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Kips Bay Medical, Inc. (KIPS) Is “One To Watch”

|Includes: Kips Bay Medical, Inc. (KIPS)

Kips Bay Medical was founded back in 2007 by a living legend of the medical industry with nearly four decades in medical device work under his belt, Manny Villafaña, guided by a clear vision to create breakthrough technologies for cardiac surgery. That vision is emerging today as this Minneapolis-headquartered company's first major product nears commercialization, an ingenious nitinol (nickel/titanium composite) mesh sleeve designed to vastly improve the overall outcome and functionality of coronary artery bypass graft (CABG) procedures using typical autologous saphenous vein grafts (SVGs).

With some 415k CABG procedures done in 2009 alone (the figure is a good midpoint average for the last several years), the company's eSVS Mesh® technology presents a compelling solution to common problems associated with artery grafts, like thickening of the inner wall of the artery or failure of the corrective surgery, by providing structural support around the diameter of the vein at the tissue level. This technology offers cardiac surgeons a way to ensure the long-term viability of the procedure (shoring up the cost-benefit characteristics of CABG in the process somewhat) in the form of an external support to the grafted vein wall, which improves both overall flow characteristics and lumen (the vein's interior) integrity. The eSVS is currently CE marked for sale in six countries and has seen over 400 implants since the start of international clinical trialing. A mountain of preclinical work has demonstrated the performance viability of the design, seeing peer-reviewed publication in The Journal of Thoracic and Cardiovascular Surgery (February 2008), as well as the Journal of Vascular Surgery (June 2009).

This is the sort of pioneering device technology one might expect from an operation founded (his seventh IPO) by the guy who co-invented the first lithium pacemaker, the St. Jude heart valve, and the ATS heart valve (also founder of CPI/Guidant Corp., St. Jude Medical, Inc., and ATS Medical respectively). With the eSVS, the cardiac surgeon simply shrouds the vein (using provided introducer and snare) in this single-strand woven mesh and then applies a coat of cardiovascular-approved fibrin sealant designed to rapidly normalize natural blood clotting, while forming a solid bond between the tissues and the mesh. The vein harvesting and installation techniques already established throughout the industry dovetail exceptionally well with the product design and after a simple sizing procedure (using a simple tool which is also provided) and enmeshing, the rest of the process is standard.

This technology vastly augments CABG, the most common form of open heart surgery in the U.S. today and the only real surgical alternative to largely patch-work angioplasty stents and the like. CABG is all about improving blood flow to the heart and by the time coronary heart disease (NYSE:CHD) gets bad enough to need bypass surgery, there isn't really any alternative. CHD is the leading cause of death in both men and women in the U.S. today, and it is also the most common form of heart disease, representing just under a staggering 25% of all deaths in America in 2008, more than half of which were men (CDC data). Needless to say, with projected costs for CHD in 2010 totaling roughly $108 billion, there is a huge opportunity for the company's technology.

Just last month Kips Bay Medical reported their latest milestone with the eSVS Mesh, as an extremely well-designed, randomized, and multicenter study of the device saw enrollment of its first patient in the eMESH I clinical feasibility trial, being carried out over in Switzerland at Bern University Hospital (the nation's second largest canton). Projections by independent market analysis firm Millennium Research Group indicate that Europe will see some 165k CABG procedures on the books next year, and the progress that has been made in the trial is really helping to clear the way for FDA approval of participation by U.S. hospitals.

KIPS looks to file an amended IDE Application with the FDA containing preclinical design testing data as requested, with high confidence in rapid acceptance by the U.S. regulator for opening up this vital technology to domestic physicians. A confidence evident in the company having already moved to secure substantial territory across top U.S. heart centers, with a great deal of work being put into obtaining internal approvals by the associated institutional review boards and administrations.

This is a winning concept for a globally widespread procedure that shows no signs of having subsiding incident factors and while new medications and exercise can help delimit the rates at which CABG operations are being performed out of necessity, the market clearly isn't going anywhere. High compatibility with existing workflows for both types of current CABG (on-pump and off-pump) and the open or endoscopic saphenous vein harvesting techniques associated therewith, the improvement of the grafted vein to the extent that it functions more like an artery, improved robustness that means further procedures are less likely, and radial constriction that more closely approximates the target artery function (producing better flow velocities) all contribute to making the eSVS Mesh a serious contender.

Cardiac surgeons will be eager to get their hands on this kind of technology and the potential end points for procedure success, patient quality of life, and the amount of value added to CABG procedures will be strong commercial drivers for KIPS. The U.S. market could put sales into supernova and the company has a firm footing in Minnesota's large medical community, with Villafaña himself having cut his teeth in the industry as the first ever international sales admin for Medtronic. Strong industry ties like that will go a long ways towards cementing clinical feasibility here in the U.S. and investors should stay alert for prevailing developments.

If you would like to know more about Kips Bay Medical, visit the company's website located at:

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