Hemostat Market Research

• Category I: Important and Enabling
  Important to prevent excessive bleeding and transfusion, to ensure safe procedure, and to avoid mortality and to avoid complications associated with excessive bleeding and loss of blood.
  
• Category II: Improved Clinical Outcome
  Reduces morbidity due to improved procedure, reduced surgery time, and prevention of complications such as fibrosis, post-surgical adhesion formation, and infection (includes adjunct to minimally invasive surgery).
  
• Category III: Cost-Effective and Time-Saving
  Immediate reduction in surgical treatment time and follow-up treatments.
  
• Category IV: Aesthetic and Perceived Benefits
  Selection is driven by aesthetic and perceived benefits, resulting in one product being favored over a number of medically equivalent treatments.

Source: MedMarket Diligence, LLC

Cryolife Q1 2010 - Edited

Ashley Lee

Our cash, cash equivalents and restricted securities balances as of today are approximately $40 million. Net income for the first quarter of 2010 was $1.9 million or $0.07 per basic and fully diluted common share compared to $1.9 million or $0.07 for per basic and fully diluted share for the first quarter of 2009. We recorded pretax charges in the first quarter of 2010 of $729,000 in connection with the write off of capitalized legal expenses associated with our BioGlue intellectual property rights in Germany. Approximately $380,000 in business development cost primarily associated with our proposal to acquire Medafor and approximately $415,000 in cost associated with our litigation with Medafor.

Steven Anderson

During the first quarter progress continued on the European post market study for BioFoam at three EU centers. The focus of the study is the assessment of BioFoam as a surgical hemostatic adjunct in the open repair of liver parenchyma following liver resection or liver transplant surgery. A total of 53 patients have been enrolled into the study with a target enrollment of 55 patients at these three centers. This includes 13 in the United Kingdom, 15 in France and 25 in Germany.

Interim analysis shows achievement of HemoStase within 1 minute in 88% of the application site and within 3 minutes in 94% of the application site. We are adding a fourth center from Leipzig, Germany to increase overall enrollment to 70 patients. As we broaden our clinical approach CryoLife is also establishing an online data registry for surgeons to document clinical information related to the use of BioFoam.

Based on the successful outcomes and surgical technique refinements developed during the European post market study, distributor and direct sales team training was conducted in late January at the Annual European kickoff meeting that was held in Rome. The product was formally introduced to the marketplace at the European Association for the study of liver which was held in Vienna in mid-April this year. Initial sales to date have been made to distributors and clinics in Germany, Italy, France and Spain.

Early acceptance of BioFoam by clinicians has been encouraging with more than 70 applications of the BioFoam product to-date. On December 9th the company received approval from the Department of Defense to move forward with the IRB submissions at pilot centers for the BioFoam IDE in the United States. This is the last step in the DoD approval process for the IDE study. As you will recall the DoD is funding the US clinical study for BioFoam. FDA has already provided approval for this IDE study. We expect to receive final written approval from the DoD within the next four to six weeks.

We expect patient enrollment for the United States IDE for BioFoam used as an adjunct to conservative measures of achieving HemoStases on resected liver parenchyma tissue to commence in Q2. An interim analysis is planned once all 20 patients from the two pilot centers reach 12-month follow-up. The study report along with a request to initiate the pivotal phase of the study will be submitted to FDA and DoD at that time.

During the recent preclinical testing of BioFoam it was observed that it was effective and withstanding aortic blood pressures. Accordingly, a decision was made to design a study to evaluate HemoStases in a cardiovascular application.

The animal work is beginning and will consist of 25 animals to be followed for up to three months. BioFoam's effectiveness will be evaluated against the effectiveness of Gelfoam and BioGlue. This study is expected to begin during the second half of this year.

Ashley Lee

We are reiterating our guidance for the full year of 2010 subject to the ongoing litigation with Medafor including our continued ability to sell HemoStase. We expect total revenues for the full year of 2010 to be between $118 and $123 million which includes between $1.5 and $2.5 million related to funding received from the Department of Defense in connection with the development of BioFoam.

We have withdrawn our proposal to acquire Medafor and do not currently anticipate a transaction with them occurring during 2010. However should we renew our proposal or take other actions to acquire Medafor such as a proxy contest or tender offer, we could incur expenses or changes in the value of the Medafor derivative that could materially affect our guidance. Medafor informed us on March 18, 2010 that the distribution agreement between the parties was terminated. We filed an emergency motion for preliminary injunction in federal court requesting that the court order of the agreement to not be terminated. The court has set a hearing date for May 10, 2010. If Medafor is successful in its attempt to terminate the agreement and elects to discontinue shipping HemoStase to us, then our full year 2010 guidance would be materially, adversely affected.

We believe that Medafor does not have a basis for terminating the agreement, and the guidance above assumes that it will not be successful; however, there is no guarantee that the outcome will match our expectations. Additionally, we have budgeted for a certain level of expenses related to our ongoing litigation with Medafor. If actual future legal expenses exceed the amounts budgeted, then it could materially, adversely affect our expense and earnings guidance.

Q & A

Matt Dolan – Roth Capital Partners

Okay, with respect to the Medafor agreement, where are you on HemoStase supply at this point, are they still shipping to you and how far along are you on any contingency plans you might have?

Ashley Lee

As it relates to their shipping product to us, the last purchase order that they were shipment was due to us was placed in January and they have substantially fulfilled the shipment of that purchase order. We recently placed additional purchase orders recently and the shipment for those particular purchase orders are not due until mid-May. So we will find out in mid-May as to whether or not they will – they’re planning on continuing to ship product to us.

reg Brash – Sidoti & Company

Okay, and you’re maintaining your guidance, so I’m assuming you have some confidence that (inaudible) determination but if he doesn’t you have plans to bring on some additional products to replace HemoStase.

Steven Anderson

We’ve stated that we remain very active on the business development front and we’re not going to talk about specific areas or specific targets until it’s appropriate to do so, but the HemoStase product line is important to us and to the extent that we came, we would like to protect that revenue stream going forward.

Greg Brash – Sidoti & Company

Okay, switching to BioGlue, some past quarters you were seeing off label use, less off label used pricing pressure, hospitals just curtailing the use of surgical sealing. Any improvement there?

Ashley Lee

We continue to see those types of issues out in the field, I think one of the areas that first of all the business was up year-over-year, that’s the important thing but one of the areas of the country where we did see some challenges more so then recently was in the North East, but all the other issues that we see they’re still out there but we still remain focused on growing that business.

Raymond Myers – The Benchmark Company

Okay that sounds good. And next I wanted you to explain the – why patent loss in – or explain whether the patent loss in Germany would impact your BioGlue sales?

Steven Anderson

We don’t think that that is filled. First of all, Tenaxis, the party that – the other party is Nova Reaction (ph) has already been distributing BioGlue, I mean their products, which is (inaudible) in Europe. So we have been competing against that in Europe for a year or two now.

So even with that competitive product on the market, if I would recall correctly, we increased our revenues in Germany year-over-year about in excess of 20% and we expect to do even more than that in 2010 compared to 2009 as it relates to Germany. And then the Nova Reaction (ph) that resulted in us taking the charge in the first quarter is only specific to Germany, it doesn’t really affect any of the other countries in the EU.

Raymond Myers – The Benchmark Company

Thanks. One other question, how is there a gain on the Medafor stock, when it’s not publicly traded, how do you value that?

Ashley Lee

That’s a long discussion, but I will do my best to answer here Ray. When we initially purchased our position in Medafor, we gave the selling shareholders a makeover provision whereby we could pay them additional compensation for their stock in the event that we were able to successfully acquire Medafor.

So what we had to do is when we initially setup net asset on our books, we had to determine what we could – where that’s considered a couple of factors, the likelihood that we would acquire Medafor, what and eventual price might be. And so a lot of assumptions went into what the ultimate value was that we established on our balance sheet to acquire Medafor.

Since we withdrew our proposal to acquire Medafor, all of those assumptions changed. And since those assumptions changed, the value of the derivative or the likelihood of the transaction might occur, all those assumptions changed and that resulted in us revaluing the derivatives associated with their stock. And as a result of that, we had to take income into other income for the first quarter of this year.

There is going to be a long discussion about that in our 10-Q that we will provide you much more detail. But hopefully in a nutshell that wasn’t too confusing as to how that was altered in the gain in the first quarter.

Raymond Myers – The Benchmark Company

So we shouldn’t assume any quarterly – necessarily any quarterly volatility based on share price or anything else unless there is a material change in your Medafor relationship?

Ashley Lee

That’s fair.

Raymond Myers – The Benchmark Company

Great, thank you.

Source: Seekingalpha

IIT-K develops polymer to stop bleeding

Researchers at the Department of Biological Sciences and Bio Engineering of IIT-Kanpur claim to have developed a polymer which when applied to a fresh wound stops bleeding within five seconds. They believe the Natural Polymer Sponge (NPS), which has been developed from a chemical found in crab shells, would revolutionise medical treatment, as excessive bleeding has often been the main cause of fatalities.

“A polymer sponge that can promote haemostasis (the process to prevent the flow of blood from an injured body part) has not been developed anywhere else,” said Ashok Kumar Kaul, Associate Professor in the Bio-Sciences and Bio-Engineering Department. Kaul said the haemostasis creams and ointments available in the market provide only partial relief. “In fact, they are ineffective in controlling bleeding in major injuries,” he added. After conducting animal trials, the IIT-K team is now looking forward for clinical testing of the product and is also planning to apply for a patent.

The NPS is made from a substance called chitin extracted from crab shells at -20 degrees Celsius using “cryogelation technology”. The chitin is modified into another substance called chitosan. “Using dextran and other polysaccharides, chitosan is developed into NPS. The sponge has several pores which have the capacity to absorb large volumes of blood to promote haemostasis,” said Kaul.

The biodegradable NPS is in the form of a 1-mm thin sheet but can be different as per requirement. “We have designed the NPS to have a similar impact in all seasons,” Kaul said, adding that they will look for collaboration with foreign institutes for further tests if required.

Vascular complications after percutaneous coronary intervention following hemostasis with the Mynx vascular closure device versus the AngioSeal vascul

Abstract

We investigated the prevalence of vascular complications after PCI following hemostasis in 190 patients (67% men and 33% women, mean age 64 years) treated with the AngioSeal vascular closure device (St. Jude Medical, Austin, Texas) versus 238 patients (67% men and 33% women, mean age 64 years) treated with the Mynx vascular closure device (AccessClosure, Mountain View, California). RESULTS: Death, myocardial infarction or stroke occurred in none of the 190 patients (0%) treated with the AngioSeal versus none of 238 patients (0%) treated with the Mynx. Major vascular complications occurred in 4 of 190 patients (2.1%) treated with the AngioSeal versus 5 of 238 patients (2.1%) treated with the Mynx (p not significant). Major vascular complications in patients treated with the AngioSeal included removal of a malfunctioning device (1.1%), hemorrhage requiring intervention (0.5%) and hemorrhage with a loss of > 3g Hgb (0.5%). The major vascular complications in patients treated with the Mynx included retroperitoneal bleeding requiring surgical intervention (0.8%), pseudoaneurysm with surgical repair (0.8%) and hemorrhage with a loss of > 3g Hgb (0.4%). These complications were not significantly different between the two vascular closure devices (p = 0.77). Minor complications included hematoma > 5 cm (0.5%, n = 1) within the AngioSeal group, as well as procedure failure requiring > 30 minutes of manual compression after device deployment, which occurred in 7 out of 190 patients (3.7%) treated with the AngioSeal versus 22 of 238 patients with the Mynx (9.2%) (p = 0.033). CONCLUSIONS: Major vascular complications after PCI following hemostasis with vascular closure devices occurred in 2.1% of 190 patients treated with the AngioSeal vascular closure device versus 2.1% of 238 patients treated with the Mynx vascular closure device (p not significant). The Mynx vascular closure device appears to have a higher rate of device failure.

J Invasive Cardiol. 2010 Apr;22(4):175-8.

Perfect Storm Brewing for Plasma Stocks

Baxter International (BAX) started it with a profit warning last week, saying that its blood plasma revenues would not grow by the expected mid-single digits for 2010 and instead would decline by a damaging mid-single digits. The group fashionably included US healthcare reform as one of the reasons for the dip, but the news of its difficulties soon caused the other main players in the plasma sector to rapidly start hemorrhaging value.

While Baxter finished last week with a 17% decline in its shares to a 10-month low, the likes of Talecris Biotherapeutics (TLCR) dipped 11%, Grifols (GIFLF.PK) was down by 12% and despite CSL (CMXHY.PK) protesting it would not be revising its earnings guidance, its shares also finished the week 8% lower. The falls are perhaps so steep because, as can be seen from the table below, many had been expecting the good old days in the plasma and immune globulin market to continue and growth in the sector to continue at roughly 7% over the next seven years.

But these forecasts are almost certain to come down and if Baxter is anything to go by, could slip into negative territory, at least for 2010.

Market fundamentals

Healthcare reform, or the ramifications of it, may indeed be one of the reasons for Baxter predicting a bad 2010 for its plasma franchise, but there are other multiple and more fundamental reasons for the current weakness in the plasma market.

Looming large among the culprits is lower demand, especially at the higher and more lucrative end of the market, intravenous immunoglobulin (IVIG), typically used for people with weakened immune systems. Here it is thought that the number of people losing their jobs during the recession and therefore their health coverage may have had a bigger impact than previously thought.

Vincente Martin, healthcare analyst with Santander, estimates that the cost of IVIG treatment can range from as much as $50,000 to $90,000 a year. “In the current environment it is clear that these treatments are looking very expensive and this is the same for coagulation prices.”

Adding to the industries woes, this decreased demand in the US has coincided with a destocking by both distributors and hospitals. To obtain good discounts, hospitals and distributors are encouraged to bulk buy. As such, if their inventories are now full, orders are likely to be reduced, meaning that there could be little prospect of a recovery during 2010.

“The fundamentals in the sector are weaker than they were a year ago. If you look at the market it is growing at a lower rate in the US, 1-2% compared to 7-8% a year ago,” Mr. Martin added. “Nobody knows what is going to be the revised growth rate for the business.”

Over-stocking

Completing the ingredients for a perfect storm is the excessive supply in the market, which in turn has led some to offer bigger discounts to entice customers, which has resulted in lower pricing. Baxter, which has been losing some market share in the last few quarters to the likes of Talecris and CSL as they have cut their prices, has itself recently announced that it too will be reducing the cost of some of its products.

The glut for plasma products is a direct result in the growth in plasma collection, which has in the last three to four years been growing 15-20% a year. Demand has not kept up with this rate of supply and as such many plasma collection companies are overstocked.

Mr. Martin estimates that Grifols has 13 months of plasma supplies. The normal inventory levels are 7-8 months. If as suspected other companies are similarly overstocked, then the bad time for the industry could be set to continue for sometime as higher inventory will result in higher working capital and costs, further increasing pressure on these companies.

With the outlook for the plasma market looking so gloomy, last year’s failed merger between CSL and Talecris could now look like a blessing in disguise (CSL’s reality check sinks Talecris deal, June 9, 2009).

Source - Seekingalpha

Cryolife may have problems beyond continued supply of Hemostase

A new non-clinical video comparing Hemostase (AKA Arista) with PerClot indicates Cryolife may have problems beyond continued supply of Hemostase. The video indicates a much stronger absorptive capacity for PerClot manufactured by SMI. The non-clinical video available HERE on Youtube appears to be an internal SMI validation of their product. Meanwhile the Medafor rejected proposal and (what appears to be imminent divorce) of the Medafor-Cryolife marriage is being thrashed out publicly in a curiously tabloid fashion.

Recently Medafor CEO Gary Shope stated "we no longer believe that CryoLife can be viewed as a trustworthy partner" and on March 18, 2010 after notifying CryoLife that it was treating the EDA as terminated, Medafor notified CryoLife that it would not fulfill their order.

Gary Shope, CEO of Medafor, has also stated, "Over the past six months, CryoLife has repeatedly breached our contract in China, Europe, Brazil and the U.S. CryoLife has also continued to insist that it is entitled to distribute HemoStase in China and Japan, despite the clear terms of the EDA to the contrary . As such, we were highly concerned about whether CryoLife was going to honor our agreement in the future, and had no choice but to insist it provide us assurance, as required by law. CryoLife ignored our request, effectively repudiating the contract and allowing us to cease all performance under the agreement.” Under the agreement, CryoLife had the exclusive right to sell the MPH product into cardiac and vascular surgeries in the United States (excluding Department of Defense facilities) and into cardiac, vascular and general surgeries in the rest of the World (except China and Japan ) excluding ENT, orthopedic, neurosurgery and topical applications.

Both Cryolife and Medafor have made no secret of their mutual dissatisfaction with each other, Cryolife has created a site dedicated to public laundering of their difficulties HERE and includes the following:

Frequently Asked Questions

Why did CryoLife acquire a stake in Medafor? How much of Medafor does CryoLife now own? What were the terms of the proposal CryoLife made most recently to Medafor? What was the breakdown between cash and stock? What has been the reaction of Medafor’s board to the recent CryoLife proposal? Why has CryoLife chosen to make its communications with Medafor’s board public? Is the proposal that CryoLife made to the Medafor board and that it has now withdrawn available to Medafor shareholders? What can Medafor shareholders who wish to sell their shares to CryoLife do? Why did CryoLife purchase additional shares from some investors but not make its proposal available to all? How has Medafor failed to help HemoStase reach its full potential? What will CryoLife do differently? How did CryoLife arrive at its most recent proposed acquisition price? Does CryoLife’s Medafor stake give CryoLife any additional powers outside those of a normal shareholder? Why did CryoLife withdraw its offer? What are CryoLife’s next steps? When does CryoLife plan to communicate with Medafor shareholders? Why did CryoLife file a lawsuit against Medafor? Why is Medafor claiming that CryoLife repudiated its distribution agreement and what is CryoLife’s response? Why would Medafor continually attempt to put revenues at risk and expose itself to additional litigation with this fourth attempt to terminate the agreement? Why would Medafor decline to ship product for additional revenue? Who can shareholders contact if they have questions? While Medafor respond on their website HERE