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Adoption of the AngioJet®, good
clinical papers and FDA approvals driving growth for Possis Medical
Bio of Analyst,
· Follows Medical Technology and selected biotechnology and diagnostics companies.
· Nine years experience as an investment analyst covering medical technology and selected biotech companies.
· Over three years experience in the biotech industry as a Vice President of Finance, he assisted in the completion of several financings to fund company sponsored late-stage clinical trials.
· Chartered Financial Analyst; Master of Arts in Applied Economics, Marquette University; Bachelor of Arts, University of Minnesota.
· In 1996, named an All-star Analyst in the medical products space in the Wall Street Journal's annual survey.
About Dougherty & Company
CEOCFOinterviews: What companies do cover in that space?
Mr. Eayrs: We cover Possis Medical Inc. (NASD: POSS), Merit Medical Systems Inc. (NASD: MMSI) and two smaller cap companies, one of them which I have a neutral rating on is Vascular Solutions, Inc. (NASD: VASC), which is in vascular closure. The second small cap company I cover is called Synovis Life Technologies (SYNO) andthey also have a cardiovascular focus.
CEOCFOinterviews: What do you think of the Possis Medicals AngioJet® and the development of their company?
Mr. Eayrs: The AngioJet® system, is a minimally invasive catheter based technology that uses water-jet pressure to break up a blood clot and extract it from the body. Their business is taking off fast; they are on a July 31, fiscal year end. Last year they did 30 million in revenues, and they had a 20-cent loss per share and in July of 2002, I have them projected to do 42 and-a-half million in revenue and make 32 cents positive earnings per share so they move from a loss to positive earnings on 45% plus revenue growth. What is driving that is the combination of the growing adoption of the AngioJet® in cardiovascular interventional medicine supported by good clinical papers, and additional FDA approval of some of their next-generation catheters.
CEOCFOinterviews: How have people been responding to the adoption of the product?
Mr. Eayrs: They had a paper that was just published in February; in the American Journal of Cardiology ; with the final clinical results from their VeGAS 2 study. Independent clinical investigators compared using the Posis Medical, AngioJet® Rheolytic Thrombectomy System catheter system versus Urokinase Thrombolysis drug therapy to remove fresh blood clots in blocked native coronary arteries and blocked coronary bypass grafts. These bypass grafts are done when a patient has had cardiac bypass surgery. In the past when a patient had already had blockage, they suture in bypass grafts to create blood-flow around a signficant blockage.Later, these bypass grafts can become blocked too. The AngioJet® is used in both the native coronary arteries and the saphenous vein bypass grafts to quickly reestablish blood flow to the heart muscle. Basically the AngioJet had a better overall procedural success rate than Urokinase, which is a clot dissolving drug that is the common drug that they give to patients that are having acute Angina (chest pains) from a coronary blockage.
CEOCFOinterviews: So there been a greater success using the AngioJet® system.
Mr. Eayrs: Yes, using the interventional AngioJet catheter system; they had an overall success rate of 86% in the 180 treated patients, versus Urokinase with a procedural success rate of 72% in 169 treated patients, so the AngioJet® was a statistically significantly better treatment approach. They also had fewer patient complications and fewer adverse events. There were bleeding complications in 12% of the patients given Urokinase drug therapy, and only in 5% of theAngioJet treated patient group. The Urokinase patients had major adverse cardiac events in 33% of the cases at follow-upand the AngioJet group had only 16%, which is quite a bit lower. They had better procedural success and fewer serious complications; this was a large trial with almost 350 patients and it was peer reviewed and randomized.
CEOCFOinterviews: Is Possis Medicals main competition coming from drug therapy?
Mr. Eayrs: Yes, the main competition, especially in the
coronary arteries, is anti-thrombolytic drug therapy; however balloon angioplasty is also
used sometimes without thrombectomy (AngioJet). When working in the peripheral arteries
and the kidney dialysis access grafts, they also use devices such as the Possis
Medicals AngioJet® to open up peripheral arteries as well, in the legs and arms.
There are some other cruder catheter-based technologies, so they compete with
some other catheter based systems in the peripheral arteries but up in the coronaries,
its mainly the clot dissolving drugs, which is their main competition.
Mr. Eayrs: With their AngioJet system, you can intervene
quicker and then roll to balloon angioplasty and the placing of coronary stents too,
whereas with drug therapy, you typically have to wait several hours. If a person has a
clot in their coronary artery and they put them on clot dissolving drugs, they typically
have to wait 4-24 hours before they can come in and do balloon angioplasty and stenting.
With the AngioJet® system you can roll right through the total interventional procedure.
First use the AngioJet catheter, and go up and clean the clot out and then you can
go back in with the balloon catheter and do balloon angioplasty to widen the site
(compress plaque), then go back with a stenting catheter and place the stent.
CEOCFOinterviews: Are there any advantages to using drugs over the AngioJet®?
Mr. Eayrs: The drugs are easier to use but there is a tradeoff because you have the time delay before angioplasty/stenting. The patients actually do better when the Possis Medical product, AngioJet® when it is used right away and the clot dissolving drugs are not used. This was the conclusion of the VeGAS II study that we spoke of previously.
CEOCFOinterviews: Can you give us your thoughts on their approach to marketing?
Mr. Eayrs: What they are doing is going direct, they
havent hired a large major medical device company as a partner to help market
AngioJet; they are doing it by having their own direct sales people, which is always a bit
harder. It takes time but you also control everything when it is your own sales people.
They are going with a direct sales force in the United States, and then using distributors
in Europe and overseas.
CEOCFOinterviews: What do they need to do to continue growth in the market place?
Mr. Eayrs: Just keep producing good clinical results in published papers, get additional approvals, get the device out in the hands of experienced interventional cardiologists and interventional radiologists; give them a chance to work with it. They usually have clinical specialist support people there in the beginning to make sure the procedure goes right. It is just a matter of basic blocking and tackling to get the marketplace penetrated with their AngioJet system.
CEOCFOinterviews: But you think that they have a successful strategy for growth in this market?
Mr. Eayrs: Yes, they are growing; they are doing it on their own which takes a little longer but they control it.
CEOCFOinterviews: Does their revenue model include disposables?
Mr. Eayrs: It is primarily disposables, that drives the
revenue stream. The drive unit is a machine with a pumping unit with controls, it monitors
and controls the pressure to break-up and extract clot from vessels, to monitor what is
going on inside the vessel. They get revenue both from sale and lease of the machine, and
then they get revenue from the one-time use, disposable catheter, and related disposable
products that are used with the procedure.
CEOCFOinterviews: Do you give them a rating?
Mr. Eayrs: The rating we have is a Buy Rating on their shares. We actually have a four rating system, Strong Buy, Buy, Neutral and Sell, so Possis Medical has our number 2 rating. We expect positive price appreciation over the next twelve months, at least better than the market in general, a 20% or higher gain.
CEOCFOinterviews: In closing, could you address possible global markets for their product?
Mr. Eayrs: The one thing about POSSIS is that most of their
current revenues are derived from sales in the United States.They have applied for
Japanese clearance and we project it will be approved in Japan around August 1st
this year (2002). Most of the $42 million in projected sales for this July fiscal
year-end is U.S. revenues; and there is just minimal revenues from outside the U.S.
CEOCFOinterviews: Will that be done through partnering?
Mr. Eayrs: They
are going to use a partner to help them in Japan.
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