Medical Device Daily

Heart support devices that beat and those that whir will come together in complementary fashion with WorldHeart's (Oakland, California) report yesterday that it will acquire all of the assets of MedQuest Products (Salt Lake City).

MedQuest is developing the HeartQuest ventricular assist device (VAD), a magnetically levitated centrifugal rotary blood pump. WorldHeart, in its efforts, is developing the pulsatile Novacor LVAS — essentially a system that pulsates somewhat like a beating heart.

Thus the merger adds an advanced rotary pump to World Heart's VAD platform.

WorldHeart said it would raise up to $23 million in a combined private placement and warrant exercise. In addition, all existing debentures will be converted to common shares of the company.

WorldHeart has entered into a private placement with Maverick Venture Management. With deal close, Maverick will invest $12 million in WorldHeart via purchase of about 8.9 million common shares at $1.35 a share. Maverick, a majority shareholder of MedQuest, has previously invested around $14 million in that company.

Maverick and the MedQuest shareholders will hold a 33% ownership stake in the combined company and be able to nominate up to two members to the WorldHeart board.

WorldHeart's debenture holders and warrant holders also have agreed to convert their debentures and exercise the warrants issued to them in a previous financing in order to provide the merged firm with more capital to execute its plans.

WorldHeart will issue 9.3 million common shares to MedQuest in connection with the acquisition.

Investors that participated in the company's September 2004 convertible debenture transaction have unanimously agreed to convert their debentures at the price of $1.25 a common share into around 10.7 million common shares. Convertible debenture holders have agreed to exercise the corresponding warrants into about 10.7 million common shares of the company for $1 a common share for gross proceeds to WorldHeart of about $10.7 million. Warrants are currently exercisable until Sept-ember 2009 at a price of $1.55 a common share.

Jal Jassawalla, president and CEO of WorldHeart, said that his company is “the world leader in terms of VAD reliability and long-term durability. Long-term VAD support, or destination therapy [DT], represents the most significant need and growth opportunity in our field.

“Our industry needs both pulsatile and rotary pumps to treat the full spectrum of clinical needs of end- and late-stage heart failure patients,“ he said. “We believe that pulsatile devices are best suited for end-stage patients with poor ventricular contractility, who require full support, or functional replacement'; rotary devices are better suited for late-stage patients, with some contractility, who require only partial support, or assist.'“

Thus, he said, “WorldHeart will now be the only company with small, silent, next-generation pulsatile and rotary systems under development, as well as having the most durable and reliable current-generation pulsatile device in the market today.“

WorldHeart will retain MedQuest's employees in Salt Lake City, with those operations serving as the development and manufacturing site for WorldHeart's rotary pump products.

Pratap Khanwilkar, co-founder, president and CEO of MedQuest, will lead the combined firm's rotary pump activities and also head business development for the company.

Khanwilkar said, “We believe that our HeartQuest VAD is the most technologically advanced rotary pump under development. Our magnetically-levitated rotor results in a pump with no moving parts subject to wear, resulting in a small device expected to provide multi-year support over a wide range of flows.“ He called combination of the two systems “critical in expanding the destination therapy market.“

“We have made significant progress in the second half of the year in several key areas,“ said Jassawalla, WorldHeart president and CEO since last July. “We are selling well into our traditional markets, and we have enrolled nine clinical centers in the DT RELIANT [Randomized Evaluation of the Novacor LVAS In A Non-Transplant population] trial, with several additional leading medical centers in the process of completing their internal institutional review processes. We have met our key milestones in the development of our next-generation pulsatile system, the Novacor II, and ended the year performing strongly.“

With the acquisition, WorldHeart's product platform will include:

• The Novacor LVAS, currently sold for a bridge-to-transplant indication in the U.S., Canada, the European Union and Japan. In Europe, it also is commercially available for DT and bridge-to-recovery. In the U.S., it is under evaluation in a pivotal study for destination therapy.
• The Novacor II, a small, bearingless, next-generation pulsatile VAD under development and expected to begin animal trials this year, the company said.
• The HeartQuest VAD, a small rotary pump in advanced development and in pre-clinical animal and bench testing, with an initial feasibility clinical trial expected to be initiated by the beginning of next year.

Kevin Compton, a Maverick principal, said, “We believe that WorldHeart is now poised to be a leader in the treatment of advanced heart failure and are excited about helping create a hugely successful company around these treatments.“

The Novacor LVAS has had more than 20 years of clinical use, WorldHeart reported, saying it is the first is VAD “to provide a recipient with more than six years of circulatory support. It continues to hold the industry record for longest support on a single device of more than 4.5 years. These statistics are unmatched by any other implanted electromechanical circulatory support device on the market.“

It reports more than 1,500 patients supported with the Novacor, with almost 600 patient years of experience and with no deaths attributable to “device failure.“

The acquisition of MedQuest and the private placement are subject to WorldHeart shareholder approval.

WorldHeart said it expects to obtain shareholder and other customary approvals allowing the transaction to close in about 90 days.

WorldHeart said it would hold a teleconference call tomorrow concerning the acquisition.

Other companies in the VAD sector include A-Med Systems (West Sacramento, California), Arrow International (Reading, Pennsylvania), MicroMed Technology (Houston), Thoratec (Pleasanton, California), Vascor (Pittsburgh) and VentraCor (Sydney, Australia). Ventracor yesterday reported receiving approval to begin UK enrollment in a trial to support CE-marking of its VentrAssist LVAS.