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The Two Technologies In summary

Both the pacemaking and counter-pulsation technologies support the heart function.

The pacemaking technology progressed quickly to permanent use outside of a hospital environment due to the inventiveness of Earl Bakken, co-founder of Medtronic (MDT). From initial use in the late 1950's, 600,000 pacemakers are now being implanted each year.

However, from its introduction in the late 1960's, counter-pulsation technology has continued to be limited to use, on an acute care basis in a hospital environment, for temporary support and relief of patients with Congestive Heart Failure (CHF).

For reasons given below, counter-pulsation therapy has not progressed, in the same way as pacemaking technology, to an implantable device providing permanent long term support.

Due to the inventiveness of Dr William Peters, co-founder of Sunshine Heart (SSH), this is now changing. Using the C-pulse system, counter-pulsation therapy is, for the first time, able to be employed to provide permanent support and relief of CHF patients outside of a hospital setting.

The C-pulse system addresses a presently large unmet need. There is every reason to believe that in time implantation of the C-pulse system will grow to very large numbers as has happened with pacemakers.

Achieving just 6% penetration of its target market would result in implantation of over 300,000 C-pulse devices per year (see here).

About Sunshine Heart C-pulse -

The Sunshine Heart C-pulse system is a medical device to treat Congestive Heart Failure by assisting the natural heart's pumping function. To further explain -

  • Drugs mostly just slow the progression of Congestive Heart Failure;
  • LVADs take over the work load of the heart (but entail risks of blood clotting and strokes) ; and
  • The C-pulse system does not take over from the heart. It employs proven counter-pulsation technology, to reduce the workload of the heart, and to create additional blood flow to the heart muscle. This provides ongoing permanent support and allows a tired heart muscle some opportunity to rest and recover, in a measurable way (NYHA Heart Failure class improvement). For further information see here.

Sunshine Heart - Similar beginnings to the fledgling Medtronic -

Earl Bakken, inventor of the first wearable pacemaker, co-founded Medtronic together with his entrepreneurial business partner and brother-in-law, Palmer Hermundslie.

Dr William Peters, inventor of the C-pulse system, co-founded Sunshine Heart together with his entrepreneurial business partner, Crispin Marsh, a Patent Attorney.

Both Earl Bakken and Dr William Peters developed their early proto-types in their garages.

Both set out to further develop existing medical technology/therapy to make it more effective and patient friendly.

Both the pacemaker and the C-pulse are based on individual inventiveness. They did not come out of the research labs of a large organization.

Medtronic and Pacemaker development -

1957 - Existing pacemakers were large boxes on carts plugged into electrical outlets. Dr C Walton Lillehei, open heart surgeon at the University of Minnesota Hospitals, attached these devices to patients while they healed.

Concern at power outages caused Dr Lillehei to ask Electrical Engineer, Earl Bakken, to develop a battery powered device. Earl Bakken developed the first prototype in his garage and it was quickly put into production.

It only treated a small segment of heart patients because it did not offer permanent pacing. Medtronic is incorporated.

  • 1958 - 1 year on - Medtronic develops a portable pacemaker with the battery operated external pacemaker worn with a cord around the neck or strapped to the waist.
  • 1959 - 2 years on - Development of a new electrode that can be permanently stitched to the heart allows permanent pacemaking.
  • 1960 - 3 years on - Medtronic partners with Dr William Chardack and engineer Wilson Greatbatch to produce the first commercially produced implantable pacemaker.
  • 1990 - 33 years on - Medtronic introduces the world's smallest pacemaker weighing only 17 grams. In the 1960s, industry forecasts had predicted all-time worldwide sales of some 10,000 pacemakers, but by the 1990s an estimated 350,000 pacemakers were being implanted worldwide each year.

Counter-pulsation therapy development -

  • 1968 - Dr. Adrian Kantrowitz introduced the intra-aortic balloon pump (IABP) in the late 1960s as a simple yet effective device to increase coronary perfusion, using the principles of counter-pulsation.
  • 1999 - 31 years on - Despite improvements in the actual balloon pump and peripherals, this therapy still requires delivery in a hospital setting with the patient hooked up to a console. The balloon pump, implanted in the blood stream in the aorta, is considered highly thrombogenic and requires anti-coagulation medication to reduce the risk of blood clotting. The use of an IABP is generally limited to 7 days or less, though this can be extended to around thirty days in particular circumstances.

For these reasons, equipment for counter-pulsation therapy has not advanced to a fully implantable device like the pacemaker.

Sunshine Heart and C-pulse development

1999 - Dr. Peters has developed a number of successful cardiac technology innovations, including an endovascular cardiopulmonary bypass system for minimally invasive cardiac surgery, which was commercialized by Heartport Inc., a NASDAQ-listed company that later was acquired by Johnson & Johnson.

He has extensive clinical experience in thoracic transplantation and a variety of heart failure technologies, including intra-aortic balloon pump systems and left-ventricular assist devices (LVADs) from such companies as Biomedicus, Abiomed, Thoratec and World Heart-Novacor.

He has conceived the idea of utilizing the scientific principles of intra-aortic balloon counter-pulsation applied in an extra-aortic approach to avoid contact with the blood stream (a major risk for LVADs as well as IABPs).

This would allow a device to be developed that would be both permanent and fully implantable, allowing patients the same freedom and long term use and benefit as with a pacemaker.

He develops a proto-type in his garage.

Sunshine Heart is incorporated with Dr Peters as CEO.

  • 2005 - 6 years on - First human implant of C-pulse into a 56-year old patient with history of congestive heart failure. The operation took place at New Zealand's Auckland City Hospital on 4th May 2005. This is the first of five human implants (in very sick patients) that demonstrate the efficacy of the system for its purpose.
  • 2008 - 9 years on - 20 patient FDA sanctioned USA feasibility trial commenced.
  • 2011 - 12 years on - 20 patient feasibility trial fully enrolled. Initial results of this highly successful 20 patient trial published.
  • 2012 - 13 years on - Sunshine Heart receives unconditional FDA approval for 388 patient Pivotal Trial. Sunshine Heart receives CE Mark for commercial sales in Europe. Sunshine Heart stock is listed on NASDAQ. Fully implantable proven feasible in animal trial.
  • 2013 - 14 years on - Sunshine Heart announces contracts let and to be let for design of elements of fully implantable production model. The existing model has percutaneous leads similar to LVADs. Fully implantable is the "Holy Grail" for heart assist devices. It is something not yet achievable for Thoratec (THOR) and Heartware (HTWR) LVADs despite large R&D commitments over many years.
  • 2015 - 16 years on - Sunshine Heart's expected completion date for 388 patient Pivotal Trial.
  • 2017 - 18 years on - Projected timing for C-pulse marketing approval in USA (after one year follow up of Pivotal Trial results).
  • 2027 - 28 years on - C-pulse product needs only to achieve 6.6% penetration of its target market in USA and EU to achieve sales of ~350,000,000 units (similar number to pacemaker in the 1990's per above).

What do the timelines above tell us?

It goes without saying that getting a new medical device approved in the 1950's was a lot easier and quicker than today.

In their early years, growth of both Medtronic and Sunshine Heart was constrained by availability of funding. It is interesting to note, that in the 13 years from inception through to 31 December 2012, Sunshine Heart has made incredible progress despite total expenditures for all purposes amounting to just $79.3 million. In contrast, Heartware expended $83.5 million on R&D alone in the twelve months to 31 December 2012.

Medtronic's rate of growth would have been further constrained by the need to establish facilities, and marketing and sales infrastructure, both in the USA and world-wide to achieve growth in product sales.

Sunshine Heart could be expected to face similar constraints.

But growth in sales of the C-pulse product is not necessarily constrained in that manner.

Sunshine Heart, with its C-pulse system, is a likely acquisition target for large medical device companies with much, if not all, of the required infrastructure already in place.

Potential bidders would include Medtronic, Thoratec the current LVAD market leader, Heartware, and other diversified medical device companies, such as St. Jude (STJ), Boston Scientific (BSX), Abbott (ABT), and Johnson & Johnson (JNJ).

Conclusion

As described in my SeekingAlpha article, "Sunshine Heart: Potential '10 Bagger' In 4 Years, '100 Bagger' In 10 Years", Sunshine Heart could grow to a size to match the Medtronic of today.

It would be an immense task for Sunshine Heart to carry that out from a walk up start.

The far more likely scenario is for the C-pulse opportunity to be realized through a larger medical device company with existing infrastructure.

Coincidentally, that company could well be Medtronic.

Caution

Investing in micro cap companies is not suitable for all investors and can be risky. It's important that investors thoroughly perform their own due diligence and analyze the potential risks. Due to illiquidity, share prices can fall despite strong fundamentals and possible inability to raise sufficient additional cash to continue to fund ongoing operations is always a serious concern. Fuller details of risks associated with Sunshine Heart as identified by the company may be found with their form 10-12B/A registration filing with the SEC and their other SEC filings.

Source: Medtronic And Sunshine Heart: Pacemaking And Counter-Pulsation - A Tale Of 2 Technologies