Kips Bay Medical Inc., the latest venture of serial entrepreneur and Minnesota medical-device pioneer Manny Villafaña, reported its first quarterly results as a public company Thursday, six weeks after completing its initial public offering at $8 a share, raising $13.6 million for the company.
Villafaña, chairman and chief executive officer of Kips Bay, is a Minnesota transplant by way of the South Bronx. He launched Kips Bay three and one half years ago as his sixth Minnesota-based medical-device start up. With Kips Bay, he’s gone full circle in a way. Villafaña traces his Gopher State roots back to Medtronic, which he joined in 1967. His latest venture is based on technology purchased from the Fridley-based medical device giant.
He set out on his own to found Cardiac Pacemakers Inc. in 1972, which was bought by Eli Lilly and ultimately became Guidant Corp. That was followed by his most successful start up, St. Jude Medical, in 1976. Other startups included GV Medical in 1982, Helix BioCore. — later renamed ATS Medical, in 1987 — and CABG Medical in 2003, which went out of business three years later.
His current venture is developing a device for use in heart bypass surgery. The company is seeking to commercialize a mesh sheath, eSVS MESH, for use in coronary-artery bypass grafting, or CABG surgery. In CABG surgery, a vein is taken from a patient’s leg and attached to the heart to re-route blood from blocked arteries. The idea is to place a mesh sleeve over the vein graft and has been shown to increase the longevity of the graft.
“Kips Bay Medical has come a great distance in its short three and a half year history,” Villafaña said in a statement issued by the company. “We have completed a 90 patient multi-national clinical trial which formed the basis for the eSVS MESH receiving the CE Mark, commercially launched the eSVS MESH in select international markets, and as of February 2011, completed an initial public offering of our common stock. We look forward to continuing our efforts to dramatically improve the success of CABG surgery worldwide.”
And he has plenty of challenges to keep him busy.
Kip’s Bay has run a total of 90 trials in Europe, South Africa and Asia and is seeking U.S. Food and Drug Administration approval to run clinical trials in the United States later this year. If approved for U.S. trials, the earliest the product could be available in this country would 2015, according to company filings with the SEC.
The core intellectual property of the company on the eSVS MESH is in a portfolio of patent applications purchased from Medtronic in 2007 and based on technology developed at University of Cape Town South Africa. Four of the patent applications have been rejected by the U.S. Patent Office as being similar to “prior art,” which the company is appealing. Kips Bay was successful in overcoming similar rejections by European Union patent officials.
The company filings said that CABG is the most commonly performed cardiac surgery, with 448,000 performed in the United States in 2006 and an estimated 165,000 procedures performed in Europe by 2013. To see a video of the graft at work, go here.
For the fourth quarter the company reported sales of $116,000, a gross profit margin of 68.1 percent and a net loss of $803,000, or $0.06 per diluted share. This is compared to a net loss of $117,000, or $0.01 per diluted share, in the fourth quarter of 2009. The year earlier result was boosted by an $810,000 gain from a non-cash adjustment related to stock options.
For all of 2010, net sales totaled $223,000, gross profit margin was 65.5 percent and a net loss was $10.9 million, or $0.81 per diluted share, compared to a net loss of $3.3 million, or $0.30 per diluted share, in 2009. The net loss in 2010 includes a $5 million milestone payment to Medtronic and a $2.3 million non-cash charge related to stock option expense. KIPS made its first sale of eSVS MESH in June 2010.
The company issued its earnings report after the market closed Thursday, so the market will react to the news this morning. The stock closed yesterday at $6.30, up $0.17 on 4,000 shares traded.
