The last few months have been pivotal for med-tech specialist AorTech International plc (LON:AOR), while the coming 12 to 18 could be transformational, according to chairman Bill Brown.
The acquisition of RUA Medical Devices has seen the firm morph from a virtual business to an end-to-end device developer with some tried and tested intellectual property and two potentially significant valuation milestones on the horizon.
All this is a far cry from when Brown, shortly after taking the reins at AorTech, was given a reality check by one disgruntled investor. “He said we were a dog of an investment,” he recounts ruefully.
Internally, there was a recognition things had to change, particularly in the wake of some long-running litigation, and the March 11 unveiling of the RUA deal has effectively tooled AorTech for success.
Ripe for change
It has acquired a business that in normal times is profitable and cash generative. But more importantly, strategically, AorTech now has the infrastructure and regulatory accreditation to kick on.
AorTech and RUA were previously collaborating on grafts and patches coated with the former’s Elast-Eon.
This is a biostable polyurethane-based material for medical devices that has a 15-year track record and has been used on devices in around 7mln patients.
It expects to start animal trials of Elast-Eon-coated large-bore grafts in the second half of 2020.
“By end of the calendar year we should be finishing off the animal trials and gathering the data for submitting the package to the FDA [the US Food & Drug Administration] for approval to market those products in the US,” reveals Brown.
“What started out as a design product will be close to being a regulated product.”
Second value kicker
The second of the two developments has the potential to be even bigger – but like any research and development project there is no guarantee of success.
The company is working on a synthetic heart valve, called a polymeric valve, that overcomes substantially all of the downsides of the current technologies.
Pyrolitic carbon mechanical valves tend to be ‘indestructible’, but require patients to take anti-coagulants, which have some significant side effects.
Animal tissue alternatives, as well as being expensive, are apt to re-calcify (harden up) in around 12 years.
What Aortech is developing is a technology that is as durable as a mechanical valve but operates as an analogue of the natural heart valve.
“So, it shouldn’t require anti-coagulation treatment, but because it is made of a polymer that is proven not to calcify it should have substantial benefits,” explains Brown.
“It is a better valve, cheaper to make and should be highly disruptive in the valve industry.”
'Stunning' result
The AorTech chairman said the prototype valves generated earlier this year using a new plastic technology and manufacturing process were “stunning”.
He’s not coy in revealing he has spoken to some of the industry leaders in the field, not least to seek guidance on what data they might like to see from a successfully developed heart valve.
“We are doing everything right; the way the big companies would do it,” says Brown.
There is a recognition in this approach that AorTech won’t be taking the development all the way to the home plate.
That said, there is a lot of work, and some significant hurdles to jump before industry interest is converted into a commercial deal.
For example, the AorTech heart valve is not quite at the ‘design freeze’ stage, the point at which testing can begin.
There are then two types of testing: the animal variety that proves the valve works and the calcification model is correct; then there’s a whole raft of durability and mechanical work.
“From the start of those trials it is probably nine months before you know you’ve got something that is capable of going into man,” says Brown.
Human trials
A first-in-man study will initially recruit at least 150 patients, from which 400 patient-years of data must be gathered before they give new devices the green light.
Potential buyers of new heart valve technology tend to get really interested around the time of the human trial phase, Brown observes.
“Take-out values have been US$300-500mln,” he points out. “What we’ve got is substantially more disruptive.
“It is a massive opportunity, which if we get it right, will be fantastic for our shareholders. But if we don’t get it right, we still have a valuable exciting business.”