UPDATED August 17, 2015, 5 p.m., with comment from Julio Palmaz.
Palmaz Scientific, the company co-founded by coronary stent pioneer Dr. Julio Palmaz in 2008, is out of cash and looking for a new CEO, according to a letter to shareholders obtained by MassDevice.com.
Julio Palmaz plans to step down from his chairman’s role at Palmaz Scientific, to be replaced by former Kinetic Concepts Inc. CEO Cathy Burzik. Burzik, who led KCI through its $6.1 billion sale to a private equity consortium in 2011, will also serve as interim CEO as Palmaz Scientific seeks a replacement for Steven Solomon. He resigned “to pursue other opportunities,” according to the letter. Julio Palmaz will stay on as chief scientific officer, he wrote in the August 13 letter.
Palmaz Scientific has “completely exhausted its financial resources” and faces mounting debts with no money coming in, despite a recent infusion of several million dollars from the Palmaz family, according to the letter. After seeking and failing to find traction with larger medical device companies for the new medical alloy its developing, Julio Palmaz wrote, the Fremont, Calif.-based company is seeking an infusion from a group of investors led by venture capital shop Targeted Technology, where Burzik is an operating partner.
Burzik today confirmed to MassDevice.com that the letter was sent to shareholders last week, but declined to elaborate.
Palmaz Scientific raised $26.3 million from some 260 private investors in November 2013, but a hoped-for debt offering worth $15 million in the spring failed to bring in any outside backers despite the $2 million put down by members of the board. An outside investment firm also failed to gin up any interest, according to the shareholders letter.
The company’s technology involves laser etching of high-performance “super-alloys” the company believes can disrupt several markets, Palmaz wrote.
“We believe if we can bring to regulatory approval in the United States just one of the half a dozen devices we could create today, it could be a game-changer. For example, we believe that we can create devices which will be superior to anything in the market today to treat peripheral artery disease, intra-cranial aneurysms, and structural heart disease, all of which have significant unmet medical needs for both clinicians and patients,” he wrote.
“Our efforts to partner with large medical device manufacturers have encountered a consistent negative attitude by their R&D teams. The nature of our fabrication methods imply a profound restructuring of the conventional methodology, as is currently used by all medical device manufacturers. Our advanced fabrication methods have been highly resisted by all companies we have approached to partner with, typically rationalizing their aversion to change,” Palmaz wrote. “Therefore, I believe that we should take the offensive – designing, testing and producing our own devices – we believe we can break through the prevailing conservatism of the major medical device manufacturers and create an opportunity to compete on an even playing field.”
Palmaz Scientific should focus on “taking a new-generation intravascular stent all the way to U.S. and international market approval,” he recommended.
Julio Palmaz told MassDevice.com during a telephone interview that PSI is focused on creating a new super-alloy for smaller medical devices.
“During the years that I have worked on this, 1st in the lab and then in the clinical realm, I always thought there was a void in what a stent could be, in so far as materials,” he told us. “We can actually make better intravascular stents [for the] intracranial space and small vessels below the knee. Those 2 areas really stress the need for advanced materials.”
Palmaz said the metal alloys used to make devices like coronary stents are “crude and full of impurities” that make them inadequate for smaller, micro-sized devices like below-the-knee stents.
“It’s a material that works well in the larger sizes, but the minute you get down to the smaller devices, they start failing. The metal at that point cannot be made with the conventional natural alloys,” he said, explaining that the PSI metal is a high-purity alloy designed to deliver the structural integrity and predictability needed at that smaller scale.
“The structure is essentially very ordered. That allows the mechanical properties to be optimized at very small sizes,” Palmaz said, noting that an intracranial stent would need to be no more than 50µ to 60µ thick.
Palmaz estimated that it would take $20 million to $25 million to get an intravascular stent on the U.S. market and slightly less than that for an intracranial stent.
“Palmaz Scientific is very well positioned to do this,” he told us. “I’m very confident that our technology is superior and, given the opportunity, we should succeed.”
