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Heart-Valve Startup Stakes Claim in OC Device Hub

Direct Flow Medical Inc. was looking for animal tissue expertise when choosing where it would manufacture its less-invasive replacement heart valves.

Its search led it to Lake Forest, where it plans to grow operations.

“If you’re doing anything with tissue, either in the heart valve space or the ophthalmic space, if you’re not in Southern California, specifically in the Irvine area, you really don’t have much in the way of presence,” said Bernie Lyons, chief executive of the Santa Rosa-based medical device startup. “For us, once we knew this concept was going to be very attractive to the marketplace, we made the decision to strategically locate a facility [in Orange County].”

Direct Flow makes aortic transcatheter valves, which are used to treat patients with severe aortic stenosis, or a narrowing of the arteries. It opened its 2,500-square-foot facility in Lake Forest in 2008.

The plant features a “clean room” for manufacturing. The plant’s location in Lake Forest, situated just east of Irvine, places the company at OC’s hub of medical businesses ranging from a steady stream of startups to long-established companies such as Edwards Lifesciences Corp. in Irvine and Abbott Medical Optics in Santa Ana, a unit of Abbott Park, Ill.-based Abbott Laboratories Inc.

Direct Flow has 20 local workers and will be adding an unspecified number of manufacturing and research and development jobs, as it prepares to take its valve to market in Europe, Lyons said. The company just finished its European clinical trial and expects regulatory approval there in next year’s first quarter.

“As we go forward, the significance of Southern California will grow, because that’s where all the tissue processing is being done currently, where 70% of the cuff sewing is done,” Lyons said.

Most of Direct Flow’s assembly work will be done locally, he added.

A U.S. clinical trial on the valve is planned to start in 2013, and Lyons said he didn’t expect a Food and Drug Administration decision until the end of 2016 or early 2017.

Lyons: executives “made a decision to strategically locate”

Its valve is “quite different from what everyone else is doing,” Lyons said.

That’s because it’s flexible “as opposed to a rigid metal stent design” as found in transcatheter valves such as Edwards Sapien, Medtronic Inc.’s CoreValve and Portico, the newly approved valve from St. Jude Medical Inc.

Such flexibility can “virtually eliminate the aortic regurgitation that could be left behind by a rigid, open-metal type of structure,” according to Lyons.

He said the valve also allows doctors to fully assess clinical outcomes before deploying the valve.

Direct Flow also makes the valve at its Santa Rosa corporate base, where it has about 50 employees, including administrators. Lyons said the company wanted to have “redundant manufacturing” in case there is an earthquake or other natural disaster in Southern California.

Direct Flow has raised $75 million in three rounds of funding since its establishment eight years ago.

Backers include Michigan-based EDF Ventures, Massachusetts-based Spray Venture Partners, Menlo Park-based New Leaf Venture Partners and the venture-capital arms of device heavyweights Johnson & Johnson and Abbott Laboratories.

Sales

Direct Flow has no revenue as yet. It plans to begin sales through a mix of distributors and its own sales staff once regulatory approvals are in place, Lyons said.

Direct Flow could draw interest from established competitors, along the lines of other valve startups. Edwards paid $125 million for New Jersey-based Percutaneous Valve Technologies Inc in 2003. Medtronic bought Irvine-based CoreValve Inc. for $700 million in 2009.

“What the future holds, I can’t predict,” Lyons said.

Direct Flow was established in 2004 by engineers Gordon Bishop, now the company’s vice president of research and development, and Randy Lashinski, now chief executive of Santa Rosa-based device maker Claret Medical Inc.

The pair had been with Arterial Vascular Engineering Inc., a Santa Rosa-based stent maker that was later bought by Medtronic.

Bishop and Lashinski “were involved in the mitral valve repair space prior to forming Direct Flow Medical back in 2004,” said Lyons, who joined the company in 2006.

“At that point, the market seemed to be a little more conducive to financing on the mitral disease side,” he noted.

Direct Flow’s founders then spoke to doctors who initially implanted transcatheter valves and learned “there was a pretty significant opportunity to improve upon” aortic technologies, Lyons said.

Mitral valves have been placed on the back burner but Direct Flow could revisit them, noting that the Direct Flow design can be used in any replacement valve location, he added.

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