Why a nearly $1B acquisition of an Israeli heart surgery startup could be game changing


It might be surprising to know how difficult a simple heart procedure is. One of the medical industry’s most famous photos is of a doctor in a space-staring trance after a 23-hour open-heart battle. His assistant is folded up napping in the back corner of the room.

Open heart surgery is a slow, tense procedure that is a last resort for doctors. It is not as simple as getting patients to eat healthier to avoid the operating table. Sometimes something needs to be repaired and professionals are desperate to smooth over the surgical experience with non-invasive or minimally intrusive procedures.

In 2013, medical device company HeartWare invested big time in Valtech Cardio, an Israeli startup developing a new procedure to repair busted heart valves with a mechanical catheter. On Tuesday, HeartWare threw down approximately $1 billion to acquire the company.

The will be carried out in stock only; 4.4 million HeartWare shares will be offered up front to Valtech investors, with successive units of about 800,000 more shares contingent on reception of CE marks (Conformité Européenne, or European Conformity standards) and successful implants.

“We have concluded that Valtech’s platforms represent the most innovative and comprehensive portfolio of interventional and surgical products for mitral and tricuspid repair and replacement in development today,” Doug Godshall, President and CEO of HeartWare said in a press release.

Alterior routes to the arteries

The next section’s vocabulary is not for the faint of heart.

The company focuses on annuloplasty (literally, ring implantation) repair of the most common heart valve diseases: mitral valve regurgitation (MR) on the heart’s left side and the tricuspid (TR) to the right.

MR is three times as common as TR in the U.S., but both combined still affect 5.8 million Americans. That represents a “several-billion-dollar market opportunity,” according to the acquisition statement.

Valtech’s flagship product is its Cardioband (expected to get its CE mark this year), a catheter that is inserted transfemorally (that is to say, via the femoral vein) and snakes its way into your heart.

In those cases, neither valve closes properly, sometimes pumping blood backwards, clogging arteries and leading to heart failure. The ring is placed on the unfortunately named annulus, anchoring the valve’s opening.

HeartWare is betting that this will allow it to offer treatments to sufferers before the valve flapping just gets out of hand. However, Valtech is hardly the first company to enter the niche market for minimally invasive heart surgery, but this acquisition signals it might be surging to the front.

Besides St. Jude Medical and Medtronic’s FlexCath, the biggest corporate competitor is Edwards Lifesciences, which has been a leader in manufacturing annuloplasty rings. It also produces a ring designed to be implanted through the sinuses: the Monarc. Also in the game is the Accucinch by GDS, which arthroscopically goes through the skin to reach the heart.

A hearty market

The transcatheter segment of the heart valve repair industry is the fastest growing. According to a July report by Persistence Market Research, the business is likely to expand from a $3B industry in 2014 to a staggering $4.7B worldwide by 2020.

The aging population in Asia is likely to drive global expansion. And while the report doesn’t do much to change the old stereotype that American obesity is a pervasive problem (leading to North America being the biggest market for heart surgeries), the report predicts (Western) lifestyle changes in booming economies like India and China will likely create the same conditions for an unfortunately emerging heart surgery market there, too.

Valtech was founded by CEO Amir Gross in 2006. Top staff also includes COO Tal Reich and VP Tal Sheps.


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