Vapotherm Inc. is waging a comeback after revenue at the Stevensville respiratory device maker disappeared two years ago.
The company's only product, an innovative machine that heats and moistens air to help patients breathe better, was still gaining market share during the summer of 2005 when disaster struck.
Its device was in more than 900 hospitals and the eight-year-old company was about to reach the break-even point.
That's when Kevin Thibodeau, executive vice president and chief marketing officer, was calling on a hospital in California and a message from a Vapotherm distributor flashed on his BlackBerry: One Pennsylvania hospital had reported that a Vapotherm machine had become contaminated with a bacterium called Ralstonia. The Centers for Disease Control and Prevention (CDC) was investigating.
"CDC - those are three letters I never wanted to see associated with our company," Thibodeau recounted.
After more than a year off the market, Vapotherm returned its machines to hospitals in January 2007 with some tweaks in design and instructions.
Now, use of the devices is nearly what it was before the recall, quelling fears that hospitals forced to use other machines wouldn't return as Vapotherm customers.
But as he read that e-mail back in 2005, Thibodeau wasn't feeling so confident.
Vapotherm first set out to verify the reports, then tried new disinfectant procedures. A test by the CDC found that the new cleaning procedure worked for a few days, but after a week, Ralstonia returned.
For the remainder of that year, 29 hospitals in 16 states found Ralstonia in Vapotherm machines, and the germ was found in 40 pediatric patients at those hospitals, according to the CDC publication Morbidity and Mortality Weekly Report.
In eight of those cases, CDC reported, the patient had an infection. In the rest, Ralstonia was present, but it did not appear to have made the patient sicker.
Vapotherm voluntarily recalled the machines in December 2005 after its attempts at a quick fix failed. That meant the company was taking its only product off the market.
"We definitely had our egg in one basket," Thibodeau said. For a company that had about $12 million in revenue in 2005, "sales went essentially to zero in 2006," he said.
About 5,000 returned machines were laid out in Vapotherm's warehouse, in an industrial park just at the eastern end of the Chesapeake Bay Bridge.
"It looked," said Thibodeau, "like a military graveyard."
But while it was scrambling to figure out what was causing the problem, Vapotherm stepped up research and development. Its venture investors provided another $11 million, allowing all 30 employees to keep working and permitting acceleration of the work on new devices.
Now, the company has a new model of its hospital machine nearing Food and Drug Administration approval and two different home machines in clinical trials. Vapotherm plans to seek FDA approval to market those machines in the fall.
William Niland, Vapotherm's co-founder and still its chairman, had worked in sales for a respiratory anesthesiology company. He started Vapotherm, in 1997, licensing the rights to key technology from his former employer.
He developed a machine that warms and humidifies air by pumping it through "a thousand tiny straws," Niland says. There is heated water on the outside of the straws, which are permeable membranes; the air gets hotter and wetter.
Using a small tube inserted into the nose, called a cannula, the Vapotherm machine avoids heavy masks and throat tubes used in some other breathing-assistance devices. It could deliver up to 40 liters per minute of oxygen to a patient, compared with 6 liters typical of other cannula devices, according to Niland.
"It lets us support smaller babies without a ventilator," said Dr. Suzanne Rindfleisch, director of neonatology at Anne Arundel Medical Center in Annapolis, one of the first hospitals to adopt the Vapotherm machine.
A ventilator requires intubation, the insertion of a tube into the throat. It provides very good breathing support, she said, but the tube can cause injury or infection.
The newborn intensive care unit at Anne Arundel, which cares for more than 500 tiny and sick babies a year, reports fewer chronic lung problems and quicker discharges than its peers, and those measures have improved over time, Rindfleisch said.
When the Vapotherm device was recalled, she said, "We were in a quandary." Her hospital had checked and found no Ralstonia. For a while, it used a somewhat-similar device but Rindfleisch said she was glad to switch back to Vapotherm when it became available again.
According to the FDA, more than 100 respiratory therapy devices have been approved during the past quarter-century, but only Vapotherm and one other use the water-across-membrane design.
Ralstonia is not rare in the environment. An article about the Vapotherm outbreak in the medical journal Pediatrics, with a CDC investigator as lead author, called it "ubiquitous" in water and other moist environments.
But it is "not a frequent cause of infection," said William A. Rutala, director of hospital epidemiology at University of North Carolina at Chapel Hill. However, any potential cause of infection is of particular concern for medical devices being used in intensive care units, since the patients are particularly fragile.
Vapotherm brought in Rutala as a consultant.
Why did Ralstonia show up in the Vapotherm devices? "I don't think anybody knows the answer to that question," Rutala said. Without a clear cause, he continued, "They implemented control measures for each potential source."
Eventually, the FDA approved the device to go back on the market. "The recent clearance reflected changes in the device's design, maintenance and disinfection procedures," said Peper Long, an FDA spokeswoman.
Some of the changes included new procedures to check for contamination during manufacturing. Hospitals, who received new disinfection instructions for the machine, were told to use sterile water rather than tap water. And Vapotherm modified the machine so a bag of sterile water could be connected without opening up the device.
The Ralstonia problem has not returned.
The new device costs more than the old model (about $5,000 versus about $3,500), but the cost of a key disposable cartridge has dropped from about $150 to about $85. And while the old machine takes 47 minutes to disinfect, the new machine takes less than a minute thanks to the redesigned disposable cartridge.
Ultimately, the recall - shipping the machines back and forth, hiring consultants, working up fixes for the problem - cost the company "a couple of million," Thibodeau said.
Michael Ward, a partner with QuestMark Partners, the Baltimore venture capital firm that is Vapotherm's largest investor, said the recall didn't deter his company from investing more in the operation. Ward said his firm was confident of the machine, and the recall highlighted the importance of having more than one product on the market.
Because the business was essentially suspended, he said, "there was probably more focus on developing the next generation of products."