VCR ventracor limited

michael spooner, ceo interview.

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    EMMA ALBERICI: It's been a landmark week for artificial heart company Ventracor.

    Not only was the stock promoted to the ASX 200, but the firm also received long-awaited approval to start a trial of its artificial heart.

    Four years and $20 million later, cardiologists at the Alfred Hospital in Melbourne will fit 10 patients with the device over the next few months.

    If successful, Ventracor expects to be one of the first companies to gain access to a global market estimated to be worth up to $20 billion a year.

    Michael Spooner is chief executive of Ventracor and he's with us now.

    Good morning to you.


    EMMA ALBERICI: Ventracor shares have doubled over the past six months.

    The market's clearly expecting big things from you and indeed investors will punish firms who overpromise and underdeliver?

    MICHAEL SPOONER: Ventracor has a good history of delivering on its milestones.

    We're very excited by the prospect of delivering a device to a market that's estimated to be about eight million sufferers of congestive heart failure -- 800,000 who die every year from this particular disease.

    And it's been a process that's been well-understood, something that's been evolving over many, many years.

    EMMA ALBERICI: OK. How much will this pilot trial cost the company?

    MICHAEL SPOONER: In fact, the pilot trial itself will be in part reimbursed by government and so on.

    EMMA ALBERICI: How much will the government reimburse you for?

    MICHAEL SPOONER: I can't honestly tell you at this point in time.

    We're very much geared to pay for it ourselves.

    We do have sufficient funds in the bank.

    EMMA ALBERICI: You've got a commitment from the government to pay back some of this?

    MICHAEL SPOONER: Well, part of the government reimbursement schedule, for ventricular devices, especially in Victoria, do reimburse parts of these costs.

    EMMA ALBERICI: But you don't know yet?

    MICHAEL SPOONER: It's a process of how long people are in hospital for, what complications may or may not arise as we go through.

    EMMA ALBERICI: How do you -- on that issue of how long they're in hospital and so on -- how do you arrive, or how do the analysts arrive at that market valuation of that $20 billion-odd worth for the artificial heart?

    MICHAEL SPOONER: The market's very well-defined.

    Congestive heart failure, as I said before, is a population of about eight illion people, with 800,000 people dying every year.

    EMMA ALBERICI: But that $20 billion in particular, what does that represent?

    MICHAEL SPOONER: It's representative of the cost of the device itself and a percentage of the population who would be suitable candidates for the device.

    EMMA ALBERICI: Is this the device here?

    MICHAEL SPOONER: Yes, it is actually.

    EMMA ALBERICI: Can we get a shot of that. That's it there. It's that small?

    MICHAEL SPOONER: It is, 300-odd grams.

    It's implanted in a three-hour operation.

    People who do receive the device itself it's anticipated that they be in ICU for about seven days and then a general ward for 21 days, and then home.

    These people are debilitated, they're folks who can't get up and walk around freely and it's an opportunity for them to regain an enormous amount of mobility and quality of life.

    EMMA ALBERICI: So that $20 billion includes the hospitalisation and the palliative care afterwards?

    MICHAEL SPOONER: No actually, just the device itself.

    In fact, in the United States, 5.5 million people who suffer from this cost the US Government about US$19 billion every year to look after those people.

    So there's a tremendous economic motivator that sits behind these devices.

    EMMA ALBERICI: And how much will it cost each patient to have one of these fitted?

    MICHAEL SPOONER: Today, first generation devices, again, this is a process that's evolved over a 25-year period, it costs about US$50,000 to US$70,000 for the devices alone.

    EMMA ALBERICI: How many implants can you reasonably make each year and how much revenue can you derive from them?

    MICHAEL SPOONER: That's a great question and it's something that will evolve over a period of time.

    Today, that market is emerging, bearing in mind that today, only people obtain heart transplants, so these devices aren't commonly used throughout the world, only as a bridge to transplantation, not as alternative to heart transplantation, which is the market that we're looking for.

    EMMA ALBERICI: But what does your projection show?

    How many can you make?

    MICHAEL SPOONER: Thousands, tens of thousands, actually, hundreds of thousands.

    It's a process that, I guess, is limited by the number of doctors and the hospitals themselves that can implant the device.

    The device implantation process is relatively straightforward.

    We've designed it, we've worked with the doctors.

    For any reasonably competent cardiothoracic surgeon to actually implant it -- not a heart transplant specialist -- these are folks who do open heart surgical procedures day in day out.

    EMMA ALBERICI: So, should everything go to plan and the trials are successful, how quickly can this become commercially viable, how quickly will you turn a profit?

    MICHAEL SPOONER: We're an organisation that's focused on immediate milestones and that's to go through the pilot trials.

    EMMA ALBERICI: You must have some projections?

    MICHAEL SPOONER: We do, it's going to be a couple of years yet, we believe, but it's really dependent upon how quickly the doctors can take up this new technology.

    So it is different from drug trials.

    The numbers of patients who enrol for these trials are a lot smaller.

    The outcomes are a lot more immediate and have greater impact than drug trials.

    So the process for approval from government departments is that much faster.

    EMMA ALBERICI: Now your cash reserves are depleting, you admitted such back when you gave your six months results, that it was around $14 million -- that's around $6 million less than you had six months before that.

    How long can you afford to continue the research on the trials before you run out of money?

    MICHAEL SPOONER: In fact, we had $14 million at the 31 December.

    We've sold off part of our business -- an ECG business that raised $3.5 million, plus another $1 to $2 million that's been raised through options exercised by employees.

    Our cash burn rate is not significant.

    We do have sufficient funds in place to certainly fund the pilot trials and start the more global international trials.

    So we're well-funded, we're well-managed.

    We're an organisation that has a tremendous amount of expertise internally, both scientific and engineers, that are dedicated to this and we believe that we will be able to move through it in record time.

    EMMA ALBERICI: All the best of luck.

    MICHAEL SPOONER: Thank you very much.
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