Medical Device Daily Associate

Cardiac Science (Irvine, California), a manufacturer of automated public-access defibrillators, reported that it has expanded its multiyear strategic distribution agreements with GE Healthcare (Waukesha, Wisconsin), a division of General Electric, giving it an inroad for the first time into the lucrative in-hospital external automated defibrillator (AED) market in North America.

Under the agreements, GE Healthcare will market Cardiac Science’s line of Powerheart-brand AEDs on an exclusive basis to hospitals in the U.S. and Canada.

“We have [previously] been making our AEDs for GE under the GE brand name for sale in international companies,” Raymond Cohen, chairman and CEO of Cardiac Science, told Medical Device Daily.

He noted that GE Healthcare first began selling an original equipment manufacturer version of the Cardiac Science-manufactured AEDs internationally in late 2003. Then in October 2004, Cardiac Science made its first shipments to GE Healthcare of its G3 PRO AED, designed for medical professionals, under the Responder label.

Importantly, GE also confirmed the assignment of the distribution agreements to the new corporate entity being created through the pending merger deal between Cardiac Science and Quinton Cardiology Systems (Bothell, Washington) (Medical Device Daily, March 4, 2005).

The agreements provide GE Healthcare exclusivity in North American hospitals, based on certain annual performance criteria, for Cardiac Science’s line of defibrillators including Powerheart G3 AEDs, Powerheart CRM and Cardiac Science’s new traditional “crash-cart” in-hospital AED, which is currently pending FDA 510(k) clearance and anticipated to be released for worldwide sales this summer.

As is the case with the existing line of Cardiac Science Powerheart AEDs, the new traditional crash-cart hospital external defibrillator incorporates the company’s patented STAR biphasic technology and Rhythmx analysis software. The new product will be manufactured by Cardiac Science under the Powerheart-brand for sale by GE Healthcare in North American hospitals, and on a private label basis under the GE Responder brand name for sale by GE Healthcare in Europe, Asia, the Middle East and other international markets.

“For the first time, we will soon begin competing for a share of the lucrative traditional in-hospital external defibrillator market where in the United States alone, several hundred million dollars worth of these defibrillators are being purchased each year to replace older models,” said Cohen. “In addition, we believe GE Healthcare can help us sell AEDs in the emerging U.S. hospital AED market, where AEDs are being deployed in the non-acute sections of the hospital to treat patients and protect visitors and hospital employees who suffer sudden cardiac arrest.”

According to Cohen, in the hospital market – particularly in regards to crash cart defibrillators – two companies, Medtronic (Minneapolis) and Zoll Medical (Chelmsford, Massachusetts), have had the majority of the North American market (80%-85%) to themselves, making it difficult for any other company to establish a toehold, let alone a foothold, in the market.

“For us, going in alone as a small company into the hospital market, it makes it difficult,” Cohen said. “For us going in with GE as our partner, it’s a totally different story.”

The company’s goal, according to Cohen, is to take at least 10% of the hospital market share “right away,” thanks to its relationship with the big corporate titan. He says he relishes the chance to do market battle with Medtronic and Zoll in their “bread and butter products” market and to put some pressure on those companies in much the same way that they have competed with Cardiac Science in the outside-the-hospital AED sector.

“We have not competed with them in this segment; they have competed with us outside in the AED market, so we’re looking forward to competing with them and put some pressure on these guys through a really big partner,” he said.

The company is also excited about asserting, through the GE agreement, its own brand name, rather than traditionally providing products to that company under its brand name.

“We felt it was definitely to the benefit of Cardiac Science to have [GE] market the product under our brand name . . . as opposed to making it on an OEM basis and then no one ever knows anything about our name,” said Cohen.

According to Cohen, Cardiac Science still expects to complete its merger with Quinton in the 3Q05 timeframe. Still at issue with that merger is a pending shareholder lawsuit attempting to block the consolidation on the grounds that the transaction “is grossly unfair to Cardiac Science’s public shareholders,” he said.

The complaint also alleges that the proposed transaction provides a dominant member of the board with preferential treatment.

Cohen said he does not believe the lawsuit has any merit, and that the merger is in the shareholder’s interest. “The company is extremely optimistic that it will resolve that to satisfaction, in advance of going to the shareholders for a vote,” he said.