Medical Device Daily

Calling it a "landmark day," for Cambridge Heart (Bedford, Massachusetts), company CEO and Chairman Robert Khederian and other executives yesterday reported a new three-year sales and marketing agreement with St. Jude Medical (St. Paul, Minnesota), under which St. Jude will be responsible for marketing Cambridge Heart's HearTwave II Microvolt T-Wave Alternans System and sensors to cardiologists and electrophysiologists in North America.

St. Jude has purchased $12.5 million of preferred stock in Cambridge Heart, convertible into common stock at $2.99 a share. St. Jude will market and sell the system to cardiologists and electrophysiologists in North America, and Cambridge Heart will manage the installation of systems, customer training, and equipment servicing. The agreement covers North America only.

During a Thursday morning conference call, Khederian said, "Today, we transition from a small company with a great product and a lot of potential, but with limited resources and 17 representatives in the field, to win the support of St. Jude Medical's world-class cardiac rhythm management sales and marketing team, which is focused on educating cardiologists and electrophysiologists about the importance of incorporating alternans testing into their practice."

And he called the agreement a "critical step" toward making the technology available to "physicians and patients to enable them to make appropriate treatment decisions." He said that Cambridge Heart's technology "is now being recognized by the cardiac management industry as a valid risk stratifier" for the $6 billion ICD market.

Cambridge Heart's sales force will continue to market the HearTwave II to internal medicine and primary care practices. Alternans testing is designed to allow physicians to identify patients who are at increased risk of sudden cardiac death (SCD). According to the American Heart Association (Dallas), sudden cardiac death (SCD), or cardiac arrest, is the sudden, abrupt loss of heart function in a person who may or may not have diagnosed heart disease. The time and mode of death are unexpected. It occurs instantly or shortly after symptoms appear.

With the agreement, Cambridge Heart raised its 2007 revenue guidance to $14 million-$16 million from the prior guidance of $12 million-$14 million.

However, Its net loss for 2007 is expected to increase as compared to the company's prior plan in order to build clinical support, manufacturing, general, and administration costs as it builds its infrastructure to support St. Jude Medical's sales efforts.

Khederian said he expects Cambridge Heart's clinical applications specialist staff to increase to about 30 by year-end 2007, about double what the company reported in its January plan.

"As St. Jude Medical's representatives become fully trained, we expect them to play a more significant role in driving utilization of the Cambridge Heart technology, thus reducing the responsibility of Cambridge Heart in this area," he said.

The agreement includes annual sales targets designed to measure performance, as well, and Khederian said the company has factored those sales targets into its current revenue guidance.

"We expect the benefits of our agreement to be more visible in the second half of the year as sales ramp up, and our quarterly rate of sales should continue to accelerate in 2008, as the St. Jude Medical reps become trained," he said.

"Industry reports estimate 10 million-12 million individuals in the U.S. with underlying heart disease and at significantly higher risk for sudden cardiac death than the general population," said Laurence Blumberg, MD, VP of business development, a founder, and a director of the company, said during the conference call.

He added: "Unfortunately, there are many high-risk patients who are not receiving the therapy they need, and our HearTwave II System allows physicians to identify, non-invasively, those who will most likely benefit from ICD therapy."

Cambridge Heart's HearTwave II Microvolt T-Wave Alternans System measures a specific subtle pattern of beat-to-beat fluctuations in a person's electrocardiogram. This pattern of fluctuations is called T-wave Alternans. These tiny variations in the electrocardiogram, measured at one millionth of a volt accuracy, are measured most commonly during a sub-maximal exercise stress test in the doctor's office or hospital outpatient setting.

Clinical research has shown that patients with a positive or non-negative microvolt T-wave Alternans test are at increased risk for sudden cardiac death, while those who test negative are at reduced risk.

The company also said that based upon the $12.5 million investment from St. Jude, it does not foresee a need to raise additional capital in the near-term. Therefore, it intends to withdraw its universal shelf registration statement currently on file with the Securities and Exchange Commission.

Banc of America Securities LLC acted as financial advisor to Cambridge Heart.

The company's products incorporate its proprietary Microvolt T-Wave Alternans measurement technologies, coupled with its patented Spectral Analytic Method and ultra-sensitive disposable electrode sensors.

In other financings news:

• Aethlon Medical (San Diego), which focuses on therapeutic devices for infectious disease, reported entering into an $8.4 million common stock purchase agreement with Fusion Capital Fund II (Chicago), an institutional investor.

The company has agreed to sell to Fusion $400,000 of its common stock on the date that a registration statement related to the transaction is filed with the Securities and Exchange Commission. The company may sell an additional $8 million of common stock to Fusionl from time to time over a 25-month period after the SEC has declared effective the registration statement.

Aethlon said the proceeds will be used to advance commercialization of its Hemopurifier treatment technology.

The company has the right to sell shares of common stock to Fusion from time to time in amounts between $32,000 and $1,000,000, depending on certain conditions, for up to $8 million of additional funds. The purchase price of the shares will be based on the current market prices of the company's shares at the time of sales without any fixed discount, and the company will control the timing and amount of any sales of shares to Fusion Capital.

"We are pleased to renew our long standing relationship with Fusion Capital," said James Joyce, CEO and chairman of Aethlon. "The agreement provides us with reasonable terms, the flexibility to execute other transactions, and the ability to sell our shares to Fusion Capital when we determine the share price is most advantageous for the company," Joyce said.

The Hemopurifier is a broad-spectrum treatment for drug and vaccine resistant bioweapons, pandemic threats and chronic infectious disease targets, including Hepatitis-C (HCV) and the Human Immunodeficiency Virus.

On March 6, Aethlon submitted an Investigational Device Exemption to the FDA for human safety studies of the Hemopurifier as a treatment countermeasure against select category "A" bioterror threats (Medical Device Daily, March 8, 2007).