Emerging from a Securities and Exchange Commission-mandated "quiet period" last month and on the heels of its $165 million IPO in June endovascular technology developer ev3 (Plymouth, Minnesota) now has plenty to say. Over the past five years, ev3 has been acquiring and developing a variety of catheter-based technologies used in the treatment of coronary, neurological and peripheral vascular diseases. Its cardiovascular products include the SpideRx, the X-Sizer, the Diver C.E. and the PLAATO. It also is developing a variety of stents used in the peripheral vasculature, including its family of Prot g devices and a family of balloon angioplasty catheters.
President and CEO Jim Corbett was eager to discuss the many new products his company has recently released, as well as ev3's future direction. "We have built what we think is a competitive advantage," Corbett told Cardiovascular Device Update when asked how his company has managed to thrive in a highly contested arena with many very large companies, including Boston Scientific (Natick, Massachusetts), Guidant (Indianapolis), Medtronic (Minneapolis) and Johnson & Johnson (New Brunswick, New Jersey) providing hefty competition.
"On the one hand," he said, "we're small enough that we're really innovating in fields [peripheral vascular, neurovascular and cardiovascular] that have not gotten significant innovation." But he noted also that the company is not so small that it should be considered a "one-product wonder."
Indeed, ev3 has been very busy, with 22 product launches around the world in the past nine months alone. "Over 80% of our sales will be on products that we've developed in the past four months," Corbett said, adding that for his company, "it's all about product flow." In the first five months of 2005 alone, the company has been on a roll. In May, it received the CE mark for its Prot g Rx self-expanding stent and delivery system for use in carotid interventions. The first human uses of that system were performed in conjunction with the EuroPCR meeting that same month. Also in May, ev3 received FDA clearance and the CE mark for the Prot g GPS large-diameter stents. These stents are 12 mm and 14 mm in diameter and come in a range of lengths.
In April, ev3 completed its PLAATO registry, a multi-center, single-arm registry designed to demonstrate safe, ongoing and effective use of the Percutaneous Left Atrial Appendage Transcatheter Occlusion (PLAATO) device for left atrial appendage closure in high-risk patients with atrial fibrillation who are not candidates for long-term warfarin therapy. In March the company received FDA clearance for the Diver C.E., a hydrophilic coated low-profile aspiration catheter for use in thrombus management.
ev3 was founded in 2000 by Dale Spencer, former president and CEO of Boston Scientific's Scimed division, with primary funding from Warburg Pincus (which formerly owned more than 92% of the company) and The Vertical Group. Since then, the company has been busy on the acquisition side, buying 11 other companies with endovascular technologies, including its majority-owned Micro Therapeutics (Irvine, California) subsidiary, which develops treatments for neurovascular disorders of the brain associated with stroke.
The company also has had dramatic growth in staff, from 12 employees four years ago to just over 800 today. And it's not just employee numbers that are growing quickly. In early July, the company reported 2Q05 revenue of $31.5 million, up 53% over the prior-year period, and $59.2 million in revenue for the first half of fiscal 2005, a 44% gain over the prior year. The growth was generated internally and reflected net sales growth in each of its reportable business segments and geographic markets. As an example of what ev3 says is its global reach, half of its 200 direct sales representatives are outside the U.S., and its wholly owned ev3 International (Paris) subsidiary gives the company a sales channel for products not yet approved in the U.S. while facilitating clinical trials abroad.
As part of its initial business strategy, the company decided to evenly distribute its resources between the U.S. and international markets because it found that roughly half the endovascular market was outside the U.S. In 2004, the business was split almost exactly 50/50 between those two distinct geographic areas. Because of this mix, Corbett said ev3 is "able to get quicker market feedback on our new designs. We're also able to get quicker commercialization which helps our bottom line."
Unlike firms that try to ramp up revenue at any cost in order to sell out to a larger company, ev3's goal, Corbett said, is to build a "vibrant, thriving, profitable enterprise." He noted that while the company could one day be sold, it was developed to be a stand-alone entity. Indeed, he noted that the company, thanks to Warburg Pincus and The Vertical Group, already is debt-free. "The story for ev3 is really about innovation through product flow and growth," Corbett, said, adding: "That's what ultimately will make us successful."
Stents, ICDs prominent in earnings reports
Boston Scientific reported acquisition-related issues last month, with deals already made. Its 2Q05 profit fell more than a third amid both deal costs and moderating sales growth for its coronary stents, but the company still managed to match Wall Street expectations. The company reported net income of $205 million, or 24 cents a share, in the April-June period, compared with a profit of $313 million, 36 cents a share, in the year-ago period. Sales rose 11% to $1.62 billion from $1.46 billion a year ago.
The company said results were hurt by one-time expenses, including charges totaling $199 million in costs related to its acquisitions of TriVascular (Santa Rosa, California), CryoVascular Systems (Los Gatos, California) and Rubicon Medical (Salt Lake City). Excluding those charges, Boston Sci said its profit was $404 million, 48 cents a share, up 7% from an adjusted profit of $377 million, or 44 cents a share, in the year-ago quarter. The most recent quarter's performance matched the consensus estimate of analysts surveyed by Thomson Financial.
Worldwide sales of coronary stents rose 7% from $652 million a year ago to $700 million, a much more modest gain than the 345% increase in stent sales for all of 2004 compared with 2003. Worldwide sale of the Taxus paclitaxel drug-eluting stent (DES) systems were $663 million, an increase of 11% over a year ago. U.S. sales of the Taxus Express systems were $460 million.
Paul LaViolette, chief operating officer, said during an analyst conference call that the next-generation DES, the Taxus Libert , continues to perform "extremely well" in a limited release outside the U.S. He noted, in most cases, a very rapid conversion to the Libert from the older Express models, and predicted CE-marking for the Libert later this summer.
In the U.S., the company completed enrollment in its ATLAS clinical trial in April, a study designed to support FDA approval of the Libert system. It anticipates U.S. approval in mid-2006, LaViolette said, with the company recently commencing its modular submission to the FDA for that system.
Johnson & Johnson also reported 2Q results in mid-July, recording higher growth in its medical device sector than in pharmaceuticals which were hurt by competition from generics and the Cypher drug-eluting stent taking market share from Boston Sci's Taxus DES. Cypher moved from a share of somewhat over 30% to about 40% in that market, the company said. Sales of the Cypher DES from J&J's Cordis (Miami Lakes, Florida) unit rose 53% to $1 billion, with quarterly U.S. sales of $320 million.
Overall, sales of medical devices and diagnostics by J&J companies rose nearly 20% to $4.9 billion, with strong performance across all major products, including Cypher, orthopedic and spinal devices, wound care products, blood glucose monitoring devices and contact lenses. J&J has bucked the recent trend among drug-makers of divesting businesses to focus solely on highly profitable prescription drugs. Its decades-long philosophy borne out, it said, by the 2Q report is that the expanded performance of medical devices and consumer goods will buffer drug sales slowdowns.
J&J raised its full-year earnings forecast to a range of $3.44 to $3.47 a share, up as much as 12% from 2004. It previously forecast 2005 profit of $3.41 to $3.43 a share.
St. Jude Medical (St. Paul, Minnesota) reported higher-than-expected quarterly earnings last month and raised its outlook for the full year, citing continued robust sales of its implantable cardioverter defibrillators (ICDs). During an earnings conference call, President and CEO Daniel Starks said the company secured 17% of the global market for ICDs in 2Q05, up from 11% a year ago. He forecast ICD sales growing some 20% and that the company would continue to win share in this important and fast-growing market. St. Jude competes with Medtronic and Guidant, both having to recall certain of their ICDs during the first half of the year because of various problems.
"Our guidance does not assume some huge shift in competitive dynamics tied to any of our competitors' special circumstances," Starks said, adding that 2Q05 ICD sales surged 92% over year-ago levels. And he added that the company faces no constraints should it need to increase ICD production.
In the latest quarter, St. Jude reported net earnings of $101 million, or 27 cents a diluted share, compared with $99 million, or 27 cents a diluted share, a year ago. An increase in discretionary spending and acquisition related charges offset the jump in ICD sales. The company also took a charge of about $14 million for in-process R&D in conjunction with the April completion of its acquisition of Velocimed (Maple Grove, Minnesota), a company that makes specialty interventional cardiology devices.
Pelak moving to CRM start-up
After nearly 30 years in the medical device industry with increasing levels of responsibility it would seem almost counterintuitive for a man of Dan Pelak's stature to leave an established company that was being bought out by one of the biggest players in the business to join a small start-up company that hasn't even begun clinical work yet.
But that is exactly what Pelak, currently CEO of Closure Medical (Raleigh, North Carolina), is planning on doing after his duties for that company which was acquired early last month by Johnson & Johnson through its Ethicon (Somerville, New Jersey) subsidiary in a deal valued at $370 million end on Sept. 2. Pelak has been named CEO of a little-known medical device start-up, Interventional Rhythm Management (IRM; Durham, North Carolina), which has developed what it said is a "disruptive" technology platform for cardiac rhythm management (CRM) devices using interventional technology. He will join that company on Sept. 26
According to Pelak, the reason he is leaving the proverbial "sure thing" with Closure and its well-established new parent company to sign on with IRM, which currently has only 16 employees, is because of what he sees as the company's great potential. "This technology, once successfully commercialized, will save thousands of lives each year by offering therapy to patients who need a defibrillator but are not receiving one," Pelak told CDU. "It's one of the more novel, breakthrough concepts I've seen and I'm just delighted to be a part of it."
Prior to his three years at Closure, Pelak spent 26 years with Medtronic. During his career there he progressed through several positions of increasing responsibility in sales and marketing and ultimately served as vice president of cardiovascular marketing. His general management assignments spanned several divisions within Medtronic's Neurological and Cardiovascular businesses.
IRM was founded in 2003 and incubated by Synecor, which has offices in Durham and Menlo Park, California, to focus on the management of patients with arrhythmias, or abnormal heart rhythms. Getting a bit more specific about the nature of the technology, but still keeping things close to the vest, Pelak said that IRM is "developing a replacement for a standard defibrillator as we know it." He said that although "over time" the technology can be used to address patients who need standard pacemaker technology, "at the moment, the company has focused exclusively on developing a defibrillator type of product."
CryoCor IPO raises $41 million
Cryoablation specialist CryoCor (San Diego) last month raised $41 million in its initial public offering, selling 3.7 million shares at $11 each, at the bottom of the range anticipated. Proceeds from the offering will be used, the company said, to continue development of its cryoablation technologies, including support for ongoing trials, build sales and marketing capabilities, provide working capital and for other corporate purposes. CryoCor makes catheter-based products that treat cardiac arrhythmias, its cryoablation system involving the insertion of a catheter into a blood vessel that connects with the heart. The catheter then delivers extreme cold to help the heart function normally. The cryoablation system has been approved in Europe; the company is conducting clinical trials in the U.S. for the treatment of atrial fibrillation and atrial flutter.