Cambridge Heart inked a three-year agreement with St. Jude Medical last week, turning over to the behemoth sales and marketing responsibilities for its HearTwave II Microvolt T-Wave Alternans System and sensors to North American cardiologists and electrophysiologists. In exchange for the marketing rights, St. Jude Medical will pay Cambridge Heart $12.5 million in convertible stock. Cambridge Heart will manage the installation of systems, training of new customers, and servicing of the equipment. And the Nike Air More Uptempo Bedford, MA firm will retain responsibility for selling the HearTwave II to internal medicine and primary care practices. The arrangement appears a win-win: Cambridge Heart gets a financial boost, and St. Jude grabs a stake in a testing technology that has potential to bolster its ailing implantable defibrillator business. Alternans testing helps physicians identify patients who are at increased risk of Sudden Cardiac Death and therefore candidates for defibrillators. Following a wave of negative publicity about how implantable defibrillators may have caused some patient deaths, insurers have questioned covering the devices and sales of the implants have tumbled.
As a result of the agreement, Cambridge Heart raised its 2007 revenue guidance to $14 million to $16 million from the prior guidance of $12 million to $14 million. However,Nike Air More Uptempo Cambridge Heart’s net loss for 2007 is expected to increase as compared to the company’s prior plan. Clinical support, manufacturing, general, and administration costs are expected to increase as Cambridge Heart builds its infrastructure to support St. Jude’s sales efforts. Additionally, there will be a material impact on the Cambridge Heart’s balance sheet, as the company will carry much higher inventory levels than it has historically. Based upon the $12.5 million investment from St. Jude, Cambridge Heart does not foresee a need to raise additional capital in the near-term.