Abiomed, Inc.

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Abiomed, Inc.

22 Cherry Hill Drive
Danvers, Massachusetts 09123
U.S.A.
Telephone: (978) 777-5410
Fax: (978) 777-8411
Web site: http://www.abiomed.com

Public Company
Incorporated: 1987
Employees: 264
Sales: $24.9 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: ABMD
NAIC: 339112 Surgical and Medical Instrument Manufacturing

Abiomed, Inc. gained world recognition in 2001 when its AbioCor artificial heart, the first fully implantable device of its kind, was placed in a human being. The event was the culmination of almost 20 years of effort for the Boston-area company. Through grants, private investments, and conservative management, it has been able to conduct its pursuit of the artificial heart without having to sacrifice its independence, as has been the case with numerous biotechs that have sold themselves piecemeal to the major pharmaceuticals. Although the artificial heart has been the focus of Abiomed, the company is also involved in developing devices to help assist heart patients on a temporary and permanent basis. Abiomed’s BVS5000 cardiac support system is used worldwide as a bridge-to-recovery device, essentially performing the functions of a heart to allow patients sufficient time for their natural hearts to rest, heal, and recover normal function, generally following heart surgery.

First Artificial Heart Developed in the 1950s

Heart replacement has been an age-old dream of medicine. However, it was not until the 1950s that Dr. Paul Winchell developed an implantable artificial heart, which he subsequently donated to the University of Utah. There, a group of scientists led by Dutch-born Willem Kolff developed a working model, testing it in animals in 1957. The technology was advanced enough that in 1964 the National Institutes of Health established the Artificial Heart Program Office. Three years later Dr. Christian Bernard performed the first heart transplant in Cape Town, South Africa, which ultimately resulted in a successful method of replacing damaged or diseased hearts. The need for an artificial heart remained, because the number of available donor hearts would always fall short of the need.

In 1969, Denton Cooley of the Texas Heart Institute implanted the first human artificial heart in a patient, serving as a bridge for 64 hours before the 47-year-old patient received a transplant. With scientists in the 1960s making steady progress in landing a man on the moon, it was assumed by many that the development of the artificial heart was very much in reach. It was seen as the Apollo project of the medical field. Progress, however, would prove to be painfully slow.

It was the Jarvik-7 heart, named after Robert Jarvik, who was instrumental in its development at the University of Utah, that truly excited the public imagination about the realistic possibilities of an artificial heart. In 1982, surgeon William DeVries implanted the Jarvik-7 in a retired dentist named Barney Clark, for whom a transplant was not a medical option. He died after 112 days from organ failure not related to the heart device. Several other patients received the Jarvik-7, with one man, William Schroeder, living as long as 620 days. Excitement over the artificial heart, however, was soon replaced by revulsion. The device was a pneumatic pump that connected an external compressor the size of a washing machine to the patient through two six-foot air hoses attached to the chest. Although the patients were kept alive, their quality of life was poor. During his four months on the Jarvik-7, Clark suffered from strokes and infections, and grew so depressed that he begged his doctors to allow him to die. Schroeder lived far longer than Clark, and he too suffered: 70 percent of the time he had a fever, for 366 days he had to be fed through a tube, and he endured four strokes caused by blood clots. The Jarvik-7 was simply too invasive: the tubes leading into the chest were both a breeding ground for infection and a source of stroke-inducing blood clots. After boldly announcing that the age of the artificial heart was dawning, Jarvik ultimately abandoned hope that the idea would ever be fully realized. Nevertheless, he improved the Jarvik-7, helping to develop a smaller model that found use as a bridge to a heart transplant.

A number of companies shared Jarvik’s early enthusiasm for inventing the human heart, including the forerunner of Abiomed, Applied Biomedical Corp., which was formed in 1981. The founding scientists, led by Dr. David M. Lederman, were working together for the medical research division of Avco Corp. when they decided to start their own company, taking with them some of Avco’s government-funded research and development contracts. Lederman—Abiomed’s chairman, president, and CEO—earned a doctorate in Aerospace Engineering from Cornell University before joining Avco in 1972 and becoming chairman of the Medical Research Group. He originated the design of blood pumps and valves that Applied Biomedical exploited in its effort to develop an artificial heart. By the mid-1980s, there more than a dozen other companies with a similar goal, many of which were forging ties with major corporations. Applied Biomedical received some early funding from Eli Lilly & Co. but was careful not to be become too deeply tied to a corporate giant or incur heavy debt.

Applied Biomedical elected to husband its money, relying on NIH research grants and a private investment group, and developing other products to sell while technology advanced far enough to make an implantable artificial heart a reality. After optimism over the Jarvik heart gave way to disenchantment in the mid-1980s, the company resolved to be patient. It developed the Bi-Ventricular Support System 5000 (the BVS5000) and began selling it in Europe in 1987. Not only did the device supply a source of income, it provided a way to test technology that could be used in a complete artificial heart. The company also looked to develop other unrelated, interim products such as advanced dental probes.

Incorporated in 1987

In preparation for a public offering of stock, Abiomed was incorporated in 1987 and Applied Biomedical subsequently merged into it. Abiomed then went public at $11 per share. It also continued to seek out research grants, receiving in 1988 a five-year, $5.6 million NIH contract to develop an artificial heart in collaboration with the Texas Heart Institute. In all, NIH awarded Abiomed four national grants totaling $20 million. However, Dr. Laude Lenfant, director of NIH’s National Heart, Lung, and Blood Institute, ultimately announced that after awarding nearly $240 million for two decades the unit was terminating all grants investigating the development of a total artificial heart, maintaining that “the biology didn’t work” and preferring instead to focus on heart-assist devices. An advisory panel soon endorsed the funding of artificial heart research, and politicians from states impacted by the loss of the funding also brought pressure to bear, eventually forcing Lenfant to reverse his decision. At the very least, the incident reflected the lessening expectations of success in developing a viable artificial heart.

Abiomed pressed on in its research efforts, electing to pursue a risky strategy of not patenting its technology as much as possible. Because an artificial heart was such a long-term, complicated endeavor, patents taken out on early, but key, developments might easily expire by the time the company had an approved device ready to market. Abiomed preferred to maintain trade secrets and not start the clock on patents, which lasted 20 years, until the last possible moment. In some cases, however, because of grant requirements, the company had to reveal how certain technology worked. In these instances, patent protection was sought. In 1989, Abiomed received its first patent, which covered the hydraulic pumping system key to its concept for an artificial heart.

Efforts at producing secondary products to generate revenues also continued. In 1989, Abiomed also received FDA approval to market the Perio Temp Probe, a microprocessor-based instrument intended to detect gum disease by measuring the minute differences in temperature between normal and inflamed tissues. Later the company developed the Halimeter, which detected bad breath. To consolidate its dental business, a subsidiary named Abiodent was formed in 1990. Also in that year, Abiomed gained FDA approval on a noninvasive device to detect lead content in adults. Two years later, following five years of trials, the FDA approved the BVS5000 for sale in the United States. Because of these interim products, Abiomed generated increasing revenues, which grew from $2 million in 1992 to $16.5 million in 1997. The company was also able to turn an annual net loss of $5.1 million in 1992 to profits of $500,000 in 1996 and $700,000 in 1997. After years of risky research, not only had Abiomed maintained its independence, it was debt free, with millions in the bank to support a final push and get the company through extensive FDA clinical trials for an artificial heart, provided it could actually produce such a device.

In the fall of 1993, Abiomed and its partner, the Texas Heart Institute, were only one of three groups to be awarded contracts by the National Heart, Lung, and Blood Institute to complete the final development of a battery-powered heart. It was clear that whoever was first to reach the market with a product would hold a significant advantage. Abiomed imposed a deadline on itself, intending to begin clinical trials in the year 2000, and began a final push in its research. The company raised the necessary cash by selling a 14 percent stake to Genzyme Corp. for $15 million. Genzyme’s chairman, CEO, and president, Henri A. Termeer, was a member of Abiomed’s board of directors and therefore familiar with the company’s research efforts. In addition, the two companies agreed to work together on the new field of “biosurgery,” which combined biotechnology with biomedical engineering. The emphasis would be on minimally invasive cardiac surgery.

Company Perspectives:

As a pioneer in the important emerging markets of cardiac assist and heart replacement, Abiomed has demonstrated its ability to develop and commercialize advanced technologies to address patient needs.

To meet the demands of completing its artificial heart, Abiomed added staff, essentially doubling in size by the fall of 1997. It stress-tested components to ensure reliability and successfully implanted the devices in calves. Because of the history of the Jarvik-7, the company was very sensitive about the ethical concerns surrounding the use of an artificial heart. In 1999, it enlisted Elizabeth Haavik Morreim of the University of Tennessee’s College of Medicine to set up an independent Patient Advocacy Council, which would name a knowledgeable mentor for each patient involved in clinical trials of the device. Other than Morreim, no members of the council were to be revealed to the media, and Abiomed was also not permitted to interfere with the council’s work. Moreover, no council members, surgeons, or any other parties connected to the clinical phase were permitted to hold stock in Abiomed. The company also produced a lengthy consent agreement, totaling some 13 pages, detailing 14 potentially fatal risks.

Abiomed’s artificial heart, made of titanium and plastic, was originally called PulsaCor, then changed to AbioCor. It incorporated technologies unavailable to the Jarvik-7, using bladder-like liquid pumps instead of a bulky pneumatic system and a microprocessor the size of a videocassette embedded in the abdomen to adjust the blood flow. Improved batteries also eliminated the need for external power, allowing recipients of the Abio Cor to leave their beds, unlike the tethered Jarvik patients. To eliminate any tubing or wiring that might break the skin and cause infection, a spiral induction coil located under the skin permitted recharging of the lithium-ion battery cell. Streamlined in comparison to the Jarvik-7, the AbioCor, roughly the size of a grapefruit and weighing two pounds, remained a relatively large unit, only suitable at this stage for use in males.

While pre-clinical work proceeded on the AbioCor, Abiomed elected to discontinue its dental business, which was not performing as hoped. The company suffered a further setback when it had to issue a recall on some of its BVS5000 units. Increased spending on AbioCor also resulted in mounting losses. Nevertheless, Abiomed, thanks to disciplined management of its funds, remained well financed. In September 2000, in fact, the company was able to acquire the exclusive rights to the so-called Penn State Heart and the assets of BeneCor Heart Systems, a company created to commercialize the artificial heart developed by the Pennsylvania State University. The BeneCor applied slightly different techniques, which might prove useful in pursuing the next generation of artificial hearts. Lederman characterized Abiomed’s position as having “both the Mercedes and Rolls-Royce of artificial hearts.”

Although Abiomed did not meet its goal of entering clinical trials in 2000, by the end of that year it sought approval from the FDA to begin testing the AbioCor on humans. A few weeks later the FDA granted permission to implant the device in five patients. Over the ensuing months, the company prepared to take the next crucial steps. Rather than becoming the victim of media hype, Abiomed downplayed expectations and tried to conduct its business in secret. It looked for candidates who had less then 30 days to live and who had no chance for a heart transplant or any other way to survive. The initial goal was to double the patient’s life expectancy to 60 days. The company also made it clear that all five patients were certain to die in a relatively short period of time. Moreover, while preparing to conduct the initial implant, Abiomed quietly began to file for a series of patents covering every aspect of the technology involved in the AbioCor. As had been the plan for over a dozen years, the company now started the clock on the 20-year patent period.

AbioCor Implanted in First Patient in 2001

On July 2, 2001, a surgical team led by Dr. Laman A. Gray and Dr. Robert D. Dowling implanted the AbioCor in the chest of an anonymous 59-year-old male patient, ushering in a new era in the development of the artificial heart. Everyone involved with the project was protective of the patient and it was not until 51 days after the operation that his identity was revealed at his own request to head off speculation. He was Robert Tools, a former teacher and telephone worker. To the surprise of most gathered for his first public appearance, he walked into the press conference. In June, when he had first met with the surgical team after reading about the AbioCor in a Newsweek article, he barely had enough strength to speak. Tools’s condition improved enough in the weeks following his press conference that he was able to take walks with his wife in a nearby park and engage in other activities with his family. Without question, the quality of his life had been significantly improved by the introduction of the AbioCor.

Key Dates:

1981:: Applied Biomedical Corp. is formed.
1987:: Applied Biomedical is merged into newly formed Abiomed, which is taken public.
1994:: The National Institutes of Health (NIH) selects company to receive funding for final stage of artificial heart development.
2000:: The Food and Drug Administration (FDA) grants approval to conduct clinical trials on the AbioCor artificial heart.
2001:: First patient receives the AbioCor and lives 152 days.

The subsequent recipients of the AbioCor faced much less media attention. The second operation occurred in Louisville on September 13, 2001, just two days after the terrorist attacks on the Pentagon and New York City. Tools eventually suffered a debilitating stroke on November 11 and never recovered, dying later in the month after living 152 days with the world’s first fully implanted artificial heart. Nevertheless, the clinical trial showed enough early success that the FDA approved the AbioCor for use with an additional five patients. After another patient suffered a stroke caused by a blood clot, Abiomed decided in early 2002 on a design modification, eliminating a small plastic cuff that had been necessary for use with animal subjects. The company was not certain that the cuff was the cause of the blood clots, but it was a likely suspect, and it served no function in humans. The company also announced that it planned to have a smaller model of the AbioCor, suitable for all adults, ready for testing by 2004. Even though the clinical trials for the original model were far from over, the company began looking forward. Although the company had already achieved a notable success, the result of 20 years of dedicated effort, the future remained uncertain. Should the FDA allow Abiomed to market its artificial heart, there appeared to be a potentially sizeable market for the product, but there also remained a number of uncertainties. Other devices might replace it—not only rival artificial hearts but also cardiac-assisted devices that had the advantage of using a patient’s real heart as a backup. Moreover, there was the possibility that scientists might one day “grow” organs employing new biotech discoveries. Although such a concept might currently belong to the realm of science fiction, the idea of a human being surviving even five minutes with a portable mechanical heart was once considered equally as fantastic.

Principal Subsidiaries

Abiomed Cardiovascular, Inc.; Abiomed R&D, Inc.; Abiomed B.V.

Principal Competitors

ATS Medical; Arrow International; Boston Scientific Corporation; Edwards Lifesciences; Medtronic, Inc.; St. Jude Medical, Inc.; Thoratec Corp.; Zoll Medical.