[Posted on February 28, 2008 - 5:09 PM]
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DiggDrug delivery and device maker TyRx Pharma Inc. has landed $25 million in a first institutional round of investment on the strength of regulatory approval of its first commercial product, and will use the new capital to build a sales and marketing team and to boost other products in development.
Pappas Ventures of Research Triangle Park, N.C., and Clarus Ventures of Boston co-led the round, which brings total equity investment in Monmouth, N.J.-based TyRx to about $35 million. The deal was initiated last October and closed Feb. 25 after TyRx received approval in January for an antibacterial wrapper made of proprietary degradable polymers that gradually releases antibiotics to prevent infection from device implant procedures.
TyRx CEO Bill Edelman (right) said the 10-year-old company has financed itself primarily with angel investment and a $4 million strategic investment from Boston Scientific Corp. in January 2005, but decided to go to the venture market for a large round to build its own sales and marketing team.Edelman would not disclose a valuation for the new investment but said the company had multiple term sheets and that it came at an attractive premium on previous investment. The round is aimed at taking the company to positive cash flow within two years, he said.
TyRx was founded in 1998 based on a licensing agreement from Rutgers University for proprietary polymers, but it operated largely as a research company prior to Edelman coming aboard in 2004. He said he was attracted to the company based on the promise of combining its materials research with existing drugs to address the incidence of infection resulting from implant procedures. Within eight months of his arrival, the company had plans
for products for use with pacemakers and implanted defibrillators.
TyRx's AIGISrx product consists of a mesh envelope that holds implanted devices in place, and a polymer coating that gradually degrades, releasing controlled amounts of antibiotic as the implant wound heals over seven days. The product is designed to provide a more concentrated antibacterial agent to prevent infections that are common in the 500,000 pacemaker implant procedures conducted each year in the U.S.
Because its products are implanted using medical procedures currently in use, TyRx did not need to conduct clinical trials in humans to receive U.S. Food and Drug Administration approval, and Edelman said the product was approved after extensive internal testing in vitro and in animals. He said the company conducted its fundraising efforts while approval for its products was pending, and had a deal in hand upon receiving the go-ahead from the FDA.
While the AIGISrx product is the first commercial product the company will take to the market on its own, TyRx has previously worked with distributors on products for hernia treatment that it then licensed to C.R. Bard Inc., a Murray Hill, N.J., medical device maker. In addition to its equity investment, TyRx has received about $8 million in licensing and other fees.
Sean McCarthy, a principal with Pappas Ventures, said he was introduced to the deal by Clarus, and was particularly attracted to the sector based on Pappas' investment criteria. "We have had an interest in the broader issue of procedure-based device infections, and this was a particularly good fit for us because about 80% of our investments are in therapeutics, and the 20% we put in devices are in late stage," he said. "This is a direct hit, because the device is at approval stage, but the company has a number of other filings for other applications coming in the next couple of years."
McCarthy said TyRx's product launch is particularly timely, as the Center for Medicare and Medicaid Services, the U.S. government agency that administers Medicare, Medicaid, and the State Children's Health Insurance Program, recently dictated that surgery centers will be responsible for implant-related infections. Private insurers typically follow the lead of the CMMS, and McCarthy said it is likely that surgeons will put more emphasis on preventing infection if costs will not be reimbursed.
TyRx also seeks other markets for its technologies, but will focus on taking its product directly to the roughly 5,000 cardiologists and electro-physiologists working in the U.S. Edelman estimated the total U.S. market for medical device infection control products at $3 billion.
TyRx did not use an outside financial adviser for its investment round, and had legal work on the deal from John Hession and Mark Recht of Cooley Godward Kronish LLP in Boston. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC represented the investors. - Clifford Carlsen
