Medical Device Daily Associate

Despite the company's assertions over the past couple of years that there would continue to be a place for vascular brachytherapy (VBT) in a market now dominated by drug-eluting stents (DES), it appears that Novoste (Norcross, Georgia), the only company still in the VBT space, is folding its tents and closing a business that once held so much promise.

The company's board of directors provided what is probably the final footnote to use of the technology for the treatment of restenosis late on Tuesday, saying that it has determined that its VBT business is no longer viable and, as a result, has authorized a staged wind-down of the business.

The directors said that this decision was necessary to preserve Novoste's dwindling cash resources and arises as a result of the continuing decline in revenue for the company's VBT product. Additionally, the board said it continues to evaluate strategic alternatives, including liquidation and dissolution, and believes that it will be able to conclude its evaluation of alternatives within 60 days.

The board also said it determined that the strategic alternatives available to the company do not include an ongoing requirement for a field sales force focused on disposable, medical devices. As a result, the company said it would reduce its U.S. work force this quarter by 52, from a current level of 97, about a 60% reduction in the total work force.

Novoste also said that it has notified all 16 of its employees outside of the U.S. that they will be terminated in accordance with their contracts and the relevant country's employment regulations.

These most recent cuts are on top of the more than 200 positions eliminated at the company since January 2003, which should have indicated, if nothing else had, the precarious state of its affairs.

The reduction impacts the firm's suburban Atlanta headquarters location; European operations and domestic sales force, and affects all levels of employees, including, the company said, several officers.

Novoste said its products have been available to the market for several years, “and the continued field support of our customers no longer requires the extensive field training activities and customer support that had previously been required when the product was launched in 2000.“

The company said it would record in 1Q05 about $1.7 million in one-time severance-related costs for the U.S. employees being cut. The company said this level of reduction would minimize cash use during the wind-down period. However, it added that it would continue to evaluate its cost structure in light of its existing contractual obligations and the level of catheter sales.

With its buyout of Guidant's (Indianapolis) vascular brachytherapy assets last spring (Medical Device Daily, April 23, 2004) for $2.5 million plus royalties up to $4 million and Johnson & Johnson's (New Brunswick, New Jersey) exit from the sector in December 2003, Novoste had become the sole provider of VBT with its Beta-Cath system.

At the time of the Guidant deal, company President and CEO Al Novak said that while the VBT opportunity was “much smaller“ than that of drug-eluting stents, he said he believed it still had a place in the interventional cardiology market. Novak said that both VBT and DES “represent the future of interventional cardiology. One [DES] is the front-line technology and the other [VBT] is its backup.“

While acknowledging at the US Bancorp Piper Jaffray Healthcare Conference in February 2003 (MDD, Feb. 3, 2003) that analysts' predictions of 100% uptake of DES were probably correct, Novak asserted that that the clinical rates of failure and projected rates of more failures in real-world use of those devices would give the company this backup opportunity with a DES failure rate of between 7% and 10%. “We're building our business model around that 7% failure“ and higher, he said. Those numbers, it appears have so far not been borne out.

While drug-eluting stents were a major factor in Novoste's decline, the company was further hurt by a report made at last September's Transcatheter Cardiovascular Therapeutics (TCT) conference in Washington, saying that vascular brachytherapy provides no benefit for prevention of complications in angioplasty patients five years post-treatment (MDD, Sept. 30, 2004).

At the time of presentation, Martin Leon, MD, chairman of the TCT-sponsoring Cardiovascular Research Foundation (CRF; New York), called the results of the study “sobering.“ Leon added: “What we had once viewed as a powerful therapy to prevent short-term tissue overgrowth [restenosis] actually may not have any lasting benefits.“

While the writing has apparently been on the wall for some time, Novoste made it official last October, saying that “continuing challenges“ facing the company's vascular brachytherapy business have resulted in an ongoing decline in revenues, and that it had been “actively seeking new product opportunities, as well as a merger, business combination or other disposition of its business or assets.“

Novoste said it would be sending communications to its remaining customers as to how it intends to service their accounts. It said it anticipates that it will continue to provide catheters for the next several months to those customers with existing contracts. Catheters will be available to customers to support existing patient needs while the board evaluates the next steps for the company.

“It is regrettable that we have to take the action that is required to preserve the remaining resources of Novoste,“ Novak said in a prepared statement. “Vascular brachytherapy was a difficult product to market even before the advent of drug-eluting stents, and we believe our sales team did a terrific job in a tough environment. The marketplace for our product has spoken in terms of the continuing and rapid deterioration of sales.“

Novak was out of the office on Wednesday and unavailable for further comment.