Datascope Corporation

14 Phillips Parkway
Montvale, New Jersey 07645
U.S.A.
Telephone: (201) 391-8100
Toll Free: (800) 288-2121
Fax: (201) 307-5400
Web site: http://www.datascope.com

Public Company
Incorporated: 1964
Employees: 1,200
Sales: $298.8 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: DSCP
NAIC: 334510 Electromedical and Electrotherapeutic Apparatus Manufacturing; 339112 Surgical and Medical Instrument Manufacturing; 339113 Surgical Appliance and Supplies Manufacturing

Datascope Corporation is a leading maker of medical devices for cardiac patients. The company pioneered the manufacturing of intra-aortic balloon pump systems and catheter technology. Intra-aortic balloon pumps are used in various types of coronary surgery, where the balloon catheter acts as the pumping device within the patient’s aorta. Datascope’s intra-aortic balloon pumps and catheters are used in the treatment of acute heart failure, irregular heart rhythm, cardiac shock, and in open-heart surgery and coronary angioplasty. About 40 percent of the company’s sales come from its Cardiac Assist division, which develops and manufactures intra-aortic balloon pumps and catheters. Datascope has three other principal divisions. Its Patient Monitoring division manufactures devices used in hospitals to keep track of patients’ vital data, including blood pressure, temperature, cardiac output, blood oxygen saturation, airway carbon dioxide, and concentration of anesthetic. This division generates about 35 percent of Datascope’s sales. The company operates another division, Collagen Products, to market its VasoSeal line of arterial sealant devices. The VasoSeal is a collagen-based plug that is used to seal arterial punctures and prevent bleeding. Patients undergoing angioplasty or other similar procedures end up with a puncture wound in the leg where the catheter was inserted. Datascope’s VasoSeal products reduce the time needed to stop bleeding from this puncture. The division also manufactures other products used to stop bleeding during surgery. Datascope’s fourth division is run as a subsidiary company, InterVascular Inc. InterVascular makes knitted and woven polyester-coated grafts used to replace diseased arteries. InterVascular Inc. derives almost 60 percent of its sales from overseas markets, with strong sales in France, Germany, Italy, Belgium, and Japan. Datascope is headquartered in New Jersey, and operates several manufacturing and research facilities in that state. Datascope’s InterVascular subsidiary also operates a manufacturing plant in La Ciotat, France.

Early Years

Datascope was founded in 1964 by Lawrence Saper. The company made high-tech medical diagnostic equipment. It went public in 1972, and its stock began trading on the Nasdaq exchange. The company was small, but by the mid-1980s, it was the market leader in both patient-monitoring equipment and cardiac-assist devices. Its two principal products were intra-aortic balloon pumps, which accounted for about half its sales, and patient monitors. The company’s net profits rose and fell, but sales grew steadily. Datascope began the 1980s bringing in just over $31 million in sales, and passed $50 million in 1985. Sales topped $100 million in 1988, and climbed annually into the early 1990s. Despite the small size of the company, it eventually became notable for its profitability. A specialist in high-tech stocks interviewed in Barron’s on January 12, 1987, picked Datascope as one of the best health care stocks around, noting in particular that the company’s research and development gave it a consistent stream of valuable new products. By 1990, Datascope commanded from 60 to 70 percent of the intra-aortic balloon market. Its biggest competitors were Aries Medical Inc. and Kontron Instruments Inc. While Kontron suffered from quality-control problems that led to a temporary shutdown, Datascope continued to do well. Sales grew to over $113 million in 1990, and then to over $120 million in 1991. The company came up with new patient-monitoring products in the early 1990s. Although the initial versions were troubled by software problems, they had advantages over competitors’ products because of special safety features.

New Products in the Early 1990s

By 1991, Datascope was still leading the intra-aortic balloon pump market, but sales were slowing. Its products were used to support the heart during heart surgery, and the market seemed to have matured. The company set its sites on another, similar market, by developing a catheter for angioplasties. The balloon angioplasty catheter was used to clear clogged arteries in a procedure that was an alternative to the traditional heart bypass operation. This market was expected to grow rapidly and be worth about $400 million already in 1991. Datascope invested heavily in a new catheter, called Integra, and another called Micross-sl. But the angioplasty catheter market was highly competitive, and Datascope may have come to it too late. In 1992, the company announced that it was giving up on development of an angioplasty catheter and concentrating its efforts on other product lines.

Its most promising product was the VasoSeal. In 1991 Datascope announced that this new device would debut in Europe and was expected to get approval for the United States market soon. Already expert in the intra-aortic balloon, Datascope found a need for a device for what was essentially the other end of the coronary operation. Doctors inserted intra-aortic balloons through a catheter inserted in the patient’s femoral artery. The balloon was pushed through the patient’s bloodstream until it reached the proper position in the aorta, and surgery could proceed. After the surgery, the balloon was withdrawn through the catheter, and the catheter removed. Then a nurse or technician would apply pressure to the resulting puncture wound in the leg. It usually took some 20 minutes before the wound caused by the catheter stopped bleeding, and then the patient had to be immobilized for hours, and usually not allowed to walk for some time. VasoSeal worked to plug the puncture wound with collagen derived from cows. The device needed only about five to eight minutes of pressure from a nurse or technician before bleeding stopped. It was absorbed into the body in about six weeks. The worldwide market for the device was expected to be large; an estimated 2.5 million arterial catherizations were performed annually across the globe. In dollar terms, the worldwide market was estimated to be worth from $250 to $350 million. Critics claimed that the VasoSeal was not medically necessary. It was expected to cost upwards of $100 per use, and a low-tech solution—manual pressure on the wound—already existed. Nevertheless, Datascope was confident it had discovered a new niche market, and the company’s share price more than tripled from the end of 1990 to late 1991.

Growth in International Sales

VasoSeal was approved for use in Europe years before it became available in the United States. Datascope worked hard during the early 1990s to increase its sales in Europe and abroad. Working with overseas customers also taught the company some things about handling changing domestic conditions. During the early 1990s, Datascope’s Cardiac Assist division in particular aggressively pursued foreign markets, opening four new sales offices and adding 20 people to sell Datascope’s catheter balloons and pumps abroad. According to the division’s sales manager, Ken Waters, quoted in Sales and Marketing Management, from August 1995, price was more of an issue in medical markets outside the United States, because hospitals usually operated under some form of managed care or national health insurance. Datascope’s sales force had to do more than demonstrate that their product worked. They had to persuade and educate customers to overcome barriers against new technology that might be costly. The overseas sales force became versed in selling to hospital administrators and financial officers, whereas the domestic force was focused more on selling directly to cardiologists. Waters considered his sales team’s experience with overseas markets valuable preparation for changes in the domestic market, as doctors themselves began to have less say in hospitals’ financial decisions. By 1996, foreign sales accounted for more than 20 percent of Datascope’s total revenue.

Increasing Competition in the Late 1990s

Price was a certainly a factor in Datascope’s sales abroad, but it was also becoming more of an issue in domestic sales. Though the company maintained strong market share, competition forced it to lower prices for its intra-aortic balloon pumps. The company also cut into its profit margin by spending heavily on research and development for its second core business, patient monitoring. Datascope did see overall sales gains through the mid-1990s, continuing a long pattern of growth. Sales passed $150 million in 1992, and by 1995, the company brought in $195.7 million. Sales for 1996 went up to over $211 million. By 1996, about half the company’s sales came from its Cardiac Assist division, and about 40 percent from its line of patient monitoring devices. Most of the remainder of its sales came from its vascular graft products. But VasoSeal finally got approval from the Food and Drug Administration (FDA) in late 1995, and it was the only product of its type for sale in the United States. FDA approval was granted at first only for use in coronary angioplasty and a related procedure, angiography. But the potential market was large, as nearly a million Americans underwent these procedures annually. In early 1997, the FDA approved more uses for VasoSeal, allowing it to be used to seal puncture wounds caused by certain radiology procedures. Datascope’s stock jumped 14 percent on the news of the FDA’s widened approval.

Company Perspectives:

Datascope Corporation manufactures proprietary products for clinical health care markets in interventional cardiology and radiology, anesthesiology, cardiovascular and vascular surgery, emergency medicine and critical care.

Though VasoSeal was first to reach the U.S. market, it was not the only such product. At least two other American companies made and sold devices for sealing arterial punctures in Europe and were aiming for the domestic market as well. Kensey Nash, of Exton, Pennsylvania, had a similar product called AngioSeal, which got FDA approval for sale in the United States in August 1996. AngioSeal worked using collagen in combination with a plastic plug manipulated with a tube and string. Perclose, a Menlo Park, California, company co founded by a well-known cardiologist, marketed an arterial sealing device that allowed a physician to suture the wound shut with flexible needles. Perclose became a subsidiary of the health care conglomerate Abbott Labs in 1999. Kensey Nash was a small company with a record of losing money, but its stock, like Datascope’s, jumped at news in 1997 of FDA approval of wider use for its device. By 1997 AngioSeal was bringing Kensey Nash about $6.4 million annually. Nevertheless, Datascope was ahead of the game. It was bringing in about $8 million in its first year of selling VasoSeal, and sales increased dramatically over the following years. The worldwide market for VasoSeal and its competitors’ products was potentially huge. The estimated dollar value placed on that market rose, varying from $400 million to as much as $1.3 billion.

By the late 1990s, Datascope was comfortably situated with four growing business divisions. In 1999, the company announced plans to spend $16 million on new facilities. Some of its laboratory and warehouse space was outdated, so it built a state-of-the-art facility in Mahwah, New Jersey. By 2000, Datascope had seen ten straight years of double-digit sales and earnings growth. Overall sales were close to $300 million for 2000. Its Cardiac Assist division accounted for about 40 percent of total sales, less than in earlier years, but the company believed its market still had room for growth, particularly in Europe. Sales of patient monitors also continued to increase, jumping ten percent in 2000. Datascope had a line of portable, battery-powered bedside monitors that led the market for their type. International sales were also particularly strong for this division. The company’s Intervascular, Inc. subsidiary did almost 60 percent of its sales overseas. Its profits were sometimes mixed because of currency fluctuations, but this division too seemed to be expanding. In 2000 Datascope acquired a 30 percent equity in a German company, AMG GmbH, which distributed stent products (tubes used inside blood vessels in coronary operations). Datascope planned to market AMG’s stents through its own sales force in Europe, and to have AMG sell VasoSeal in Germany. Datascope’s Collagen Products division, which marketed VasoSeal, was its real success story. Sales for the unit leapt over 30 percent in 2000. The company brought out VasoSeal ES, a second generation product, and readied a third generation, VasoSeal EZ, for clinical trials in 2001.

Datascope had grown almost exclusively through developing its own products, and it had little debt. It continued to bring out new lines and to invest heavily in research and development. For 2000, over 40 percent of its sales came from products the company had developed in the past three years. It continued to expand its sales of its core line of intra-aortic balloon pumps in spite of years of warnings about softening conditions in that market. And its patient monitors continued to be market leaders. With the great promise of its collagen product line, the company seemed poised for more gains in years to come.

Principal Divisions

Cardiac Assist; Patient Monitoring; Arterial Puncture Sealing; Vascular Grafts.

Principal Subsidiaries

InterVascular, Inc.; Datascope Belgium S.p.r.l.; Datascope B.V. Hoevelaken (Netherlands); Datascope S.A.R.L. (France); InterVascular S.A.S. (France); Datascope GmbH (Germany); InterVascular GmbH (Germany); Datascope Italia s.r.l; Datascope Medical Co. Ltd. (United Kingdom).

Principal Competitors

Abbott Labs; Kensey Nash Corporation.; Agilent Technologies.

Key Dates:

1964:

Lawrence Saper founds the company.

1972:

Datascope becomes a public company.

1988:

The company’s annual sales top $100 million.

1991:

The company announces its new VasoSeal product for sale in Europe.

1995:

VasoSeal gets FDA approval for use in United States.

Further Reading

Benway, Stuart J., “Datascope Corp.” Value Line, Edition 1, Part 3, March 22, 1991, p. 215.

“Datascope Corp.,” Wall Street Journal, July 21, 1992, p. B3.

“Datascope Corp.: FDA Clears Sale of Seal for Use in Heart Surgery,” Wall Street Journal, October 3, 1995, p. B4.

“Datascope Corp.: FDA Requests More Data to Finish VasoSeal Review,” Wall Street Journal, December 11, 1992, p. B6.

“Datascope Corp.: Stock Rises 14% as FDA Approves New Product Use,” Wall Street Journal, January 8, 1997, p. A12.

“Datascope Unveils Device Used to Seal Arterial Punctures,” Wall Street Journal, April 30, 1991, p. B4.

Gianturco, Michael, “A Play on Catheterization,” Forbes, December 30, 1996, p. 146.

Hower, Wendy, “A Dream Team Revives Kontron Instruments,” Boston Business Journal, October 22, 1990, p. 6.

Keenan, William Jr., Royal, Weld F., and Campanelli, Melissa, “Bravo, Bravo!,” Sales and Marketing Management, August 1995, p. 35.

Key, Sandra W., and Daniel J. DeNoon, “Datascope Plans to Enter Life Science Research Market,” AIDS Weekly Plus, November 3, 1997, p. 23.

Lazo, Shirley, “Speaking of Dividends,” Barron’s, December 2, 1991, p. 42.

Lowenstein, Roger, “Medical Gear Maker Datascope Draws Crowd, But Doubters Cite Hospital Cost Pressures,” Wall Street Journal, July 11, 1991, p. C2.

“New Device Stops Bleeding Faster,” FDA Consumer, January-February 1996, p. 2.

Oppenheim, Mitchell A., “Datascope Corp.” Value Line, Edition 1, Part 3, September 18, 1992, p. 215.

Plante, Thomas R., “Datascope Corp.,” Value Line, Edition 1, Part 3, September 13, 1996, p. 213.

Shook, David, “Montvale, N.J.-Based Medical Device Manufacturer to Move 350 Workers,” Knight-Ridder/Tribune Business News, February 1, 1999.

Stark, Karl, “FDA Approves Pennsylvania Firm’s Artery-Repairing Tool for Wide Use,” Knight-Ridder/Tribune Business News, August 12, 1997.

“The Growing Might of Midcap Stocks,” U.S. News & World Report, November 18, 1991, p. 98.

Welling, Kathryn, “High on Tech,” Barron’s, January 12, 1987, pp. 11, 27–32.

—A. Woodward