| Corporate Update |
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Dear Ladies and Gentlemen:
Additionally, management’s thinking behind this strategy was based upon the fact that the aging U.S. population, 78 million “baby boomers,” would increasingly be confronted by complications from cardiovascular diseases. Historically, the company has focused on unique products for the treatment of complex cardiac and vascular reconstruction procedures. It was management’s thinking that expanding the treatment options for people with cardiac and vascular issues would enable us to bring life and limb saving technologies to more people throughout the world. To that end, in September of 2010, CryoLife signed a manufacturing and distribution agreement with Starch Medical, Inc., of San Jose, California, for PerClot, a powdered hemostat that they were marketing in Europe. This agreement helps solidify our participation in a worldwide market for powdered hemostats that industry analysts estimate to be about $2 billion. Our agreement covers the entire world except for China, Hong Kong, Macaw and certain Middle Eastern countries. PerClot is CE Marked for distribution in many European countries at this time.CryoLife has conducted animal trials and biocompatibility testing and expects to submit its investigational device exemption or IDE to the FDA soon. PerClot is not approved for use in the U.S. at this time. PerClot’s international sales in the third quarter were $620,000 and were $1.9 million for the first nine months of 2011. In the three months that PerClot was sold by CryoLife in 2010, international sales were $264,000. PerClot is a complimentary product to our BioGlue surgical adhesive. BioGlue has been available for clinical use since 1998 and has been used in over 650,000 surgical procedures throughout the world. PerClot may be used in wet surgical fields and initiates hemostasis immediately when it is confronted by blood from a wound. In tests conducted in our research laboratory it appears that PerClot absorbs two to three times as much water as the other powdered hemostats that are commercially available. In May of 2011, the company completed the acquisition of Cardiogenesis Corporation. Cardiogenesis, a wholly owned subsidiary of CryoLife, Inc., is a pioneer in the development and use of laser technology for transmyocardial revascularization (TMR) in patients with severe or refractory angina. TMR is approved by the FDA for distribution in the U.S. and is CE Marked for use in Europe. TMR is a Medicare approved therapy and is reimbursable. TMR is accepted as a meaningful therapy and treatment for refractive angina by the American College of Cardiology, American Heart Association and the Society of Thoracic Surgery. Cardiogenesis has a CE Mark for the use of autogenous stem cells in conjunction with TMR. In July, we made an equity investment in ValveXchange, a privately held company that is developing a lifetime tissue valve replacement system. They recently announced first-in-man implants of their Vitality valve in three patients. Our understanding is that all three patients are doing well and ValveXchange is making plans to begin efforts to obtain approval of their valve technology in the EU. ValveXchange also has a minimally invasive TAVI product under development that leverages the same technology as the first generation system and has substantial promise. Their technologies and sales points are complementary to our cardiac tissue business and fit well with our expertise and sales channels into the surgical valve replacement market. Our agreement gives us the right of first refusal to acquire ValveXchange. These acquisitions and investments are consistent with our strategy to invest in differentiated technologies that address large, growing segments of the cardiovascular market. For a more detailed discussions of the company’s operations, products and services you may request a copy of the company’s Annual Report on Form 10-K or you may view it on the company’s website under the investor relations section. Very truly yours, Steven G. Anderson |
During the first quarter of 2010 CryoLife management embarked on an aggressive corporate acquisition strategy to strengthen the company’s product offerings in the areas of cardiovascular and vascular surgery. The Company has been able to implement this strategy due to the unusual economic conditions that presently exist in the U.S. financial markets related to the lack of funding that is available for new technologies and start-up companies. CryoLife’s unique cash flow position and our ability to access working capital have given us the opportunity to acquire and fund new technologies that are under development or acquire and fund small companies unable to successfully access U.S. capital markets.