons and payers to actively seek an alternative standard of care for degenerative disc disease (DDD). Freedom, along with other TDRs, are poised to take advantage of this opportunity with increasing long term efficacy results and documented economic benefits. To support market launch and favorable reimbursement, AxioMed included economic endpoints in its FDA pivotal study for FLD, including surgical time, length of hospital stay, return to work time, medication usage, quality adjusted life year measurements and cost data for the index procedure as well as any subsequent interventions.
Additional AxioMed has created significant value in:

1.  CE Mark Approval for FCD – Pre-clinical testing and clinical rationale on safety and performance made up the CE Mark Technical File submission for the FCD, an anatomically optimized design that was accepted by the EU Notified Body in conjunction with the receipt of CE Mark approval in May 2012. This pre-clinical testing will also be used for an FDA IDE submission. The FLD experience provides excellent data support and a proven regulatory pathway for an efficient IDE process for the FCD.

2.  Complete FCD European Pilot Clinical Study – AxioMed’s FCD was first implanted commercially in the EU in February 2013, in conjunction with the start of the post-market study in the EU that is collecting clinical data to support an FDA IDE application (estimated for year-end 2014).

3.  Completing FLD Pivotal Clinical Study Enrollment – The Company has completed the IDE Study enrollment with more than 400 subjects, which will place Freedom on track to receive FDA approval in 2016/2017.

4.  Pro-Actively Solicit Expanded Reimbursement for TDRs – Economic data generated from the FLD IDE study will be used to expedite national coverage for FLD as a viable standard of care for DDD. This economic data will support FLD reimbursement in advance of market launch.

5.  Establish Market Awareness of Freedom with Key Opinion Leaders in Europe – Availability of FLD in Europe since 2009 has increased awareness of AxioMed’s clinical approach to TDRs. To date, key opinion leaders in strategic markets have performed TDR procedures with Freedom and have presented positive clinical outcomes data in international spine surgeon symposia.

Impact of the Freedom Technology on the market

Current Market

Industry research and analysts estimate that the current worldwide lumbar TDR market is $350 million1. Similarly, the worldwide cervical TDR market is estimated to be $600 million[1]and analysts expect growth to exceed 25%[2]. Current estimates, however, emphasize the limitations of and challenges faced by first generation TDR technologies and thus, have not fully considered the impact that next generation technologies will have in addressing third party payer and surgeon concerns, in management’s opinion. In addition, current market estimates do not fully appreciate the concept that Freedom’s pivotal study economic data will have an influential effect on the reimbursement landscape by proving to third party payers that a new technology is available to them with as good or better clinical outcomes and significantly better economics.

Limitations of Fusion

In contrast to fusion, first generation TDRs were designed to allow motion in the diseased segment and possibly provide greater pain relief, diminished disability and earlier return to activity. Results for fusion, currently the standard of care treatment for symptomatic DDD and a market exceeding $6 billion1, have demonstrated that the procedure may increase intradiscal pressure and motion at levels adjacent to the fusion which may contribute to radiographic and symptomatic DDD at levels adjacent to fusion. As the surgical treatment of choice for DDD for many years, fusion has thus far had a consistent reimbursement history. Published data indicate, however, that only about 75% of fusion patients experience any clinical benefit.[3] Only half of the fusion patients will experience major or complete relief of pain or disability. Anticipated re-operation rates within ten years are reported to be between 10% and 25%.3 Additionally, fusion is believed to cause complications that result in the potential for increased pain and patient disability. Patient and physician dissatisfaction with fusion gave rise to the concept that removal of the symptomatic disc with maintenance of motion (as is done in total knee and hip procedures) is more likely to improve clinical results and reduce or eliminate the incidence of adjacent level disease (ALD).

Recent third party payer pushback suggests some degree of uncertainty— calling into question the efficacy of roughly 25% of the overall fusion procedures.3 Additionally, issues concerning biologics (InFuse) and capitated pricing strategies have exerted significant downward pressure on fusion implant pricing. AxioMed believes that the increased scrutiny on fusion reimbursement, recent pricing trends and physician and patient desire for an alternative treatment create a significant market opportunity for a differentiated technology such as Freedom. As an example of recent payer pushback on fusion, Blue Cross/ Blue Shield recently limited fusion procedures in certain circumstances. In addition, CMS bundled pricing on anterior cervical decompression with the associated fusion procedure, which resulted in fusion pricing being essentially equal to cervical TDR reimbursement.2

Other Drivers
A recent market study suggested that approximately 77% of cervical TDR procedures were single-level with the remainder applying to two or more levels.10 This represents a significant upside potential for FCD due to its unique anatomically optimized design, including the FCD’s viscoelastic properties similar to that of a healthy natural disc and the Freedom technology’s ability to reproduce the normal spinal function and alignment.

EU Lumbar and Cervical TDR Market Opportunity

AxioMed’s assessment of the EU market opportunity was developed under similar assumptions as those used to estimate the US opportunity. The main differences are related to the timing of Freedom’s and other technologies’ earlier availability in the EU as well as consideration for the higher adoption rates experienced by new technologies in the EU. Furthermore, medical devices in the EU are typically priced at a discount to those sold in the US. Based on this premise and current pricing data, AxioMed estimated EU average selling prices for FLD and FCD to be $4,200 and $3,200, respectively, with projected prices increasing 3% annually.
European Sales

AxioMed currently markets the Freedom Technology in Europe through a limited distribution network. The primary countries are Germany, United Kingdom and Switzerland. With minimal marketing efforts the Freedom platform is on track to achieve over $1MM over the next 12 months.
AxioMed’s Assets

AxioMed has developed differentiated next generation total disc replacement platform in Freedom. The company has created significant intellectual property and assets. These assets fall into a variety of categories, including:
· 8 US Patents, 3 US patent applications, 20 PTC applications and 3 Registered trademarks

· Complete FLD Pivotal study enrollment. The Company has enrolled more than 400 patients, which will place AxioMed on track to receive FDA approval 2016/2017.

· Technology addressing the multi-billion dollar symptomatic degenerative disc disease market.

· Expanded Reimbursement for TDRs – Economic data generated from the FLD IDE study will be used to expedite national coverage for FLD as a viable standard of care for DDD.

· Asymmetric FLD design to meet the unique morphology of the L5-S1 Disc space

· Unique and clinically relevant patient data

· Market supporting pre-clinical and clinical trials underway

· Next generation product designs

· Product cost reduction designs

· Manufacturing and design equipment

· Surgical product inventory

· Intellectual capital and expertise

The assets of AxioMed will be sold in whole or in part (collectively, the “AxioMed Assets”). The sale of these assets is being conducted with the cooperation of AxioMed. AxioMed and its employees will be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership. Notwithstanding the foregoing, AxioMed should not be contacted directly without the prior consent of Gerbsman Partners.
Next Milestones – by 2015

AxioMed is working towards additional key milestones that will be achieved by years end. These include:
· The FCD 50 Patient Multi-center Post-Market EU clinical Study. Completion of the study enrollment provides:
o Support FCD IDE submission
o Option for clinical journal publication
o Identical sample size to the FLD multi-center European clinical study
o The prospective study, sample size and two year follow up provides significance to the data set
· FDA approved ASC’s supplement to form Clinical Events Committee (CEC). Currently conducting CEC Meetings for the FLD IDE Study. The CEC is responsible for adjudicating all Adverse Events (AE) and Serious Adverse Event’s (SAE) as it relates to the investigational device and control. This is an FDA requirement and a key item in order to begin data analysis for the PMA submission.
o The FLD Pre-clinical (biomechanical/biocompatibility studies) module is complete and AxioMed is also preparing for the manufacturing module for PMA submission.
Management

Patrick A. McBrayer
President & CEO
Mr. McBrayer joined AxioMed Spine as Chief Executive Officer in 2006 and was elected to the Board of Directors at that time. Prior to AxioMed, Mr. McBrayer was Chief Executive Officer of Xylos Corporation, a medical biomaterials company. He is also a Founder of Transave Inc. (now Insmed), a biotechnology company focused on the site specific treatment of lung disease. Prior to joining Xylos, Mr. McBrayer served as President and CEO of Exogen, Inc., a company focused on the non-invasive treatment of musculoskeletal injury and disease, which was acquired by Smith & Nephew, Inc. in 1999. Previously, Mr. McBrayer was President and CEO of Osteotech, Inc., a worldwide leader in tissue technology that was acquired by Medtronic, Inc. Mr. McBrayer began his business career with Johnson and Johnson after service as an officer in the United States Army Infantry.
James M. Kuras
COO
Mr. Kuras is co-founder of AxioMed Spine and has over 25 years of medical device development experience, his primary focus being device and market development in the orthopedic spinal area. He has development experience in the both class II and class III devices and demonstrated proficiency in developing, implementing and executing strategic business plans for the US, Europe and Pacific Rim. He previously held the position of Senior Vice President and Chief Technology Officer with the company, responsible for the development of the FLD System. He also holds a number of key patents in orthopedics. His career includes positions at such notable companies as AcroMed, Sheridan Catheter and North American Instrument Corp.
Gerald Baty
CFO
Mr. Baty joined AxioMed Spine as Chief Financial Officer in 2008 with over 20 years’ experience in finance, accounting, legal, human resources, administration and business operations. He has assisted small pharmaceutical and biotechnology companies raise funding through various vehicles, including public offerings, PIPE’s, private venture financing, debt and grants. Prior to joining AxioMed, Mr. Baty was Chief Financial Officer for Mt. Cook Pharma, a pharmaceutical development company focused in Urology.
Neal D. Defibaugh
VP Clinical and Regulatory Affairs
Mr. Defibaugh joined AxioMed Spine in 2006 and has over 20 years’ of medical device clinical and regulatory experience focused in orthopedic devices. He has clinical and regulatory experience in both class II and III devices obtaining marketing clearance / approval in the US and international markets. Mr. Defibaugh joined AxioMed Spine from Smith & Nephew, Inc., Orthopedic Division, where he most recently served as Director of Clinical Affairs.

Board of Directors

§ Ashley Friedman, Investor Growth Capital
§ Peter Kleinhenz, Chairman, CID Capital
§ James Kuras, AxioMed Spine Corporation
§ Patrick McBrayer, AxioMed Spine Corporation
§ Peter McNerney, Formerly of Thomas, McNerney & Partners, LLC
§ Larry Papasan, BioMimetic Therapeutics Inc.
§ Kathy Tune, Thomas, McNerney & Partners LLC

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the AxioMed Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of WTI, Gerbsman Partners, or AxioMed, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and WTI, AxioMed, and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the AxioMed Assets. Sealed bids must be submitted so that they are actually received by Gerbsman Partners no later than Friday, October 31, 2014 at 3:00 p.m. Pacific Time (the “Bid Deadline”) at AxioMed’s office, located at 5350 Transportation Blvd., # 18, Garfield Heights, Ohio 44125. Please also email steve@gerbsmanpartners.com with any bid. Please bid on the fixed assets that are secured by the Ohio Department of Development- Innovation Loan Fund separately. Detail information is available in the due diligence room.

Bids should identify those assets being tendered for in a specific and identifiable way.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable. All bids must be accompanied by a refundable deposit check in the amount of $250,000 (payable to Venture Lending and Leasing V, Inc.). The winning bidder will be notified within 3 business days of the Bid Deadline. Unsuccessful bidders will have their deposits returned to them within 3 business days of notification that they are an unsuccessful bidder.

WTI reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all of the assets from sale. Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.

WTI will require the successful bidder to close within a 7 day period. Any or all of the assets of AxioMed will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the EGT Assets shall be the sole responsibility of the successful bidder and shall be paid to WTI at the closing of each transaction. For additional information, please see below and/or contact:

For additional information, please see below and/or contact:

Steven R. Gerbsman
Gerbsman Partners
(415) 456-0628
steve@gerbsmanpartners.com

Kenneth Hardesty
Gerbsman Partners
(408) 591-7528
ken@gerbsmanpartners.com

[1] Spine Technology Summit, 2010
[2] RBC Capital Markets 2Q 2011 Spine Survey, pg 19
[3] Christensen FB. Lumbar spinal fusion. Outcome in relation to surgical methods, choice of implant and postoperative rehabilitation. Acta Orthop Scand Suppl. 75 (313); pp 2-43, 2004

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