HeartPort: Still Beating
Executive Summary
Once one of the highest-flying medical device companies of the 1990s, the last couple of years have not been easy for minimally-invasive cardiac surgery company, HeartPort Inc. The company developed an innovative approach to minimally-invasive bypass and heart valve surgery, one that incorporated the use of CPB (coronary-pulmonary bypass) in a closed procedure on the theory that CPB is the gold standard in open procedures. The problem is, no one wanted it. (Most surgeons would like to eliminate CPB from open procedures, if possible.) As adoption rates of its technology lagged far behind the company's projections, HeartPort became a fading star. But company officials insist HeartPort's fortunes are turning around.
Once one of the highest-flying medical device companies of the 1990s, the last couple of years have not been easy for minimally-invasive cardiac surgery company, Heartport Inc. The company developed an innovative approach to minimally-invasive bypass and heart valve surgery, one that incorporated the use of CPB (coronary-pulmonary bypass) in a closed procedure on the theory that CPB is the gold standard in open procedures. The problem is, no one wanted it. (Most surgeons would like to eliminate CPB from open procedures, if possible.) As adoption rates of its technology lagged far behind the company's projections, HeartPort became a fading star.
But company officials insist HeartPort's fortunes are turning around. New CEO Casey Tansey, former VP of sales and marketing, who took over from Frank Fischer this past September, argues that the company's prospects look significantly better with the expansion of its product line in the fourth quarter of last year to include a system for facilitating open-chest beating heart surgery called PrecisionOpand another system, Insite AVR, for less-invasive aortic valve replacement. HeartPort followed that with the launch of more components for its beating heart system at this year's STS (Society for Thoracic Surgeons) meeting, held in Ft. Lauderdale last month.
HeartPort's new product lines represent the company's first foray into off-pump minimally-invasive surgery, a huge concession from its early posture as a champion of port-access surgery on arrested hearts. But then, the entire minimally invasive cardiac surgery industry has been moving over the past several years to an embrace of all platforms; HeartPort is simply getting in step. Indeed, the old debate between beating heart and arrested heart approaches that so defined the industry just a few years ago are largely irrelevant now.
In addition to the new product introductions, Tansey says the company has a strong IP position on a beating heart stabilizer that it has not capitalized on yet. Tansey wouldn't elaborate on the company's IP position, but he did argue that IP, which until now has not been much of a factor in minimally invasive cardiac surgery, will become more so in the future.
And Tansey isn't conceding that port access, HeartPort's core technology, is dead. He argues that small-incision approaches will catch on as new, easier-to-use technologies, including robotics, are adopted. "There are dozens of peer-reviewed articles that demonstrate the benefits of smaller incisions," he says. "I think people are looking at small-incision surgery now and trying to figure out how to do it, particularly off-pump."
HeartPort did around $18 million in sales last year and expects to do $26-30 million in 2000, achieving profitability by year-end. Over the past year, the company has completed a significant head count reduction, restructured its selling effort—including a near doubling of sales force size—and refocused its distribution and R&D programs—all in an attempt to capture some of its former promise. (See "Re-Starting HeartPort,"IN VIVO, July 1998 [A#1998800153, and "Be Still My Beating Heart: Can HeartPort Deliver?," IN VIVO, February 1997 [A#1997800026.)
Whether all of this is enough to put HeartPort back on track is another question. Competition in minimally-invasive surgery is heating up. CardioThoracic Systems Inc. , which has spent the last couple of years establishing a strong lead in the market, was acquired by Guidant Corp. last year [See Deal]. HeartPort's other major competitor is Medtronic Inc. , whose Octopus system is also finding favor.
Industry observers note that it's still early enough in the minimally-invasive cardiac surgery game for small companies with innovative products to move quickly and capture the hearts and minds of surgeons. But if cardiac MIS goes the way of MIS in general surgery—where companies like Ethicon Endo-Surgery Inc. , a Johnson & Johnson operating company, and United States Surgical Corp., a division of Tyco International Ltd. , dominate distribution channels—small companies will find that it quickly becomes nearly impossible to position themselves against larger, well-established competitors like Medtronic and Guidant, if only because marketing soon replaces technology development as a critical success factor. (For more on this topic, see "Genzyme Muscles Its Way Into Heart Surgery," page 51 of this issue.)