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Tiny surgical camera in works for Microvision?

Speculation arises after Microvision-Ethicon deal



Microvision Inc., a Bothell high-tech maker of imaging systems and high-resolution displays, has signed a deal for up to $11.7 million with Ethicon Endo-Surgery Inc., a Johnson & Johnson subsidiary, for what could be the production of a tiny endoscopic camera.

The deal, announced yesterday, calls for Cincinnati-based Ethicon to give Microvision up to $6.2 million this year in licensing and other fees. After a product evaluation period, Ethicon could funnel an additional $5.5 million to Microvision.

In return, Ethicon will receive an exclusive license for Microvision technology that can be used in human medical applications, such as surgeries.

In a statement, both companies declined to disclose the medical device under consideration because the market for it is competitive. News of the deal, which was signed Thursday, pushed Microvision shares up 19 cents, to close at $7.19, on the Nasdaq stock market yesterday.

"This is a major milestone for Microvision, because it's the first time we negotiated one of these deals all the way through production," said Rick Rutkowski, Microvision chief executive.

Alan Robinson, research director at Delafield Hambrecht in Seattle, speculated that the product could be an endoscopic camera, given what both companies do. Microvision has talked about developing such a camera in the past.

A 1.4-megapixel device that is 3 millimeters in diameter could be attached to a rigid or flexible sticklike instrument. It then could be inserted into the body to help doctors see during surgeries, such as gallbladder operations. Such a camera would be smaller than any currently being used in the market. There are estimates that the market for such cameras is about $700 million per year for both rigid and flexible endoscopes.

Robinson said the $6.2 million, which is expected in the first seven months of this year, will help Microvision, which has posted cash losses in the recent past.

"It will mitigate the cash-burn rate and allow the company some breathing room ahead of much needed cash infusion," Robinson said. "On the scale of things, it's nice. But it's not nice enough." [Editor's Note: Not nice enough for who? Talk about a total failure to grasp the obvious. This is the same guy with the 'sell at $4' call still out there. 5 months and an 80% gain later. It's been said that on Wall St. there's no shame in being wrong, just in staying wrong...]

He said he does not own Microvision stock, and his firm has no investment banking business with the company.

Rutkowski agreed that the money will help stem its cash-burn rate, which recently has been about $6 million to $7 million per quarter, but he said investment in the company's future remains an important goal.

"I've got a choice that I need to make. Do I invest (research and development) dollars today so I can gain share in these markets?" he said. "We think of it as an investment."

As a Johnson & Johnson subsidiary, Ethicon can draw on its resources, including its sales staff, once the joint medical product clears the Food and Drug Administration and is ready for market.

Microvision also might raise more money later this month, when it will have the opportunity to sell shares of Lumera, a company spinoff in Bothell that makes disposable biochips and compact antennae. Microvision, said Robinson, will be eligible to sell its 5.5 million shares at the end of this month.

In the past, Microvision, which now has about 160 employees, has entered into development deals with German car manufacturers to project information, such as data from Global Positioning System satellites, on windshields and with a Japanese camera company to make an electronic viewfinder for digital cameras.


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