Medical Device Daily

Some companies take on the jack-of-all-trades approach, fighting to become a market leader in nearly every segment that its hands are in. Those listening to the BMO Capital Markets (New York) fireside chat with ev3 (Plymouth, Minnesota) yesterday found that quite the opposite is true for that company.

During a session moderated by BMO med-tech analyst Joanne Wuensch, ev3 President/CEO Robert Palmisano told listeners that the company is interested in maintaining its position in the neurovascular market and that it plans to further grow that market.

Nothing could be further from the truth, especially since the company signed an agreement to acquire Chestnut Medical (Menlo Park, California), a company that holds many synergies for ev3.

"This acquisition really fits into our wheelhouse," Palmisano said. "We would have loved to have paid less, but we're glad to take part in the deal."

Under the terms of the agreement, ev3 will acquire 100% of the equity of Chestnut for total up-front consideration of $75 million paid upon closing, 30% to 40% of which is payable in cash, with the remaining portion payable in ev3 common stock.

An additional milestone-based contingent payment of up to $75 million is payable in a combination of cash and ev3 common stock upon the receipt of U.S. FDA premarket approval of the Pipeline device. ev3 will finance the up-front payment due upon closing through cash on hand. Any contingent milestone payment is not expected to be paid until 2011. The transaction is subject to customary closing conditions and is expected to close within approximately 45 days.

"This acquisition directly supports our stated strategy of bringing breakthrough neurovascular therapies to our markets and adds an innovative new product platform to benefit the large number of patients suffering from brain aneurysms that currently are not well treated with either surgical or endovascular techniques," Palmisano said. "In addition, this acquisition is expected to be an immediate revenue contributor, leverage the strong global distribution capabilities of ev3's neurovascular sales organization and provide another growth engine for delivering enhanced value to our shareholders."

But don't expect for the company to delve much into cardiovascular products after this deal.

When asked if that was going to be the next logical step, Palmisano said it was best that ev3 best stick with what it knows.

"That would be a task that would defer us from what we know we can do well and we're sticking to what we know," he said when asked about getting into the cardio vascular market.

Its neurovascular franchise holds the No. 2 spot in the $700 million worldwide hemorrhagic stroke market, with industry-leading products such as the Axium Detachable Coil System and Onyx Liquid Embolic System. Momentum should continue in 2009, with the launch of the Axium PGLA and Axium Nylon coils, and new access products.

In the $3 billion peripheral vascular market, ev3 sells a portfolio of atherectomy products (plaque removal), stents, balloons, thrombectomy (thrombus removal), and embolic protection devices. In January, the company initiated the worldwide launch of its EverCross and NanoCross PTA balloons. The company also is conducting a series of clinical trials, the DEFINITIVE trials, designed to evaluate its SilverHawk and RockHawk atherectomy devices.

Perhaps one of its greatest accomplishments was its merger with FoxHollow Technologies (Redwood City, California) (Medical Device Daily, July 24, 2007). The $780 million cash and stock transaction plan created a new company with a market capitalization of about $1.7 billion. It grew ev3 to a size that would be one of the largest in the endovascular space at nearly twice the size of the applicable business units of other industry behemoths such as Johnson & Johnson (New Brunswick, New Jersey), Boston Scientific (Natick, Massachusetts), Abbott Laboratories (Abbott Park, Illinois), and Medtronic (Minneapolis).

But don't count on a repeat of a move like that in the future.

"We don't see us doing what we did with FoxHollow a couple of years ago," Palmisano said. "We're looking right at the products that we know about things we would be looking at would be in our wheel house. We really want to avoid integration."