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Summary

  • It is widely acknowledged that Sunshine Heart C-Pulse heart assist device is highly efficacious, has low technical risk and a multi-billion dollar market potential;
  • Slow enrollment in the current Counter HF Pivotal trial is not unexpected. From the SSH 4th Quarter 2013 CC it is evident that the enrollment process is being handled well;
  • American Heart Association guidelines require hospitals to use inotropes only as a bridge to more definitive treatment measures. C-Pulse is such a treatment measure;
  • The massive market over reaction to the slow trial start has created an alpha opportunity, particularly for medium to long term investors.

Sunshine Heart C-Pulse heart assist device is highly efficacious, has low technical risk and a multi-billion dollar market potential

This article is intended primarily to address enrollments for the Sunshine Heart (NASDAQ:SSH) C-Pulse Counter HF Pivotal trial.

Matters of efficacy, technical risk and market potential of the C-Pulse heart assist device are dealt with extensively in my article, Sunshine Heart: Potential '10 To 100 Bagger' Revisited - Part IV.

Suffice it to say that in C-Pulse's 20 patient feasibility trial, 60% of these NYHA Class III and ambulatory Class IV advanced HF patients improved by at least one NYHA Class (a very significant improvement in quality of life) and 25% of the 20 patient cohort have become asymptomatic for Heart Failure (HF) and have been weaned off the device.

This result is unheard of with drug therapy where generally the best that can be expected is a slowing in the worsening of the condition.

The C-Pulse technology is long proven counter-pulsation therapy applied in a different, innovative, and far safer methodology outside the blood stream. The materials used in C-Pulse manufacture are tried and proven high tech medical materials. The target market is estimated at 5.2 million advanced HF patients in the US and EU. Only a tiny percentage of these patients have to be implanted to achieve multi-billion dollar revenues.

Slow enrollment in the current Counter HF Pivotal trial is not unexpected

I quote from my article referred to above,

In the world of investing, uncertainty equates to risk. And of course, there remains considerable uncertainty as to the level of uptake this early stage microcap, Sunshine Heart, might achieve for its C-Pulse product.

I have always considered there would be similar uncertainty in relation to the rate of enrolment, particularly until critical mass is reached. But I have never doubted the end outcome.

I am encouraged by what Dave Rosa, CEO of Sunshine Heart, had to say in the 4th quarter conference call about actions taken and being taken to accelerate enrollments.

Listening to the Sunshine Heart Fourth Quarter 2013 Earnings Conference Call it is evident that the enrollment process is being handled well despite a slow start.

Activation of sites and education of physicians -

Eleven (11) sites have been activated and a further 21 sites have agreed to participate and are currently in the process of being activated. A further 4 sites are yet to commit. Main delays in activation are for the most part related to minor administrative and contractual issues, such as whether SSH will contribute $250 for transport of patients to and from hospitals.

Sites are mainly community hospitals. Their main interest is likely to be actually providing the therapy to their patients rather than viewing their trial involvement from just an academic perspective.

There appears to have been a lack of appreciation by physicians of the HF patients most suitable for inclusion in the trial.

A meeting on 20 February of 40 physicians from 21 of the sites is thought to have done a lot to clarify this aspect. There seemed to be a hint of a suggestion from Dave Rosa that this could lead to an early increase in the number of implants to be reported in the next update.

Inotropes -

By far the most encouraging disclosure I took away from the Q&A session was the discussion on inotropes.

The Q&A session revealed exclusion by physicians of patients on inotropes was unnecessarily eliminating significant numbers of patients eligible for C-Pulse therapy.

Of the 20 patients in the feasibility trial, 4 were on inotropes and were successfully weaned off inotropes within 48 hours of C-Pulse implantation.

It is only truly long term inotrope dependent patients that would not be recommended for C-pulse because they are too advanced in heart failure and too sick.

American Heart Association (AHA) guidelines require hospitals to use inotropes only as a bridge to more definitive treatment measures. C-Pulse is such a treatment measure

The issue is that hospitals are increasingly supplying non truly inotrope dependent patients with continuing inotrope therapy on discharge to reduce re-hospitalization rates.

This is driven by a 1% penalty for re-hospitalization within 30 days amounting to $280M in 2013 and that penalty rate will triple to 3% in 2015 (see here).

I believe that this use of inotropes by hospitals will come under increasing scrutiny and criticism.

I quote from an AHA journal article -

The use of positive inotropes (parenteral inotropes and oral PDIs) in chronic HF has been consistently demonstrated to increase mortality.36,37

And

... the current American College of Cardiology/American Heart Association guidelines for diagnosis and management of chronic HF in the adult do not recommend the routine use of intravenous inotropic agents for patients with refractory end-stage HF (class III recommendation) but do state that they may be considered for palliation of symptoms in these patients (class IIb recommendation).39

And

Thus, hemodynamic benefits usually outweigh specific risks of inotropic therapy when used as a bridge to more definitive treatment measures.

C-Pulse is demonstrably preferable to inotropic therapy for reducing re-hospitalization rates for worsening heart failure

Hospitals' inappropriate use of inotropic agents -

I refer to conclusions of this article published in the Journal of the American College of Cardiology -

Conclusions: We found marked differences in the use of inotropic agents for heart failure patients among a diverse group of hospitals. This variability, occurring in the context of little clinical evidence, indicates an urgent need to define the appropriate use of these medications.

Burden on patients of inotropic therapy outside of a hospital setting -

Description of inotropic therapy outside of a hospital setting sourced from this article published in the journal of the American Heart Association -

Prolonged use requires insertion of an indwelling intravenous line, usually linked to a wearable drug-infusion pump. Before the catheter is inserted, it is critical to ascertain the adequacy of community home health agencies to help maintain the access site and pump and the understanding of the patient and family as to its function and ultimate purpose. Maintenance of chronic intravenous infusions is associated with numerous infectious and mechanical complications from the infusion catheter in addition to those related to the drug.5,6

The advantages of C-Pulse over inotropic therapy for HF patients -

  • Inotropic therapy has been determined to increase mortality while C-Pulse has been shown to halt or reverse HF;
  • C-Pulse has been shown to improve heart health while inotropic therapy merely makes the failing heart work harder;
  • AHA guidelines are for inotropic therapy to be used only for treatment of acute heart failure or as a bridge to a sustainable therapy. C-Pulse would appear to be such a sustainable therapy;
  • Continuing treatment of HF patients with inotropic therapy appears to be a breach of AHA guidelines by some hospitals to avoid re-hospitalization penalties;
  • Furthermore, there appears to be a lack of clinical evidence that shows use of inotropic therapy actually reduces re-hospitalization rates. In the 20 patient feasibility study trial, C-Pulse was shown to very significantly reduce re-hospitalization rates. In the current EU Options HF trial none of the 8 patients implanted so far have been re-hospitalized following implant of C-Pulse.

Conclusions:

  • The slow start to the C-Pulse Counter HF trial will be overcome;
  • Education of patients and physicians appears to be well in hand;
  • Additional support staff have recently been hired and their effect on the ground should be felt in the relatively near term;
  • The identification of patients who are eligible even though on short term inotropic therapy is seen by Sunshine heart CEO, Dave Rosa, as an area for significantly increasing enrollments;
  • C-Pulse is likely to be the only therapy available for Class III HF patients as an alternative therapy to what appears to be controversial use of inotropic therapy in an attempt to reduce re-hospitalizations;
  • Following on from the preceding point, further hospitals might be encouraged to commit to the Pivotal trial to gain access to C-Pulse if controversy develops over the use of inotropes for reducing re-hospitalizations;
  • If the reader accepts the foregoing points, then the current share price drop would appear to be a massive over reaction to the slow start to enrolments in the Pivotal trial;
  • The drop in share price is seen as an alpha opportunity, particularly for mid to long term investors. Early increases in implant numbers for reasons given above might result in nearer term gains.

Caution: The information above is not intended to replace the advice of a doctor. I disclaim any liability for any decisions you might make based on this information.

Additional caution: As always, please do your own research before any buy or sell decisions. Use of information and research in the article above is at your own risk.

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: Sunshine Heart: Unexpected Buying Opportunity