Direct Flow Medical snares $32 million in new financing

Santa Rosa-based Direct Flow Medical Inc. announced Wednesday that it has received $32 million in new financing as it competes in a crowded field to create a better device for replacing heart valves without invasive surgery.

Direct Flow Medical said it received $17 million in private equity funding, from SV Life Sciences and an unnamed company, and $15 million from PDL BioPharma, which represents the second part of a $50 million debt facility offering.

The funding will go to complete U.S. trials for its transcatheter aortic valve system, which implants a quarter-sized valve made of bovine tissue into the patient via catheter rather than the traditional open-heart surgery that uses a metal stent. The new money also will help speed the company’s growth overseas, where its valve system is already available in Europe and the Middle East.

“It’s a really great environment,” said Bernard Lyons, Direct Flow Medical president and chief executive officer. “We had a very strong year of commercialization in Europe.”

The company has doubled its work force within a year to 260 employees, with 140 in Santa Rosa. Its investors include such well-known medical names as Johnson & Johnson Development Corp. and Abbott Ventures Inc. The funding represents the fourth round of funding for the company, which has raised $92 million in private funding and $50 million in debt financing. Lyons would not comment on if Direct Flow will seek future funding.

The domestic market for a less-invasive heart-valve replacement is expected to exceed $1 billion annually in the next five years as companies vie to bring the safest model to the market. Those companies include Irvine-based Edwards Lifesciences, which received U.S. approval for a device in 2011, and Medtronic Inc., whose Santa Rosa facility also works on portions of its aortic valve system.

As part of its expansion, Direct Flow also announced that it has appointed Chris Richardson as its first chief commercial officer. Richardson previously served as general manager at Abbot Vascular Structural Heart and was a vice president at Boston Scientific.

Direct Flow Medical is in the second trial phase with its device at about 30 U.S. sites, after an earlier phase was completed last year with 30 patients at six U.S. sites.

That earlier trial found a survival rate of 97 percent within a 30-day monitoring. A study of that trial also found a low evidence of complications and no incidents of stroke.

Medtronic’s device, named CoreValve, had been approved for U.S. use in extreme-risk patients, and in June the FDA approved it for high-risk patients, said Wendy Dougherty, director of communications for the company. It is now undergoing a clinical trial for use in patients with intermediate risks. CoreValve has been used in 6,500 patients worldwide.

Lyons contends that Direct Flow Medical will have an advantage as a second-generation device that improves the recovery for heart patients, especially in stopping the blood leakage from such procedures, which he called the “Achilles’ heel” of the industry. “Think of it as weather sealing for the valve,” Lyons said.

The company also has diversified its product base, now offering four different types of sizes for its valves, which will enable it to serve a broader patient base.

The investment will help bolster Sonoma County’s reputation as burgeoning hub for the medical device industry. Besides Direct Flow Medical and Medtronic, the county is also home to Claret Medical, which has developed a filtering system to catch mineral deposits and other debris during a heart valve replacement, and TriVascular Inc., which makes devices to treat abdominal aortic aneurysms.

Unlike other industries, the U.S. medical device sector has been able to escape a drive to outsourcing, said Ben Stone, executive director of the Sonoma County Economic Development Board. Its products require a very advanced area of manufacturing and a high degree of sanitation that developing nations cannot produce, he said.

“Medical devices are the one area where the Chinese can’t compete with us,” Stone said.

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.