Kips Bay asks shareholders to shut it down

Plymouth device company Kips Bay Medical Inc. is encouraging shareholders to vote Tuesday to wind down the eight-year-old company after disappointing results from a clinical trial of its device.

Kips Bay Medical was founded by Manny Villafaña, the Bronx-born medical device inventor and executive who founded St. Jude Medical and Cardiac Pacemakers. Kips Bay was Villafaña's seventh company to hold an initial public offering of stock.

The company's board voted in favor of a dissolution and liquidation plan in late June, and now needs shareholder approval. The company holds $2 million in cash, which should cover its existing liabilities but may not fund any cash distribution to the holders of Kips Bay's 33 million shares of outstanding stock, securities filings say.

Reached Friday, Villafaña declined to comment ahead of Tuesday's proxy vote. "We are, needless to say, extremely disappointed with the poor six-month angiographic results," he said in a company statement after the dissolution vote in June.

Kips Bay had been selling a device in Europe called the eSVS Mesh, which is used to strengthen the structure of a vein that has been grafted to the heart's coronary arteries during bypass surgery. Grafts of the saphenous vein harvested from the leg may develop saphenous vein graft disease, causing failure rates as has 50 percent at 10 years, according to studies cited by Kips Bay.

The company had enrolled 100 patients for a feasibility study that could be used to gain approval from the U.S. Food and Drug Administration. But six months after implant, angiograph results for seven of the first 10 patients showed worse outcomes than in control-group patients who didn't get the Kips Bay implant.

Following those results, the company voluntarily surrendered its permission to sell the device in Europe, canceled the U.S. feasibility trial, and voted to wind down its operations. Of the dozen people who worked at the company at the start of the year, only two remain.

If shareholders don't ratify the liquidation plan on Tuesday, company executives say it's highly unlikely that Kips Bay could get additional financing to keep operating. That would lead to an informal dissolution and liquidation, or potentially a bankruptcy filing, securities filings say.

"I would like to thank the patients who participated in this study as well as our clinical trial investigators and their teams," Villafaña said in the June announcement. "I am also very appreciative of our employees, to many of whom we must now sadly say goodbye and for the continued support and loyalty of our stockholders."

Joe Carlson • 612-673-4779

Twitter: @_JoeCarlson