Monday, February 11, 2008

N.E. stroke rehab firms confident despite Seattle competitor's setback

By Ryan McBride

New England medical devices firms with stroke-rehabilitation technology say they're undaunted by the failure of one of the most visible companies in their field.

NorthStar Neuroscience Inc. of Seattle revealed two weeks ago that its brain implant intended to activate neurons damaged by stroke missed the goals of a clinical trial, causing the firm's stock price to sink from more than $8 per share to less than $2 per share. Neurotechnology firms Myomo Inc. of Boston and Providence, R.I.-based Afferent Corp., however, say issues with NorthStar's technology would have little impact on their operations. Yet an analyst says the NorthStar flop could temper investors.

"I think this is one more cross to bear for stroke recovery," said Jason Wittes, a medical devices industry analyst for Leerink Swann & Co., a Boston-based equity research and investment banking firm. "Unfortunately, it is a miss, and a high-profile miss, that will cause some reluctance with investors."

NorthStar's system is designed to deliver electric stimulation to the cortex of the brain via an electrode implanted between the scalp and the membrane that protects the brain. However, the clinical trials showed that the device provided only marginal improvement to patients compared with those in a control group, according to the company.

But one thing neurotech companies still have in their favor, Wittes said, is a huge need for stroke treatments. There are more than 5 million people in the United States who have suffered stroke, yet there are few devices out there to revive a victim's motor skills. And the potential market in the nascent field could be worth billions of dollars.

"Investors are still attracted by the big, unmet need for stroke rehabilitation," said David Hable, president and CEO of Afferent, which has raised more than $8 million from investors including Michigan medical devices giant Stryker Corp. as well as venture firms and an unnamed Japanese company.

Hable said there always tends to be a rush of scrutiny after failures in the industry, but his eight-year-old firm is moving ahead as planned.

Afferent last year began a clinical trial at Spaulding Rehabilitation Hospital in Boston of its device, worn over stroke victims' arms, that is designed to provide small amounts of electrical stimulation to improve movement. Hable said the trial is on pace to render results by April, providing information needed to seek market clearance from the U.S. Food and Drug Administration.

Myomo last year received FDA clearance for its robotic device intended to help victims of stroke improve their arm movements. The private company has said it is commercializing the product across the United States, and its first unit sold was shipped to Braintree Rehabilitation Hospital in December 2007. The company has raised $4.2 million in private capital, including $3.1 million closed in January, from angel investors.