Interview with: Robert Dutcher, Chairman, President and CEO - featuring: their AngioJet Rheolytic ™ Thrombectomy System, and a brand-new flagship device called the AngioJet Ultra System that removes intravascular thrombus (blood clots) that can cause serious, often life threatening events such as heart attacks.

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Possis Medical, Inc.
(POSS-NASDAQ)
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Possis Medical Is An Exciting Recovery Story, With R&D Producing A Pipeline Of New Products Now Entering The Marketplace And Clinical Results That Support Their AngioJet Product



Healthcare
Medical Equipment & Supplies
(POSS-NASDAQ)


Possis Medical, Inc.

9055 Evergreen Blvd.
Minneapolis, MN 55433
Phone: 763-780-4555



Robert Dutcher
Chairman, President and CEO

Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published – December 21, 2007

BIO:
Robert G. Dutcher,
Chairman, President and CEO. Prior to joining Possis Medical in 1985, Dutcher was with Medtronic, Inc. for twelve years, most recently as Director of Research and Development. Prior to Medtronic, he worked in an engineering capacity for Control Data Corporation and Honeywell, Inc. He is the inventor of thirty-one U.S. medical device patents, including AngioJetÒ patents, and has authored several technical papers. Mr. Dutcher holds a B.S. in electrical engineering from South Dakota State University (SDSU) and an M.S. in electrical engineering with a biomedical option from the University of Minnesota. Dutcher was named Distinguished Engineer of SDSU in 2002 and Ernst & Young Entreprenuer of the Year in 2004. Dutcher currently serves as a member of the Board of Directors for Daktronics in Brookings, South Dakota and LifeScience Alley, a leading Minnesota trade association.

Company Profile:
Possis Medical, Inc. (POSS: NASDAQ) develops, manufactures and markets pioneering medical devices for the large and growing cardiovascular and vascular treatment markets. Its primary product, the AngioJet Rheolytic ™ Thrombectomy System, removes intravascular thrombus (blood clots) that can cause serious, often life threatening events such as heart attacks. The AngioJet Thrombectomy System is the most advanced catheter-based thrombectomy system available today. The intricately designed components of the system are designed to offer safety, power, performance and versatility. The AngioJet System offers many advantages over alternative treatments, including safety monitoring and balanced, isovolumetric flow. The company has a portfolio of FDA approvals and clearances for the AngioJet System: for native coronary arteries and bypass grafts, peripheral arteries and veins, and kidney dialysis access grafts.

Coronary artery disease remains the number one killer in the United States, and blood clots in the diseased vessel makes successful treatment even more difficult. The AngioJet System has been proven safe and effective in removing such blood clots from coronary arteries and bypass grafts, including heart attack victims receiving emergency treatment. In addition, the AngioJet System is cost-effective for the hospital, lowering overall patient treatment costs. Peripheral vascular disease (PVD) can lead to catastrophic circulatory blockage of the limbs, leading to surgery or amputation. The AngioJet System has been shown to provide rapid, safe and effective removal of thrombus which can occlude arteries and veins in the extremities. The AngioJet System is also FDA-cleared for removing thrombus from dialysis access grafts, which frequently develop clots which hinder critical dialysis treatment.

CEOCFO:
Mr. Dutcher, we have not done an interview with Possis since 2005; will you fill us in on changes that have taken place?
Mr. Dutcher: “There have been quite a few changes. Going back toward the end of 2004, we had an unexpected result due to a clinical trial we sponsored, which caused us to lose some of our growth momentum. Subsequent to that, we were able to show that result was an anomaly, but it still had an impact on our business. From around the start of 2005 we have been investing heavily in R&D, so that we now have a pipeline full of new products and they are entering the market place. We have new exciting clinical results that now are very supportive of the AngioJet System, which is our main product. We have a larger and stronger sales force, we are still strong financially, we have over $40 million in the bank and over the last three years we have repurchased $31 million of Possis stock. Today, we are a much stronger and balanced company, we have a broader portfolio of products, and we are now a recovery story. Before 2005, we were a very high growth company and as I mentioned we had that one data point in a trial that caused us to lose some of our growth and from a stock price standpoint, we became a damaged goods story. Today, not only is our sales growth returning but our stock price is starting to respond in a positive fashion.” 

CEOCFO: You mentioned new products, has the R&D been focused on catheters or where is the focus?
Mr. Dutcher: “AngioJet is a system which involves a piece of capital equipment that is a one-time sale and that is reusable. Doctors use the system to remove blood clots from inside a blood vessel, and for every one of those procedures, the physician would use one or more disposable products. We have a family of disposable products and each disposable consists of a catheter, which is a long thin tube that is inserted into a blood vessel , and a disposable pump that energizes high-speed water jets located at the end of the catheter that create suction. Therefore, you can think of our catheter as a long thin tube that is a miniature vacuum cleaner that literally sucks out life-threatening blood clots.

The R&D effort has been on all fronts. We have introduced a brand-new flagship device called the AngioJet Ultra System. Our first generation drive unit had served the marketplace for almost ten years and if there was one user complaint about AngioJet, it was that the equipment was more difficult to set up than what they would like to see. Therefore, we focused on making the new system very easy to use and computer-based. It will read the bar code on the disposable pump and it automatically sets up the system. With the Ultra system, we have reduced the set up steps from 19 with the first-generation drive unit to around 3 with the new Ultra System Console. We just started selling the Ultra System in January of this year and sales are going very well. We also developed an entirely new family of catheters to take advantage of the Ultra System automation. We have introduced some non-AngioJet products as well, those that can compliment AngioJet use. We have also invested in new clinical studies that have proven to be very positive for AngioJet thrombectomy and support its use. Our investment covered a lot of different fronts and those investments are now beginning to pay dividends.”

CEOCFO: One of your studies found that removing large thrombus before treatment with drug-eluting stents, improves the outcomes in heart attack patients; will you comment on that and other studies?
Mr. Dutcher: “The study you are referring to was done by Dr. George Sianos at the ThoraxCentre in Rotterdam, which is probably one of the largest cardiology centers in the world and likely the largest in Europe. We did not originally sponsor this study but the results are quite timely. The ThoraxCentre started implanting drug-eluting stents when they first came out; and they decided to exclusively use drug-eluting stents. During these procedures, if they saw large thrombus, they exclusively used AngioJet to remove that thrombus. Over several years, they gathered a lot of information about these drug-eluting stents and while they were doing that, they also gathered information about the effectiveness and safety of AngioJet. After this study was done we were approached by Dr. Sianos, who told us that they had many patients in this study that had heart attacks and also had large thrombus. Some of those patients received drug-eluting stents without the thrombus being removed first - and some of them received the drug-eluting stent after AngioJet thrombectomy was used to remove the thrombus. He wanted to know if we would be interested in comparing the performance of the two groups. We sponsored Dr. Sianos to do that analysis and when he came back to us with the results, they were quite striking. He found that if you compare heart attack patients that have drug-eluting stents implanted in vessels with large thrombus with heart attack patients who have drug-eluting stents implanted after removing the thrombus with AngioJet; the incidence of adverse events, including death, was significantly higher for those patients that did not have the thrombus removed. There is also a phenomenon going on now in the world of drug-eluting stents that has received a lot of attention lately and that is called “late stent thrombosis”. Late stent thrombosis is a blood clot that develops after you have had a drug-eluting stent put into your body. There is some evidence that would suggest that drug-eluting stents have a higher rate of stent thrombosis than the earlier, bare metal stents. We found in this same data population that those patients that did not have their thrombus removed and just received a drug-eluting stent, the incidence of late stent thrombosis after two years was 11 percent, which is very high. In contrast, if they had the thrombus removed with AngioJet thrombectomy before implanting the drug eluting stent - and looking out two years, the incidence of late stent thrombosis was zero. Those are very striking results. Dr. Sianos authored a paper, which included these findings that was published in the Journal of American College Cardiology in mid August of this year. Those results support strongly the use of AngioJet therapy especially in heart attack patients with large thrombus and we as an organization are out there trying to get this information to physicians so that patients can get the benefit of using AngioJet.”

CEOCFO: Two years ago, your peripheral business was up 30 percent; are we still seeing that kind of escalation?
Mr. Dutcher: “We are still seeing very excellent growth. Usually on the front end, you always have higher growth because you are growing from a smaller base. However, this past year we grew over 20 percent and the peripheral business is doing very well. That growth is coming through not only penetrating our existing market to a greater extent but in extending AngioJet use into a new market, peripheral veins. An exciting event for us in November of this past year was the FDA clearance to remove blood clots from veins in addition to arteries. We are on the leading edge of being able to treat what is called deep vein thrombosis or DVT. Deep vein thrombosis is a disease which afflicts close to 600 thousand people in this country every year. In some of those cases, blood clots in the deep veins in the legs can break off; travel through the heart into the lungs causing what is called a pulmonary embolism. The death rate associated with pulmonary embolism is very high; some people report that as many as 40 percent of the people who get a major pulmonary embolism die from it.

Our product is increasingly being used to remove the blood clots from veins in patients that have a high risk of developing a pulmonary embolism. We are getting very exciting results from that use, and physicians are starting to embrace the technology more and more for treating deep vein thrombosis. You have to keep in mind that until AngioJet came on the scene, almost all deep vein thrombosis was treated simply with blood thinning drugs, which can prevent additional blood clots from forming but do little to dissolve the existing blockage. If the blood clot stays there and hardens over time, a patient may develop post-thrombotic syndrome, which causes the leg to swell, and become very uncomfortable and can lead to ulcers and all kinds of chronic problems. AngioJet therapy provides a more proactive way of treating blood clots by removing them, not just preventing them from getting bigger. Physicians are starting to embrace this approach because of its immediate success with so many patients.

There was a reporter covering news in Iraq, David Bloom, who rode in a cramped tank for an extended period and developed a deep vein thrombosis, which subsequently led to a fatal pulmonary embolism. Today his wife is a spokesperson, raising awareness of deep vein thrombosis and the therapies available. She presented at a luncheon in Minneapolis a few weeks ago. We had the opportunity to talk with her and share some of the experiences that we are seeing with AngioJet and she was quite interested. It is exciting to be part of developing a treatment for a condition that is catastrophic and affects so many people. The at-risk population is growing because DVT can result from inactivity or injury or serious disease like cancer, or surgery like hip or knee replacement. For us to be able to treat these people and in some cases save their lives, is very rewarding.”

CEOCFO: You mentioned your sales team, do you have the sales team in place to get a deeper penetration into the market place or do you think you will need to grow your sales staff even further?
Mr. Dutcher: “We just recently added an additional seven people so we now have eighty seven representatives in the field. We added these people because we believe we are at a growth inflection point with our new products, and clinical science, and new markets. We have the new Ultra System in full market release. We wanted to take advantage of this inflection point and I think we now have sufficient staff to get us through this next year and probably into the following year. If we grow even faster than we plan, then of course we would add people at that time. Right now, we are staffed adequately. We are very well positioned and strong in the market place now. To have 87 people out there, that is a very strong sales organization.” 

CEOCFO: What is the financial position of the company?
Mr. Dutcher: “We have over $40 million in the bank and we have no long-term debt. As I mentioned, over the last three years we have repurchased over $31 million of Possis stock. We have been profitable on a non-GAAP basis for 27 consecutive quarters. During our 4th Quarter, we generated $2.5 million in operating cash flows. Therefore, I do not anticipate us needing to raise money; I think we have sufficient revenue to fund our growth.”

CEOCFO: In closing, why should potential investors consider Possis Medical at this time?
Mr. Dutcher: “I think we are a unique company with a very unique product portfolio. We happen to be a leader in several growing markets that use mechanical thrombectomy to successfully treat patients.  Our market opportunities are large; we estimate them to be over $600 million in the US alone. This last year we only penetrated about 10 percent of the overall current opportunity. We are the leader and our growth is not dependant on displacing our competitors because we have a very strong proprietary position; instead, our efforts are more focused on trying to displace conventional, less effective therapy. What is unique about the timing for us now as a company or for investors is that we were a high-growth company. Three years ago, our stock was $35.00 a share. An unfavorable data point from a single study caused uncertainty in our markets and we lost some of our growth momentum. We went from about $72 million a year in revenue in fiscal 2004, down to $62 million in fiscal 2006. With new, supportive data and continued successful patient results, product usage is returning to prior levels. In fiscal 2007, we were back to $67 million; and we are forecasting we should do at least $77 million this next fiscal year. Therefore, we are at an inflection point in terms of reestablishing growth for the company. One would expect that it could be a potential inflection point for a stock valuation increase as well. From an investment standpoint we would be your classic recovery story.”


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“The R&D effort has been on all fronts. We have introduced a brand-new flagship device called the AngioJet Ultra System. Our first generation drive unit had served the marketplace for almost ten years and if there was one user complaint about AngioJet, it was that the equipment was more difficult to set up than what they would like to see. Therefore, we focused on making the new system very easy to use and computer-based. It will read the bar code  on the disposable pump and it automatically sets up the system. With the Ultra system, we have reduced the set up steps from 19 with the first-generation drive unit to around 3 with the new Ultra System Console. We just started selling the Ultra System in January of this year and sales are going  very well. We also developed an entirely new family of catheters to take advantage of the Ultra System automation. We have introduced some non-AngioJet products as well, those that can compliment AngioJet use. We have also invested in new clinical studies that have proven to be very positive for AngioJet thrombectomy and support its use. Our investment covered a lot of different fronts and those investments are now beginning to pay dividends.” - Robert Dutcher

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