CD&Ds

In a move that could help offset its $458 million 4Q07 Gudiant-related losses, Boston Scientific (Natick, Massachusetts) reported last month that it had signed a definitive agreement to sell its investments in a portfolio of companies, subject to certain closing and other conditions, to Saints Capital (San Francisco), a secondary direct-investment firm.

Boston Sci first disclosed the $458 million loss in early February.

The company said in a June 19 press release that the transaction would raise pre-tax proceeds in excess of $100 million, the majority of which will be in cash, with a portion in a note payable over several years.

Boston Scientific said it expects to record a net pre-tax loss of roughly $60 million ($40 million after-tax, or about 3 cents a share), consisting of a loss of $85 million ($55 million after-tax, or about 4 cents a share) in 2Q08, to be offset by anticipated gains of $25 million ($15 million after-tax, or about 1 cent a share) during the remainder of 2008.

"The sale of these investments, which represent the vast majority of our private investment portfolio, is part of our previously announced plans to divest non-strategic assets, while focusing on our core businesses and increasing shareholder value," said CFO Sam Leno. "We are pleased to be selling our investments in these companies to Saints Capital, a firm we believe has the experience and commitment to support them going forward."

Separately, Boston Scientific said it has signed a definitive agreement to sell its investments in a portfolio of venture funds and companies, subject to certain closing and other conditions, to Paul Capital Partners (San Francisco) for pre-tax proceeds in excess of $40 million. The company expects to record a net pre-tax loss of roughly $10 million ($6 million after-tax) on the transaction, primarily in 2Q08.

"The net after-tax cash proceeds will be used principally to pay down debt, and consistent with previous divestitures of non-strategic assets, these expected net gains and losses will be excluded from our adjusted earnings per share," Leno said.

Some of the recent asset sales that triggered the quarterly loss were part of a plan by Boston Scientific to reduce the hefty debt load the company was saddled with after it purchased Guidant in 2006. Last October, the company outlined a massive restructuring that included the loss of 2,300 non-manufacturing jobs and an 11% decrease in staff.

The job cuts were part of a plan to cut operations costs by about $500 million this year.

AGA eyes up to $200M in IPO

AGA Medical (Plymouth, Minnesota) plans to go public, according to a June filing with the Securities and Exchange Commission. The company did not disclose the expected size or price of its initial public offering, but indicated that it could raise up to $200 million.

The company makes a variety of occlusion devices that are designed to work like stoppers to plug structural heart defects and abnormal blood vessels. AGA reported receiving CE-mark approval to market its Amplatzer Vascular Plug III in May and for its Amplatzer Duct Occluder II in February.

AGA has all of its manufacturing, R&D operations, as well as most of its sales, warehousing and administrative activities, in Plymouth, the company said in the SEC filing. AGA employed 335 people as of March.

Net sales at AGA have grown at a compounded annual rate of 22.5% from 2005 to 2007, according to the filing. Last year, AGA had revenue of $147.3 million, and reported sales of $36.8 million during 1Q08, the company said. It reported net income of $6.1 million in 2007 and $500,000 for 1Q08.

According to the filing, the company's lead family of products, the Amplatzer Septal Occluders represented roughly 57.4% of its net sales for the three months ended March 31, and the company expects these products to continue to account for a substantial portion of its net sales for the next few years. If sales of the Amplatzer Septal Occluders were to decline it would negatively affect the business, financial condition, and results of operation, the company said in the filing as a possible risk factor to investing in its common stock.

The chairman of AGA's board is Tommy Thompson, who served four terms as the governor of Wisconsin between 1987 and 2001 before serving as secretary of Health and Human Services between 2001 and 2005.

"There's no question that there's a lot of capital still on the sidelines. They have revenue, and real revenue is the best way through a difficult market," said Dan Carr, CEO of The Collaborative, a networking group that tracks IPOs in Minnesota.

In addition to the company's existing products, AGA has plans for new products in three key areas, according to the filing.

AGA is developing a treatment for a common structural heart defect called patent foramen ovale (PFO) that increasingly has been linked to certain types of strokes and migraines. By closing the PFO with an occlusion device, the company says, doctors may be able to reduce the incidence of these strokes and migraines.

The market opportunity for PFO closure in the U.S. and Europe is greater than $1 billion a year, AGA estimates. Its competitors in this area include NMT Medical (Boston) and W.L. Gore & Associates (Flagstaff, Arizona).

Also, Cardica (Redwood City, California) and Cook Medical (Bloomington, Indiana) last year agreed to develop a PFO closure device together.

AGA also is developing a device to occlude the left atrial appendage, a thumb-sized sack of tissue on the heart that has been linked with an increased stroke risk for patients with atrial fibrillation. Atritech (also Plymouth), a clinical-stage company, also is developing a device that would reduce the stroke risk by preventing clots from leaving the appendage.

The third area for possible growth, AGA says, is development of vascular grafts to treat aneurysms.

AGA was founded in 1995 by Franck Gougeon and Kurt Amplatz, MD. John Barr was named CEO of the company last month, taking over from Gougeon. Barr had been COO of AGA since 2005.

According to the SEC filing, proceeds from the IPO would be used to make principal, interest, debt and dividend payments, with any remaining proceeds going to working capital and general corporate purposes.

The company's stock would trade on the Nasdaq under the symbol AGAM.

First patients treated with vProtect

Three patients with established cardiac ischemia in May became the first recipients of the vProtect Luminal Shield, a self-expanding intracoronary prosthesis designed to limit arterial injury that typically occurs when stents are deployed. The Shield also provides robust biocompatible support for the vessel to ensure that the target coronary artery will remain patent after placement, according to its developer, Prescient Medical (Doylestown, Pennsylvania).

The patients were treated by Juan Granada, MD, of the Cardiovascular Research Foundation (New York) and Juan Delgado, MD, at the Corbic Institute-MUA (Envigado, Colombia). The target lesions ranged from 60% to 80% stenosis before the vProtect Luminal Shields were deployed.

These were the first three human cases studied using the device, Illana Odess, general manager of interventional cardiology, for Prescient, told CD&D, but the company still had to do a 30-day follow-up on each of the patients.

The vProtect Luminal Shield is an implantable device belonging to the stent family, she said, however, that its self-expanding nitinol design differentiates it from balloon-expandable stents. Because it is self-expanding, the Shield produces less arterial injury on deployment, compared with balloon-expanding stents.

Another unique feature of the device, Odess said, is that the primary structural elements of the Shield are longitudinal rather than circumferential, as most stents for non-coronary applications are built.

"We designed it so it is longitudinal and the main reason for that was to capture or trap healthy cells," she said. "We want to promote healing and we believe that as soon as you capture healthy cells you promote the healing aspect of it."

The device also features thin 56-micron struts, the thinnest on the market, Odess said. According to the company, thinner struts cause less injury and promote faster endothelial regrowth and vessel healing.

She said the next step for the company is a CE-mark study with plans to seek a CE mark later this year. Prescient also plans to start a pivotal trial in the U.S. later this year, she said, and hopefully get FDA approval for the device in 2011 or 2012. The company hopes to commercialize the device outside the U.S. in 2Q09.

While commercialization of the device outside the U.S. still is at least a year down the road and even farther down the road in the U.S. Odess said the company saw "excellent results" with these first three human cases.

In the first patient, a 75% occlusion in the mid-circumflex coronary artery underwent pre-dilatation at low pressure with a 2.5 mm x 9 mm balloon and then received a 3.5 mm x 15 mm Luminal Shield. After gentle post-dilatation, angiography revealed that blood flow had been restored to the distal portion of the treated vessel.

In the second patient, an 80% occlusion in the middle of the left anterior descending (LAD) branch required pre-dilatation with a 2.5 mm x 9 mm balloon. Additional lumen gain was achieved by Shield placement and post-dilatation, again achieving restoration of blood flow distal to the treated segment.

The third patient was a challenging case with a 65% occlusion in the mid-LAD, located in a bend near a side branch ostium. The vProtect Luminal Shield was chosen for this patient based on its mechanical properties, including high vascular conformability. Because of its flexibility, the vProtect Luminal Shield was able to access the tortuous anatomy and cross the lesion successfully. Restoration of flow was achieved without angiographic evidence of straightening of the target vessel, a common occurrence with rigid balloon-expandable stents. In addition, the side branch was preserved without evidence of plaque shifting or worsening stenosis.

"The vProtect Luminal Shield and delivery system performed extremely well," Granada said. "The three patients we treated presented with lesions representative of what we see in daily clinical practice and we were able to cross these lesions and deliver the device safely in each case. Although the vProtect Luminal Shield has ultra-thin struts to promote healing, it maintains an intrinsic radial force that matches the vessel compliance. I am very pleased with these early results."

Prescient is a privately held device company founded in 2004 to reduce the number of deaths from heart attacks, Odess said. Most of the executives at Prescient, including Odess, came from Johnson & Johnson's (New Brunswick, New Jersey) Cordis (Miami Lakes, Florida) business and went on to find other careers in interventional cardiology.

"And 10 years later we still felt we had an unmet need," Odess said. "We wanted to have a detection and then a treatment, which we call prevention."

The "detection" component of the "prevention platform" comes from another device the company is developing called the vPredict Optical Catheter System, designed to "rapidly analyze materials within arterial walls during a procedure we call Optiography," she said. The system is intended to detect and characterize atherosclerotic plaques that may be vulnerable to rupture, Prescient said.

Medtronic tops list of innovators

The number of patents held by a device firm seems to say something about its prominence in the device universe, not to mention its presence on Wall Street.

According to an article in the June 17 issue of the Wall Street Journal that gave a patent scorecard for medical devices, Medtronic (Minneapolis) holds 379 patents and scores 250 out of 250 on science strength on its way to an aggregate "tech strength" score of 807.5.

Coming in a close second, as might be guessed, was Boston Scientific (Natick, Massachusetts), with a tech strength score of 662.2. The company's score is based on a portfolio of 388 patents (nine more than Medtronic) and a science strength of 250, the maximum.

However, Boston Sci falls behind Medtronic on industry impact scoring, hitting about 1.3 (on a scale that topped out at 2.5), whereas Medtronic's impact score exceeds 1.5.

Johnson & Johnson (J&J; New Brunswick, New Jersey) came in third in the WSJ analysis with a score of 412.6, based in part on a patent portfolio of 247. Coming in fourth was patient-monitoring specialist Masimo (Irvine, California), which boasts only 22 patents, but which clobbered the competition on industry impact with a score of 13.9.

Other Top 10 finishers include Abbott Laboratories (Abbott Park, Illinois), St. Jude Medical (St. Paul, Minnesota) and Siemens (Munich, Germany).

300M share sale by WorldHeart

WorldHeart (Oakland, California) reported that it will sell 300 million shares of common stock for $30 million in a deal to raise money to continue its operations. The troubled company voluntarily removed its stock from the Toronto Stock Exchange earlier and it has been warned it could be delisted by the Nasdaq.

The company, which makes mechanical blood pumps, lost $11.5 million on sales of $635,996 in the quarter ended March 31.

World Heart had earlier said it was in danger of defaulting on a $5 million loan from Abiomed (Danvers, Massachusetts), which is secured by the company's assets. At that time, the company said it only had enough money to keep operating a few weeks.

In this deal, Venrock Partners will invest $10 million and Special Situations Fund will invest $9 million, both through several associated funds and corporate entities. WorldHeart is talking to other investors about the remainder of the money.

Abiomed has agreed to convert the $5 million debt owed by WorldHeart to 86 million shares.

Venrock and Special Situations Fund have agreed to a bridge loan of up to $1 million to WorldHeart.

This deal has certain closing conditions, but should be wrapped up by July 31, according to the company.

Roche to market line of POC tests

Response Biomedical (RBC; Vancouver, British Columbia) reported in late June that it has entered into an agreement granting rights to Roche Diagnostics (Indianapolis) to market its line of cardiovascular point-of-care (POC) tests worldwide.

It said Roche Diagnostics' comprehensive sales and marketing infrastructure allows for broad worldwide penetration of Response's cardiovascular line.

The RAMP cardiovascular product line includes Troponin I, CK-MB, Myoglobin and NT-proBNP Tests. The company is awaiting FDA 510(k) clearance before the NT-proBNP Test can be sold in the U.S.

"Our collaboration with Response Biomedical is an important step to further expand our presence in the dynamically growing POC cardiac market, expecting double-digit growth over the coming years," said Dirk Ehlers, head of Roche Professional Diagnostics. "The Roche POC portfolio will be enhanced by the addition of the RAMP cardiovascular product line and will allow us to target key global markets by responding to customer demands for choice in systems for different throughput and parameter needs."