Thoratec Corp. is in the early stages of a new strategy to better respond to competition from HeartWare International Inc. and return to growth, new CEO Keith Grossman said Nov. 5.

Grossman, who was reappointed as CEO in September after an eight year hiatus, acknowledged that the company's long experience as virtually the only left ventricular assist device maker on the market has made it slow to respond to competition from HeartWare, which launched its LVAD system in the U.S. in 2012.

“Thoratec is populated by exceptionally bright, talented and experienced people. Our internal level of expertise in the [mechanical circulatory support] field is impressive and I think it’s the hallmark of an industry leader,” Grossman said during a third-quarter earnings call. "However, the long history of Thoratec has been one largely free of commercial competition and this has indeed shaped our culture. The change to a competitive environment over the last few years has been a major transition for our organization that’s really hard to overstate.”

This was Keith Grossman’s first earnings call since taking over as Thoratec CEO on Sept. 22 after Gary Burbach stepped down. Grossman previously served as Thoratec CEO from 1996 through 2006 and has been serving on Thoratec’s board since 2006. (See Also see "Thoratec Goes Back To The Future With CEO Appointment" - Medtech Insight, 22 September, 2014..)

When Grossman was CEO before, his job was to establish LVADs as a viable therapy for end-stage heart failure. Now his priority is fend-off stiff competition from HeartWare.

In the third-quarter, Thoratec’s revenues were $105.8 million, down 16 percent from the third quarter of 2013, the company reported Nov. 5. Revenue in the U.S. was down 14 percent and international revenue was down 25 percent.

Thoratec blames most of the decline on slow HeartMate II unit sales. During the quarter, it sold 825 HeartMate pumps worldwide, a decline of 14 percent year over year, including 28 implants of the next-generation HeartMate III LVAD in ongoing clinical trials. In the U.S., HeartMate unit volume declined 14 percent and international HeartMate unit volume declined 12 percent, with zero units sold in Japan during the quarter.

Meanwhile, rival HeartWare’s revenues are booming. On Oct. 30, the company reported third-quarter revenues of $68.6 million, up 25 percent over the same period of 2013. HeartWare says it sold 675 HeartWare ventricular assist devices (HVAD) during the quarter, up from 550 in the third quarter of 2013, including 361 in the U.S. and 314 overseas.

A Cultural Revolution

Grossman outlined his key areas of focus as he tries to turn the company’s fortunes around. He said the company is currently trying to complete a “cultural revolution,” which is necessary to grow its revenues.

“The issues affecting growth are multi-factorial. I think some are execution on our part and some are just market and technology driven,” he said. Although he was sparse on details in order not to give “a competitive roadmap for our competitor or what we’re going to do, not do, do differently,” he stressed the importance of changes to the company’s management structure. “The first role for me is to find really great leadership,” he said.

On Oct. 6, Thoratec created the position of president of North America, and named Niamh Pellegrini, formerly of Johnson and Johnson, to the new job, which will oversee the previously North American commercial activities, which were previously managed separately. The company also named Vasant Padmanabhan, former VP-Product Development for Medtronic’s Implantable Defibrillator Business, to the position of Senior VP of Technical Operations, to oversee product organization, innovation, speed and quality. (See [A#01141013002].)

Grossman said his next priority is to find a president of International “that will be on the ground in Europe and will be a counterpart to our president of North America.”

He said that the company has “adjusted admirably” to some of the changes in the competitive landscape over the years, but to a large extent, “we’ve been far too slow to adapt.”

In particular, Grossman stressed the company has a lot of work to do to revitalize sales in the U.S. “It’s my very strong conviction that our commercial engine in the U.S. is a competitive advantage that has not been utilized to its full capability to date.” Like Burbach, Grossman is looking to new devices – especially the HeartMate III – to solidify the company’s position atop the U.S. VAD market. (See Also see "Thoratec Looks To Next-Generation LVADs To Revive Sinking Sales" - Medtech Insight, 8 August, 2014..) He said the ongoing U.S. pivotal trial of the HeartMate III “represents a unique opportunity to increase our presence and our influence with U.S. customers.”

He also expects HeartMate III to help revive sagging international revenues. “Maybe too many of our market share wounds in Europe have being self-inflected, and we plan to have the unique opportunity to launch the HeartMate III into Europe and other markets outside the U.S. before the end of 2015,” he said. “We must make certain that our commercial organization and our plans are optimized in order to take full advantage of this very critical product launch. Our strategy in the rest of the world, particularly in certain emerging markets needs to be formulated and executed as well as these will be more critical to our growth in future years.”

Grossman appears to be looking at many options for how to boost shareholder value. “That could be acquisitions that bolster our VAD presence. It could be acquisitions that diversify what we do,” he said. “It could be stock repurchase. It could be increased investment in our existing business where we think there is an outsized return. So it could mean a lot of things.”

Thoratec Seeks 'Cultural Revolution' As Rival HeartWare Makes Strides

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