OAKLAND, California, Jan. 31 /PRNewswire-FirstCall/ -- World Heart Corporation ("WorldHeart" or the "Company") today announced that it has signed a definitive agreement to acquire all of the assets of MedQuest Products, Inc. ("MedQuest"), subject to certain approvals, consents and conditions. MedQuest, based in Salt Lake City, Utah, is in the final development stages of its HeartQuest(TM) ventricular assist device (VAD), a magnetically levitated centrifugal rotary blood pump. WorldHeart currently offers the leading long-term pulsatile Novacor(R) LVAS. The acquisition of MedQuest will add an advanced rotary pump to WorldHeart's VAD platform and will also result in the Company raising up to US$23 million in a corresponding private placement and warrant exercise. In addition, all existing debentures will be converted to common shares of the Company.
"WorldHeart is currently the world leader in terms of VAD reliability and long-term durability. Long-term VAD support, or Destination Therapy (DT), represents the most significant need and growth opportunity in our field," commented Mr. Jal S. Jassawalla, WorldHeart President and CEO. "Our industry needs both pulsatile and rotary pumps to treat the full spectrum of clinical needs of end and late-stage heart failure patients. We believe that pulsatile devices are best suited for end-stage patients with poor ventricular contractility, who require full support (or functional "replacement"); rotary devices are better suited for late-stage patients, with some contractility, who require only partial support (or "assist"). "WorldHeart will now be the only company with small, silent, next-generation pulsatile and rotary systems under development, as well as having the most durable and reliable current- generation pulsatile device in the market today."
As part of the acquisition, WorldHeart will retain MedQuest employees in Salt Lake City, Utah. The Company's operations in Salt Lake will serve as the development and manufacturing site for WorldHeart's rotary pump products. Mr. Pratap Khanwilkar, MedQuest President, CEO, and co-founder, will lead the Company's rotary pump activities and will also lead business development for the Company.
"We believe that our HeartQuest VAD is the most technologically advanced rotary pump under development," commented Mr. Khanwilkar. "Our magnetically- levitated rotor results in a pump with no moving parts subject to wear, resulting in a small device expected to provide multiyear support over a wide range of flows. Combining our rotary pump with WorldHeart's clinical and commercialization infrastructure and its current and next-generation, long- term, pulsatile Novacor systems will be critical in expanding the Destination Therapy market."
"We have made significant progress in the second half of the year in several key areas" commented Mr. Jassawalla, who became WorldHeart's President and Chief Executive Officer in July, 2004. "We are selling well into our traditional markets and we have enrolled nine clinical centers in the DT RELIANT trial, with several additional leading medical centers in the process of completing their internal institutional review processes. We have met our key milestones in the development of our next-generation pulsatile system, the Novacor II, and ended the year performing strongly. With this acquisition, we are broadening our product platform and helping to make real the promise of Destination Therapy as a widely adopted treatment."
WorldHeart's product platform, subsequent to completion of the acquisition, will include:
- the Novacor LVAS, which is currently commercially available as a
Bridge-to-Transplant in the US, Canada, the European Union and Japan.
In Europe, it is also commercially available for DT and Bridge-to-
Recovery. In the US, it is under evaluation in a pivotal study for DT
- the Novacor II, a small, bearingless, next-generation pulsatile VAD
currently under development and which is expected to begin animal
trials in 2005; and
- the HeartQuest VAD, a small, next-generation rotary pump, now at an
advanced stage of development and in preclinical animal and bench
testing with an initial feasibility clinical trial expected to be
initiated by the beginning of 2006.
In connection with the acquisition of MedQuest, WorldHeart has entered into a private placement with Maverick Venture Management, LLC, ("Maverick"). Maverick is a private investment firm focused on investing in emerging growth markets. At the closing of the acquisition, Maverick will purchase US$12 million of common shares of WorldHeart. Maverick, a majority shareholder of MedQuest, has invested approximately US$14 million previously in MedQuest. At the closing of this transaction and the associated financing, Maverick and the shareholders of MedQuest are expected to hold a 33% ownership stake in the combined company. Maverick will be given the right to nominate up to two designees to WorldHeart's Board of Directors.
In addition, as a condition of this transaction, WorldHeart's debenture holders and warrant holders have agreed to convert their debentures and exercise the warrants issued to them in a previous financing (September 2004) in order to simplify the Company's capital structure and provide the Company with more capital to execute its plans.
"We are all excited about this investment in WorldHeart and the possibilities for this to create a leading medical device company and accelerate the growth of the Destination Therapy market," stated Mr. Kevin Compton, a Maverick principal. "We believe that WorldHeart is now poised to be a leader in the treatment of advanced heart failure and are excited about helping create a hugely successful company around these treatments."
The Novacor LVAS is an electrically powered, pulsatile flow device with more than 20 years of clinical use. It is the first ventricular assist device (VAD) to provide a recipient with more than 6 years of circulatory support. It continues to hold the industry record for longest support on a single device of more than 4.5 years. These statistics are unmatched by any other implanted electromechanical circulatory support device on the market. To date, more than 1,500 patients have been supported with the Novacor, with almost 600 patient years of experience, and with no deaths attributable to device failure.
Novacor II is a next-generation miniaturized pulsatile VAD building on proven Novacor technology. The pump's pusher plate is driven by direct magnetic actuation, eliminating bearings or other precision components. The pumping chambers are fabricated from the same polymer material as in the current Novacor, which has never experienced a pump sac failure. The use of proven technology, combined with a simple, bearingless design, is expected to yield system reliability and durability, even greater than that of the current multiyear device.
The HeartQuest VAD is an advanced second-generation rotary blood pump intended for Destination Therapy. Unlike first generation rotary pumps with blood-lubricated bearings, it is a compact centrifugal pump with an impeller which is completely magnetically levitated. Full magnetic levitation eliminates wear mechanisms within the pump and provides for greater clearances for more optimized blood flow around the impeller, while eliminating dependence on the patient's blood for suspension. HeartQuest's levitation technology employs a unique combination of passive and single-axis active control, resulting in a system of optimal simplicity.
This strategic acquisition and financing will permit WorldHeart to accelerate the development of both next-generation systems. The combined strength of the WorldHeart and MedQuest teams, efficiencies of scale and platform synergies (particularly for external subsystems) will enhance the development programs. Preclinical animal and bench testing of the HeartQuest is currently underway. A feasibility clinical study is expected to be initiated within a year. Commercial approval is expected in Europe in 2007 and in the US in 2009. Development of the Novacor II will continue in parallel, with animal implants scheduled to begin this year. Clinical use and approvals for the Novacor II will generally occur a year later than those for the HeartQuest rotary system.
Acquisition and Financing Terms
The acquisition of MedQuest and the private placement are subject to WorldHeart shareholder approval.
WorldHeart will issue 9.3 million common shares to MedQuest in connection with the acquisition. In addition, Maverick will invest $12 million in WorldHeart to purchase approximately 8.9 million common shares at a purchase price of US$1.35 per common share. Investors that participated in the Company's September 2004 convertible debenture transaction have unanimously agreed to convert their debentures at their stated conversion price of US$1.25 per common share into approximately 10.7 million common shares. In addition, accrued interest will be converted into common shares at a conversion price equal to the market prices at the date of conversion. Convertible debenture holders have also agreed to exercise the corresponding warrants into approximately 10.7 million common shares of the Company at an adjusted exercise price of US$1.00 per common share for gross proceeds to WorldHeart of approximately US$10.7 million. Warrants are currently exercisable until September 2009 at a price of US$1.55 per common share. The Company will seek shareholder approval for a US$0.55 reduction in the warrant exercise price in return for the holders' agreement to exercise the warrants early and convert their debentures, as a condition of this acquisition and private placement
At the close of this transaction WorldHeart will have:
- eliminated all US$13.3 million of convertible debentures and up to
US$2 million of interest that would have been payable over the
five-year life of the debentures to their maturity on September 12,
- issued common shares in connection with the exercise of warrants
representing approximately 10.7 million common shares;
- added approximately US$23 million to its cash balance which was
US$8.8 million at the end of its fiscal year ended December 2004; and
- approximately 55.4 million common shares outstanding.
WorldHeart does not provide quarterly financial guidance, as predicting specific adoption rates in a new technology market such as the Destination Therapy market is not feasible. However, if the Company meets its operating plan, we anticipate that the cash balance at the end of this transaction would be sufficient to fund operations to approximately the end of 2006.
It is expected that the approvals will be obtained in order for WorldHeart to close these transactions in approximately 90 days.
WorldHeart will hold a teleconference Thursday, February 3, 2005 at 10:30 a.m. EST to discuss this strategic acquisition. Call in information will be provided in a separate Press Release on Tuesday, February 1, 2005. The Company will release its results for the fiscal year and fourth quarter ended December 31, 2004 following approval by its Board of Directors, in March 2005.
About World Heart Corporation
World Heart Corporation is a global medical device company headquartered in Ottawa, Ontario, Canada, with additional facilities in Oakland, California, USA and Heesch, Netherlands.
The securities offered in connection with the acquisition and the
Maverick private placement have not been registered under the U.S.
Securities Act of 1933, as amended, and may not be offered or sold in the
United States absent registration or an exemption from the registration
requirements. This press release does not constitute an offer to sell, or
the solicitation of an offer to buy, any securities in any jurisdiction.
Any forward-looking statements in this release are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that all forward-looking statements involve
risk and uncertainties, including without limitation, risks in product
development and market acceptance of and demand for the Company's
products, risks of downturns in economic conditions generally, and in the
medical devices markets, risks associated with costs and delays posed by
government regulation, limitations on third-party reimbursement,
inability to protect proprietary technology, potential product liability,
potential lack of anticipated synergies and efficiencies of scale,
potential difficulties in the integration of the operations and other
risks detailed in the Company's filings with the U.S. Securities and
WORLD HEART CORPORATION