Bryden gushes over World
Heart's prospects, but others
have their doubts
Ottawa company to release quarterly
results on Thursday
Ian Jack
Financial Post
OTTAWA - Rod
Bryden, still somehow
boyish at 58, cannot
resist a huge grin as
he contemplates the
prospects of World
Heart Corp.
The Ottawa
entrepreneur isn't
likely to make much
money from his
ownership stake in
the city's hockey
team, the Senators.
But he's convinced he
has scored a huge
winner with an
investment in a little
company that claims to have at least a partial solution to a big
problem -- heart disease.
He's a financial guy, a guy who loves numbers, and he fires out
plenty to buttress his contention that World Heart, which will release
quarterly results Thursday, is "the best business opportunity this
country has seen, bar none."
He says it without a hint of a blush, leaning over the small work
table in his office for emphasis.
"It's an amazing commercial opportunity!" But then, the grin
continuing, "that's not to say we won't screw it up."
It's good there's a hint of doubt, for the obstacles are formidable.
Like the fact none of the artificial pumping hearts the company is
working on have been approved for implantation into humans, that
they've never been shown to work in a live human, that the
company has yet to set up a functioning manufacturing plant, or
make a dime.
Mr. Bryden knows all that, but he also knows there are only 4,000
real hearts a year available for transplant on the planet, while
44,000 people in Canada alone die from heart disease every year.
Of those, 25,000 would be candidates for transplant. The one-time
cost of buying and implanting an artificial heart from World Heart is
expected to be about $100,000 -- no more than the price of
keeping a sick patient alive in a hospital for one year, he says.
And he recites some more numbers, which really ignite the wolfish
grin: at a sale price of $75,000, World Heart can achieve a gross
margin of 65% in a world market estimated to be worth as much as
$3-billion.
"The market is so large you can build a world-scale company
around it," he says.
There are more people in Brazil alone who have health insurance
and need a heart transplant than the total population of Canada, and
a total of about three million potential patients globally. Mr. Bryden
said in a recent interview that he expects the company to make
$1-billion in revenue within five years -- without the huge U.S.
market.
Alan Tuchman, a New York-based analyst, calls those numbers
"aggressive."
He says the market for the heart is probably closer to $500-million
a year, representing those who would likely die within a year
without a transplant and for whom drugs offer no hope.
"People don't like to have anything implanted in them," said Mr.
Tuchman. "People prefer to take drugs and the drugs keep getting
better."
The heart, the size of a child's fist, is expected to be implanted in a
human for the first time this December, at the University of Ottawa
Heart Institute. From there it would move to market in Canada,
while also seeking approval from officials in Europe and Brazil.
The biggest question for the company may be its competition. Mr.
Bryden insists other companies are at least five years behind, and
working on straight pumps, while World Heart's device sends blood
out in pulses, more closely mimicking the heart's own functioning.
"We have a significant lead, both in time and in function."
Mr. Tuchman has no argument with that point, but he does express
a huge caveat. "If it works, they're way ahead," he says. "That's the
only question that matters. It works on the bench, it works in cows.
But will it work in humans? I don't know."
Many biotech companies target the richer U.S. market from the
start, but World Heart wants to approach it last, planning for 2003.
Mr. Bryden says that's a luxury they can afford given their lead time
and the size of the market elsewhere.
The current Ottawa site will be converted into a factory in time for
next year, and Mr. Bryden said at capacity it can clear a $25-million
profit on $150-million in sales.
"The value of the quality assurance is so high that it outweighs the
slight labour cost disadvantage of locating in Canada," he says.
Mr. Bryden is the single largest shareholder in World Heart, with
21%. Another storied Ottawa businessman, Michael Cowpland of
Corel Corp., also has a significant holding at 9%. And the Heart
Institute, creator of the heart, owns 10%. The stock has bounced
around this year as investors speculate on when and whether the
heart will come to market, ranging from $8.75 to $26 over the past
52 weeks.
Talk of being the next big thing leads to speculation about a
takeover, but Mr. Bryden bristles at it. There is no poison pill at
World Heart, and no doubt in his mind that a bid one day could
come.
But, "we see that as a threat, not an opportunity."
"Our intention as a group is to build the business and constantly
demonstrate to the shareholders that we are getting as much growth
out of the company as anyone else could."
A last number, in the form of a prediction, from the man who built
his fortune at SHLSystemhouse: Both sales and market
capitalization should grow by at least 50% a year until revenue hits
$1-billion.
"The only question," says Mr. Bryden, settling back in his chair, and
smiling once more, "is can we actually build a business out of this. I
think we'll put that one behind us shortly."
nationalpost.com
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