UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 OR 15(d)
of the Securities Exchange Act of 1934
Date of report (date of earliest event reported): September 9, 2015
HEARTWARE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
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001-34256 |
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26-3636023 |
(State or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(I.R.S. Employer
Identification No.) |
500 Old Connecticut Path
Framingham, MA 01701
(Address of principal executive offices)
Registrants telephone number, including area code:
508.739.0950
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
On September 9, 2015, HeartWare International, Inc., a Delaware
corporation (HeartWare or the Company) posted to its website (under the investor relations link) a transcript of its presentation delivered at the 2015 Wells Fargo Healthcare Conference on
September 9, 2015 held at the Hyatt Regency in Boston, Massachusetts. A live webcast of HeartWares presentation was provided through the Companys website and is available for replay at ir.heartware.com for approximately 90
days. A transcript of the presentation is attached hereto as Exhibit 99.1 and is hereby incorporated by reference into this report.
During the presentation, the Company referenced its entry into a Business Combination Agreement with Valtech Cardio, Ltd., a private company
incorporated under the laws of Israel (Valtech), HW Global, Inc., a Delaware corporation and a direct wholly-owned subsidiary of HeartWare (Holdco), HW Merger Sub, Inc., a Delaware corporation and a direct
wholly-owned subsidiary of Holdco (US Merger Sub), Valor Merger Sub Ltd., a private company incorporated under the laws of Israel and a direct wholly-owned subsidiary of Holdco (ISR Merger Sub) and Valor
Shareholder Representative, LLC, a Delaware limited liability company, pursuant to which, subject to satisfaction or waiver of the conditions therein, HeartWare and Valtech will effect a strategic combination of their respective businesses under
Holdco wherein (a) US Merger Sub shall merge with and into HeartWare, with HeartWare surviving the merger as a wholly-owned subsidiary of Holdco (the US Merger), and (b) ISR Merger Sub shall merge with and into Valtech,
with Valtech surviving the merger as a subsidiary of Holdco (the ISR Merger, together with the US Merger and the other transactions contemplated by the Business Combination Agreement, the Transactions).
Important Information
Additional Information about the Transactions and Where to Find It
In connection with the Transactions, Holdco intends to file relevant materials with the Securities and Exchange Commission, or the SEC, including a
Registration Statement on Form S-4 that will contain a joint proxy statement/prospectus. Investors and security holders of HeartWare and Valtech are urged to read these materials when they become available because they will contain important
information about HeartWare, Valtech and the Transactions. The joint proxy statement/prospectus and other relevant materials (when they become available), and any other documents filed by Holdco or HeartWare with the SEC, may be obtained free of
charge at the SEC web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Holdco or HeartWare by directing a written request to HeartWares investor relations department
at HeartWare International, Inc., 500 Old Connecticut Path, Framingham, MA 01701, Attention: Investor Relations. Investors and security holders are urged to read the joint proxy statement/prospectus and the other relevant materials when they become
available before making any voting or investment decision with respect to the Transactions.
This communication shall not constitute an offer to sell or
the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Participants in the Solicitation
HeartWare, Valtech and
their respective directors, executive officers, certain members of management and certain employees may be deemed to be participants in the solicitation of proxies from the stockholders of HeartWare and Valtech in connection with the proposed
transaction. Information regarding the special interests of these directors and executive officers in the transaction will be included in the joint proxy statement/prospectus referred to above. Additional information regarding the directors and
executive officers of HeartWare is also included in the HeartWare Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on March 2, 2015. This document is available free of charge at the SEC web site
(www.sec.gov) and from Investor Relations at HeartWare at the address described above.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking
statements, including, but not limited to, the ability of the parties to consummate the proposed Transactions; satisfaction of closing conditions to the consummation of the proposed Transactions; the impact of the announcement of the proposed
Transactions on HeartWares relationships with its employees, existing customers or potential future customers; and such other risks and uncertainties pertaining to the HeartWares business as detailed in its filings with the SEC on Forms
10-K and 10-Q, which are available on the SECs web site at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. HeartWare assumes no obligation to update
any forward-looking statement contained in this document.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No. |
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Description of Exhibit |
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99.1 |
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Transcript of Wells Fargo Webcast on September 9, 2015. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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HeartWare International, Inc. |
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Date: September 9, 2015 |
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By: |
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/s/ Lawrence J. Knopf |
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Name: |
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Lawrence J. Knopf |
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Title: |
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Senior Vice President, General Counsel and Secretary |
INDEX TO EXHIBITS
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Exhibit
No. |
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Description |
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99.1 |
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Transcript of Wells Fargo Webcast on September 9, 2015. |
Exhibit 99.1
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SEPTEMBER 09, 2015 / 12:50PM, HTWR - HeartWare International Inc at Wells Fargo Healthcare Conference
CORPORATE PARTICIPANTS
Doug Godshall Heartware International, Inc. - Executive Director, President & CEO
CONFERENCE CALL PARTICIPANTS
Larry
Biegelsen Wells Fargo Securities - Analyst
PRESENTATION
Larry Biegelsen - Wells Fargo Securities - Analyst
Good morning, everyone. Im Larry Biegelsen, the medical device analyst at Wells Fargo. And its my pleasure to introduce this morning, Heartware.
With us, we have the management team, the CEO, Doug Godshall; and I think Peter McAree somewhere in the audience; hi, Peter and Chris Taylor of Investor Relations.
In terms of format, Doug is going to provide a brief introduction and then were going to open it up to Q&A. We are trying something new this year.
We have one audience response question which hopefully will be informative and provocative. So, Doug, thanks again for coming to our conference.
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
Sure. Experiment with one too many just to make sure and thanks and pleasure to be here. Thanks everybody for joining us. Well, I wanted to just cover three
topics before we move over Q&A. First topic I wanted to cover was MVAD which is our next generation pump platform. With all of the news surrounding HeartWare over the past week, I just want to make sure that everybody is clear that the
enthusiasm we have for MVAD has never been higher. We have 11 patients enrolled in our trial so far internationally. We are thrilled with how the device is performing. Larry has probably asked me in the past what keeps me up at night, what do I
worry about with MVAD and on the pump side, we tested it so much that we really werent worried and I think it suggests we have good reason for not having being worried. Were really pleased with the result so far.
The one thing that did keep us up at night or at least you just dont know is on the controller side and the controller is performing very nicely,
actually. The one thing that we were struggling with the controller on however is we as we ramped up production, our yields were not improving and so for over the past couple weeks weve actually been investigating why is that happening
and in our investigation, we found that in the assembly of the controllers that on one of the circuit boards, we were when we shifted from engineers building the controllers to operators building the controllers, they were putting too much
stress on some of the circuit boards, for one circuit board particularly and as we investigated, we found a way to reduce the stress but we have to add some fixtures and some other work to make sure that the yields improve and we have certainty of
quality of the controller at the end of the line.
To implement that process improvement weve got to build the controllers, test the controllers and
then rebuild production quantities. So its going to take probably eight to 10 weeks to now have controller supply back online. So were going to take a pause on enrollment probably until November it looks like while we upgrade our
manufacturing process on the controllers or while our vendor does. So its very reproducible, the kind of thing that everybody on our team is like (inaudible). Its sort of what you do when youre scaling electronics production lines
as you find some of these issues, but we havent seen any complaints in the field. As a result of it, the controller is working great. But were now luckily at a point where we have bench strength that you can find these things and fix
these things quickly whereas a couple of years ago, we wouldnt have even been able to figure this out, we didnt have the capacity. And so we now find things and fix things.
Similarly on commercial side, those folks who have tracked the Company realize weve been working through a warning letter, making phenomenal progress on
that and as we uncover opportunities to improve our quality, we implement them. The area thats been our most nagging issue has been batteries and we actually switched to a new supplier of battery cells recently in the US, a year ago
internationally and the new batteries cells are performing beautifully and were just not seeing any battery failures to the point where this new supplier is clearly giving us a better quality component than what we were getting before. So
were actually going to later this year, beginning next year, expand a prior field action and replace whats left of older batteries albeit they were screened and performing well. The new ones are just that much better. So, in an effort to
give the patients the best possible product, were going to be doing that and well be recognizing that expense here in our next financial reporting.
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SEPTEMBER 09, 2015 / 12:50PM, HTWR - HeartWare International Inc at Wells Fargo Healthcare Conference
And then the third piece is Valtech, which Im sure Larry will have questions on and there was a
misperception that concerns about MVAD drove Valtech, couldnt be further from the truth. Confidence in MVAD gave us confidence to create a broader heart failure company around the MVAD platform and now expanding into the ability to treat
mitral disease and ultimately have a replacement for mitral and treat tricuspid disease. And we knew that there was going to be some education process required to get everybody sat around to why does this make sense for HeartWare.
The one thing I was actually nervous about going into it was how our customers are going to react. We sell to surgeons, principally are they going to feel
like were taking patients away from them and giving them to cardiologists. And frankly, I am amazed at how positively our customers have responded to this. They love the fact that HeartWare is in it to build a real company. They love the fact
that we are going to be addressing both the surgical repair with cardinal interventional repair with Cardioband and pull more patients in for them and their colleagues to treat.
What has been a real pleasant surprise is people like principal investigators for MVAD who love MVAD are now introducing us to new people higher up in the
food chain at hospitals, because they see this mitral opportunity is so big that they want to be part of it. And having had a relationship with them for eight years, nine years, they never introduced us up the food chain. It was always we were this
little VAD company, which is a good thing.
Were perfectly happy being VAD company. We are just a much more compelling company in the eyes of our
customer in just one week since the announcement and that has been a real pleasant surprise and everyone has already started lining up saying you got to make sure Im in your trial and you were going to pull more patients in, when we go out
with interventional cardiologists and I can talk about VADs and the cardiologists can talk about Cardioband, that is going to be a huge benefit for us as a heart team and its going to be huge benefit for [MVAD] program. And so Ive
been it is been an unanticipated positive response and more positive, I thought it would be a more mixed response from customers that would take some handholding and it hasnt.
So we are thrilled with MVAD, we are delighted by the opportunity with the Valtech combination and we hope that as folks study more and understand the scale
of that opportunity that they share our enthusiasm. So those were my sort of three topics I wanted to cover.
Larry Biegelsen - Wells
Fargo Securities - Analyst
Perfect. Since there is never any shortage of things to talk about, we try not to be dull. So lets start with
well start with the MVAD news because that was new. And so just maybe if you could help us understand a little bit more about the yield issue with the controller and I heard about the stress on the circuit board. I guess Im trying to
understand what the real issue is that would lead you to pause in implants and the confidence that its only going to be eight to 10 weeks to get back new supply?
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
Yes, so when youre building your first sort of validation units, which we did earlier this year, you do all the testing to make sure that you have
that the system works obviously and you dont always identify everything that has to be validated post assembly and so one of the boards which the product in the field, it was basically built by engineers is all high integrity.
The problem is, now that weve seen somewhere in this yield investigation, were seeing some components on the board that are not as on as
securely as theyre supposed to be. Once you discover that you say, okay, well, how do I have confidence now that the rest of the product that Im going to be manufacturing even if that passes all of the test, how do I know that, that
component is going to stay on permanently and so there are certain standard ways to enhance how well its connected. We are implementing that. We actually ran tests over the weekend. And that one modest change already gets us 90% of the way
there.
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SEPTEMBER 09, 2015 / 12:50PM, HTWR - HeartWare International Inc at Wells Fargo Healthcare Conference
And so the last thing we have to do is just add a couple of fixtures. So its not somebody using their
thumb to shove the circuit board into the controller but you have a fixture that does it with very low stresses so that youre not having variability in stress because that looks like what it is, most of the circuit boards are just fine. Some
of them were not fine and the challenges you cant like X-ray it later and confirm that it is fine. So you got to validate your assembly process in that particular area, which had not been done initially because it wasnt identified as a
risk until we did the yield investigation.
Larry Biegelsen - Wells Fargo Securities - Analyst
And the process to restart implants in November?
Doug
Godshall - Heartware International, Inc. - Executive Director, President & CEO
Yes. So we have to well start building the
test units next week because we already have the fixtures designed. Then, once you build the unit, then youve got actually destructively test them and validate that you were right that this process works, which there is no reason why it
wouldnt. Then you redo your paperwork and then build your units to ship. So its that sort of the build test paperwork rebuild sequence. So by late September or early October, youre going to know for sure that youre on
track and you are back to the rebuild mode.
Larry Biegelsen - Wells Fargo Securities - Analyst
And in terms of regulatory approvals?
Doug
Godshall - Heartware International, Inc. - Executive Director, President & CEO
Its just a process change. So were not
were not making any fundamental design changes. Weve also identified as we anticipated, we found, weve seen some software bugs that would require a regulatory approval, but thats not a gating item, we will roll
out a software probably end of this year, beginning of next year and thatll be the work is going on in parallel. We have already written the code, we are testing the code and so when we when we move ahead in the US, we will have
this enhanced I guess assembly integrity and well have the new code without the bug.
Larry Biegelsen - Wells Fargo Securities -
Analyst
Okay, thats helpful. And then, the field action for the battery supplier, theres an expense you said I think in Q3, you had a
couple of those and they havent had a commercial impact as far as I can tell. So is this a whats the right word do you expect it to be disruptive to kind of the business at all?
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
Yes, I apologized to our field team. The last thing they want to do is do this kind of thing. This is an expansion of an old action because its sort of
continuing just a larger serial number range. Even with so we had batteries, then we enhanced the screening of the batteries and had a dramatic improvement in performance.
The fact that this is so obviously even better performance, they are like coming in our position as youre working through a warning letter, you just
cant sit on it and say, well, were going to ignore the fact that these new ones are so much better and batteries are still our largest volume complaint product.
So I think it will actually have a very beneficial effect, certainly in Europe, were getting a very positive response from in the past year
weve been shipping these higher integrity, I guess, cells and its really endeared us to this customers who used to be frustrated with our battery, they are not any one. And, the US, we just got approved in June. So there is not enough
experience with new batteries yet for people to say that for people to be able to recognize that theyre better.
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SEPTEMBER 09, 2015 / 12:50PM, HTWR - HeartWare International Inc at Wells Fargo Healthcare Conference
Larry Biegelsen - Wells Fargo Securities - Analyst
So, in terms of commercial impact [beside any expense]?
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
It shouldnt have any impact. Positive if anything.
Larry Biegelsen - Wells Fargo Securities - Analyst
So, I wanted to cover Valtech and MVAD. We started with MVAD, maybe we can finish off on MVAD and then come back to Valtech. You also provided an update on
[about 11 patients as being implant] I believe. Maybe if you could talk about the features about MVAD youre most excited about? What your goals are with MVAD and how you feel at this point, very early stage about meeting those goals?
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
Yes. So my goal is to finish the CE trial in January, its now feels like more like February or March once we come back online. And my expectation
is that this is going to be a device that has dramatically lower adverse events than certainly what weve seen historically as a field not just as a company.
I dont see anything that tells me Im wrong but its also early and even if I felt comfortable giving a blow by blow clinical update on every
patient, it could be a bit misleading to say, okay, we have a patient out seven weeks and hes doing great. Therefore you conclude that every patient is going to do great but we havent seen anything that says to us, okay, were going
to compromise our expectations and think that this is going to have an adverse event profile that is analogous to current generation devices.
I think
its going to be a materially better AE profile because of the low share, because of the small size, because of the ability to steer the pump into the middle of the ventricle with just gimbaled sewing ring and the fact that the controller which
patients will love, its working so well despite this enhancement in manufacturing, the shock absorber in the drive line of the controller, we think is also going to reduce the adverse events around the driveline infections, which is way too
early to say now because were too early for driveline infections to have occurred.
So were if all we had was equal adverse events, the
docs are getting about the device so for. Its just so small its almost hard to see when you implant it. Its so small. And certainly when you drop the [heart in] it just disappears if youre doing (inaudible). So,
universally positive reaction to the pump itself and the controller has people actually almost as excited or more excited than the pump. So, so far, its been a very validating experience in the clinic, but its also early. So weve
still got to prove our beliefs in a larger patient set and over longer period of time but so far so good.
Larry Biegelsen - Wells Fargo
Securities - Analyst
We have one audience response question and its on MVAD. So why dont we do that now then transition to Valtech?
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
Okay.
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SEPTEMBER 09, 2015 / 12:50PM, HTWR - HeartWare International Inc at Wells Fargo Healthcare Conference
Larry Biegelsen - Wells Fargo Securities - Analyst
Right. So, everyone should have a controller. Im interested, basically the question, whats your view of Heartwares MVAD? And there are four
answers and if you dont mind, there is a controller here that you want to use, A, B and C is the answer. Put your answer in and then well read it out loud. People are voting. We want to get to Valtech here. So lets get the votes
out. Alright, 57% believe it will split the market with St. Jude Thoratecs HeartMate III, 25% believe it will eventually become the market leader, about 14% believe it will run into issues and become a niche product. Doug, I dont know if
you want to make any comments on that or
Doug Godshall - Heartware International, Inc. - Executive Director, President &
CEO
Yes, I totally agree that were going to split the market. Its sort of where you split. If thats a 50/50 split, I dont know
that I agree. So [Im biased] more towards a 25% just based purely on the level of enthusiasm for this device, even in the US where we havent started yet and we were so hopeful that were going to be starting at the end of this year.
It feels like, given that we need to include this new stuff in our submission, it seems more likely now its a first quarter start, but docs are so enthusiastic and we havent even started yet. So Im somewhere north of cautiously
optimistic that were more likely than not, were going to be the market leaders with MVAD.
Larry Biegelsen - Wells Fargo
Securities - Analyst
Thats helpful. All right, Valtech. Lot of questions on Valtech. I wanted to ask some questions about Cardioband because
its a lead product and the commercial opportunities there, but also, I guess, the most common question I got was on the timing of the deal. And what does it signal on MVAD and so the question was if youre so confident in MVAD, why dilute
your current shareholders by about 30% when your stock could be much higher in 6 to 12 months if MVAD goes smoothly? That was probably the most common question I got the day after the deal.
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
Sure. No, Ive need to say, Ive heard that question a couple of times. And sure, if you could guarantee a higher stock price, get a
compelling company to wait until you get the hopefully higher stock price, sure, that would be great. We there was a feeding frenzy starting to develop around Valtech. We agreed with them that we would put in a second investment earlier this
year that would buy us an exclusivity period that expired mid-September. It was quite clear from the communications we were getting from the company that they were having to fend off interest from others. It was also quite clear from the company
that they are an R&D powerhouse that doesnt really want to build a commercial organization.
So the combination of we had an expiring
exclusive negotiating period in not too distant future knowing that people are going to pay a lot of money for this franchise given the level of interest and if we were found ourselves in a bidding position which would likely be happening
would have happened as soon as they got a CE mark, there is never a perfect time and the power of this portfolio between cardinal for surgical repair and the ability to tailor surgical outcome, Cardioband to replicate a surgical repair for tricuspid
and for mitral and then the upside potential of transseptal valve which granted is still on animals and I cant prove that it works yet but having diligence to (inaudible), I think, its more likely its not going to work and
its very likely going to be one of the first two [transseptal resistance], which is what we think is necessary for the replacement market to really gain traction. And so, we wrestled with wouldnt it be nice if we could wait and is
this better for our shareholders.
Obviously, last week, it was not better for our shareholders. We acknowledged that the reaction was more negative than
we had anticipated and I feel still bad that if we had forecast, were thinking about getting into mitral, that would have had a negative stock reaction just by forecasting it and frankly if we couldnt do Valtech, we werent going to
do mitral because we needed a we believe we need the ability to repair surgically and repair interventionally and we believe we need a portfolio. If we came in with a single device, if we had bought (inaudible) one of those, your single
product transseptal replacement in a market that may or may not happen in the next five years versus having a repair in an existing market with existing reimbursement that you can enter now and with a certain market that is certain to grow
substantially if you have a more reproducible safe procedure which Cardioband delivers.
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SEPTEMBER 09, 2015 / 12:50PM, HTWR - HeartWare International Inc at Wells Fargo Healthcare Conference
So, everything stacked up, this is a transformational opportunity for the Company and you cant get
transformational opportunities for small places and the fact that we got we found a shareholder base that loves the idea of writing the upside of their portfolio versus draining our cash to complete an acquisition, it was sort of very
synergistic view of the world although you always like to pay less if you could pay less, obviously.
Larry Biegelsen - Wells Fargo
Securities - Analyst
So, Cardioband, CE mark approval, that is mitral repair product obviously. CE Mark approval, it seems like maybe just around the
corner. The number you put in your slides in 2020 for the sales, you had about $140 million, 90% of that was Cardioband, $130 million or so and that just coincidently happen to be the same sales as MitraClip in Europe about five years post launch, I
think. So it seems like youre kind of modeling it to have kind of similar uptake to MitraClip year one through five. Is that fair?
Doug
Godshall - Heartware International, Inc. - Executive Director, President & CEO
Its not overly dissimilar in part because we
dont think theyre going to go away. So were not first of all, they will have a nice position on degenerative diseases where Cardioband will be used some but not a lot.
Larry Biegelsen - Wells Fargo Securities - Analyst
Im talking about (multiple speakers).
Doug
Godshall - Heartware International, Inc. - Executive Director, President & CEO
Yes. So, last time I checked out, it was a pretty good
company and pretty powerful company and I dont expect everyone to just change over to the Heartware Valtech products day one. So, year one is build a strong clinical experience and clinical base with millions of dollars of revenue, but not
tens of millions of dollars of revenue because we want to make sure that we have a really sustainable business, similar to what we did with HVAD, where we picked excellent centers and made sure they were getting great outcomes so that we had the
ability to build off of that.
I happen to think that our model is overly conservative, which Im okay with because the deal still actually looks
very attractive despite our conservatism and I think it is overly conservative just because Ive spend enough time with the docs and they are looking for something better, theyre looking for a safer more reproducible procedure and the
folks Ive spoken to post deal, now that we can speak up openly with them, they cant wait to use this much more liberally than theyve been able to use it to date and so post approval, Ive a feeling were going to have a
much stronger clinical pull than weve modeled.
Weve modeled it more as a missionary sale where youve got to go and spend time getting
the customer trained and confident of technology, I think there is going to be enough confidence in the technology, particularly as they start talking to each other that will actually exceed our expectations, but you are right, our trajectory is a
our model is conservative and modest so that were not we didnt want to base our justification of the transaction on an upside assumption and Im pretty sure and Im encouraged that even with the conservative
model, its still is very attractive, not necessarily in first year or two, but its very attractive in years three, four, five and beyond.
Larry Biegelsen - Wells Fargo Securities - Analyst
Its not (inaudible). Its an underpenetrated market. So
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SEPTEMBER 09, 2015 / 12:50PM, HTWR - HeartWare International Inc at Wells Fargo Healthcare Conference
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
Massively. Yes, you probably spend more time analyzing this in some ways than at least MitralClip specifically than we have. We sort of try to model,
analyze the whole space and MitralClip works well. Its a good product but its also used in part because there is no other alternative and what Cardioband is going to enable is a very consistent reproducible procedure which is not hard
although it has the reputation of being hard, its actually fairly methodical and it doesnt cut off any options.
So, for a surgical risk
candidate, great, for a low surgical risk candidate, great, for a pre-surgical candidate, yes, you might actually try this as Maisano talked about on our call last week. You can go less sick with this device because there is no downside rather than
the transseptal puncture thats where the only downside is sort of PFO kind of risk, which is present with any transseptal strategy.
So its
we believe this is going to be a huge market expander for repair generally and while were at it, were going to improve surgical outcomes with cardinal because now they can tune the outcome on a beating heart which they cant
do with any other ring. So, well be in an existing $200 million market which is vastly underpenetrated, the existing $200 million surgical ring market, were already starting with a $200 million sort of base to go after with meaningful
upside from there. Its really hardly any US revenue in the current repair picture.
Larry Biegelsen - Wells Fargo Securities -
Analyst
So, we have about 3 minutes left on to make sure we give people in the audience a chance to ask a question. Please, just raise your hand and
come over with the mic. MVAD, Valtech, anything else? So, I dont see any hands. So, let me just ask you on Cardioband, you said its not a hard procedure, why is it perceived to be a hard procedure?
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
Yes, its the quote I would just hear was only Superman can do it and by Superman they meant Francesco Maisano, who is just a spectacular guy. So,
Francesco was the Chief Medical Office and by the way practicing surgeon and interventionalist sort of man of all seasons and I think in early days, he was right. He wanted to make sure that he was in every case to figure out what to tell the
engineers to fix and change and also to figure out how do you create a reproducible procedures.
The problem is he insisted on staying in all the cases
for way too long and so he wasnt really proctoring, he was doing the cases. So hed be in Paris and then if there was any struggle, he would sort of just take over. And so he created the perception amongst the other clinicians that this
must be really hard because only Francesco can do it. The procedure times have gone down meaningfully since he left. So they sort of said, okay, we cant build a company if youre in every case, aside from the fact that you just took over
Zurich and youre too busy and you cant (inaudible) anyway.
So, Karl-Heinz Kuck who was on our call, his first cases I think his first
five cases were with Francesco and theyre good friends, but his last five or six have been much easier. He understands the procedure now that he is sort of allowed to do without Francesco. They have also enhanced their training and
visualization and pre-implant planning. So you know this is how Im going to map around the annulus and drop the anchors in and I get it exactly where its going to be preoperatively.
And so, the training is really straightforward and there is not theres just not the part and uncertainty of trying to grab leaflets from below
and avoiding (inaudible) and the like. So, by going supra-annular you just map out and the hardest part about the procedure was theyre sort of two points on the mitrial, on the annulus where it was a little harder to deploy the anchor just
because the angle you had to get the delivery system angle towards, theyve enhanced the steerability, gave it more degrees of freedom and now those two at least in case the other day when it was an hour and half total procedure time, that same
procedure part would have been four hours a couple of years ago, so it dropped dramatically and thats pretty similar to what MitraClip case can be.
What you probably wont get to is a half-hour procedure. Well probably get to about an hour, reproducibly maybe an hour and half, some mitrial
cases are in that sort of half hour range and I just dont think were going be able to get that sort of that kind of procedure time, but if its predictably an hour, thats or predicted to be an hour and half, it is
really the predictability part thats essential. If you have wide variabilities then that blows the cath lab schedule and nobody likes that.
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SEPTEMBER 09, 2015 / 12:50PM, HTWR - HeartWare International Inc at Wells Fargo Healthcare Conference
Larry Biegelsen - Wells Fargo Securities - Analyst
Perfect. We have one question. We just ran out of time but why dont we (technical difficulty).
QUESTIONS AND ANSWERS
Unidentified Audience Member
(inaudible - microphone inaccessible) controllers in the field given that youre halting enrollments?
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
Right now, the controllers in the field are performing beautifully. If we end up having concluding that with this enhanced assembly process that its even
better than the ones in the field, then there are whatever 22 controllers between the 11 patients, well swap them out.
Unidentified Audience
Member
(inaudible - microphone inaccessible).
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
No, the problem is once you know that what youre producing has this even if it resulted in an issue, although what happen is the screen will go
blank, the pump wouldnt stop. Its not a safety issue. But you dont want screens going blank and you dont want international regulators saying, hey, how come screens are going blank and by the way, we find out that you knew
about it. So, there is the problem of the now that we know we need to do something about it, if we didnt know this, we probably would have completed the trial, we probably would have had no complaints, the controller would have been
fine, but were stuck now with this awareness and knowledge and you cant not fix it because now you know.
Larry Biegelsen -
Wells Fargo Securities - Analyst
Okay, good. Were out of time. Doug, thank you very much.
Doug Godshall - Heartware International, Inc. - Executive Director, President & CEO
Yes, thanks.
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SEPTEMBER 09, 2015 / 12:50PM, HTWR - HeartWare International Inc at Wells Fargo Healthcare Conference
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