SCVMMay 6, 2008
Knobias Clip Report (05-05-2008)
Submitted By Knobias ClipReport
Article too long to fit on thread in its entirity.. Please research Knobias for the full article.
SCVM: Expects FDA 510(k) Approval by 2009 in a $500M Market
One name that should be fairly easy to understand is Scivanta Medical Corp. (SCVM). The Company is a medical product development company which is expecting to lose the developmental stage tag soon.
The Company is managed by David LaVance and Tom Gifford who founded Century Capital Associates. Century Capital is a boutique investment banking firm providing strategic, transaction and financial advisory services to emerging technology companies. The firm specializes in the biotech, pharmaceutical and medical device areas. LaVance serves on the board of directors for Hologic Inc. (HOLX), a medical device company specializing in women’s health care and digital imaging, and Algynomics, Inc., a privately held company pursuing the genetic causes of pain. He also was a former managing director of KPMG Health Ventures and an executive officer of Dornier MedTech, a medical device company focused on lithotripters and other devices. Gifford has served on the board for several development stage life science firms and has extensive experience with startup and middle market life science companies. He also worked at KPMG Health Ventures. Together, they manage Scivanta which owns the rights to develop and distribute the Hickey Cardiac Monitoring System.
Currently, the Swan-Ganz pulmonary artery catheter is still the standard care for the diagnosis of patients with heart failure, sepsis, congenital heart disease, or burns. Basically, a catheter is inserted through a patient’s artery and snaked into the heart. Often through the internal jugular, subclavian or femoral arteries, the catheter is threaded with the aid of fluoroscopy through the right atrium, right ventricle, and into the pulmonary artery monitoring the performance in each.
The clinical use of the invasive monitoring device is controversial. The risks inherent and costs sometimes outweigh the benefit of its use. But that hasn’t stopped Edwards Life Science (EW) from fully marketing and capitalizing on the device.
Edward’s Critical Care segment includes the FloTrac catheters, Venous Oximetry catheters, Swan-Ganz catheters, Central Venous catheters, and the Vigilance and Vigileo monitors. The company is the largest maker of pulmonary artery catheters. In their latest earnings report, their Critical Care segment grew sales by 17.4% in the first quarter. In their latest 10-K, they reported overall sales of $1.091 billion, of which, the Critical Care segment accounted for $397.8 million. Sales in that segment grew 13.7% from 2006 to 2007.
The growth is somewhat astounding given the life threatening risks (arrhythmias, ruptured arteries, thrombosis, infection, and pneumothorax), the price (Swan-Ganz are normally $1800) and the invasiveness and precaution required (Swan-Ganz can only be used in ICU settings which increases the cost of use to patients).
The use of the Hickey system, on the other hand, is much cheaper (around $600), less risky, and doesn’t need to be administered in an ICU or CCU setting, nor does it need to be administered by cardiologists. The components include a two balloon catheter that is inserted into the esophagus and the attached monitoring system.
“ “Aside from the obvious benefit of eliminating the need for a surgical or highly invasive procedure, the Hickey system offers a number of other improvements over today’s standard for cardiac monitoring, including: performing phonocardiogram and monitoring audible heart sounds unaffected by surrounding noise, integrated ECG and blood pressure measurements, it is disposable and uses no metal components which would interfere with magnetic resonance imaging and its rapid insertion and positioning by non-physician personnel.”
LaVance noted that the Hickey system should garner 510(5) FDA approval by the fourth quarter with rollout and commercialization beginning in 2009. The accuracy of the data between the Swan-Ganz and the Hickey system is predicted to be statistically indifferent. That and the fact that it is much less invasive, risky and costly should help with an expedited 510(k) approval by the FDA.
With the development team finalized, all eyes point towards FDA approval which is expected to be announced by the fourth quarter. With approval, the market could greatly expand past what Edwards displayed in their Critical Care segment of $397 million for the year. According to a University of Buffalo research study, the Hickey system has tremendous market potential which will generate sales from the consumer catheter component and capital equipment. Its capabilities also make it well suited for other applications. Anesthesiologists might find it useful when monitoring patients undergoing treatment for aneurysms, trauma surgery or other heavy fluid loss surgeries requiring close monitoring of cardiac performance.
“The market for standard cardiac monitoring is more than 1 million procedures a year. It’s a figure that non-invasive technology could greatly expand because of its ability to be performed outside of intensive care units,” finished LaVance.
With an estimate of a $500 million overall market for non-invasive hemodynamic monitoring, Scivanta’s market cap of only $3.6 million could be severely undervalued with FDA approval and a market share grab of as little as 10%. Add in the population’s rising age, the propensity of heart disease, and a growth rate for the market between 15-30% and one can easily see this Company is one to follow. Investors would be wise to watch.