CEO and Chairman: Bob Stockman
Juan Costello: Good day from Wall Street. This is Juan Costello, senior analyst at the Wall Street Reporter and joining us today is Bob Stockman, CEO and chairman for REVA Medical. The company trades on the Australian Stock Exchange, Ticker Symbol is RVA.AX. Thanks for joining us today Bob.
Bob Stockman: Thank you Juan.
Juan Costello: Great. Now, starting out, give us a brief overview and history of REVA for some of our listeners here that may be new to your story.
Bob Stockman: Certainly. REVA stands for Restoring Vascular Function; REVA has developed a proprietary and revolutionary plastic Stent for the heart‘s coronary arteries that does its job and then safely dissolves. We believe this is going to change our lives, as arterial disease of the heart is the largest killer of people. It accounted for 29 percent of all global deaths in 2004 according to WHO and of that 29 percent the large majority of cardiac death results from coronary artery disease, which is a common incident of blockages that form in the three main arteries that feed the heart muscle.
The safety benefits of the REVA Stent that are to be borne out in clinical trials I think will help our company capture much of the $5 billon worldwide market of Stents that are sold each year. Because metal Stents are permanently in the heart, they have drawbacks. One of those drawbacks is that metal Stents have been shown to have late forming blood clots or “thromboses”. While a small percent of people develop theseclots when you consider that over 50 million people have metallic Stents that can be a considerable issue and it is; and that’s an expensive problem because people have to take drugs to combat that blood clot risk.
The other advantage of a Stent that goes away is that it restores a vessel to its natural contractility, meaning that the vessel once the Stent is gone can expand and contract naturally like the heart muscle, without a rigid metallic cage. And it is believed that the elimination of rigid metal tubes in our heart’s arteries will lessen turbulence and other factors downstream from the stented areas that should make the heart healthier. Our Stent has proven to be safe in animal tests and a human trial that we did in 2007 with a first generation version. So, we are moving ahead with broad clinical trials to gain necessary regulatory approvals, ultimately in all world markets, and our first trial is right upon us.
Investors in our IPO – in summary – have the opportunity, excuse me, investors from our IPO and in our stock today – have the opportunity I believe to make considerable profits. The money first of all that we raised in our IPO in Australia in December 2010 should be sufficient for us to gain market approvals first in Europe that should allow REVA to generate substantial sales and profits; then as we broaden the product out into other markets and ultimately to the United States, we hope that REVA’s market share of stents and resultant sales and profits will be reflected in the valuation of this company. So, in a nutshell, we are presenting investors with an opportunity to be part of an idea that was launched when Stents were conceived almost 25 years ago. They were intended to dissolve and go away but manufacturers had difficulty making plastic Stents that could safely and effectively be delivered into the heart’s tiny arteries without blocking them, and in materials that didn’t create an inflammatory response. REVA has overcome these technical and clinical challenges with our ReZolve stent.
So while the original large manufacturers of stents defaulted to stainless steel devices, we think this is not an ideal solution and that a design of ours and made up of a material that is biocompatible that is cleared safely from the heart will be a very significant improvement in the treatment of coronary artery disease. That in a nutshell is the opportunity that awaits REVA: the development of a coronary artery Stent we call “REZOLVE”.
Juan Costello: Right. And the actual, the actual product is called RESOLVE?.
Bob Stockman: Yes. We branded it RESOLVE, the play on words but a good word because it resolves, it restores function and goes away.
Juan Costello: Right. And that’s using a novel mechanism?
Bob Stockman: Yes. There are two distinctive features to our stent product, one is the geometry or the design of the Stent that you just touched on. All Stents that are delivered to the heart travel compacted onboard angioplasty, or balloon catheters. A four feet long very thin catheter is introduced in the femoral artery of the leg and threaded up into the heart. The end of that catheter has a balloon that’s folded over on itself that’s very small; compacted on top of that balloon is the Stent. When the balloon expands, the balloon is actually forcing the offending plaque up against the wall of the artery to restore flow through the artery, creating a lumen, an opening or passageway for the blood of the artery.
The Stent is there to act as a medicated band aid to structurally support the artery from the trauma caused by the balloon as the artery goes through the healing process and scaring process. All Stents other than Reva’s bend open into position, they bend or deform open. Our Stent conversely slides and locks open much like the cable tie or a zip tie in reverse. And that lock out feature doesn’t allow the device to slide back or recoil. And this hoop strength that we generate from this design allows us to make our Stent very thin and have almost the strength of metal.
That’s a major breakthrough that’s highly patented by the company. In combination with that unique design we also make the Stent out of a material, that’s called a tyrosine polycarbonate, it’s a complex series of words but tyrosine is an amino acid or building block of cells in our body. And when tyrosine breaks down, it breaks down into tyrosine, carbon dioxide and water and all are cleared safely from the body and the safety of those components are well understood and have been well proven in many studies that we’ve done. So, when you combine this unique material with our unique design REVA has produced a unique device which clinical experts who know our story and those in the broader cardiology community around the world are eager to see go through the clinical trial paces that are upcoming.
Juan Costello: Well, great and so you mentioned the market opportunity for the stent; what is the market opportunity there and perhaps you can talk a little bit more about some of the trends in the sector.
Bob Stockman: Sure. The annual market worldwide for Stents as I mentioned earlier is about a $5 billion market. And it is dominated by three companies, Medtronic, Boston Scientific and Abbott. They make excellent products, Johnson & Johnson was a fourth participant in this market, in fact J&J created the market with the first inventions of Stents. But Johnson& Johnson recently exited the coronary Stent market because it didn’t have a next generation product that it could bring to the market in time to compete against the other three major companies.
And so after investing many, many hundreds of millions if not a couple of billion dollars in their latest next generation product that failed,Johnson & Johnson decided to leave the market place. The three companies that remain have excellent product as I say and there is a tremendous price competition between the three of them but they wrestle over mindshare with the clinical community. Stents are surgical devices used by interventional cardiologists in the catheterization lab of the hospital; treating coronary artery disease is a significant healthcare cost and the stenting procedure is the most profitable element we understand in a hospital setting.
So, what we expect to see with new technology like this is actually an increase in the market size, we think that the benefit, the clinical benefits of our technology and frankly of, one of our competitors Abbott Laboratories one of the market leaders in metal Stents will open up a sort of a new zone in treating people particularly if safety benefits can be proven in the future. And the potential to eliminate or reduce the prescription of drugs that people today take to prevent blood clots would factor great savings into the healthcare system. So, Stents will be around for a long time because they provide a very important function for reliving chest pain for people who suffer from artery disease.
And in the long term we believe that medicated plastic devices that dissolve can someday prevent certain forms of heart disease that would present a market even greater than the $5 billion Stent market today. So, we think the future, a new dawn, a new era of of new technologies that are bio compatible materials that provide many purposes to deliver drugs in addition to scaffold the arteries to medicate them is now upon us; we’re on the verge, on the doorstep of introducing together with Abbott Laboratories, this fantastic technology and REVA is the only independent company in the world this is this far advanced developing plastic bioresorbable Stents.
Juan Costello: Excellent. And perhaps you could walk us through your background and experience Bob and talk a little bit about the strength of the management team over at REVA.
Bob Stockman: I’m really proud of our management team. We have a group of people who have deep experience in project management developing unique products and medical devices over many years. The overall project leader is Dr. Bob Schultz who came from Dura Pharmaceuticals where he was head of R&D there. And Bob has a unique background in combination products; that means products that both involve devices with drugs. So, he is ideally suited to understand the Pharmacokinetics or, you know, the biology of a drug and its interaction onboard a Stent such as ours. Our Stents are drug coated, so they are combination devices. My background, I’ve been in the medical device industry for 30 years and have been involved in five other companies where I have either been a co-founder of or have led in one form or fashion.And this has been mostly in medical implants in ophthalmology and cardiovascular devices, in hearing aids as well and I believe that the backgrounds that Bob and I and other key members of the team share will be well suited for launching a game changing technology like this into the market place.
Juan Costello: Certainly. And what are some of those goals and milestones that you and the team there hope, you know, accomplish over the course of the next year?
Bob Stockman: Thank you for asking. These are the most important and exciting times for the company as we launch into what we call a pilot study to prove the safety of this device. And that pilot study will involve enrolling 50 patients in Brazil and Germany. And after we follow those patients for a period of time and report late braking news on the health of those patients over the six months post implant and beyond, We will then enroll patients in a pivotal study of up to another 350 patients. And the idea of the pivotal study is to submit the results of that study to gain CE mark or approval to market the technology initially in essentially half the world’s markets, Europe, South America, and Australia/New Zealand.
So, the beginning of our pilot study we believe it will take place shortly, in the fourth quarter of this year, and throughout the early part of 2012. REVA will be announcing updates on those patients and then make a determination as to when to enroll patients in the broader pivotal trial. And people will be very eager to see how the device performs in both settings.
Juan Costello: Well, good and as far as the financial community and investors are concerned, do you believe that the REVA Medical story and your message as well as the company’s full upside are completely understood and appreciated by them and if not what do you wish investors better understood about the company as a whole?
Bob Stockman: Well, I – the stock trades under the symbol RVA:AX as you’ve said we trade on the Australian Stock Exchange, so our exposure to U.S. investors is limited. We are very grateful to UBS to invite us to their healthcare conference next week in New York. And as this story begins to come forward and be better known within the media such as yourselves, I do think investors are going to look very carefully at the story. I think the potential for this technology is so substantial and frankly so quick. If we get the CE mark approval to allow us to commercialize the REZOLVE stent, for example, by the end of 2013, or early 2014 as what we’re targeting, the potential revenue attainment for the company when one considers that’s a $5 billion market is very, very compelling; that upside should be reflected in the stock price well before that.
So, because it’s an event driven story meaning that we have to get into the clinic, we have to generate the positive clinical data and we have to get approvals like most medical companies, all medical companies this is what the market will be watching. But I can tell you that based on clinical experience that we’ve had and especially our recent animal tests and bench tests that we’re very excited with the promise this technology holds to be a disruptive product that will generate substantial profits for us very quickly if good results from the clinical trials and subsequent regulatory approvals occur. So, it’s a story that’s now coming forward: we’re it as a publicly traded company that singularly focuses in this coronary Stent market place with a disruptive technology. So, I think people on Wall Street will begin to focus on it because our market capitalization, I don’t believe, reflects anything close to the upside the stock affords.
Juan Costello: Certainly. And so once again joining us today is Bob Stockman, CEO and chairman for REVA Medical. The company trades on the Australian Stock Exchange, Ticker Symbol is RVA. Currently trading at 72 cents a share and the market cap is north of 23 million. And before we conclude Bob to recap some of your key points here, why do you believe that investors should consider the company as a good investment opportunity today?
Bob Stockman: Juan, first ,our market cap exceeds $200 million, not $23 million and actually has been as high as $400 million recently.
In a nutshell I think REVA presents an opportunity for investors to participate on the ground floor in a business that could generate substantial revenue and profit as it moves into one of a largest medical device markets with important and unique technology. This bio resolvable Stent again is not a new idea, this was the original concept when Stents were conceived many, many years ago and because of a difficulty in developing the technology, it has taken us 12 years and Abbott just as long, the only two companies with these degradeable plastic technologies. Abbott, one of the world’s leading diversified healthcare companies, of course gives tremendous credibility to the future potential and adoption of bioresorbable stents to be used in the heart, as Abbott is gaining very significant early clinical success for their product; we will be right behind Abbott with a competitive product.
And I think the conversion or adoption to these plastic devices that do the job to scaffold the artery so it can heal as metal Stents do, but then go away to leave a naturally healed artery in place, provides a unique investment opportunity for investors to participate in a company that should appreciate in many respects, particularly in market capitalization.
Juan Costello: Well, we certainly do look forward to continue to track the company’s growth and report on your upcoming progress and I like to thank you for taking the time to join us today Bob and update our investors on REVA Medical.
Bob Stockman: Thank you Juan, very much. I’ve enjoyed it.
Juan Costello: Great having you on.