Good article from Nick Evans...
Did Ventracor collapse trigger FTC’s HeartWare move?
Nick Evans
Tuesday, 4 August 2009
VENTRACOR’S collapse, while disastrous for its shareholders, may have also been the trigger for the US Federal Trade Commission’s decision to block the takeover of HeartWare by Thoratec.
While the FTC did not mention Ventracor by name when it announced it would block the $429 million deal last week, the regulator’s court filings consistently referred to HeartWare as the “only potential competitor” for Thoratec in the US left ventricular assist device market.
That, of course, wouldn’t be true if Ventracor’s own devices were still in late stage development – but that’s no longer the case after the Australian company collapsed earlier this year.
HeartWare and Thoratec called off their acquisition deal over the weekend, saying they did not fancy the prospect of fighting the FTC’s decision in the US courts.
In its court filing last week, the US FTC described HeartWare as the “one company poised to seriously challenge Thoratec’s monopoly of the US left ventricular assist device market”, with HeartWare one of only a few companies allowed to sell LVADs into the US market, albeit under an Investigational New Device Exemption from the US Food and Drug Administration.
“Of these companies, HeartWare alone represents a significant threat to Thoratec’s LVAD monopoly,” the FTC said.
Before its collapse, Ventracor was well ahead of HeartWare in the race to have a new LVAD approved for the US market, with the company having finished recruiting patients for its Bridge to Transplant Trial in the US in March.
Those patients, and Ventracor’s technology, are now in limbo pending the final liquidation of the company’s assets.
The US FTC described the potential acquisition of HeartWare by Thoratec as illegal under US law, saying “no other firm has the ability to replace the current and future competition eliminated by the merger”.
HeartWare corporate development director Howard Leibman told BTN this morning that Ventracor’s demise would have made it very difficult for the US FTC to approve the acquisition.
“It’s difficult to know if the ruling would have been any different if Ventracor had survived – I suspect it may not have been very different – but clearly Ventracor’s demise did not help the cause.
“[The US FTC] did a very detailed competitor analysis. They spoke to every one of the clinicians, and pretty much every hospital that’s ever implanted VAD in the US – they did a really detailed analysis of the overall landscape and on that formed the view that it’s HeartWare that will be the one to compete.”
But, surprisingly, Leibman said the feedback received from investors had been positive since the announcement.
“Certainly there has not been anyone contacting us who has been disappointed the deal is off.
“Throughout this process Thoratec has made it very clear that we are the ones to own, and I think a number of our investors had anticipated being in this stock to compete with them, rather than becoming a part of Thoratec at a very early stage,” he said.
HeartWare’s financial position
But the company will almost certainly need to raise more money to complete its clinical trial program before it is in a position to genuinely compete with the US giant.
HeartWare finished last quarter with only $US5.9 million at bank, with a quarterly cash burn of around $US7.7 million.
The company also has a $US20 million convertible loan facility from Thoratec still available and has drawn down $US4 million of that amount.
The loans, if not repaid by HeartWare by November 2011, can be converted to HeartWare shares at the rate of $US1.
If fully drawn down and converted, the loan would lead to Thoratec owning around 6% of HeartWare’s stock.
Leibman told BTN the company was in no particular financial trouble due to the existence of the loan facility, but would obviously need to consider its capital requirements in the near future.
http://www.biotechnologynews.net/StoryView.asp?StoryID=1032897
VCR
ventracor limited
