Medical Device Daily

NEW YORK — Last year saw a blooming, or rather a re-blooming, of initial public offering (IPO) opportunities in healthcare, and two of the med-tech success stories in the marketplace were Kinetic Concepts (San Antonio), focused on wound care, and Animas (West Chester, Pennsylvania), developing insulin pump technology.

Kinetic Concepts, already robustly profitable, tested those waters early in 2004 (Medical Device Daily, Jan. 6, 2004) and garnered about $620 million, while Animas, still moving into a profit mode, pulled in more than $63 million (MDD, Feb. 25, 2004).

Both companies presented their cases for additional investor support this week at the annual Piper Jaffray Health Care Conference at the Pierre Hotel, which ended Thursday.

Introducing Kinetic Concepts CEO Dennert Ware, Piper Jaffray (Minneapolis) senior med-tech analyst Thom Gunderson said that the firm's IPO was “one of the best-performing of recent memory,“ adding that the company “transforms the image of what a wound care company can do.“

Kinetic Concepts, said Ware, operates “as a billion-dollar company with two business platforms“ — its V.A.C. (vacuum-assisted closure) wound care technology and “therapeutic surfaces,“ meaning specialty beds for the handling of difficult-to-care-for patients, such as the extremely obese.

The V.A.C. technology produces 70% of the company's revenue, Ware reported, growing in its most recent fiscal year by 45%. He reported V.A.C. sales of $699 million for the year, with a market opportunity “in excess of $3 billion“ in the U.S.

He termed the V.A.C. technology “the No. 1 brand in advanced wound care,“ with primary focus on “complicated wounds“ that otherwise may result in extended healing time, amputations, “even death.“

The system consists of a pump and self-contained canister for collecting exudates from the wound, plus tubing and dressing. “V.A.C. removes interstitial fluid from a wound by applying vaccuum through a sponge, through an occlusive dressing. It removes harmful materials by using intermittent mechanical force to adjacent tissue, promoting self-proliferation,“ Ware explained.

The company's VAC Freedom enables patients to be ambulatory and heal while at home.

The target for the systems is tough wounds such as chronic pressure ulcers, abdominal compartment syndrome and vein graft wounds associated with coronary bypass procedures, with Ware providing highly graphic examples of such wounds and subsequent healing.

Ware said the system “works better than any other treatment modality“ to promote healing in these cases and that Kinetic Concepts has little equivalent competition “the way we do it,“ though it is pursuing a patent action against one firm and “proceeding in an orderly pattern on that.“

Kinetic Concepts is eyeing up to 1.4 million difficult wounds annually, according to a consultant's estimate, “that should be V.A.C.-ed,“ Ware noted. Specific markets are the acute care, extended care and home care segments.

A plethora of studies are supporting the use of V.A.C. in terms of its healing ability and overall savings, Ware said. “We can't say it has standard-of-care recognition everywhere, but more and more physicians and [medical] societies are recognizing the value of treating with V.A.C.“

Reimbursement initiatives, he added, have resulted “in more than 200 million lives covered“ and the company is showing insurers “the kind of value they're actually receiving.“

The company's therapeutic surfaces business produced $294 million in sales during its last fiscal year, with Ware calling that business “relatively stable, but we expect it to grow in the low- to mid-single digits over the next several years.“

The main growth area for this unit is the company's newly introduced Roto Prone bed, providing a “very high-end therapy,“ he said. “It's a good clinical sale, an important sale. We have had good clinical results and we will continue to build more time in our sales force for the Roto Prone to make that sale occur.“

Summarizing, Ware said, “We're excited about what we've accomplished and where we're going.“

Eschewing the multiple unit/product line model, Animas puts its efforts entirely on the insulin pump market, with CEO Katherine Crothall outlining plans for growth and also helping to reverse the under-penetration of the sector.

Crothall bannered the company's IR 1250 pump, about to be rolled out, as “the smallest, slickest and most technologically advanced pump,“ describing it as “like cool cellphones, with three metallic colors and music tunes for alerts.“

She emphasized the importance of “cool“ in a disease area where patients, especially teens, may be embarrassed to use pump devices and where ease of use is critical to self-management 24/7. Thus, “Patients often choose [a pump] on the basis of aesthetics, coolness,“ Crothall said.

The device also features “more lines of display, a huge database, the easiest user interface,“ enabling the patient do a variety of functions such as “look up foods, adjust portion sizes and automatically calculate the number of carbs and required bolus size.“

Besides having features both cool and useful on its pumps, Animas puts large emphasis on education and customer service, Crothall said, to overcome the barriers to market uptake and for intensive disease management.

On the patient side, key barriers are “ignorance of the therapy“ and the concept of 24/7 management, combined with “technophobia.“ For prescribers, she pointed to the eight to 20 hours required to get a patient “up and running“ on a pump, heavy paperwork and clinicians feeling that patients are “too stupid or lazy to benefit from the therapy.“

She emphasized close company contact with patients, saying that in this sector “service is of paramount importance.“

Animas has recently expanded its R&D pipeline with two additions of technology.

It acquired exclusive worldwide license rights to micropump and microneedle technology from Debiotech (Lausanne, Switzerland) for $12 million and 400,000 restricted shares (MDD, Nov. 2, 2004), and Crothall predicted the launch of the first “micropump“ sometime in 2007. That pump, she said, will be about 25% smaller than its current smallest pump while still providing “high precision, high accuracy and inexpensive enough to be sold as a disposable product.“

The company also late last year agreed to purchase the intellectual property and assets of Cygnus (Redwood City, California), primarily its GlucoWatch and its related electrochemical sensor technology (MDD, Dec. 20, 2004).

Crothall estimated pump sales for 2005 of between $82 million and $84 million and producing “our first truly profitable year.“

The overall goal is expansion of the company's share point, which she said now stands second to Medtronic MiniMed (Northridge, California).

No small task, since on Wednesday Art Collins, CEO of Medtronic (Minneapolis), promised in his conference presentation a continuous rollout of new pump products and movement toward an integrated sensor/pump system.

Animas' future strategy?

Crothall said the company's emphasis over the next two to three years “will be vertical growth by getting prescribers to do more pumps per year as opposed to [marketing to] additional prescribers.“ Most, she said, prescribe fewer than 15 pumps per year. “Theoretically, they can do 50 pumps per year, so there are significant growth opportunities.

“We believe we're competent to execute on our plan with only nominal increases in our sales force year to year,“ Crothall said.