The Risks of Surgical Over-Reaching
The announcement this month that HeartPort Inc. will be acquired by Ethicon Inc., a Johnson & Johnson operating company, turns a kind of final page on what was, to anyone living through the crazy world of medical device start-ups over the past several years, one of the industry's most interesting stories. In the end, what has become clear, is that HeartPort simply made the wrong bet. The cardiac surgery revolution, if you can call it that, has been a shift from CPB to off-pump procedures; about minimally invasive techniques per se, surgeons are still very ambivalent.
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The Vertical Group sticks closely to medical device investments, because that's the industry its partners know best. Although it has a narrow industry focus, its flexibility allows it to thrive in good times and bad. It runs an evergreen fund, of which general partners and its two special limited partners own 50%. And it has a great deal of investment flexibility as well; it can invest in all stages of a company, from seed stage to the aftermarket, where it can hold both long and short positions.
Several relatively new companies are making inroads into a new market for bypass assurance with devices that help cardiovascular surgeons intra-operatively assess the patency of each anastomosis. Cardiovascular surgeons historically have been resistant to adjunctive surgical innovations designed to help them do their jobs better. These companies, however, are betting that the difficulty posed by new beating heart coronary artery bypass graft (CABG) procedures will motivate surgeons to slowly but steadily adopt their minimally invasive tools.
Adding non-transfusion-dependent anemia patients to the Reblozyl label is a key strategy for the product, which BMS expects to reach $4bn in annual sales.