Artificial Hearts for "Investors"

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"Investment News" from The Motley Fool web site. Presenting

business aspect of artifical hearts here then in next post medical aspect.Karen

Artificial Hearts for Investors

Replacement hearts zoomed back on the radar last week when a patient in Louisville received the first totally implantable artificial heart replacement: Abiomed's AbioCor. Risk-tolerant investors might find more fertile ground in companies whose products assist the heart, rather than replace it. Better still, they should employ watchful waiting.

By Tom Jacobs (TMF Tom9)

July 9, 2001

Unless they were on Mars without the wireless Internet, investors couldn't miss the news last week about the implantation of an Abiomed (Nasdaq: ABMD) AbioCor replacement heart in a Louisville patient. This event reminded many of the unsuccessful Jarvik-7 artificial heart, and the media attention surrounding William Schroeder, who lived -- suffered, really -- through 620 days in 1984 with the device.

While Abiomed deserves a lot of credit for bringing the more advanced AbioCor to its first human tests, it isn't necessarily going to provide better outcomes than the Jarvik-7. Investors should look beyond the headlines.

Folks, let's have a heart-to-heart about hearts. Lub dub.

Replacement hearts

These are the first human tests of the Abiomed plastic and titanium AbioCor device, pursuant to a Food & Drug Administration (FDA) investigational device exemption (IDE). The AbioCor is a Class III medical device, subject to the government's most rigorous regulation. The company first tested the AbioCor in animals, developing the data necessary to secure the IDE.

The IDE granted permission to start testing the device in a small number of end-stage heart patients with irreparably damaged hearts who were at risk of imminent (within 30 days) death and whose other organs function. As it develops data, Abiomed must then seek FDA approval to expand the number of test patients. The company's goal is to develop enough data on the safety and effectiveness of the device to satisfy the FDA when Abiomed submits its pre-market application.

Why replacement hearts? Only about 2,000 hearts are available annually for transplant, not enough to satisfy even a small part of the estimated 200,000 patients worldwide who would benefit from a replacement heart -- artificial or otherwise. The goal is a device that allows end-stage heart patients to leave the hospital and live normal lives for a time. Abiomed reportedly believes survival of up to six months would represent success.

Who will pay?

I am not a heartless demon. Really. But as investors, we have to talk hard money, even when we're looking at potential help for people in dire straits. For a medical device maker, a product's success depends not only on securing FDA approval, but also on convincing health insurance companies to pay for it. There isn't a very big market of people who can pay the $75,000 to $100,000 estimated cost for an AbioCor system -- or even the $25,000 the company says it might cost after sales ramp -- so unless you're a non-profit company, you need to convince insurers that the benefits of the heart outweigh the costs. For an insurer, that means that the AbioCor must save money.

Insurers spend a lot of money on cardiac care for patients. Based on the last complete statistics, which are from 1996, half of the 700,000 annual U.S. deaths from cardiac disease are sudden. That leaves a large number of coronary heart disease (CHD) and congestive heart failure (CHF) patients whose hearts progressively decline, and who are likely to spend much time -- and certainly their last days -- under very expensive hospital care. Think machines, drugs, medical personnel, and lengthy stays. If a company can make a product whose cost compares favorably with these expenses, chances are insurance companies would pay for it.

There may not be enough savings if the AbioCor keeps a patient out of the hospital for six months, but the company hopes to achieve multiple-year durations through testing and further work. That's when the cost-benefit analysis becomes more favorable to the company's product, especially when compared to after-care for transplant patients, which includes expensive immunosuppressive drug therapy. (Immunosuppresive therapies are meant to temper the natural response of the body's immune system, which can cause the rejection of transplants. The AbioCor is not expected to provoke immune response).

If you're the patient, you'll surely be happy with anything that improves quality of life, whether you're waiting for a heart transplant that is unlikely to come or just wanting to spend a few months of your life not sitting in a hospital in the form of a human pin cushion. But unless you're King Midas or Queen Latifah, you won't be able to do it with AbioCor without insurance.

Heart assistance

There are other possibilities beyond replacement hearts. Some companies market temporary heart assist devices, such as ventricular-assist devices (VADs). Remember that the heart has four chambers -- two atria and two ventricles. The blood enters the atria, which deliver it to the ventricles. They in turn pump blood to the lungs and the rest of the body. VADs pump the pumper, so to speak. Abiomed's BVS, on the market since 1992, is a VAD.

Temporary assist devices are deployed in three ways:

as bridges to recovery, in patients whose hearts are temporarily indisposed -- not fully restarting after open-heart surgery, for instance, and thus incapable of being weaned off the heart-lung machine;

as bridges to transplant, for patients awaiting heart transplants; and

for staging, for such patients as those in transport or between heart transplant rejection and replacement heart implant.

According to the company, Abiomed's BVS device is used typically where a patient's heart can recover in less than a week. At least two other companies, Thoratec Corp. (Nasdaq: THOR) and World Heart Corp. (Nasdaq: WHRT), market temporary heart assist devices.

Permanent heart assists?

Some companies hope to market longer-term, or permanent, heart-assist devices. One is Arrow International (Nasdaq: ARRO), which developed the LionHeart left ventricle assist systems (LVAS). Arrow is profitable, benefiting from a mature product line of critical care and cardiac assist products, including a variety of catheters. (Catheters are hollow tubes inserted into the body to assist the flow of fluids.)

It hopes for future growth from the LionHeart, which is not a bridge-to-transplant or bridge-to-recovery device, but intended for patients with "progressive, irreversible, end stage congestive heart failure for which heart transplantation is not an option." Pursuant to an IDE, the LionHeart has been implanted in 19 patients, one of whom has survived 20 months on the device.

The LionHeart involves a wearable battery power supply, but patients may have up to 20 minutes of untethered use. The goal is to allow the patient to return to home, work, and leisure activities. Investors may find greater potential for the LionHeart than the AbioCor, because current tests show at least the possibility of long-term survival and thus a better -- or at least earlier -- shot at a favorable cost-benefit analysis.

The LionHeart has some competition. World Heart's Novacor LVAS is already approved as a temporary assist device for bridge-to-transplant use, and 25% of test patients from that group have stayed on it for at least six months. The company is now conducting clinical trials of Novacor LVAS in the U.S. for long-term use. Thoratec is testing its HeartMate II in Europe, also for longer-term use.

For more information on heart assist devices, Texas A&M University maintains a handy website devoted to heart assist device research, development, and products.

Choices for investors

There is no doubting the need for help for CHD and CHF patients, nor that current drug treatments are limited. But a risk-tolerant investor looking at the heart assist medical device sector should first determine whether the opportunity is worth the risk. The big money would appear to be in the possibility of a long-term -- possibly permanent -- assist device, if and until a replacement heart can provide significant survival times. If so, it's important to examine which companies are the strongest financially:

Only Arrow is profitable, and its cash flow -- running about $9 million a quarter -- may well keep it afloat while it tests LionHeart. Abiomed and Thoratec's cash cushions appear sufficient salves for their burn rates for a few years, but World Heart may have to find a partner or hit the capital markets in under two years. The short interest is notable because the market appears to find Abiomed overvalued.

With so many variables at play here, investors should proceed cautiously knowing there's much more to the heart medical device story than Abiomed's AbioCor. At least for now, you can't always get what you want -- a new, replacement heart that works indefinitely -- but it's possible you might sooner get what you need: a heart assist device that works long-term.

Unless investors have mad money -- stark, raving, mad money -- it may be best to employ that time-honored medical therapy: watchful waiting.

Tom Jacobs (TMF Tom9) currently causes others to need medication but takes none himself. At press time, he owned no shares in companies mentioned in this story. To see his stock holdings, view his profile, and check out The Motley Fool's disclosure policy.

Related sites:

Heart Assist website

Clinical Trials and the FDA

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Learning Lessons by

Heart Patient Still Stable

From Associated Press at 6:04 PM

The first patient to receive a self-contained artificial heart remained in stable condition Sunday, six days after the transplant.

Doctors and staff at Jewish Hospital, where the surgery was performed last Monday, were able to rest over the weekend during what spokeswoman Linda McGinity Jackson called a "quiet period."

In a National Public Radio interview broadcast Saturday, Dr. Robert Dowling said the man, who is alert and writing notes to family members, is on a blood thinner to prevent clots and might be put on medication for hypertension.

"We couldn't be happier with how he's doing," Dowling said.


Learning Lessons by Heart

By Guy Gugliotta

Washington Post Staff Writer

Sunday, July 8, 2001; Page A01

He lies in a Louisville hospital bed, a middle-aged man about whom almost nothing personal is known except the most intimate details of his health. He was - and perhaps still is - about to die.

Last Monday, surgeons at Jewish Hospital removed his diseased heart and replaced it with a man-made pump constructed of hard plastic and titanium. It was the first fully implantable artificial heart ever put inside a human being.

"He has shown improvement every day," surgeon Robert Dowling said Friday. "He's interacting with doctors and nurses through his gestures, and the device is functioning flawlessly."

Although the man's long-term prospects remain far from clear, his doctors have been surprised by his early progress, said his condition was unchanged yesterday and have even speculated that he may eventually be able to leave the hospital and return to some semblance of a normal life.

In the meantime, however, medicine's latest effort to tackle one of the most difficult technological challenges ever attempted is remarkable for yet another reason - its absence of controversy.

Experimental treatments involving the desperately ill often pose many complex ethical questions, particularly when the object of the treatment is to cheat death in spectacular fashion.

The first artificial heart implants in the 1980s proved so controversial and fraught with ethical pitfalls that the field was all but abandoned for 15 years. Many observers speculated that those problems - coupled with advances in treating heart disease, improvements in the outcomes of transplants, and the development of highly effective partial heart pumps - might preclude any future attempts to develop a full artificial heart.

While some of those questions and potential ethical traps remain, even some of the harshest critics of earlier efforts acknowledge that so far, Abiomed Inc., the Danvers, Mass., company that developed the AbioCor device, appears to have learned well from the mistakes of the past.

"One of the ethical issues that I would have flagged would have been hubris, and they are not guilty," said University of Pennsylvania medical sociologist Renee Fox, an expert on the ethics of organ replacement and transplantation. "They are not only prudent, but very candid."

Abiomed waited until new technology enabled its AbioCor heart to be fully enclosed inside the patient's chest, lessening the chance of infection and eliminating the need for the device to be tethered to a power source through an open wound.

The company wrote a 13-page consent agreement, spelling out 14 separate potentially fatal risks associated with the implant, everything from liver failure to tissue damage caused by an overheated device.

It set up an Independent Patient Advocacy Council to provide each patient with a knowledgeable mentor and funded the council with an irrevocable blind trust, leaving the four initial members to add advocates as they saw fit.

No council member, surgeon or anyone else connected with the clinical aspects of the experiment is allowed to hold stock in Abiomed. No one from Abiomed is allowed to meddle with the council. No one in the media was allowed to know the name of any council member except chairman Elizabeth Haavik Morreim of the University of Tennessee's College of Medicine.

Abiomed briefed reporters on the company and the device in April and discussed the Louisville surgery at a July 4 news conference. But it refused to divulge the patient's name or discuss his background except as it related to his medical condition.

And to further dampen publicity, it has cautioned repeatedly that no matter how well the patient's recovery has appeared to be going, the man was so sick - with diabetes, kidney failure, hypertension and overall weakness - that he could die at any time.

Abiomed Vice President Ed Berger said the company extensively studied the 1980s cases of Barney Clark and William Schroeder, who received Jarvik 7 artificial hearts powered through wires and tubes inserted through incisions in the skin and connected to a noisy, bedside console the size of a refrigerator.

The public's initial euphoria gave way to distress as the two patients contracted infections and illness before dying. Many wondered whether the implants had simply prolonged the men's suffering.

"The extension of life without improving the quality of life is an empty goal," Berger said. "Abiomed took a very, very long time to wait for big technological developments and then apply them to the device."

Electronics miniaturization shrunk the console to the size of a telephone beeper. The transcutaneous energy transmission system, or TETS, enabled electricity to flow from an external battery pack to electrodes mounted inside a patient's abdomen.

Neither advance improved the heart's function, but that wasn't the idea. "They learned that you should not implant an artificial heart that is not totally implantable and totally forgettable," said ethics specialist George Annas of the Boston University School of Public Health. The Jarvik 7 console "was extremely loud, and you could never get away from it. You could never live a normal life."

But Abiomed, like Jarvik, had the additional problem that regardless of how quiet the machine was, its early patients by definition would be so ill that they would never be able to live a "normal" life.

This, Fox said, "is what a colleague calls the 'black years' of developing new medical technologies - when the device is completely new, when the patients are terminally ill and it is likely that unhappy events will occur."

Robert Jarvik said the missteps with Clark and Schroeder were almost inevitable, in part because of the "black years" phenomenon. He noted that a variant of the Jarvik 7 is routinely used today for brief periods without mishap by patients awaiting heart transplants.

"It's not pleasant for so many years to be trashed like that," Jarvik said. "Abiomed faces that risk too, and unfairly if they have bad results. It takes time to work out the details."

Abiomed's formula for success was modest. Patients would be chosen only if they had been rejected for transplantation and were judged to have an 80 percent chance of dying within 30 days. With AbioCor, the company hoped to double the lifespan.

"Can a person in such a situation give an adequately free and informed consent?" asked medical ethicist Robert M. Veatch of Georgetown University's Kennedy Institute of Ethics. "I call this a 'coercively attractive offer' - you die in 30 days, or you take this offer and get 60 days. The offer may be irresistible, but that doesn't necessarily make it immoral. I am not troubled as long as patients know the trade-offs."

The consent agreement made sure of that. Besides the risks associated with the operation, the agreement detailed six activities that patients should avoid, including traveling long distances and swimming, which could cause the device's pressure settings to malfunction. "This could lead to serious injury or death," the agreement said.

Abiomed recruited the University of Tennessee's Morreim to set up the Advocacy Council in mid-1999. The council has two at-large members, including herself, and six on-site members serving as patient advocates at the five hospitals authorized by the Food and Drug Administration to perform the implantations.

Morreim said the on-site advocate in Louisville consulted extensively with the Jewish Hospital patient and his family and was present when the consent agreement was signed. And while in Louisville, Morreim was asked to identify the advocate but she refused.

"At first we were worried about them being misquoted, but then I thought further," Morreim said. "If the [advocate's] face becomes known and he was seen in the hospital, people would know an implant was coming. Would that be a good idea? I don't think so."

© 2001 The Washington Post Company

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