Microport buys rights for Lombard’s stent grafts

December 28, 2016 – 3:30 PM | By Omar Ford | No comments yet

By Carmen Ho, Staff Writer

HONG KONG – Chinese companies, many with improving technologies, continue to use acquisitions to expand their global market share. A case in point is Shanghai-based Microport Scientific Corp., which inked a $15 million investment in Lombard Medical Inc. (NSDQ: EVAR), of Irvine, Calif., a specialist in endovascular aneurysm repair.

The investment sets the stage for a strategic partnership that gives Microport the exclusive marketing rights in China and Brazil for Lombard’s Aorfix and Altura stent graft products as well as the right to manufacture the products for the China market.

For Lombard, the deal has two benefits. The first and most obvious is an injection of cash to fund regulatory and commercial programs. The second will be faster commercialization of its two key products in China.

“With the aging global population and conversion from open surgery repair to interventional therapy facilitated by technology, there is a large growing endovascular aortic repair [EVAR] market worldwide with room for expansion,” said Microport spokesman Chen Yi. “The China EVAR market is approximately $150 million in size and rapidly growing at a compound annual growth rate of around 15 percent.”

Aorfix is the first – and to date only – stent graft with approvals to treat abdominal aortic aneurysms (AAA) with aortic neck angles up to 90 degrees.

Aorfix works by creating an internal bypass of an aneurysm and reducing the risk of rupture. Aorfix has a helical and circular design to conform to the contours of human anatomy, including aortic necks with high angulations and iliac arteries with extreme bends. Aorfix has been evaluated in three studies and used in more than 7,000 procedures. It has a CE Mark and was approved by the U.S. FDA approval in 2013.

Altura is a stent graft to treat standard AAA anatomy. It is delivered via an ultra-low profile 14F catheter and allows for repositioning during deployment and accurate placement at each renal artery, which allows physicians to use all of the available aortic neck. It also eliminates the need for cannulation, which cuts down on procedure times. The Altura system received CE mark in 2015 and Lombard launched it in the U.K. and Germany in February 2016. A broader international rollout is underway.

Part of the new deal would see Microport manufacture components for Altura and Aorfix at its facilities in Shanghai.

According to Microport, the manufacturing collaboration will make the products more affordable.

“(W)e believe our planned component manufacturing collaboration will significantly reduce manufacturing costs and increase margins for both Aorfix and Altura product lines,” Lombard Medical CEO Simon Hubbert said in a release announcing the deal.

The market for minimally invasive treatment of AAA could be worth $1.8 billion. Research and Markets has forecast the stent grafts market in China will grow at a compound annual growth rate (CAGR) of 10.55 percent between 2014-2019.

However, the prevalence of AAA in Chinese patients is low, which does not support routine screening, said Jensen Poon from the department of surgery at Queen Mary Hospital in Hong Kong. This could mean that the market for Lombard’s stent graft products may not be that big in China.

Through its $15 million investment, Microport acquired Lombard Medical common stock and convertible debt. Microport purchased $5 million in common stock at $0.62 per share, which represents a 29 percent stake in Lombard. Microport will also have a pro-rata purchase right on future equity offerings by Lombard.

Lombard also issued Microport a five-year $10 million unsecured promissory note at a rate of six-month LIBOR plus 4 percent, convertible into Lombard Medical common stock at a price of $0.90 per share at any time prior to maturity. Two representatives of Microport will be appointed by Lombard to serve on its board of five non-executive directors.

Microport has undertaken a series of deals over the past couple of years to reach into global markets.

In June 2014, the company completed a deal with Sorin Group, of Italy, to develop cardiology products. The aim of the deal was to develop and market cardia rhythm management (CRM) devices in China. Microport invested $10.2 million into 51 percent of the new venture. (See Medical Device Daily, June 2, 2014.)

A year earlier, the Chinese company stepped into the orthopedics market by acquiring, through a subsidiary, the Orthorecon business from Wright Medical Group Inc., of Arlington, Tenn. When the $290 million was completed in the first quarter of 2014 it was the largest by a Chinese company in the U.S. (See Medical Device Daily, June 17, 2014.)

Microport’s stock on the Hong Kong stock market closed at HK$5.62 (US$0.72) on Dec. 22, down 1.4 percent. Still the stock value doubled early in the year, climbing from a low of HK$3.12 in February to top out at HK$6.22 in October.

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