Private companies whet the appetites of attendees

By Larry Haimovitch

Medical Device Daily Contributing Writer

January 18, 2011

SAN FRANCISCO — This annual conference, which in recent years has become the "must go-to" healthcare meeting, offers something for just about everyone's appetite. And, for those of us who are interested in earlier stage, private companies there was a rich menu to choose from.

Three private medical device companies that stood out to this observer, all based in northern California and first time participants as well were Zeltiq Aesthetics (Pleasanton, California), TriVascular (Santa Rosa, California) and Penumbra (Alameda, California). The first two are venture capital backed while the latter has been financed by its founding management and a few angel investors.

As its corporate name clearly implies, Zeltiq participates in the aesthetics space with its proprietary "Cool Sculpting" treatment technology. This technology is based on cryolipolysis patents acquired from Massachusetts General Hospital (Boston) and Harvard University (Cambridge, Massachusetts) about five years ago.

According to CEO Gordie Nye, this proprietary technology is premised on "leveraging adipose tissue's hypersensitivity to cold for aesthetic good." Said more conventionally, it is like a child who sucks on a very cold popsicle, creating "pockets of pucker" in their cheeks. Similarly, the extreme cold of Zeltiq's device kills about 25% of the treated fat tissue and can help reduce "love handles" in the tummy area and other exercise resistant bulges.

A typical patient will report that "my clothes fit better" although the outward appearance may be subtle.

Its business model is based on a $100,000 piece of capital equipment with multiple applicator heads powered by EZ cards, which cost somewhere between $100 and $250 per usage. These applicators typically generate about $1200 to $1500 per treatment area. The procedure takes about one hour but occupies just a few minutes of the doctor's time, while the patient can relax, read, nap or catch up on e-mails while the treatment is progressing. According to Nye, the procedure is virtually painless and does not require any pain management.

Since entering the market in 2010, Zeltiq has made an impressive showing. Nearly 35,000 patients were treated and the company generated roughly $25 million of revenue. This stellar performance is particularly striking because the product was not specifically labeled for cosmetic use until early September.

A major reason for its commercial success is that its physician customers typically recover their capital outlay in six months or less and generate substantial cash flow from the device.

"Zeltiq-onomics is very powerful," said Nye, adding that two treatment days per week can mean annual income of one million dollars per treatment room.

A second reason for Zeltiq's success is that its patient satisfaction surveys show an astounding 84% rate, even higher than for such gold standard aesthetic procedures as Botox and breast implants.

Zeltiq is poised for another tremendous surge in 2011. Nye noted that installations should more than double in 2011, while procedures could quadruple, leading to revenue in the $60 million range.

Another private company that is excelling is Penumbra, which is totally focused on neurovascular disease, specifically the treatment of stroke.

According to the American Stroke Association (Dallas) stroke is the third leading cause of death and the leading cause of adult disability in the U.S. Penumbra's initial foray in the stroke market addressed acute ischemic stroke (AIS), which accounts for about 85% of the estimated 800,000 strokes per year.

CEO and co-founder Adam Elsesser indicated that the company's goal is to develop and market products that "change clinical practice." The company appears to be succeeding. Since launching its first product in the U.S. in 2007, Penumbra has become the AIS device market leader, with its highly-regarded line of thrombectomy catheters that navigate the tortuous anatomy of the brain vasculature and remove clots from the very tiny vessels.

Elsesser believes that the AIS market is hugely under penetrated, with clot busting drugs like tPA applicable only to lacunar (small vessel) strokes and being severely restricted by a three-to-four hour "window of opportunity." Numerous studies in recent years have shown that only 3% to 4% of AIS patients receive tPA, in great part because of its limited time window.

Conversely, endovascular devices like Penumbra's can address large vessel occlusions and generally have a six-to-eight hour window. Elsesser believes that about 200,000 to 250,000 patients in the U.S. could annually benefit from an endovascular stroke procedure.

He cited the Penumbra System of thrombectomy catheters as a significant advance because they have slashed the time to remove a clot from about 40 to 45 minutes to an average of 14 minutes.

"This has dramatically changed acute ischemic stroke therapy," he said.

In addition to its stellar suite of AIS catheters, Penumbra recently entered the hemorrhagic stroke market in Europe with a line of metallic coils for treating intracranial aneuryms. The company hopes to launch in the domestic market sometime in 1Q11.

Elsesser described this introduction as a "paradigm shift" in aneurysm therapy because each coil will fill about 30% of the aneurysm, vs. only 7% for the average coil on the market today.

This attribute should both lower the cost of coiling per case as well as shorten the typically very lengthy procedure times.

Elsesser concluded his talk by pointing out his company has been profitable the last two years, has plenty of cash to support its growth and currently employs about 300 people. He did not provide any information on the company's revenue but a good "guesstimate," based on its AIS market leadership and employee headcount would be somewhere in the range of $40 to $50 million.

Perhaps the most intriguing private presenting company was TriVascular, an emerging player in the endovascular and thoracic aortic repair market. Originally founded in 1998, TriVascular was sold to Boston Scientific in April 2005 and then shockingly was shuttered in mid-2006 After many long months of tedious negotiations, TriVascular management was able to re-acquire its assets (including manufacturing facilities and IP) and with the aid of $65 million of Series A venture capital financing was able to re-launch the company.

The company participates in a global market that CEO Mike Chobotov estimated at about $1. 1 billion, which is comprised of nearly $900 million in abdominal repair and an additional $250 million in thoracic repair. Chobotov furthered estimated that this market would approximately double in the next five years, reaching about $2.1 billion in 2015.

The company's Ovation device, which received the CE mark in August 2010 and is now in the early stages of its European rollout, is notable primarily for two key qualities: (1) its considerably smaller profile (14 to 15 Fr.) versus the competition's 18 to 24 Fr. (2) Its polymer filled sealing ring, as opposed to the traditional means of a stent and graft, which provides radial force to hold the device in place.

The former feature allows for more patients to receive endovascular aortic repair performed percutaneously (as opposed to a surgical cutdown) and further permits women and tiny men to be treated endovascularly and avoid a dreaded open procedure.

The latter characteristic mitigates the tendency of its stent grafts to migrate, which has plagued other companies' stent graft devices. Chobotov noted that its experience in 98 patients has produced "compelling data," with an impressive performance in virtually every key measure of safety and efficacy.

In the U.S., the company expects to complete its pivotal trial enrollment this quarter and anticipates FDA approval in late-2012.

Concluding his very upbeat presentation, Chobotov said that "we are very confident that our technology will have a major impact on the market."

2011 J.P. Morgan Healthcare Conference

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