Anteris Prepares $5 Billion Heart Valve as Suitors Circle

Wayne Paterson is the CEO of Anteris Technologies, which is a $190 million cap biotech that’s got an artificial heart valve. Wayne’s based in Minneapolis, they’ve just knocked back a takeover from an SPAC, one of those special purpose acquisition companies that are cash boxes. They’ve got human trials going on at the moment in Georgia, not the state, the country, and they’re probably, he says, three years away from starting to sell these things.

They’ve got to get approvals, they’ll probably finish their human trials this year and then go into approvals. So, look, it’s a very interesting company, Wayne Paterson says it's a $5 billion product at least, $5 billion US he’s talking, and the market cap is currently $187 million, so if he’s right there’s a fair bit of upside with this business. So, have a listen, make your own mind up.

Here’s Wayne Paterson, CEO of Anteris Technologies.

Table of contents:
Cashed up into 2023
SPAC Bid Rejected
Anti-Calcification Treatment
Sixty Patents
Stunning Human Trial Results
Human Trials in Georgia
Year-Long Approval Process
Suitors Circling 

Well, Wayne, as you know, we always start these interviews talking about cash. What is your cash position? You’ve raised some money from an outfit in New York, I think $20 million?

Yeah, thanks, Alan. No, the cash position for the company is probably the best position we’ve been in certainly in the history since I’ve been here on the board and as a CEO. We are cashed up well and truly deep into ’23, which is a first again for this company. The one we just brought in is important, the fund’s called Perceptive. They are top three of the blue chip healthcare funds in Wall Street, so it’s a big deal to get them in for $US20 million, $28 million Aussie, recently. They did a lot of due diligence with physicians and they are physician-led on this particular team that we work with. So, you had a doctor talking to the doctors that we work with who had seen the recent patient data, who had seen the scans, the echoes, the CTs, and were making that investment decision around that data. So, they obviously acknowledge the data was good, very good I would say, and then came in.

I like that deal because we did it two months after we’d been trading at about $7 or $8, so within that two-month period we went up dramatically, we did a great deal with these guys, good deal for them…

What was the price for Perception, what did they pay?

Fifteen dollars and that was obviously a discount to the spot price, the spot price had moved dramatically within a matter of days and weeks at that time, so we weren’t going to get to the spot price of course, but conversely, we could have done the deal in November and it would have been about $6 bucks instead of $15. But they didn’t ask for options or warrants or anything, it was just really a straight, clean equity deal which was very, very nice – but it was an indication of their confidence in the company. We are pursuing a dual-listing on the Nasdaq as well June quarter of this year, been working with them for about 12 months and Perceptive will certainly be a cornerstone for that IPO as well.

Speaking of cash, you received in February a bid from a cash box, a special purpose acquisition company named Medicus Sciences Acquisition Corp, and knocked it back pretty quickly. What was the deal that they offered, can you tell us?

It was interesting. The deal with SPACs in general and the SPAC space has peaked in the US, I think, and some are coming down the other side of the curb and not all SPACs are created equally. Typically, SPACs approach private companies as opposed to publicly-traded companies where negotiation on price is a little challenging. They came in at market price, so what they basically wanted to say was we’ll buy it at market price, not an acquisition per se but more that they bring across the shareholders at the same price. The shareholders, basically net-net would lose the dollar value of their portfolio in that scenario and would have a Nasdaq listed entity.

The challenge with that SPAC or any SPACs is the dilution factor once you go through the next level. I felt that the dilution factor was a little bit more challenging to accept when I probably didn’t need to as we were pursuing an IPO dual-listing in the background anyway and had been for many, many months. We were certainly grateful for the offer from the SPAC and frankly, I probably fielded 10 or even more SPAC offers that I haven’t taken to the markets prior, where I’ve just rejected them out of hand. We do get quite a few of them as we become more interesting as a company.

That was on the back of one of the big four med-techs making a verbal offer to buy the company last August as well, so we’ve had quite a few folks circling around but nothing that I would certainly bother taking to shareholders and compelling enough to unlock the real value of what we’re sitting on right now. Of course, the product is in a $10 billion space and we’re demonstrably about 50 per cent of that market right now based on clinical data. So, it doesn’t take much to work out what the market cap multiple should be, which is obviously many multiples of where we are at the moment.

Yes, but what are you going to do about takeover offers? I mean, do you want to keep Anteris independent, separate?

It’s a great question, Alan. I think at the end of the day, the shareholders are making those decisions along with board recommendations. I certainly have – a big part of this is, of course, national pride. We have a world-beating technology, a global product. I’ve launched a lot of medical products around the world, this will be in the top one or two for medical benefits and clinical benefits. We’re demonstrably better, 50 per cent of the competition. I’ve launched big drugs, $5-6 billion drugs where a 10 or 25 per cent better is a good number, I’ve never had 50. Part of that is, at what point do we say, okay, we’re going to run…? We can certainly run it all the way, I can commercialise this product, I’ve done it my whole career, that’s not a problem, but it’s a matter of what shareholders want at the end of the day.

This is a very de-risked product at this point, getting to market is not like a drug, for example. A med-tech product is very different. If you look at my biggest competitor, Edwards Life Sciences, they’ve got a $66 billion market cap. In my mind, that’s a small company because where I come from in the big pharma area, that’s a pretty small company by standards, of course bigger than we are now. But, 80 per cent of their revenue is their TAVR device which we’ve just beaten in patients and that’s 5 or 6 billion, so you can see the stakes are very high and you don’t have to get much to get there. They’ve got a $66 billion market cap, $5 billion in sales, 80 per cent of their revenue and that’s the product we’ll take down.

I’m not suggesting we get to that kind of number, but the numbers can be quite, quite compelling.

You just said, “That’s the product we’re going to take down…”

Yeah.

What do you mean?

I mean, come to market, that’s the product that will lose market share to DurAVR.

How much of the market have they got currently?

About 65 per cent.

And what’s the other 35 per cent?

A product called Evolut by a big med-tech, it’s actually a much, much bigger company called Medtronic, they’re also based here in Minneapolis. Medtronic’s a very diverse med-tech company and that, in particular, med-tech is starting to get up to the size of some of the bigger pharma companies, so it’s a decent sized company. They have the other 35 per cent with their product called Evolut. The two products are different in the market, the market preference is the Edwards product which is 65 per cent. When you talk to the physicians that we work with, they’re top of the tree, they of course work with these companies, everyone knows everybody in the space and our clinical data has shown demonstrably to be 50 per cent better clinically than the Edwards product out there.

We’re going to keep proving that with more patients of course and there’s a very good reason why it’s giving very different results, it’s designed very, very differently with IP that we own of course. It’s going to be, that particular product, that DurAVR, will compete against and take out…

Okay, tell us about the differences between your product and the Edwards one?

The fundamental differences are two…

And maybe – sorry, can I interrupt – it might be a good idea just as part of that, give us a bit of the background of it, the history of how it was developed?

Sure, okay. When I joined the company at the board level, the old Admedus, now Anteris, was working on multiple things. We had a drug development platform headed up by Ian Frazer, which is probably why I was brought onto the board, because pharma was my background. I shut that down because it was not viable. We had a Sydney-based business for distributing pumps and infusion machines and things into the hospital systems, that was not profitable because we didn’t own those machines, we were licencing it and distributing for other companies.

Then we had this product called ADAPT, it was invented in Australia by a cardiothoracic surgeon named Professor Neethling. This ADAPT material is what the valve is made from, it wasn’t the valve per se, I started the valve program once I joined. But, ADAPT is the material we make the valves from. All of these valves are made from similar animal collagen because it gives the right physical characteristics. But we had proven with that material to have technology that showed in humans – now, ADAPT was already FDA approved, not as a valve but as a different kind of product – to not calcify in human patients.

Now, aortic stenosis which is the disease we’re talking about is a disease of calcification. We have the best anti-calcification treatment in the world and we weren’t kind of using that and that was just because it was developed by a physician over in Perth who was trying to solve the problem of calcian. Now, this disease is a disease of calcian, once I took that material and turned it into a valve, which is what we’re talking about with DurAVR, we suddenly had a valve that was demonstrably better in terms of anti-calcification material that we made it from and that’s proven in studies left and right. It’s FDA approved. The material itself is in about 20,000 patients around the world, so it’s obviously not experimental. Then, we made the world’s first 3D single piece valve for TAVR…

When you say this material’s in 20,000 patients, in what form?

This material, if you think about it like a sheet of paper, it’s not, it’s animal collagen. Now, that piece of paper is treated with a material and ours has called it that and everybody has a similar some kind of treatment. Now, this product, before it was a valve, surgeons would use this to repair a vascular problems, ASD, BSD, like hole in the heart, if you’ve ever heard of that with kids, this material’s basically used to patch you up on the inside. They sew it into the vasculature and close you back up.

That is also an area where you get a lot of calcium because these foreign materials are introduced to the body. So, we first started to see this lack of calcium build up in the surgical space. This product was sold at CardioCel all around the world and that’s why it’s in 20,000 patients.

Who by?

We were selling it originally, then I licensed out the portfolio to a Nasdaq company in Boston called LeMaitre just before COVID – which, thank goodness we did that before COVID. We sold, not the technology, but we licensed out the portfolio and they now sell it for us. We make it under licence, we manufacture it and sell them the product, they go out there and sell it in the markets. That’s how it’s in patients. We then took that sheet of paper, if you like, that patch material, and turned it into the world’s first 3D valve. The other valves – you asked about the differences – the other valves in the market, two big ones out there, are made of three pieces of this material sewn together into a frame, put onto a catheter and then inserted into your body.

Your actual valve in your body right now is a 3D single piece valve, so we made one of those. Instead of having three pieces…

Hang on, just back up. The two that are in the market now, Edwards and the other one, are the same material, they’re just not one piece, they’re three pieces?

Correct. There’s a lot more to this, but firstly, their anti-calcification treatment is inferior, we’ve gone head to head studies and shown that. They certainly don’t have the data that we have. I don’t think anyone argues that our calcification stuff is the best in the world, not even Edwards and Medtronic, they all know me and they’re not arguing that it’s the best. Now, what kills the replacement valves, by the way, is also calcium. These replacement valves calcify heavily, so the better your anti-calcification material, the better off you’re going to be in the long run.

The second part is these three-piece valves don’t open as much as your native valve, the valve in your body, so they’re very restrictive. If you get an Edwards valve, for example, and this is well known clinically, you do not come out of aortic stenosis, you end up on the mild side of the disease and these valves then start to degenerate over time so the next thing, you’re back to moderate and then if you live long enough to get to severe, they try to put another valve on top, called valve on valve.

Our valve has been shown to give normal hemodynamics because it’s a 3D design, so it looks like your normal native valve, it’s anatomically correct, if you like. It’s got a lot less sutures, they have about 600 sutures in one of those other valves, we have about 60, that means there’s a lot less holes and wear and tear and so on. But this valve has been shown that when you get off the table with this valve, you’re actually out of the disease, you’re back in the normal blood flow range. It doesn’t calcify, we know that for sure because of the ADAPT process. And the mechanical properties of this valve, because of a single-piece design, it’s got much more structural integrity, so it mechanically wears out far more slowly which is important because you only want to stick one of these valves in a patient hopefully for the rest of their life. These other valves, where at three to five years you’ve got to go back and try and do it again, which becomes very problematic. This is solving a very big problem that wasn’t solved before, which is a valve that works normally or works better and one that lasts longer than what’s in the current marketplace.

What’s to stop your competitors using the same material and saying, “Okay, we’ll just make it in one piece instead of sewing three pieces together.”

IP and massive litigation.

You’ve got the patent on one piece, have you?

We’ve got about 60 patents up and down the valve, up and down the ADAPT process, up and down the catheter which is unique as well, up and down the frame. The IP family’s all around this product, they are intense as they have to be. I embedded an IP lawyer when we started doing this project three years ago, I put her in the team when we had a blank piece of paper so that meant that we were not going to touch any of their IP but we were also making sure we generated original IP, which coming from the pharma industry, IP is key so you know to do that straight up, make sure your IP is clear and free.

They could have a shot. I think without ADAPT it’s very difficult to mold a 3D valve, you can’t do it, that’s why other people haven’t done it. But also, these guys are in the market, they can’t just come out and take one and try it, have a shot at it and release it the next day, they’ve got to go through the same tests and trials that we have to do because it’s essentially a new product. Even if they got there, even if they got around my IP which would be nearly impossible, they’d be years behind me right now, even to get to market, because they’ve got to go through the same FDA process that we have to go through so we’re going to be miles in front.

That being said, I don’t believe they can do it. If they violate IP, obviously we’ll end up in court and I’ll take that fight any day of the week, I’m not worried too much about it. We have physicians' support right to the highest levels in this space globally, by the way, so we have a lot of doctors rallying around us who helped design this product with me and with the engineers, so they kind of have ownership of the product. From that point of view, we’re in pretty good shape.

So, since I last spoke to you, you’ve got human trials going on. How many humans did you put them into?

Yeah, we did five so far, we’re just working through the second cohort now, those patients are in fact being screened. We did those in November and we saw the results that we kind of expected to see based on all of the animal work and everything else, we’d done cadavers and so on, but it was still stunning to see it. The patients landed right where we thought they would, which is in the normal range off the table and we had some pretty sick people in that study. For example, the numbers don’t – you can just get the perspective from these numbers, one patient we had had a blood pressure mean gradient of 90 millimetres of mercury, which is two weeks from being dead, basically. He left the room with 9.6, so went from 90 to 9.6, which is in the normal range, which he had a very messy anatomy and so on obviously with a physician. So, we saw some stunning results…

Has any of them died?

No, thank God. No, they won’t die, they’re all doing better. The 30-day follow-up was outstanding. We’ll do a six-month follow-up as part of the study protocol and we’re doing our next group of patients in the next few weeks.

Is this study, the human trials, is this part of approvals from the TGA?

Yeah, we have two processes here globally. TGA, we’ll come back to in a second. We’ve got the European approval, of course the FDA approval. This study is not in the FDA process, but the patients will count in the FDA file that we submit, they have to be. We’re working very closely with the FDA now on our submission. I would say by the end of this year, the study which of course you may not have caught that is being done in Tbilisi, Georgia, so apart from a few geopolitical issues right now, that’s going as planned.

Why Georgia? This is not the State of Georgia, this is the country, Georgia?

It’s not the Peach State down south from where I live, no, it’s the country. There is a hospital in Georgia that is connected through to the US institutions and there is a lot of places around the world. A lot of US companies use this particular centre in Georgia and the reason you use it, is they do what’s called GCP studies, the studies are therefore recognised by the FDA, but you’re in a market where patients don’t have access to any of these products. There’s no Edwards valve, there’s no Medtronic valve, there’s no alternative so you can go into these patients, offer them a product that they can’t get hold of to get them on the study…

They’re a little more desperate?

I think it’s a market where they don’t have access to all the products we have everywhere else, so it’s easier for them to say, “Okay, we’ll give informed consent for the study because there’s no alternatives.” Like I said, we had some very sick patients. That being said, the whole team that went across were all from the US. We had six US doctors, all the OR staff were from the US. You use the facility, you use the nursing staff there and the rest is done with the people you take and that’s why it’s recognised. Great centre, wonderful people to work with.

But of course, geopolitically, with what unfortunately is going on in that part of the world, we just had to put a bit of a pause for a couple of weeks because we do end up taking 10 to 12 US people with us to Tbilisi for the week to do these studies. So, that’s pushed us back a little bit just to wait and see what’s happening, but the physicians are all very much onboard to go back and do the next cohort and I’ve just added an Australian physician from Prince Charles Hospital in Queensland who’s one of our three TAVR doctors down there and he’s going to come across to the next one as well to get his hands on and get some training and get to learn it so we can start to open up some Australian sites.

Those patients will be counted in the file that we submit finally to the FDA, but the whole FDA EFS study should be actually finished enrolled and done before the end of the year and we’ll be on the podiums with the results, plus the Tbilisi patients. So, by the end of this year, I should have probably 25 to 30 patients completed.

How quickly will that then lead to final approvals?

The approval process then could take up to a year but you’ve got two stages. We do the EFS for the FDA, you roll into the…

What does EFS stand for?

Early Feasibility Study – and we’ve been dialogue on this study, it’s not like you just roll in and hand in a file and hope the approve you. We’ve been liaising with them for a good 12 months on the work plan of the studies we have to do and bit by bit we’ve been submitting information and discussing it with them so that we are going to get that approval for the study. The CE study in Europe of course comes next year, that’s a registration study. That one will come through, in terms of being approved, that will be the first commercial approval, I would say 2024 give or take, it’s not too far away. The FDA study, commercial approval should come through back end of ’24, early ’25. The challenge for the company of course, that’s not the major catalyst, the catalysts coming multiply between now and then are the approvals for those studies, the first patients being enrolled, the clinical data going up on the podiums at the big conferences globally, which of course all the big executives at the big companies, everyone sits in those presentations and watches what’s being said by the key opinion leaders and physicians. So, we have multiple catalysts between now and those approvals coming through and if we go all the way in the first commercialisations as well.

Right, so before you start making money from this, it’s what, another three years?

I think that would be conservative, but I would sit with three years as probably being reasonable.

And I suppose the challenge in the meantime is to stay independent, not that you’d knock a decent offer back, I suppose. But it sounds like they’re circling?

Well, they are circling. As late as last week, they talked to Piper, who is our M&A adviser, I mean they’re talking to them before… But we know their executives, they know me and like I said, we talk a lot anyway and the physicians. It’s just a challenge, I mean if somebody came in and offered $500 million, obviously that’s not enough. $1 billion, for me, is not enough, because the big catalysts are not far away, it’s not like 10 years down the track…

Hang on, what did you just say, that $1 billion is not enough?

One billion is not enough, for sure. We’ve got a $5 billion product. Here is the thing, Alan, to keep in mind, we’ve launched a lot of products globally so we know how to get that part done, that’s not a problem for us. The key issue though, is when you look at this it’s a $5 billion product, that’s a given in the marketplace because that’s what the clinical data tells me and that’s what my experience has shown me from the products I’ve launched. But a $5 billion product has a multiple of what, 5x or 10x? Where is the market cap? One billion doesn’t touch the sides of that number and the companies out there know that.

If you partner up with us or if you acquire this product, we will change the trajectory of any company that gets this product because we’ve added a $5 billion product to their portfolio. However, a partnership will not change our trajectory because our course is set, this is a $5 billion product, we currently own it. You’ve got to be careful with getting in love with a deal just because it’s a deal, because we’ll change their trajectory, they won’t change ours and that’s how I look at this.

And you’ve got enough cash now to get you to next year, is that right?

We’ve got enough cash to get through the approval processes and then we’d have to tap the well again, but you’d be looking at a significantly bigger market cap as we continue to do as we raise capital, the market cap keeps getting much bigger. The next time we hit the well, we should be looking maybe at a 10 per cent raise against a far bigger number to get into commercial. Now, I know the big funds in our top four have supported us to say, “We will go all the way commercially…” and they’ll back us with that, so I’m not worried about scratching around for capital to start to raise the commercial profile of the company. We’ve been pre-commercial on this for a year or two or more.

Commercially, we’re very well known, what this product is, how it’s positioned, how it’s profiled. The physicians are out there talking about our product on the podiums and to other physicians and we’re working with some of the biggest names in TAVR and the world and some of the biggest academic institutions including Columbia University of New York, CRF, Stanford, Yale… A bunch of places are working with us because this valve science is so unique and so interesting to the academics of that level that we are well, well supported and the funds in New York know that, they talk to these doctors as well.

Well, look, it’s been great talking to you, Wayne, thanks.

Brilliant. Okay, thanks, Alan, appreciate your time.

That was Wayne Paterson, the CEO of Anteris Technologies.