Private companies make their pitches to receptive audience

By Larry Haimovitch

Medical Device Daily Contributing Writer

January 2012

SAN FRANCISCO — Amidst the sea of myriad public companies pitching their story to investors at the J.P. Morgan Healthcare Conference, numerous private companies had their opportunities as well to use the conference as their "coming out" party or to update investors who were already familiar with them.

To this observer, by far the most intriguing private company was Bausch + Lomb (B + L; Rochester, New York), which was a public company for many years until it was acquired and taken private by private equity firm Warburg Pincus (New York) in October 2007 for more than $4.2 billion (Medical Device Daily, Oct. 29, 2007).

B + L, which was founded in 1853, is one of the oldest continuous operating companies in the U.S. and has one of the best-known health care brands in the world.

Prior to its acquisition by Warburg, B + L had been struggling with a variety of challenges and had fallen behind its competitors in several key markets. Since Warburg took control, numerous changes have been made and the company has regained its momentum.

CEO Brent Saunders, who was recruited to become CEO less than two years ago, presented "The New Bausch + Lomb" to a standing room only crowd. Saunders said that B + L is "solely focused on eyes" and indicated that the annual global eye care market currently approximates $29.5 billion. The largest sector is pharmaceuticals, which at about $16 billion accounts for roughly 60% of the total, while contact lenses (including lens care products) and surgical products account for roughly 25% and 15% respectively.

He discussed in detail the various steps that he and his management team have taken to achieve a "major transformation" of the company. The success of these efforts, which is indicated by both growing revenue and expanding profitability, is visible in the table below.

Saunders pointed to the company's broad geographical presence, with North America accounting for 45% of global sales, while Europe accounts for 35% and Asia/Pacific accounts for 20%.

Its pharmaceutical division, which markets more than 250 products worldwide, is growing at a "double digit rate" and generates 40% of revenue. The contact lens division generates 26% of revenue, contact lens care provides 16% and the surgical division chips in 18%. Based on industry sources, Medical Device Daily believes that the surgical division's performance has been lackluster in recent years. It has been plagued by an aging product line, stiff competition and management turnover. To wit, the head of this division, Robert Grant, recently resigned.

Saunders's upbeat presentation included a discussion of "four pillars to grow on," which included improving the pipeline of new products, geographic expansion into emerging markets, building on its "iconic" brand name and focusing on execution, especially with better customer service.

Although no mention was made of the company's future financing plans, many industry pundits are speculating that B + L will re-emerge as a public company in 2012.

Two returnees to the conference were TriVascular (Santa Rosa, California) and Penumbra (Alameda, California).

TriVascular is an emerging player in the global endovascular aortic repair (EVAR) market, which CEO Mike Chobotov pegged at $1.2 billion million in 2010. He predicted that the EVAR market would reach about $2.1 billion in 2015.

The company's Ovation EVAR device received the CE mark in August 2010 and is now being marketed in select European countries. He described the results of this launch as "encouraging." In the U.S., the company completed its pivotal trial enrollment in March 2011 and Chobotov suggested that FDA approval could occur in late-2012.

A significant landmark for the company occurred in November 2011, when the FDA granted the company a humanitarian device exemption (HDE). This HDE is the first ever granted by FDA for an EVAR device and reflects the Ovation's superb efficacy and safety.

The Ovation has two key advantages: (1) A "profoundly lower profile" (14 to 15 Fr) vs. the competition's 18 to 24 Fr (2) A polymer filled sealing ring, which provides radial force to prevent device migration, which has plagued other EVAR devices.

A smaller profile enables more EVAR procedures to be performed less invasively (femoral artery access instead of a surgical cutdown) and further permits women and smaller men to be treated endovascularly.

Indeed, in its U.S. pivotal trial, the narrower profile enabled more female patients to be enrolled than in any other PMA pivotal trial. Second, percutaneous access was used in nearly half of the procedures, considerably higher than other EVAR devices.

Chobotov also proudly noted that "our overall major adverse event rate is considerably better than the competition's."

Based upon the superior characteristics of Ovation, Chobotov said that "we are poised to become the EVAR market leader."

Penumbra participates globally in the interventional neurovascular (INR) market, which has attracted considerable interest from strategic buyers in the past two years. CEO and co-founder Adam Elsesser pointed out that "the growth of neurovascular has just begun," with myriad opportunities to improve the care of stroke patients.

Penumbra's mission has long been to develop and market products that change clinical practice.

"We are not a me-too company," he said.

Since launching its first product in the U.S. in 2007, Penumbra has become the acute ischemic stroke (AIS) 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 brain vessels.

Having become the AIS market leader, Penumbra then turned its attention to the hemorrhagic stroke market, with a line of uniquely soft and efficient embolic platinum coils for treating intracranial aneurysm. The Penumbra Coil features far higher density packing than competitive coils, saving time and money, and its entry in the U.S. about a year ago has been well-received.

Building on this success in the hemorrhagic market, Penumbra will launch two new products, the Velocity, the first hybrid guidewire/catheter product, and the Helix, an arterial reconstruction conduit. Elsesser said Helix "will eliminate the tradeoff of deliverability versus conformability and cell size." An FDA submission will occur in the next few weeks.

In addition, Elsesser is enthused about his company's new "stentriever" for the AIS market, noting that the first 30 cases in Europe have demonstrated "remarkably positive results."

Finally, Elsesser emphasized that INR is "no longer a cottage industry and we must provide solid clinical data for our products." In that regard, Penumbra has several trials underway, including the landmark THERAPY trial (The Randomized, Controlled Trial to Assess the Penumbra System's Safety and Effectiveness in the Treatment of Acute Stroke) (MDD, July 26, 2011). This trial will use CT to determine select patients that benefit the most from endovascular therapy.

Elsesser closed his presentation with the following financial metrics, over 40% revenue growth in 2011, net income in 2011 of $7 million and profitable for the last three years.

Optovue (Fremont, California) founder and CEO Jay Wei said his company's mission is to "develop innovative next generation ocular diagnostics while expanding physician access to enable earlier treatment and blindness prevention globally."

Its "cornerstone" technology is optical coherence tomography (OCT), a non-invasive diagnostic imaging technology that in recent years has become a critical tool for the diagnosis, therapy and efficacy monitoring of a plethora of eye conditions, including macular degeneration, diabetic macular edema, cataracts and refractive disorders.

Since shipping its first OCT units in 2006, Optovue has grown very rapidly, with 2010 sales in excess off $50 million. Its OCT technology is highly regarded, achieving far higher speeds and resolution relative to its competitors.

Wei pointed out that his company continues to aggressively innovate, with new products like the portable units iVue and iStand, the iWellness, a comprehensive eye exam service and the iCam, Optovue's first imaging product not based on OCT technology.

"We expect that these new products will support continued rapid growth," he said.

J.P. Morgan Healthcare 2012 Conference

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