Can cardiovascular companies keep growing just by adding new technologies, or do they need to stick only to what they have tended to do the very best? The first quarter of 2007 appeared to indicate that the answer to those questions seems to be: “Stay focused.

Following the announcement by Medtronic (Minneapolis) in December that it was forming plans to spin off Physio-Control (Redmond, Washington), its automated cardioverter defibrillators unit to focus on the implantable sector of the defibrillator industry (CDU, January 2007) — a plan since put on hold by quality control problems at Physio-Control — two other major players in the cardio sector reported plans to abandon products not reflecting their central technology concerns.

Boston Scientific (Natick, Massachusetts) in mid-March said it is exploring the spin-off, via IPO, of a minority share of a group of endosurgical businesses manufacturing products for endoscopy, urology, gynecology and oncology. It said the IPO could raise up to $1 billion. And later in the month, Edwards Life Sciences (Irvine, California) repositioned on its historical strength, the valve market, reporting plans to drop its marketing of the laser therapy for angina known as transmyocardial revasdcularization.

Boston Scientific’s decision is clearly also being driven by the heavy debt incurred with last year’s purchase of Guidant (now it rhythm management unit), and the continuing erosion of its share price and the continuing drag of an FDA warning letter that keeps the company from winning new approvals in the U.S. The company’s board gave it the go-ahead to explore selling of about 20% of the Endosurgery group — its main Endosurgery facility in Marlborough, Massachusetts — and establishing a separately traded public company. The new company would remain a majority-owned Boston Scientific subsidiary.

Lexie Code, endosurgery department manager at Millennium Research Group (Waltham, Massachusetts), told Cardiovascular Device Update, that the proposed spin is “exciting and creative,” while adding a proviso — “as long as they can find the right partner with the right managers.” Code said that the initiative was likely a response both to a long-term analysis of the endosurgery division by the company as well as the short-term pressures it is experiencing.

Code indicated that the division would be a good purchase, considering that Boston Scientific had “done a good job with [that business] and it could be a star company on its own.” An “outside party,” she said, “isn’t going to be distracted in some cases,” a likely reference to the distractions current facing Boston Scientific.

Boston Sci said that its endosurgical offerings have produced “consistent revenue and earnings growth over the past eight years” with a compound annual growth rate in revenues of about 12% during that period. The group is expected to generate more than $1.4 billion in revenue in 2007. But in a statement, it acknowledged that the endosurgical businesses have been over-shadowed — specifically, “less visible to the investment community” — by the Guidant purchase last year and its “increased presence in the cardiovascular market.”

It said that the benefits of operating the Endosurgical business as a private operation will have a variety of benefits including improved visibility and improved focus — as well as providing the $1 billion for debt repayment and providing funds for beefed-up salary offerings.

Lawrence Biegelsen, an analyst for Prudential Financial (New York), in a report said the move “signals that [Boston Sci management] acknowledges that the challenges in its core DES and CRM businesses are making it increasingly difficult for the company to achieve its debt repayment targets.”

In a conference call to discuss the proposed spin, Jim Tobin, president/CEO of Boston Scientific, emphasized the consistency of performance in the endosurgical sector but that these businesses were “not getting credit” for their track record because they are hidden in the larger corporate operations. Tobin said that a minority-interest IPO for the business group “would highlight its success and stability and create a direct investment vehicle in these specialty device markets, while giving us greater financial flexibility.”

The company said it would take from six to 12 months to evaluate the proposal and that, if approved for going forward, would be made late this year or early 2008.

If an IPO were to take place, the Endosurgery group would continue to be fully consolidated with Boston Sci for financial reporting purposes and would be headed by its current senior VP, Stephen Moreci.

After being fairly quiet in 2006, Edwards was active in its initiatives last month and unveiled its plan to sell the U.S. distribution rights and inventory related to the TRM laser product line to Novadaq Technologies (Toronto) for $8 million to $9 million.

In doing so, the company was entirely upfront in its strategy to reemphasize its foundation strength and general expertise in valves, both its core tissue valves and new opportunities in the transcatheter aortic valve sector.

For the exclusive U.S. distribution rights to the TMR assets, Novadaq will pay Edwards $1 million in cash at closing, an earn-out for the balance of 2007, estimated to be $3 million, and a final payment of $3 million which is deferred under a one-year secured promissory note. Edwards said the sale price also includes the purchase of inventory valued at about $1.4 million.

“We are sharpening our focus on unique and less invasive technologies that advance the field of cardiac surgery,” said Michael Mussallem, Edwards’ CEO and chairman.

The company said the sale of the TMR distribution rights “supports Edwards’ strategy to focus on proprietary, physician-preference products.”

The sale of the TMR system rights comes on the heels of Edwards’ discontinuation of its Optiwave 980 Cardiac Ablation Laser System in December, coupled with the sale of its angiogenesis program to Sangamo BioSciences (Richmond, California) in a share transaction worth about $7.5 million. Both the TMR system and the Optiwave are made by PLC Medical Systems (Franklin, Massachusetts), and Edwards acquired the sales and marketing rights to the TMR line from PLC in 2002.

TMR procedures are currently FDA approved for treating areas of the myocardium not amenable to traditional methods of revascularization, and.

Launched with much promise nearly 10 years ago, the technology was shadowed by critics saying that the system simply offered mainly a placebo response, and it has never reached the potential that was promised. And Edwards, though with strong marketing on the valve side, couldn’t push it to that potential. The company reported sales of the product, which is Medicare reimburseable, of about $12 million in 2006TMR rights.

Novadaq, which said it would begin marketing the TMR system “immediately,” expressed excitement about taking over the business.” It said it feels able to reach more of the projected 30,000 patients in the U.S. that could benefit from the technology. The company noted that currently, only about 7,000 patients are actually treated with the system.

“The combination of our SPY System and TMR not only holds the promise of improving the effective delivery of TMR, but will also potentially improve the quality of life for many patients,” said Arun Menawat, president/CEO of Novadaq. “TMR fits well with our current corporate strategy to provide and enable image guided therapies in the operating room and further validates our vision that real-time image guidance in the operating room can improve the effectiveness of therapeutic surgical procedures.”

Novadaq believes its SPY intra-operative imaging system may enable cardiac surgeons to visually identify the most suitable area for TMR treatment by assessing blood flow which is indicative of tissue perfusion and potentially guide TMR delivery in real-time making the procedure potentially more effective and offered more frequently to patients in need.

“Based upon Edwards’ historical revenues and margins for its distribution of TMR, this transaction will be immediately accretive to our bottom line and synergistic to our sales strategy as we can now offer cardiac surgeons a total revascularization solution,” said Menawat.

PLC also said it was pleased with the new arrangement and that Novadaq has the focus to make TMR a more successful product.

“Today, we are taking a major step for our TMR business by naming a new partner in Novadaq,” said Mark Tauscher, president/CEO of PLC. “We, and Novadaq, see strong synergistic opportunities for our TMR products used in real-time in conjunction with Novadaq’s SPY intra-operative imaging system, for which Novadaq recently built a direct U.S. sales team that targets the same end user as we do, the cardiac surgeon.”

He added: PLC “appreciate[s] the support of Edwards throughout the launch and building of our TMR business, but recognize[s] that its focus has now moved in other directions, and we are pleased to find a new and able partner in Novadaq to make this a seamless transition for our growing customer base.”

Edwards said it has committed to assist in transitioning the TMR distribution to Novadaq, and as a result of the sale, its Cardiac Surgery Systems product line, which includes Edwards Research Medical cannula and Embol-X technologies, is now expected to contribute revenues of $55-$60 million in 2007.

The transaction will result in a slight gain in the first quarter, but is not expected to have a material impact on its 2007 earnings, Edwards said.