Implantable Pump Gives Firm Reason to Take Heart

Can an innovative pump for heart failure patients prime its manufacturer for profit?

Thoratec Corp. is on track to be first with an implantable pump that prolongs the lives of patients too sick or old for heart transplants. Called HeartMate VE, the device allows patients to keep their weak hearts by helping with the pumping function.

Analysts estimate that as many as 100,000 heart failure patients each year could benefit from HeartMate, a market worth as much as $5 billion in the United States alone. Thoratec, a struggling company that lost $1.7 million in 2000, is believed to be two to three years ahead of potential competitors in developing a pump for these patients, who are so sick that they cannot sit in a chair without tiring. Government approval of the Thoratec device is expected next year.

But Thoratec, based in the San Francisco Bay Area community of Pleasanton, must clear other hurdles to succeed with HeartMate as a transplant alternative.

One challenge for Thoratec is the cost of its device: HeartMate has a price tag of $60,000, but when the operation needed to implant the device is included, the total could run as high as $160,000. Much of the cost would fall to the federal Medicare program, as many heart failure patients are elderly.

Heart failure patients who don’t qualify for transplants are treated with an arsenal of medication that costs about $120,000 a year.

Thoratec hasn’t completed a cost analysis for Medicare that compares HeartMate with standard medical care. But Thoratec Chief Executive D. Keith Grossman said the government insurance program for the elderly hasn’t denied reimbursement for a rigorously tested medical device. “It is very difficult to say why they wouldn’t pay for this,” he said.

Another challenge for Thoratec is its merger with the company that developed HeartMate. Thoratec acquired Thermo Cardiosystems Inc. in February, creating a company with 700 employees and revenue of $114 million.

The executive heading the integration effort, Thomas E. Burnett Jr., was killed Sept. 11 when United Airlines Flight 93 crashed in western Pennsylvania. (Burnett, who telephoned his wife, Deena, four times from the plane, has been hailed as one of the heroes who attempted to stop the hijacking.)

As Thoratec’s chief operating officer, Burnett oversaw sales and marketing and handled consolidation of the companies’ manufacturing operations, a cost-saving move that won’t be completed before mid-2002.

“He was our No.2 guy and played a large role in putting this all together ... and that work has been done very, very well,” Grossman said. “It is a loss, but not one that has taken us off track.”

A Payoff From Buying HeartMate Developer

The $571.3-million merger was a gamble for Thoratec, which has earned a profit in only one year since it was founded in 1976. The company is expected to lose $88million this year, largely due to noncash expenses arising from the merger. But the deal produced an early payoff this month, with publication of a study showing that HeartMate can prolong lives.

The study, sponsored by Thoratec and the National Institutes of Health, found that heart failure patients who received HeartMate had twice the survival rate after one year and three times the rate after two years of patients who received standard medical treatment.

The report, the first to compare an implantable pump with standard drug therapy, generated a huge buzz at the American Heart Assn. convention in Anaheim, where it was released.

If the device is approved in 2003, as analysts expect, the company’s sales force must persuade cardiologists comfortable with standard drug therapy to consider HeartMate for patients who don’t qualify for transplants.

“That’s why release at AHA was so critical,” Grossman said.

Unfortunately for Thoratec, the study fell short of being an unqualified endorsement of HeartMate. The device was associated with high complication rates due to infection and mechanical breakdowns--the chief reasons 77% of the 68 people who received the device died after two years.

Dr. Claude Lenfant, director of the National Heart, Lung and Blood Institute at the NIH, told cardiologists at the convention that HeartMate was beneficial overall.

But Thoratec competitors say HeartMate’s shortcomings leave plenty of room for them.

“The good news is that it performed,” said Dr. Michael DeBakey, the heart transplant pioneer who is developing a competing device. “But there are disadvantages....There’s room to improve.”

HeartMate belongs to a category of products known as “ventricular assist devices.” It is one of several VADs used to keep transplant candidates alive while they wait for a heart from a donor.

The device, about the size of a compact disc player, is implanted in the abdomen under the heart. Tubes extend from the pump outside the body and attach to a battery pack worn as a shoulder holster and a controller worn on a belt. The devices typically must be replaced after two to three years and are too large for small women and children.

Thoratec is a leading seller of VADs that are used as a temporary “bridge to transplant.” Its namesake Thoratec VAD and the HeartMate VAD together control 97% of that $65-million market, according to investment firm JP Morgan H&Q;, one of Thoratec’s underwriters.

But the size of the market could grow to $300 million as acceptance among surgeons grows, the investment firm said.

About 4,000 Americans qualify for transplants each year, and about 60% of those people get one.

Besides VADs, Thoratec markets medical test equipment and is developing what would be the first synthetic graft for coronary artery bypass surgery. Because 250,000 heart patients require a graft during bypass surgery annually, the market is potentially huge.

Firm Faces Competition in Growing Market

Thoratec’s greatest opportunity, and the company’s long-standing focus, is the alternative-to-transplant business. Thoratec is making improvements to HeartMate VE to reduce the failure rate and is developing a second-generation device that doesn’t require an outside power source. But competition is looming.

Besides the MicroMed DeBakey VAD, three other devices are being developed as possible transplant alternatives. Some are fully implantable with no outside tubes. They claim other advantages, though the devices haven’t been compared head-to-head.

DeBakey said none of the more than 100 patients who have received his namesake device, now in tests as a bridge device, has had a stroke, noteworthy because implanted devices tend to cause clots responsible for strokes.

World Heart Corp., a Canadian company, said its Novacor VAD doesn’t break down as often. Thoratec also must contend with Abiomed Inc.’s artificial heart; the first patient to receive it suffered a stroke this month after three months on the device.

The experience of World Heart in the bridge-to-transplant business shows that performance matters.

The company watched its market share plummet to 3% last year from 17% in 1998 after 23% of patients using its Novacor VAD had strokes, more than double the rate of competing devices.

World Heart Chief Executive Rod Bryden said improvements to the device have lowered the rate of strokes to less than 10%. But the company faces a struggle to restore physician confidence as it prepares to enter the transplant-alternative business.

The bridge-to-transplant market offers another insight. Though VADs have been available since 1994, only 20% of transplant candidates receive one.

Modest acceptance of the device so far suggests the new alternative-to-transplant category won’t explode overnight, especially because the firms attempting to exploit it are relatively small and lack marketing muscle.

That doesn’t worry Grossman, who said the Thermo Cardiosystems acquisition makes financial sense even if HeartMate VE fails to receive Food and Drug Administration approval.

Thoratec’s shares rose 31 cents Friday to close at $17.91 on Nasdaq.

VADs eventually will emerge as preferable to heart transplants, said DeBakey, who has performed 350 transplants in his career.

“If you have to be on the transplant list for a year, you might go ahead and implant one and then you don’t need a transplant,” he said. “And you have the advantage that, if something happens, you still have your heart.”