St. Anthony: Device industry gets a shake-up

  • Article by: NEAL ST. ANTHONY , Star Tribune
  • Updated: January 6, 2013 - 7:28 PM

Kevin Hykes, a veteran medical products executive, lost his job last month.

Not to worry.

The onetime Medtronic executive, who left in 2008 to try small-company leadership, has electrified the $6.5 billion heart-defibrillator market with his latest deal. Hykes sold California-based Cameron Health for $300 million last year to Boston Scientific, which operates its cardiovascular business from the Twin Cities.

The defibrillator industry has been dogged by problems with traditional lead wires. And the Cameron deal sure caught the attention of rivals Medtronic and St. Jude Medical.

Cameron's offering could grab up to 20 percent of the heart-defibrillator trade and grow the market in a way that's safer for patients, analysts say.

Boston Scientific, pretty much a shareholder disaster since it acquired Guidant in 2006, has positioned Cameron as critical to its rebound under a new CEO. Cameron's "subcutaneous implantable defibrillator'' or S-ICD could mean several hundred million dollars in increased annual revenue for Boston Scientific.

And the deal could mean up to $1 billion more to the 200-plus Cameron Health investors, depending upon how lucrative the S-ICD proves for Boston Scientific. That could make it one of the most lucrative medical startups of the last decade.

In Vivo, the medical-business journal, has said the S-ICD could be an industry-disruptive and market-expanding device because it's simpler and addresses lethal-and-expensive problems such as "lead failures, inappropriate shocks and the burden of complexity."

Hykes, 47, in his second commercialization of a small med-tech company since leaving Medtronic, arrived at then-flagging Cameron Health in early 2010.

"We are proud of resuscitating this tremendously important technology and a good little team that was running on fumes at Cameron," said Hykes, a Twin Cities native who was on a holiday visit from California with his family last week. "The ability to disrupt a market this big [the defibrillator market is by most measures the second- or third-largest medical device market in the world] is a big stage. And it's fun to have that sort of impact. I would feel the same satisfaction if the buyer had been St. Jude or Medtronic."

Boston Scientific stock rose last month as federal regulators continue to raise concerns about defibrillator leads, that connect an implantable heart defibrillator device to the heart. St. Jude Medical had to recall its Riata leads in 2011. The issue also has dogged Medtronic's related business.

Boston Scientific's new defibrillator has a lead, but it does not run to the heart. It is positioned just inside the patient's skin near the breastbone and can restart the heart without traditional leads that run through blood vessels to the heart. Leads can wear out or break and may make people more susceptible to infection, and they may have to be replaced several times over a life.

"Doctors now have a breakthrough treatment option that provides protection from sudden cardiac arrest without touching the heart," Dr. Raul Weiss, associate professor of medicine at Ohio State University, said last year.

Dr. Robert Hauser, a Minneapolis cardiologist who is known for exposing safety problems in heart defibrillator wires, says more needs to be learned about the new S-ICD device. Hauser, of the Minneapolis Heart Institute Foundation, said he is not raising an alarm. But he said the new device needs more study comparing its safety and effectiveness to traditional defibrillators. Hauser voiced those concerns in an editorial published in the January issue of the Journal of the American College of Cardiology.

In late November, an S-ICD was implanted in the first Minnesotan at Abbott Northwestern Hospital just as Hykes was preparing to turn the keys of Cameron over to Boston Scientific. Hykes describes his three-year role at Cameron as that of a "closing pitcher."

"I'm a late-stage guy ... the guy the venture capitalists bring in to prove the science, and make it a scalable, commercial venture," he said.

Hykes and his team raised more than $100 million by early 2011 that paid off expensive bridge loans and bought time for Cameron to complete clinical tests in the United States, grow production, introduce the product in Europe and see it through regulatory approval in the United States.

"Without the refinancing, Cameron would have ended up on the dust heap somewhere or simply purchased cheap for its assets," Hykes said.

For Hykes, this was his second consecutive successful commercialization of an incubating medical technology. That's good performance in an industry where three of every 10 deals don't pay off for early-stage investors. As chief commercial officer, in his first post after Medtronic, he raised capital, commercialized and sold venture-backed Visiogen of California, an eye-treatment company, to Abbott Labs in late 2009 for $400 million.

Hykes spent 17 years with Medtronic, including a stint in Europe, worked in several Medtronic businesses, and spent three years on the companywide management committee. But by 2008, it was time to strike out on his own.

"I had been growing impatient and frustrated with the bureaucracy and discerning what was my impact on this huge company," he recalled of his last years at Medtronic. "I just needed something higher-energy, more focused on the issues and clearer."

Hykes is relaxing for a couple of months. The family already lives in a nice house near a Southern California beach. Meanwhile, inquiries from venture capitalists are arriving. He's inclined to join another development-stage outfit and go for three scores in a row.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com

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