Last Friday, the US Food and Drug Administration (FDA) approved the beginning of human clinical trials by Advanced Stent Technologies (AST), a private US company. AST specializes in the stent industry and develops catheters for delivering the stent along the artery. It also develops stents with permeable sides for use in bifurcation areas.
To readers, this may sound like just another medical equipment start-up that has taken an important step forward towards marketing its products. However, those familiar with the field and the story of Medinol, a successful Israeli stent company owned by the Richter couple, will find it interesting that the start-up has several Israeli links. The field is tangent, even complementary, to Medinol's, and most of the founders and shareholders are Israelis.
The Israelis involved are chairman Yosi Morik, cardiologist Dr. Gil Vardi, Rafi Gidron, and Efi Gildor. Chromatis cofounder Gidron requires no introduction, but Gildor has not appeared much in the economic press in the past year. Gildor held 1.5% of Medinol and sold it to the Richters and Boston Scientific for $6 million.
The idea of developing stents for bifurcation areas was formulated four years ago, when Morik, then working as a trader on the Chicago Stock Exchange, met Vardi at a PTA (Parent-Teachers Association) meeting for parents of first graders (this is exactly the kind of accidental meeting between Gregory Pinchasik and Dr. Kobi Richter that led to the founding of Medinol).
Morik went to Chicago after the Yom Kippur War. His friends say he got permission to leave Israel from the Ministry of Defense, spent a little time in South America, then flew to the US to study. In 1981, he began working in Chicago as a bond floor trader.
In 1996, Morik met Vardi, who was then in his last year of post-graduate cardiological training at Northwestern University Medical School in Chicago. Vardi told Morik that he had invented a bifurcation stent for use in bifurcation areas - a completely new development.
Morik, who specialized in securities, was apparently unfamiliar with cardiology and began to consult experts in the field. Two of these experts were Dr. Charles Davidson, associate professor and chief of the cardiac catheterization laboratory at Northwestern Memorial Hospital in Chicago and Efi Gildor, then a Medinol shareholder, who knew a thing or two about the stent industry.
Gildor and Morik's acquaintance actually began years earlier in the mid-1980s, when Gildor was studying at the University of Chicago. Gildor, who invested in Galileo and various funds, founded Arbitrade, an option-trading company, and later sold it at a handsome profit. A decade later, Morik called Gildor and brought him into the young company as an investor. Morik also enlisted Gidron. The three invested $80,000 each, with an option to invest a similar sum in the future - an option that was not exercised. With $240,000 in start-up capital, the company began to conduct trials in improvised laboratories in a Chicago apartment.
A year later, in October 1998, AST left Chicago for California and began to expand. The company made initial contacts with private investors, eventually meeting Harris Brumfield of Chicago. Brumfield was working at the time as a Chicago Stock Exchange trader and knew Morik from their work together on the trading floor. Brumfield invested $2.4 million in AST at a $5 million company value, and became the principal shareholder. He later invested an additional $5 million at a $10 million company value, and further down the road added $5 million more at a $20 million company value.
Today, after the company has received FDA approval and set up a Scientific Advisory Board, which includes well-known US cardiologists, AST plans to raise $30 million at a company value estimated at $80-120 million. $24 million will be raised from private investors and the rest will be in the form of a bank loan.
Following the dispute between Medinol and Boston Scientific, contacts took place between Boston Scientific and AST, which yielded no results, according to sources. The degree of overlap between AST's stents and those of Medinol, which are protected by a patent, probably led Boston Scientific to abandon the idea of getting involved with AST. At the same time, AST began negotiating with $81 billion pharmaceutical giant Abbot Laboratories (NYSE: ABT). AST management is scheduled to meet Abbot representatives at the end of the month, for the sixth time.
One of the more interesting possibilities is a marriage between Medinol and AST, due to Richter's desire to strengthen Medinol, if and when it begins operating as an independent company. After all, since the bifurcation stent market is estimated at 20-25% of the global stent market, a Kobi Richter takeover of AST is likely to improve his position.
AST recently announced that it was setting up a Scientific Advisory Board, to be chaired by Dr. Alan C. Yeung of Stanford University. Other participants include Prof. Antonio Colombo, director of investigational angioplasty at Lenox Hill Hospital in New York and director of the cardiac catheterization laboratory at Columbus Hospital in Milan, Italy; Davidson, who also invested in the company; Dr. Peter J. Fitzgerald, associate professor of medicine and director of the cardiovascular core analysis laboratory at Stanford University; Prof. Kirk N. Garrat, a consultant for cardiovascular medicine with the Mayo Clinic; Prof. Paul Yock; Prof. Eberhard Grube, chief of the department of cardiology and angiology at Heart Center Siegburg in Germany; Dr. Martin B. Leon, CEO of the Cardiovascular Research Foundation at Lenox Hill Hospital, Dr, Seung-Jung Park of the Asan Medical Center in Seoul; and others considered to be leading figures in the global cardiology field.
AST, which employs 35 staff, has already completed 70 operations on human beings, with a very high success rate. Prof. Columbo, considered one of the leading specialists in the field, has performed seven operations in which AST stents were implanted, and estimates that the bifurcation stent market comprises 25% of the total global stent market. In an AST press release, Columbo describes the AST stent as, "the first stent for bifurcation which can be predictably delivered... we need to step forward with bifurcation, and AST is the first company to seriously take that jump." The question is still whether AST is capable of reproducing, even partly, some of Medinol's success, or whether it will remain an unrealized promise.
Published by Israel's Business Arena on November 19, 2001