Here's a story on the deal from the Ottawa Citizen...
WorldHeart buys out competitor
for $58M
Cowpland gives up seat on board of directors
Bert Hill
The Ottawa Citizen
WorldHeart Corp., an Ottawa medical
devices company, has gained a big U.S. ally
in its battle to develop a new support device
aimed at people suffering from advanced
heart disease.
Edwards Lifesciences Inc. of Irvine,
California, a publicly traded former division of
the Baxter International pharmaceutical giant,
will sell its Novacor heart products operation
to WorldHeart in return for a 25-per-cent
stake in stock worth $58 million U.S.
WorldHeart chairman Dr. Tofy Mussivand
said the Edwards deal could speed the start
of human testing of WorldHeart's new
product, set for late this year.
"We will get access to scientific materials,
scientists and (government-approved)
manufacturing facilities that are very
important."
Edwards will buy $20 million U.S. of
WorldHeart stock in the next seven years and
place chief executive Michael Mussallem on
the WorldHeart board.
Michael Cowpland, a key WorldHeart investor from the company's earliest
days, will resign to make way for Mr. Mussallem. Mr. Cowpland and
WorldHeart said the move is voluntary and unrelated to Mr. Cowpland's
Ontario Securities Commission prosecution for alleged insider trading in
Corel Corp. stock.
Jean-Luc Berger, an analyst with Credifinance Securities Ltd., said the deal
"provides a piece of the puzzle" that WorldHeart needs to get its new
productinto the market. "This is quite positive but the main challenge to
prove the product still remains."
In Edwards, WorldHeart gains a partner with $809 million in annual sales
and more than a generation of experience developing and selling heart
disease products.
The Novacor division has 80 employees primarily in Oakland, California,
and annual sales of $12 million.
WorldHeart has run into delays getting its product ready for human testing.
The product will sit in the chest cavity beside the diseased heart and be
powered and monitored remotely.
The current Novacor device, like most competitors, sits in the abdomen and
requires wires through the skin to monitor, power and equalize pressure.
Unlike the WorldHeart product, which can function as a permanent solution,
Novacor and competing products are designed to keep patients alive until a
human heart can be found for transplant.
Several companies are preparing products designed for the next generation
of heart-assist products. WorldHeart recently lost a lawsuit against a
competitors over patent issues.
The alliance could help WorldHeart with the challenges of meeting regulatory
standards and ultimately selling the product. Edwards will the world
distributor of Novacor and future WorldHeart products. It will also provide
valves and engineering support for both product lines.
Edwards sold $77 million in heart assist and heart-valve products in the
quarter ending Mar. 31, a gain of 3.7 per cent over the year-earlier period.
Sales of its heart-assist devices are rising at more than 10 per cent annually.
Dr. Mussivand said that 1,100 patients around the world have received
Novacor heart-assist products.
In WorldHeart, Edwards gains a potential product that could spark sales of
a stagnant line of mature heart care products. Edwards reported sales of
$197 million U.S. in the quarter ended Mar. 31, up only two per cent before
foreign exchange losses, and profits of $8.1 million, down 30 per cent from a
year earlier.
Edwards stock rose yesterday to $17 5/16, the first time since it started
trading in March that it has surpassed its initial price of $16.50.
WorldHeart stock price fell $1 to $18.
Edwards is trying to boost profit growth into the 20-per-cent range. It is
competing against companies like Boston Scientific Corp, Guidant Corp.
and Medtronic Inc. in a market estimated to be $100 billion annually.
Edwards has plenty of experience dealing with complex and difficult medical
devices. In April it stopped use of surgical patches used to treat weak aortas
after tiny cracks were discovered in test products.
WorldHeart's testing program was delayed last year after it encountered
troubles with a battery device.
The deal also gives WorldHeart access to revenues. Like most start-up
companies, WorldHeart is spending heavily -- about $4.6 million in the
quarter ended Mar. 31 with no revenues -- in order to get products ready
for testing.
It has successfully raised $15 million by issuing new stock and has reserves
of $35.8 million.
"We believe (the Edwards deal) will shorten the time, reduce the risks and
increase the impact of our entry into the heart assist market," said
WorldHeart chief executive Rod Bryden. |
