Medical Device Daily Executive Editor

Question: How do you proceed if you're a smaller device company and have a great technology, but that technology involves significant technical and regulatory hurdles — and hence, expensive developmental costs and accumulated losses?

Here are some of the answers to this multi-part question, offered by cardiovascular device company Cardica (Redwood City, California).

— You keep plugging away.

— You develop partnership relationships with a larger company.

— You keep your budget within your accumulated equity resources.

— You have a technology no one else has.

— You keep plugging away.

These strategies are paying off for Cardica, as it continues to plug away toward break-even and beyond with its anastamosis devices, that is, devices for tying together vessels around the heart.

The company reported yesterday that it has filed a 510(k) application with the FDA for its PAS-Port Proximal Anastomosis System, following the achievement of the primary endpoint in a large, prospective, randomized pivotal clinical trial. The trial compared the use of its proximal anastomosis system to the conventional method of using hand-sewn sutures during coronary artery bypass graft (CABG) procedures.

It did not report the exact data points, but said the trial achieved non-inferiority to hand-sewing in vessel patency in CABG procedures and that it would report specific data "at future medical meetings." The results come from enrollment of 220 patients at 12 sites in the U.S. and Europe.

The company's PAS-Port system, which already is commercially available in Japan and Europe, creates a secure connection between a vein graft and the aorta during bypass procedures.

"As you know, we've been working on this for a long, long time," Bob Newell, VP, finance and operations and CFO for Cardica, told Medical Device Daily.

"We feel very good about the [trial] results. It's been three years since we had the special panel meeting [in 2005] for our last Pas-Port submission, and we've done everything recommended by the panel."

The company already has FDA clearance for its C-Port system for distal anastomosis, and Newell noted that this agency okay required solving more difficult technical problems, because they involved "more delicate" vessels.

The C-Port uses "small micro staples" attaching a graft to the coronary artery, producing an anastamosis that actually pulses with changes in blood pressure.

The proximal connection — with the PAS-Port Proximal Anastomosis System — is used for connection to the "garden hose"-sized aorta, as described by Newell, so attaching the graft vessel to the aorta is very different than attaching to the coronary artery via the distal connection.

Put another way, this means an attachment to a vessel of 3 mm or more in diameter, using a clamping or "coupling" approach, compared to connection to a vessel of just 1 mm in diameter, using the delicate stapling method.

The more difficult technical hurdle first, the easier one second, was forced, Newell said, by changed requirements from the FDA — developed out of a special FDA meeting in early 2004 that focused on, and then altered, the clinical requirements for the proximal anastamosis.

Cardica already had done its clinical work on that procedure, but the FDA raised the data bar — to "95% confidence that you were better than 80% patent at six months," Newell said — and the company's trial was not sufficiently powered.

The agency did change the rules, he said, but he called the change "appropriate."

"They had to take some action. Given the issues of products in the market, they had to come up with something more clinically sound."

As a result, Newell said, a handful of companies "had to fold up their tent or redo the trials," and "only one" stayed in this particular game: Cardica.

The development costs for this game continue on, the company projecting a loss of from $16 million to $18 million for FY08 (reported this week in its quarterly guidance).

Newell noted, however, that Cardica has a good equity foundation: $28 million in cash and a monthly burn of just $2.4 million.

Additionally, it has contracts with Cook Medical (Bloomington, Indiana) to support its development efforts.

Cardica reported receiving $2 million in January from Cook and more recently another $445,000 in milestones for further development efforts under the Cook Vascular Closure Device and patent foramen ovale license, development and commercialization agreements — these agreements providing potential extension of the company's technology to other cardiovascular applications.

Newell said that, in total, Cardica has received more than $4 million in investments from Cook.

Newell says that achieving the 510(k) for the PAS-Port system will be a real, not just a virtual, breakthrough for the company, given the success it can cite in Japan, where the product is approved.

As of the end of March, Cardica reported more than 20% of all proximal anastomoses with its device in that country, using a vein bypass graft during CABG, and said that similar uptake in the U.S. would equate to 75,000 procedures, $50 million in sales and clear profit territory.

Earlier this year, Genesis Medical Center (Davenport, Iowa) reported results of a six-month analysis comparing the cost of off-pump, beating-heart CABG procedures with the cost of traditional on-pump CABG surgery, showing that beating-heart CABG saved $1,684 per procedure compared to traditional bypass surgery (Medical Device Daily, April 23, 2008).

These costs included the cost of C-Port Distal Anastomosis Systems from Cardica (which sponsored the study) used in the beating-heart cases.

"With the C-Port systems, we can reliably connect the graft vessels without stopping the heart, which improves patient outcomes, reduces costs and increases the pool of patients eligible for bypass surgery," said Nicholas Augelli, MD, cardiovascular surgeon at Genesis.