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Cold cash to pave final mile of Pathway's road to market
Seattle Times business reporter
Pathway Medical Technologies, a Redmond company with a device that aims to restore healthy circulation in clogged leg arteries, has raised $25 million in venture capital to make a final push to the market.
It plans to use the new cash for an ambitious expansion. Chief Executive Tom Clement said Pathway will grow from 37 employees to about 140, adding them over the next year in operations, engineering, manufacturing and sales.
The company also will seek a larger building on the Eastside with capability to make thousands of its devices.
Pathway hopes to submit an application to the U.S. Food and Drug Administration by mid-2007 and start selling to doctors and hospitals in early 2008.
"It's a wonderful opportunity," Clement said. "Now we've got to fire on all cylinders to make it happen."
The investor group was led by HLM Venture Partners and Latterell Venture Partners. They were joined by existing investors ABN Amro Capital Lifesciences, Giza Ventures and Oxford Bioscience.
CEO: Tom Clement
Capital invested to date: $58 million
What it does: Testing a device that busts up and vacuums out fatty buildups in leg arteries. The device initially was targeted for the heart.
Competitor: Fox Hollow Technologies
Source: Company reports
It's quite a reversal for a company that ran out of money two years ago and laid off all its employees before being revived months later with a $10 million infusion.
The company had spent its early years developing a tiny stainless-steel drill, mounted on a catheter, that can slither inside coronary arteries to break up and vacuum out fatty buildups. Its blades scrape at angles that dislodge hard deposits without cutting flexible blood-vessel walls, much like a razor cuts whiskers.
Clement, who co-developed Heart Technology's Rotablator in the 1990s to do similar work, thought the new device could be more effective.
The main new feature was a suction component that removes fatty deposits and blood clots, which can be rubbery and difficult to drill through cleanly.
But when a couple of the company's competitors failed, no one wanted to finance Pathway's trials in heart arteries. Instead, the company took its technology to legs.
It's clearly a big market. The American Heart Association estimates 8 million to 12 million Americans have peripheral artery disease, including about one in five people over age 70. The disease causes pain while walking and cuts off circulation in enough people to cause 150,000 amputations a year.
Stents, which have dominated treatment of heart disease by propping open blocked coronary arteries, have not worked as well in the legs because they tend to flex and break behind the knee joint.
Clement said he sensed an opportunity, partly because Pathway's device doesn't involve implanting anything. He decided to push ahead once he saw the success of a competitor, Fox Hollow Technologies of Redwood City, Calif.
Fox Hollow began selling its SilverHawk device for scraping out blockages in the legs in early 2004.
It sells the device for more than $2,600 and is expected to reach $200 million in sales this year, according to a research report by JP Morgan. The company is projected to turn profitable this year.
The procedure carries risks, regardless of whose device is used. Some cases of artery perforation have been reported, and studies show some arteries re-narrow and need the procedure repeated.
The evidence supporting Pathway's device is still preliminary.
Stephanie Amoss, vice president of marketing at Pathway, said data from 105 patients in Europe showed doctors could complete the Pathway procedure in under four minutes and reduce arterial blockage from 89 percent to 29 percent.
The effect doesn't appear to be temporary. In the 26 patients who have reached their six-month follow-up date, only one has needed a repeat procedure.
Amoss said the company believes it needs results from at least 143 patients, and provide six-month follow-up data on all of them, to prove to the FDA that its device is roughly equivalent to the SilverHawk.
The trial does not directly compare effectiveness of the two devices.
Dr. William Gray, a cardiologist at Columbia University and head of Pathway's scientific-advisory board, is optimistic the device will be faster than Fox Hollow's, and better at safely cutting through tough calcified buildups.
"This seems like a good follow-on technology," he said.
David Auth, an early investor in Pathway and Clement's mentor at Heart Technology, said he believes Pathway's device will be easier to use than its rival.
That's key to the product's future, he said, because stents beat the Rotablator in the marketplace partly because they were easier to use.
One way Pathway has addressed that problem: Its device runs on an electric motor that can plug into a wall outlet, making it more convenient than Rotablator's special air turbine.
The device isn't perfect. Auth said company engineers are working to make sure the suction component removes all particles of blood clots, not just 75 percent.
He said the leftovers are so tiny they shouldn't pose a danger but could save doctors the hassle of removing them with suction.
"This is the hottest product out there for restoring circulation in the leg," Auth said. "The $25 million reflects a very high level of confidence in the medical-device community. Not a lot of companies get that."
Luke Timmerman: 206-515-5644 or firstname.lastname@example.org
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