ATS to Acquire Surgical Cryoblation Biz from CryoCath

Minneapolis-based ATS Medical has agreed to acquire the surgical cryoablation business of CryoCath Technologies, a Canadian company that will now focus exclusively on electrophysiology cryoablation. With milestone payments, the agreement could reach $30 million in value.

ATS will pay $22 million in cash at closing, followed by $2 million at certain manufacturing transition milestones, $2 million two years after closing, and up to $4 million based on future sales of Surgifrost XL, a treatment for cardiac arrhythmias that’s FDA cleared and CE Marked, and planned for commercial release in the second half of 2007. The agreement includes all products under the SurgiFrost and FrostByte names.

The transition should be a relatively smooth one for ATS, as the company has been serving since November 2004 as the exclusive representative of CryoCath for U.S. sales of these products and as the exclusive distributor in certain international markets.

As such, “From day one, this transaction is accretive to the company,” said ATS CEO Michael Dale, in a statement. “Although we expect to have a net loss in the first half of 2008, we now expect to be EBITDA positive in the first half of 2008 and profitable during the second half of 2008, one year ahead of our previous forecast. For the remainder of 2007, this transaction will add approximately $3 to $5 million in incremental revenue, and in 2008, we expect to generate approximately $16 to $19 million in total surgical cryoablation revenue.”

CryoCath’s surgical cryoblation products work by creating of an intricate pattern of lesions on the surface of the heart to block inappropriate electrical conduction circuits. These conduction circuits cause the heart to be less effective when pumping blood, which can lead to stroke and heart failure. What’s unique about CryoCath’s technology is that it uses cryothermy — cold — to create the lesions on the heart surface. Other devices on the market use heat, leaving CryoCath competition-free in its approach. 

“The advantages of cryothermy over heat-based energy sources with regard to safety and efficacy are numerous and offer what we believe will be the product platform best positioned to enable minimally invasive, stand-alone treatment of cardiac arrhythmias,” said Dale.

There’s big opportunity for atrial fibrillation treatments that demonstrate advantages over the current standard of care. Red Herring reports, “Atrial fibrillation procedures are the fastest-growing form of cardiac surgery, with 25,000 operations performed each year in the United States. Surgical treatments for atrial fibrillation currently generate $105 million in global revenue, and with a 30 percent annual growth rate, that figure is estimated to hit $430 million by 2011.”

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