TriVascular2: A Superior Sequel?

At first glance, the news that Boston Scientific Corp. is selling off its endovascular assets for $65 million seemed straight-forward. After all the struggling device giant, which is still reeling from the Guidant purchase, has spent the past six months tossing unwanted or "non-core" assets overboard in an effort to right its ship.

However, the buyers of the assets make this a particularly interesting deal. Rather than sell the business to a private equity firm or a corporate player like it has done previously, the Natick, Mass. company sold the new venture--TriVascular2--back to some of the venture firms that it had acquired it from in the first place.

Chief Executive Michael Chobotov reportedly has been working to get the band back together since 2006 when Boston Scientific opted to shut down the operation, only a year after exercising its right to acquire it (ironically for $65 million up front). Boston Scientific officials apparently decided developing TriVascular's Enovus AAA endograft, a potential repair method for abdominal aortic aneurysms, would be too expensive to pursue.

It's hard to say what took so long. It's worth noting that Boston Scientific, in its annual report released in February, reported receiving a warning letter in August 2007 regarding "the conduct of clinical investigations associated with our abdominal aortic aneurysm (AAA) program acquired from TriVascular, Inc." The company said it was taking corrective actions but also noted in the report that it had terminated the program.

This might have diminished interest from outside investors until the matter was resolved.

Under the new investors, Chobotov will assume--or resume--the post of president and chief executive, the role he held before Boston Scientific acquired the company in 2005. Two other key founders of the original TriVascular, Robert G. Whirley, Ph.D. and Joseph W. Humprhey, rejoin the company as vice presidents of research and development and manufacturing technologies, respectively.

Meanwhile, Delphi Ventures and Kearny Street Partners (a firm founded by former TriVascular investors ABS Ventures) rounded out the syndicate led by venture giants MPM Capital and New Enterprise Associates.

(We'd be remiss if we missed the opportunity for shameless self-promotion. Readers of Medtech Insight were told in the current issue that a deal was happening.)

No doubt, this will be dubbed one of the larger Series A device deals in history. But let's get real folks. This isn't a Series A venture investment. It's a spinout led by venture/private equity hybrids and backed by smaller venture firms that had backed TriVascular through predecessor funds. It's worth noting that the release made a point of saying all previous investors were invited to participate. But De Novo Ventures, a prior investor in TriVascular, apparently did not take part in the new round.

Now TriVascular2 executives have what they couldn't get from Boston Scientific--money. A portion of the Series A money will go back to BSX, which also retains a minority stake (10% by our reckoning). But, according to the release, the "remaining funds have been earmarked to finance the continued clinical development of the company’s novel endovascular repair devices over a two- to three-year time frame. In addition the investors have reserved $30 million in subsequent funding intended to finance the company through the filing of a PMA."

With close to $100 million to this project, it's difficult to see how Trivascular's investors can repeat the ROI from the original purchase--a sequel is only rarely as good as the original. But it can happen. For example, MPM General Partner Jim Scopa feels Terminator 2 was superior to the original. So he's quite confident Trivascular2 faces a large enough market opportunity to warrant such a commitment.