Philips buys Innercool: The Ice Age Cometh

As part of a bid to connect the dots between its own product offerings, Philips Healthcare acquired InnerCool Therapies, maker of surface and endovascular cooling devices for the management of cardiac patients. InnerCool fits into the company's broader "care cycle" strategy, the point of which is to provide a continuum of care to patients in the diseases Philips serves. Specifically, Philips' strategy is to connect diverse care settings to its product markets, in this case, cardiac resuscitation. The combination marks a change in how sudden cardiac arrest is regarded, from an isolated episode focused on a stopped heart to a larger strategy of patient management.

Philips Healthcare (a division of Royal Philips Electronics NV), as part of a new bid to connect the dots between its own product offerings, acquired InnerCool Therapies Inc., maker of surface and endovascular cooling devices for the management of cardiac patients. [See Deal] Philips paid $12.75 million to Taxus Cardium Pharmaceuticals Group Inc., netting the company a 100% return after it bought InnerCool for $6 million three years ago. The payment gives Cardium, a cardiac tissue engineering company that saw InnerCool’s commercial-ready property as a counter to its early-stage pipeline, some much needed cash while giving Philips a nice fit for its own cardiac resuscitation business.

Mike Miller, senior vice president of the Philips Cardiac Care division, says InnerCool fits into the company’s broader "care cycle" strategy, the point of which is to provide a continuum of care to patients in the diseases Philips serves. Specifically, Philips’ strategy is to connect diverse care settings to its product markets, in this case, cardiac resuscitation. Philips is one of the top three players in cardiac resuscitation, (either number one or two, depending upon how one categorizes products, according to Miller) along with Zoll Medical Corp. and the Physio-Control Inc. division of Medtronic PLC, which all manufacture defibrillators.

The combination marks a change in how sudden cardiac arrest is regarded, says Miller; it’s moving from an isolated episode focused on a stopped heart to a larger strategy of patient management. Miller says, "Until recently, and this is just beginning to change, people have viewed sudden cardiac arrest and the resuscitation of those patients as a discrete event geared towards restoring a patient’s pulse. You would deliver CPR, a shock and get the patient back to circulation." But therapeutic hypothermia brings another dimension. There is a lot of science around cooling patients to prevent reperfusion injury, the damage caused when oxygenated blood floods injured cells, a phenomenon that can occur following a heart attack or stroke. Over the years, a weight of evidence has gathered about the potential for hypothermia to improve the neurological status and overall survival of patients. The American Heart Association and ILCOR (the International Liaison Committee on Resuscitation) have both issued guidelines on therapeutic hypothermia, and hospitals are now very interested in implementing hypothermia as part of their post-resuscitation protocols. "So this plays into our care cycle strategy," says Miller, "which is aimed at improving outcomes and helping patients to have a better life."

InnerCool offers both non-invasive and minimally invasive cooling technologies including CoolBlue, a console and disposable vest with thigh pads for cooling from the surface of the body, and RapidBlue, a catheter-based system which runs cold saline within a closed circuit to lower a patient’s temperature as much as 4-5 degrees Celsius per hour, at controlled rates. (InnerCool’s technologies can also be used to warm patients.)

InnerCool’s sales in 2008 were $2 million in a hypothermia market currently worth $180 million, but the market is largely composed of low-tech products such as cooling blankets and various kinds of products for delivering ice. Founded in 1998 and with $50 million in venture funding along they way, plus significant additional investment by Cardium, it’s not all that surprising that more than ten years later, the company has such a small revenue base. In attempting to address conditions like myocardial infarction, cardiogenic shock, sudden cardiac arrest, and stroke, InnerCool and other hypothermia companies are operating in a field with a very narrow therapeutic window and in which the infrastructure of health care doesn’t often deliver patients to the right care setting in time. Radiant Medical Inc. tried to get around this problem with a clinical application that could be validated in a more predictable and controlled manner; the prevention of contrast-induced nephropathy that can occur as a result of cardiac catheterization procedures. It failed to demonstrate efficacy in its clinical trial COOL-RCN in that indication and Zoll acquired certain assets of Radiant at a bargain price in late 2007.

By dint of its defibrillators and other CPR products, Philips has a presence in both pre-hospital and hospital environments, which will help InnerCool’s products reach the right patients. Indeed, Philips’ ability to link both the EMS (emergency medical services) and hospital markets will be an important one. Miller points out that EMS organizations already target hospitals that have centers of excellence in certain specialties; many deliberately take myocardial infarction patients to the hospitals that have the shortest door-to-balloon times, and they’ll begin to transport sudden cardiac arrest patients to hospitals that offer therapeutic hypothermia, he says.

In other ways, InnerCool was an attractive acquisition candidate. Miller says it is "a company with solid science and technology, a great patent portfolio, products available for sale, and a small but satisfied installed base of customers. We’ll be continuing to invest on the technology side, but in the short term, we’ll be focused on ramping up the investment in sales and marketing to grow the top line."

Beyond cardiac resuscitation, therapeutic hypothermia also has the potential to lead Philips into new markets that it doesn’t currently serve such as stroke, traumatic brain injury, and potentially myocardial infarction. Competitor Zoll bought Alsius Medical Corp. for $12.6 million in February 2009 for many of the same reasons. [See Deal]

Hypothermia company BeneChill Inc. no doubt profited from the trend; a week after the Philips announcement, it announced that it has raised a $13.5 million Series C round, led by new investor HealthCap of Stockholm, Sweden, along with existing investors MedVenture Associates and NGN Capital as well as the Solon Foundation. [See Deal] BeneChill has developed RhinoChill, a portable medical device that uses a catheter to deliver a propriety coolant to nasal passages, a less invasive alternative to endovascular cooling. Similarly, Swedish start-up QuickCool AB, founded in 2003, is also using the nasal passages to advance a cooling balloon. QuickCool is backed by investors CapMan LifeScience, which holds a 25% stake in the company, and Swedish venture capital firm TeknoSeed AB. Still independent is also Medivance Inc., the one company focusing on a non-invasive hypothermia approach suitable for the EMS market.

--Mary Stuart