By TRACEY DRURY
tdrury@bizjournals.com | 716-541-1609

SmartPill Corp. has raised $8.5 million in equity financing, funds that will be used to help the Buffalo life sciences firm continue to expand.

The financing, led by Psilos Group Managers LLC in New York City, will be used to begin another clinical trial looking at diagnostic health outcomes for the SmartPill, the company's flagship product.

David Barthel, president and CEO, says the trial will look at how use of the diagnostic tool provides data that can be used by physicians to change patient management. The clinical trial, which will take nine to 12 months to complete, will involve 300 subjects at multiple sites nationwide. It also will help the company as it continues to pursue reimbursement policies with insurance payors, he says.

"We want to show we have a positive effect on patient treatment," Barthel says. "We're much more accurate than other tests."

The SmartPill GI Monitoring System uses an ingestible capsule outfitted with sensors that monitor patients' gastrointestinal health. Late last year, it also was approved by the Food & Drug Administration for use in evaluating colonic transit time in patients with suspected chronic constipation.

The FDA approval was a major factor in the company landing additional equity investments, according to Barthel.

"We were able to expand our market by adding the additional use for chronic constipation," he says. "That's a key milestone for the company as it expands revenues."

The company also is working on a two-year process to receive a global CPT code for reimbursement by insurance payors. The Current Procedural Terminology (CPT) code is awarded by the American Medical Association, with the application and award processing taking up to three years to complete.

With 25 employees operating from offices on the Buffalo Niagara Medical Campus, SmartPill expects to increase its manufacturing and sales force in 2011. With plans to raise another round of expansion capital in mid-2011, the company expects to be cash positive in 2013. Founded in 2003, SmartPill has raised more than $60 million, primarily through venture funding and private equity.