Israeli heart valve treatment company Cardiovalve has announced an agreement for the sale of the company to Venus Medtech (Hangzhou) Inc., a Chinese structural heart disease treatment company. Venus Medtech will pay $150 million immediately and a further $150 million dependent on reaching regulatory milestones, among them the CE mark and approval for marketing in China. The agreement commits the buyer to invest another $100 million in Cardiovalve, in accordance with a detailed plan drawn up by the two sides.
Cardiovalve was founded in Israel in 2010 by its CEO Amir Gross. Gross was also the founder of Valtech Cardio, which he led until its acquisition in 2017 by US medical equipment company Edwards Lifesciences in a deal involving an advance payment of $340 million with a potential consideration totaling $1 billion. It is estimated that, so far, Valtech Cardio's investors have received $500-600 million.
When Valtech Cardio was sold, Edwards Lifesciences was interested in only part of its activity, system for treating the mitral valve in the heart. Another of Valtech Cardio's products, a system for replacing the same valve, remained with the company's shareholders. The investors and the team led by Gross decided to continue with the remaining activity, which is how Cardiovalve (formerly Mitraltech Ltd.) was born. $20 million from the proceeds of the exit were invested in the company, plus a further $20 million at a later stage by the same investors, so that the investor group gained twice over.
The main gainer is Peregrine Ventures. Valtech grew up in its Incentive technology incubator. Peregrine identified the need for its product through its familiarity with the major medical device companies, and brought about the founding of the company headed by Gross. Other substantial investors are Larry Best, formerly CFO of Boston Scientific, who has invested in several companies in Israel, US venture capital firm NGN Capital, European fund OXO, and GlenRock. Gross himself is not only CEO but also an investor out of the proceeds of the Valtech exit.
History is repeating itself," Gross told "Globes". "In 2015, we signed a deal to sell Valtech Cardio to American company Heartware for $860 million, but in 2016 the deal fell apart. On the day that happened, we were already receiving phone calls from other potential buyers, among them Edwards, and at the end of a very intensive year, the deal was signed."
Gross says that Edwards had an option to buy the new activity, that of Cardiovalve, as well. "They chose instead to go forward with a parallel product of their own. They notified us that they would not be exercising the option just before the coronavirus pandemic started, and two weeks later we received a call from Venus. We received calls from several other potential buyers as well.
"But that happened in March, and straight after that the whole world, and China in particular, was hit by the coronavirus storm, so everything slowly and we disappeared from each other a bit, but last May the talks were renewed. During that period we managed to raise the value of the company, as our product had been implanted in some twenty patients for each of our indications, replacement of the mitral valve and replacement of the tricuspid valve. Had it not been for Covid-19, we would certainly have done at least double that. And in July, it was clear to me that it was a done deal."
Venus Medtech is a Chinese medical devices company that deals, like Edwards, in the whole area of structural treatments of the heart. "It's a giant Chinese company, number two in China in heart medical devices and number one in the valves market, of which it holds 80%. They're like the Edwards of China," Gross says. Venus Medtech is traded on the Hong Kong Stock Exchange with a market cap of $1.6 billion.
Can the Chinese market be as profitable for a product like this as the US market?
"Certainly. The perception that the Chinese market is poor in relation to the US market is irrelevant to medical devices of this kind. In China there are a billion people, of whom about 250 million are wealthy. In the US, there are 330 million people, and they are by no means all wealthy. The global mitral valve market is estimated at $8 billion, or which $3.3 billion is in China, $2.6 billion in the US, and $2.5 billion in Europe. The market for tricuspid valve replacement is estimated at $2 billion, or which $0.9 billion in in China, $0.2 billion is in Europe, and $0.3 billion is in the US. Incidentally, Venus Medtech also operates outside China, in the US, Europe and Asia."
Where do you go from here? Will there be a third incarnation?
"I'm going to stay with Venus, and we're going to conquer the world. I committed to three years, and in my mind to much more. I'll be in charge of innovation at Venus."
Published by Globes, Israel business news - en.globes.co.il - on December 8, 2021.
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