Magnolia Medical Technologies, a Seattle-based manufacturer of devices for collecting blood and bodily fluids, announced this week it has raised $20 million in equity funding to ramp up sales of its flagship product. The funding comes as Magnolia and San Diego-based competitor Kurin battle each other in court.
RTW Investments, a New York-based firm that backs healthcare ventures, led the Series C funding round, Magnolia says. Other participants included SightLine Partners, Canepa Healthcare, and HealthQuest Capital, according to a news release; the latter two firms had invested in Magnolia previously.
Magnolia has raised nearly $51 million in combined debt and equity financing since launching in 2011, according to SEC filings.
Magnolia’s core product, which it calls Steripath, is designed to prevent blood samples from becoming contaminated. To do so, the device uses proprietary technology to isolate what Magnolia says is the part of the sample most likely to contain harmful microorganisms, by routing it to a separate compartment of the device. Contaminated samples can yield false positive test results and lead to healthcare providers misdiagnosing patients with sepsis and other types of infection. That may in turn result in providers inappropriately prescribing antibiotics for the patient, Magnolia says in the release.
A study published in 2006 by the Journal of Hospital Medicine found that 6 percent of the 939 blood culture sets researchers examined yielded false positive results, meaning they were thought to contain contaminants but actually did not. However, the researchers estimated this rate of false positives would on average cost a hospital $1.4 million to $1.8 million annually, and lead to patients cumulatively spending an estimated 1,450 to 2,200 extra days in the hospital each year.
Part of the problem appears to be that not all hospitals use trained phlebotomists to draw patients’ blood. A study of blood culture contamination rates at Parkland Memorial Hospital in Dallas, the results of which were published a decade ago, found that blood draws performed by non-phlebotomists were on average about twice as likely to result in contaminated samples than ones taken by phlebotomists.
Magnolia’s Steripath device is designed to prevent contamination at the sample collection site: the patient’s skin. With a typical blood draw, the clinician taking the sample first disinfects the patient’s skin around where he or she plans to insert the needle. However, “even when the skin site is prepared meticulously … when venipuncture is performed, skin plugs will always enter the needle lumen and culture specimen bottle, and commonly will contain microorganisms known to contaminate blood cultures,” Magnolia says in a video on its website.
When clinicians use Steripath to take a blood sample, the device diverts the first 1.5 to 2 milliliters of blood drawn, which Magnolia says is the part most likely to contain contaminants, into an isolation chamber. Magnolia has been granted more than 60 “method, apparatus, and design patents,” according to company materials.
Magnolia says the latest version of its Steripath device has undergone clinical trials, and claims it can help hospitals bring contamination rates down to as low as 0.2 percent. According to a website with information on clinical trials, Magnolia and Minnesota-based 3M (NYSE: MMM) kicked off a study of ways to reduce blood culture contamination in May 2016. However, no study results have been posted to the website.
Kurin, which is developing a device that could emerge as a competitor to Steripath, said last May it filed suit against Magnolia, alleging the company has misled consumers about its products.
“Magnolia falsely implies that its Steripath device is FDA approved/cleared and misrepresents product performance data by selecting only the most favorable results,” Kurin said in a news release announcing the lawsuit.
Magnolia did not immediately respond to messages asking whether FDA clearance is required to market Steripath and similar devices, and whether Magnolia has received one or more clearances from the FDA for Steripath.
Magnolia responded to Kurin’s legal actions last year by filing a countersuit in the same federal court in August. Magnolia said it alleges in the suit that Kurin has mischaracterized data recorded in clinical trials of the company’s Lock device, and made false claims about its functionality.
Yet another signal there’s bad blood between the two businesses came earlier this month, when Magnolia filed a separate lawsuit against Kurin, alleging it had infringed multiple patents held by Magnolia.
Documents stored in a federal court database indicate the lawsuit in which Kurin and Magnolia accuse one another of making false and misleading statements is currently in the pre-trial discovery phase. A search for information in the court database on the patent suit Magnolia reportedly filed against Kurin did not yield any results.