ev3 is expanding its neurovascular division, already the fastest-growing segment of the company, by buying Chestnut Medical Technologies for $75 million up-front and up to $75 million in milestone payments, the companies announced June 2.

The company expects to close the deal in the next 45 days.

Menlo Park, Calif.-based Chestnut is the developer of Pipeline , an endovascular (delivered on a catheter) stent for treating cerebral aneurysms, and the Alligator endovascular foreign body retrieval device for the peripheral or neurological vasculature.

ev3 expects Pipeline and Alligator to complement its existing neurovascular product portfolio, including Axium aneurysm occlusion coils, the Onyx liquid embolic system, neuro access devices and balloons. ev3 is also developing the Solitaire endovascular device for bridging cerebral aneurysms.

During a June 3 conference call to discuss the acquisition, ev3 CEO Bob Palmisano said Pipeline "is superior to anything that we have seen either out there or under development that might be available. And secondly, the management of Chestnut is really just top class. They've done everything in such a high-quality way that we anticipate a very smooth transition."

Pipeline earned a CE mark in 2008 and the company expects it to be FDA-approved by 2011. The device is a tiny, self-expanding, cylindrical mesh implant made of braided cobalt chromium and platinum strands. Multiple units can be deployed end to end to cover the entire length of vessel needing treatment.

According to a June 2008 article in Endovascular Today magazine, the Pipeline device represents a new generation of microstents aimed at reconstructing the diseased parent artery that gave rise to the aneurysm. Data from human patients suggest the device is "a quantum advance in neuroendovascular aneurysm therapy," the article states.

Chestnut's Alligator retrieval device, meanwhile, has been shown in published case reports to be effective at removing pieces of aneurysm occlusion coils that have been displaced from the aneurysm and have become stuck in an intracranial vessel. "So we believe it is a very good fit with the rest of our portfolio," Pascal Girin, president of ev3's global neurovascular business, said.

Alligator has a CE mark for sale in Europe and earned a 510(k) in 2005. However, according to ev3, Chestnut has no U.S. sales reps and "very little commercial activity outside the U.S. - a handful at best."

ev3 Targets 2011 For Pipeline Launch In U.S.

Girin said Pipeline addresses a significant unmet clinical need for treatment of large and "giant" wide-neck or non-saccular cerebral aneurysms.

These aneurysms are challenging to treat with existing endovascular and open surgical treatment strategies. Current endovascular procedures for occluding these aneurysms with coils are completely successful in only 25% to 40% of cases, Girin said.

Coil embolization of non-saccular aneurysms is rarely attempted because the opening between the vessel and the aneurysm is so wide that a coil will not stay in place in the aneurysm. Also, many of these patients cannot be treated with surgery because of difficulty accessing the aneurysm or other surgical limitations, he said.

Chestnut has begun two clinical trials of Pipeline intended to eventually support a PMA for the device. The single-arm PUFS trial (Pipeline for Uncoilable or Failed Aneurysms) has enrolled 80 patients with large or wide-neck (4 mm or greater) aneurysms not suitable for coil occlusion. A total of 100 patients are expected to be enrolled in PUFS, which will follow patients for six months. The primary effectiveness endpoint is complete occlusion of the aneurysm without recurrence. The primary safety endpoints are death and ipsilateral stroke.

Pipeline is also being tested in the COCOA trial (Complete Occlusion of Coilable Aneurysms), which recently began enrolling patients, according to Girin. COCOA is randomizing patients with small aneurysms to be treated with either Pipeline or a coil occlusion device. The trial is planned for 200 patients and six months of follow-up with the same endpoints as PUFS.

Chestnut Will Immediately Boost Bottom Line

ev3 projects the global market opportunity for Pipeline will be about $350 million annually by 2013. The projection is based on data showing that about 85,000 endovascular aneurysm procedures will be performed each year and that about 42,000 of those are more amenable to treatment with flow-diversion devices than coils. The company expects each procedure to use an average of 1.5 Pipeline devices, for a total cost of $8,200 to $8,500 per procedure.

The deal reinforces ev3's commitment to its neurovascular business, which has been the company's strongest growth driver in recent years with a 41% compound annual growth rate over the last five years, CEO Palmisano said.

"We have a terrific business in neurovascular. It's growing very, very nicely. And it is based upon having really the best technology and the best distribution system on a worldwide basis. So this fits into that very, very nicely," Palmisano said.

ev3 CFO Shawn McCormick said the company anticipates the Chestnut products could contribute between $3 million and $5 million to ev3's 2009 revenue and accelerate revenue growth about 3% annually over the next five years. ev3 expects Pipeline to be at least as profitable as any of ev3's current neurovascular products and says it will fit easily into the company's manufacturing infrastructure.

In 2008, ev3's neurovascular products division grew 27% to $132 million. The division includes neurovascular occlusion products, which grew 33% to $75 million and neuro access and delivery products, which grew 19% to $58 million.

ev3's total 2008 revenue was $422.1 million, up 49% over 2007. The large jump was partially due to the acquisition of FoxHollow and revenues from a new research agreement with Merck (¹ Also see "Ev3’s Atherectomy Business On The Upswing After Troubled First Quarter" - Medtech Insight, 4 August, 2008., p. 15).

Under the terms of the June 2 agreement, ev3 acquires 100% equity interest in Chestnut for a total upfront price of $75 million; between $22.5 million and $30 million will be paid in cash and the rest will be paid in stock. ev3 will finance the deal with cash on hand.

Chestnut will get the maximum contingent milestone payment of $75 million if FDA approval is received before October 1, 2011. If FDA approves it later than that date, the milestone will be reduced over time, and ev3 will owe no contingent payment if Pipeline is not approved by the end of 2012.

- Reed Miller (re.miller@elsevier.com)

ev3 Expands Neurovascular Division With Acquisition Of Chestnut

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