He had his say. Now Glenn Krevlin’s waiting for the company to be put in play.
That would be NMT Medical Inc., where Krevlin has been quietly building a significant stake. During the second quarter ended June 30, the managing partner of New York hedge fund Glenhill Capital Advisors spent about $885,000 to purchase 525,000 shares. He now owns almost 1.8 million shares, or nearly 14 percent of NMT, and is far and away the company’s largest individual shareholder.
The buying spree coincides with an effort to exert more influence in company affairs. In an April 9 letter to the NMT board, for example, Krevlin expressed “concern” that the Boston-based cardiac implant maker planned to use an executive search firm to identify and hire a new CEO after John Ahern stepped aside in February. Beyond the obvious cost, Krevlin said a permanent CEO was largely unnecessary, arguing NMT likely will be in a holding pattern until U.S. regulators decide — probably late next year — whether to allow sales of its StarFlex device as a tool to reduce the risk of stroke.
Less than a week after the letter, the board opted to forego the outside search and gave longtime NMT board member and interim CEO Frank Martin, 71, the permanent job. The decision didn’t precisely follow Krevlin’s script: He’d suggested promoting COO Richard Davis to CEO and making Martin chairman of the board.
But Davis hardly was pushed aside. In a move likely cementing his role as CEO-in-waiting, the NMT board last week selected him to fill the seat left vacant by Dr. James Lock, who did not stand for re-election this year. Davis also retains his duties as CFO.
Davis told MassDevice that although the company tries to respond appropriately to all of its shareholders’ concerns, the recent moves were not an explicit response to Krevlin’s April 9 letter.
“As executives and board members, we always try to listen to our shareholders whenever they have a concern. That’s true whether they’re institutional investors like Glenhill or someone with just a few hundred shares,” Davis said. “Still, in this circumstance, I don’t think you can say there was a direct influence” on the board’s actions.
“Of course, my mother thinks [Krevlin]’s a genius,” he added.
Krevlin did not respond to an interview request.
His letter, however, makes it clear he believes NMT is a likely acquisition target. “The company, in all likelihood, has a limited lifespan as a stand-alone entity,” Krevlin wrote, noting that there are several strategic options to consider, depending on how the Food & Drug Administration comes down on the latest round of clinical trials.
Krevlin has a reputation for taking big stakes in small-cap firms — a penchant he honed over seven years as a general partner at Cumberland Associates in New York. During his stint there, he specialized in food and beverage companies, restaurants, lodging, household products and consumer services, working to uncover undervalued stocks. Krevlin left Cumberland in 2001, forming Glenhill Capital.
The payoff, of course, comes when events such as FDA approval or a merger offer appear and sends investors scrambling to buy up a company’s shares. Krevlin first bought into NMT shortly after its stock briefly spiked to nearly $25 per share in February 2006. During the just-concluded quarter, he picked up about 667,000 shares while the stock ranged between $10 to $15 a share, according to ownership filings.
But NMT’s stock, bouncing at just over $2 a share, plunged Krevlin’s investment deep underwater, although his recent spree has lowered his break-even point to around $6 a share, possibly less — a strategy akin to a poker player trying to buy the pot by going all in.
To a certain degree, Davis said, he agrees with Krevlin’s main assertion that NMT may someday entertain buyout offers. Although the company isn’t actively courting suitors, he said, it’s fairly common for smaller device companies to be absorbed by the big industry players, especially if the company has a home run like he and others at NMT expect of StarFlex.
The company in early 2008 shut down one ongoing clinical trial and all but bet the farm on another trial studying whether StarFlex — a catheter-deployed device used to patch holes between chambers in the heart with a mesh-like membrane — works better than drug therapies in preventing smaller blood clots from forming and temporarily interrupting blood flow into parts of the brain.
If those trials are successful, NMT could be standing at the front of the line for an estimated $4 billion market.
The company has several potential challengers, including another membrane technology developed by W.L. Gore & Associates. But with potentially competitive devices only now enrolling patients for late-stage trials, NMT would gain a big head start if it gets the FDA nod next year.
Trials for a device developed by Cierra Medical, another would-be contender using radio frequencies and a guide wire to fuse heart tissue, has been on hold since 2007.
“It’s a bit of a cliché, but we like to think we’ve got something that’s better, safer and more reliable than anything else on the market,” Davis said of the StarFlex device, which in April was approved in the United Statesto fix holes between the lower two chambers of the heart.
StarFlex and its predecessor devices have been available in Europe since 1998, accounting for 30 percent of the company’s $3.5 million in sales during the three months ended March 30. The company also recently secured $4 million through a two-year term loan with Silicon Valley Bank to help fund its ongoing clinical trials.
Like NMT, Krevlin has been doubling down on his bets, although he’s tried to deflect attention by making relatively small plays.
Over an eight-week span starting April 24, when he crossed the 10 percent ownership threshold, Krevlin purchased 10,000 shares a day like clockwork, briefly boosting his daily take prior to a one-week break in early June.
Krevlin appeared to follow a similar pattern earlier in the year, buying a daily average of about 4,000 shares a day between Jan. 2 and filing his April 23 ownership report. That report also seemed to trigger a modest run on NMT stock, which climbed from around a buck each in late April to a mid-day high of $2.87 a share last week.
His recent spate of buying has had at least one other effect. After chastising the board in his April 9 letter for its relatively small collective stake in the company and “an economic disconnect” with other shareholders, board members responded by buying 35,800 shares.