Heart valves are a hot field in cardiology these days. One of its pioneers is Edwards Lifesciences of the US, whose leading heart valve product became part of its offering as a result of the acquisition of Israeli company PVT in 2004 for $155 million. PVT was founded by Stanton Rowe, Stanley Rabinovich, Dr. Martin Leon, and Dr. Alain Cribier, under the aegis of Medica Venture Partners.
In the light of the success of that acquisition, it is understandable why Edwards continues to be involved in the Israeli market. The company still maintains a development center in Israel based on PVT. The center employs 40 researchers working on Edwards' newest technologies.
"Not only did we succeed in keeping many of the workers who were originally at PVT, but we have even doubled the workforce since the acquisition," says Edwards CEO Michael Mussallem in an interview with "Globes". "We're happy with the group, which manages to preserve the true spirit of a start up, unlike most of Edwards' other departments. The Israeli team is no longer working on the heart valve originally developed by PVT, but on our most innovative and advanced developments, such as we still cannot even disclose." Mussallem will visit Israel from May 23 to 25, to attend the ILSI-Biomed conference, being held for the tenth successive year.
Do you plan to add to your Israeli activity an R&D group for later stages, or a production group?
"Probably not. We want to preserve the character of the group. But we are looking for more acquisitions and collaborations in Israel." On that score, Edwards signed a deal this year with Israeli company CollPlant, which develops products based on human collagen produced from plants. As part of the deal, the companies are carrying out a pilot for developing a collagen-based component for heart valves. If it succeeds, the product will be integrated into Edwards products in a deal that could be in the tens of millions of dollars.
"We're fairly selective, we mostly don't do deals at such early stages," says Mussallem, "but in this case, we were impressed both by CollPlant's technology and by their talent."
Edwards has a market cap of $10 billion, annual sales of $1.4 billion, of which $206 million derive from the product developed at PVT, a valve inserted in a minimally invasive procedure. This compares with $110 million the previous year, a rise of 87%. Edwards made a profit of $218 million last year, and it has about $400 million cash.
The vision of the future that Mussallem sketches is one that any patient would be prepared to adopt. "I believe in innovation," he says, "In my opinion, we will look back in another few decades and declare that in 2011 we were primitive in the way we carried out medical procedures. Traditional surgery will steadily move towards minimally invasive approaches. In intensive care, monitoring will improve and the interface between monitoring devices and the doctor will become simpler."
Today, Mussallem says, there are advanced technologies that exist only in developed countries. Something else that will drive the industry will be bringing these technologies to developing countries that are starting to spend more money on them. "To take advantage of this trend, you have to understand the special problems of the various countries. Not all patients are the same, neither culturally nor physically; not in their health systems and also not in the sources of finance and marketing channels. The emphasis for success in these countries is on living the market and investing in the marketing people and the doctors. This is the key to adopting technology," he says.
A finite number of companies to buy
The valve originally from PVT is currently sold only outside the US, mainly in Europe and Asia, and it is still not approved in the US market, where it is undergoing a long regulatory procedure with the US Food and Drug Administration (FDA). Edwards is currently carrying out a huge trial, which should be the last before the product reaches the US market.
Mussallem sounds optimistic. "The trial is made up of two groups. The first is of patients that cannot be operated on at all, and there we have already obtained good results. The second group is of patients that can be operated on but chose our procedure. We should receive the results from this group within a few weeks, and we estimate that the approval could come sometime from October onwards."
What are the advantages of the product
"It makes it possible to operate on patients for whom there was no other answer, and therefore it's popular. We have competitors in non-invasive valves, and our market share vis-à-vis them grew this year, but most of our growth derives from growth of the market itself. In the US the process took time, but even though we have blazed the trail for our competitors, we still have a two-year lead, in my opinion."
Analysts covering the company are concerned about the trial results, which showed that the product carried a risk of stroke. However, new data published by the company show that this risk is not necessarily higher than in surgery. "There are still complications, and we won't sleep until we have solved them," says Mussallem. "The new products that we are developing create a lower incidence of embolisms, and we have recently acquired a company called Embrella, which has developed a device for protection against embolisms, in order to integrate it with our products."
In Israel too there are companies that deal in protection against embolisms, such as SMT and Gardia Medical. "We are monitoring these two companies, and we don't rule out another acquisition in this area," says Mussallem, "but we bought Embrella recently, and at the moment we are fairly satisfied."
What are your guidelines for acquisitions?
"The success of a medical device depends a great deal on insurance companies and governments. We have to have proof in the field, data that show that the product is worthwhile clinically and financially. Potential acquirers like us know that we will have to demonstrate this to the market, and so we require as much data as possible from the start ups that we examine.
"Edwards is a focused company, and there's a finite number of companies that we can buy. Therefore, we are prepared to make deals at a slightly earlier stage and with less of a track record, unlike companies that are larger and more diversified than we are. They generally even want to see approval from the regulators and the start of sales before they will make a deal. We won't always wait until the approval stage, but we would like to see results on human beings.
"We can also support such a trial, but that's a risk for us, and so there will usually be a price for it at a later stage, such as a right of first refusal that we will demand."
Published by Globes [online], Israel business news - www.globes-online.com - on May 19, 2011
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