Medtronic gains a stake in the race to get the first FDA approval of an ablation catheter for atrial fibrillation with its $380 million acquisition of Montreal-based CryoCath, announced Sept. 25.

Valued at 10 times CryoCath's annual sales of about $38 million, the deal calls for Medtronic to launch a tender offer for CryoCath stock at $8.46 per share - a 97% premium over its Sept. 24 close.

Medtronic and CryoCath are two of many firms pursuing an AF indication for cardiac ablation systems in the United States. However, Medtronic's candidate, the radiofrequency energy-based Cardioblate surgical ablation system, is further behind the curve than CryoCath's Arctic Front cryoablation balloon catheter technology.

Medtronic's CURE-AF study, which began last year, is still enrolling patients, according to ClinicalTrials.gov. CryoCath completed enrollment of its STOP AF pivotal trial in April.

CryoCath filed the first module of the PMA for Arctic Front in July 2008. The firm expects to submit the final module with the pivotal clinical data in the summer of 2009 and earn FDA approval by late next year or early 2010.

CryoCath's AF approval will likely be the second behind Johnson & Johnson/Biosense Webster, according to Morgan Stanley analyst David Lewis. In a Sept. 25 report, Lewis says he expects J&J to gain approval first, before the upcoming Heart Rhythm Society annual scientific sessions in May 2009. Other competitors in the field include CardioFocus and St. Jude Medical.

CryoCor became the first company to complete enrollment in a randomized pivotal trial for a cryoablation catheter for AF in August 2007, and earlier this year indicated plans to submit a PMA by year-end. CryoCor was subsequently acquired by Boston Scientific in April for $17 million (¹ 'The Gray Sheet' April 21, 2008, In Brief).

Boston Scientific said it plans to use CryoCor's power console to deliver cryo energy to its own proprietary cryo balloon catheter, which begins clinical trials next year.

Patent Deal Removes Litigation Risk

In conjunction with the Medtronic deal, CryoCath announced Sept. 25 that it agreed to settle patent litigation with CryoCor relating to their respective cryoablation technologies.

As part of the settlement, all pending suits will be withdrawn, and the companies have agreed not to sue each other over cryoablation intellectual property in the next 12 years. CryoCath notes it also will pay royalties on certain future products for a limited time under the agreement.

CryoCath says AF represents a $2 billion market opportunity. Based on wide-spread off-label use, CryoCor previously estimated that 40,000 AF cardiac ablation procedures were performed in 2007, up from 26,000 the prior year, even though no devices are approved specifically for AF.

Cardiac ablation for AF received a boost from a recent editorial published in the New England Journal of Medicine. The editorial accompanied disappointing results of a study of drug-based rhythm-control therapy and suggested there should be further investigation of AF ablation.

CryoCath sells Artic Front overseas. Its U.S. offerings include Freezor cryoablation catheter for atrioventricular nodal reentrant tachycardia, and the Freezor Xtra and Freezor MAX for cardiac arrhythmias.

Clinical Risk Remains And Price Tag Is Hefty - Analyst

Morgan Stanley's Lewis called the CryoCath purchase price "hefty," acknowledging that clinical risk remains. Given the price tag of six times projected 2009 sales, "we suspect the asset was hotly pursued and Medtronic had to pay up to secure it," he writes.

The analyst says AF is the highest growth segment of the cardiac rhythm management device market. St. Jude Medical is among the firms that have made significant efforts to establish a foothold in the AF ablation market, mainly through acquisitions of companies like Irvine Biomedical, Endocardial Solutions, Epicor and EP Medsystems. In contrast, "Medtronic has the smallest footprint by far, and we see the CryoCath acquisition as a positive foray into the high growth AF space," he concludes.

- Brooke McManus (b.mcmanus@elsevier.com)

Medtronic Warms To Cryoablation With $380 Million Acquisition Of CryoCath

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