UPDATED Sept. 10, 2015, with details on MVAD trial pause, expanded field action and Valtech acquisition.
HeartWare International (NSDQ:HTWR) today said it’s pausing enrollment in a clinical trial of its next-generation MVAD heart pump while it looks to fix an issue with the manufacturing process for the left ventricular assist device’s controller.
Framingham, Mass.-based HeartWare said none of the MVADs in the study are involved in the controller manufacturing issue, which does not affect the performance of the pump.
The prospective, non-randomized, single-arm study, launched in July, is slated to enroll 60 patients, who will be implanted with the MVAD pump via sternotomy or thoracotomy, with a primary endpoint of survival at 6 months. Eleven patients are enrolled in the trial, CEO Doug Godshall told analysts at the Wells Fargo healthcare conference in Boston.
The trial pause pushes back the expected timeline on the MVAD pump by a month or 2, Godshall said.
The problem involves the way a circuit board is fastened inside the controller and does not require a design change. HeartWare expects to have an upgrade of the manufacturing process to improve the fastening technique complete by late September or early October, he said.
"It’s going to take probably 8 to 10 weeks to now have controller supply back online, so we’re going to take a pause on enrollment, probably until November it looks like, while we upgrade our manufacturing process on the controllers," Godshall said.
"It’s just a process change," he said. "We’re not making any fundamental design changes."
The delay shouldn’t affect the expected timing on a U.S. trial for the MVAD, which is slated for the end of this year or early next year, Godshall said.
HeartWare also discovered software bugs that will require an FDA-approved upgrade, he said.
"As we anticipated, we found, we’ve seen some software bugs that would require a regulatory approval, but that’s not a gating item, we will roll out a software probably end of this year, beginning of next year," Godshall said. "The work is going on in parallel. We have already written the code, we are testing the code and so when we move ahead in the U.S., we will have this enhanced, I guess, assembly integrity and we’ll have the new code without the bug."
Battery upgrade means expanded field action
After a new battery screening protocol greatly improved device longevity, HeartWare switched to a new battery supplier in the U.S., Godshall told Wells Fargo analyst Larry Biegelsen during the conference, noting that batteries are the company’s "largest-volume complaint product."
"We enhanced the screening of the batteries and had a dramatic improvement in performance," he explained. "This new supplier is clearly giving us a better-quality component than what we were getting before."
That means the expansion of an ongoing field action to replace the older, screened batteries, he said. The FDA approved the new batteries in June, Godshall said.
"We’re actually going to later this year, beginning next year, expand a prior field action and replace what’s left of older batteries albeit they were screened and performing well. The new ones are just that much better," he told Biegelsen. "This is an expansion of an old action because it’s sort of continuing just a larger serial number range.
HeartWare said it expects to take a $7 million to $9 million charge during the 3rd quarter as it looks to fix problems flagged in an FDA warning letter last year. The federal safety watchdog cited violations in design and software validation as well as complaint management and documentation, according to the FDA notice. The warning cites in particular the potential mismanagement of at least 27 complaints about HeartWare’s products, including 2 reported deaths and 4 serious injuries.
"Feeding frenzy" drove Valtech buy
The pending acquisition of mitral valve replacement maker Valtech, which pushed HTWR shares down -21% after it was announced last week, was HeartWare’s only shot at the red-hot mitral valve market, Godshall said.
"There was a feeding frenzy starting to develop around Valtech. We agreed with them that we would put in a 2nd investment earlier this year that would buy us an exclusivity period that expired mid-September. It was quite clear from the communications we were getting from the company that they were having to fend off interest from others. It was also quite clear from the company that they are an R&D powerhouse that doesn’t really want to build a commercial organization," he said. "Frankly if we couldn’t do Valtech, we weren’t going to do mitral because we believe we need the ability to repair surgically and repair interventionally and we believe we need a portfolio."
Interest in the mitral space was fueled by a pair of recent acquisitions, with Edwards Lifesciences (NYSE:EW) last month closing the $400 million buyout of CardiAQ Valve Technologies and Medtronic (NYSE:MDT) agreeing to pony up as much as $458 million for Twelve Inc.
