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BY TOM SALEMI

TRIVASCULARSSEQUEL COULDBE A BLOCKBUSTERWhen Boston Scientific shut TriVascular, all appeared to be lost for theone-time hard-charging start-up that took on the daunting abdominal aorticaneurysm market. But TriVasculars core investors and evangelical executiveteam have given the company new life.

The news came over the phone and

out of the blue. In 2006, Michael

Chobotov, PhD, who had co-founded

TriVascular Inc. with two other mechanical

engineers, got the word from the top that

Boston Scientific Corp. was mothballing

the aortic aneurysm endograft company,

which it had just acquired the prior year.

Boston Scientific had paid $65 million for

TriVascular, along with the potential of

performance-based earn-outs that could

have put the price at close to $1 billion.Since the acquisition, Boston Scientific

poured tens of million of dollars into the

TriVascular business, tripling the companys

quarters, doubling the workforce to 290 in

14 months and, most importantly, investing

tens of million of dollars in manufacturing

equipment specifically designed to construct

TriVasculars endovascular grafts.

But then along came Guidant. Boston Sci-

entific executives, having outbid Johnson &

Johnson for Guidant, now had to reconfig-

ure their company to absorb their $27 billion

prize. As part of the reconfiguration, Boston

Scientific executives decided TriVascular no

longer fit into its long-term plans. It wasnt

personal or exclusive. Boston Scientific

would undergo a series of slimming exercises

including, a year later, wide-ranging cost-

cutting and capital-raising moves designed

to focus the companys efforts while paying

off debt. In the slimming down, Boston Sci-

entific would sell its entire vascular business,

and its cardiac division as well, to Getinge

AB for $750 million. (See Boston Scientific

Shuffles and Sells in Bid to Right Ship,IN

VIVO, December 2007.) Boston Scientific in

cluded Guidants cardiac surgery unit in the

sale as well as its own vascular business.

Chobotov says he had no idea the hit was

coming. Having co-founded the company

nearly a decade earlier, the news obviously

was devastating. But he understood. It

would be years, not months, before thered

be any contribution in terms of revenue from

that program, and its an expensive program,

Chobotov says. AAA [abdominal aortic an

eurysm] is a big market. But its a complextherapy and the average selling prices of the

devices are high, $10,000 to $15,000. Every-

thing about it requires significant investment

but theres also a very large opportunity in

the space, and I think Boston Scientific ap

preciated both sides of that. Theyd been in

AAA before meeting us with theirVanguard

program and the like. So its a costly therapy

Its a PMA. And the manufacturing sophistica

tion and infrastructure needed to build these

devices is significant.

But understanding is a far way from accep

tance. That phone call from Boston Scientific

unleashed nearly two years of telephoning

e-mails and formal negotiations between

TriVasculars founders, past investors in TriVas

cular who had already seen a decent return on

the sale, new investors and Boston Scientific

Each principal entered the talks with distinct

points of view and priorities, but all shared the

goal of saving TriVascular and its endografts

from slipping into oblivion. The 21-month

scramble worked. In March 2008, TriVascu

lar became TriVascular once again. Delph

Ventures and Kearny Venture Partners (which

I Founded by three Caltechmechanical engineerswhod never spent a dayin the medical device in-dustry, TriVascular lookedlike one of the more un-likely and potentiallyone of the most successful medical device ventureinvestments in historywhen Boston Scientificbought it in 2005.

I With potential earn outsnear $1 billion, TriVascu-lar could have enrichedits investors and helpedthousands of people suf- fering from abdominalaortic aneurysms if it gotits endograft throughthe FDA and onto themarket.

I TriVascular was manag-ing through some de-sign flaws in the graftwhen Boston Scientific,grappling with recently

acquired Guidant, decid-edly abruptly to shutterthe company.

I Two of TriVasculars origi-nal investors stepped into save the company,bringing along deep-pocketed backers whohave provided the capitalnecessary to spin out thecompany and to give theexecutives, employeesand technology a secondchance.

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MEDICAL DEVICES/ENDOVASCULAR ANEURYSM REPAIR

shares management roots with TriVasculars

original investor, ABS Ventures) committed

once again to the company theyd backed a

decade earlier, participating in a $65 million

round along with the deep pockets of MPM

Capital and New Enterprise Associates.

TriVascular initially sported the name

TriVascular2 to eliminate any confusion

with its earlier form. To be sure, it was adifferent company. The former start-up

had come a long way under Boston Sci-

entific. It had improved the design of its

endograft, correcting errors that had led

to fractures in proximal stents of 22 of

the 79 implanted in the first clinical trial

conducted prior to the acquisition. TriVas-

culars investors and executives were able

to secure a broader IP platform while exit-

ing the company, scoring some additional

technology that previously fell under other

businesses (including possibly Guidant,

although TriVascular isnt saying). And,

perhaps most importantly, TriVascular now

had a full-scale manufacturing facility in

Santa Rosa, CA, specifically designed and

built for its endograft manufacturing. The

plant upgrades cost Boston Scientific up

to $30 million. (It got $30 million of the

$65 million price tag to recoup its capital

investment.) The company also retains a

6.75% stake in TriVascular, projected to be

10%. Today, TriVascular is running pivotal

clinical trials in Europe in the US, with an

eye toward the commercial launch of its

first product, the Ovation abdominal aortic

aneurysm graft, slated for later this year.I love this Cinderella story, says Manish

Mehta, MD, a vascular surgeon who was

an investigator in TriVasculars Phase I trials

and who is a principal investigator in its

new US pivotal trial. Mehta says he called

Chobotov once he heard the companys

spin-out, offering to serve as an investiga-

tor in any subsequent clinical testing. I

just commend Mike and the others a lot.

He didnt have to be that passionate to

[spin the company out]. Hed done well by

selling the company the first time around,

but he really believed in the process and

the product.

UNUSUAL ORIGINSInvestors, executives and even Boston

Scientific demonstrated an unusual com-

mitment to working toward TriVasculars

eventual success. That level of dedication

can be tied as much to the unorthodox

origin of the companys stent technology

as to the dogged pursuit competitors in

the AAA space have shown in striving to

devise better ways to treat the disease. The

space is littered with disappointments. (See

In Search of the Perfect Aortic Endograft,

Medtech Insight, March 2008.) Boston

Scientific, prior to shutting down TriVas-

cular, pulled its Vanguard stent from the

market due to problems with fabric wear

and high rate of complications. Meanwhile,

Edwards Lifesciences Corp., Cordis Corp.

and Guidant all pulled products. (See Exhibit

1.) (See Staying the Course in Endovascular

AAA Repair,IN VIVO , July 2003.) Vascular

surgeons, likewise, are working eagerly to

find less invasive manners of reinforcing

the weakened walls of the aortic aneurysm,

turning increasingly to endovascular proce-

dures to treat patients who often are too sickor feeble to survive open surgery. At least

half of all AAA repairs performed in Medi-

care patients are endovascular procedures,

but the percentage might be considerably

higher as much as 80% for the most

capable surgeries and centers. Mehta, who

is director of endovascular services at the

Institute for Vascular Health & Disease in

Albany, NY, says surgeons push for endo-

vascular approaches whenever feasible. We

have high-risk patients. The average age is

about 74. As with any patient in their 70s,

we have several co-morbidities cardiovas-

cular issues, bad heart issues, COPD and allof those things, he says. An open surgical

approach on a patient like that presents a 3

to 5% chance of morbidity. An endovascular

approach brings that down to 1%.

TriVasculars founders launched the

company in 1998 with the belief they could

develop an endograft that could be easier

to deliver and more likely to withstand the

sheer force brought down by the rush of

blood from a beating heart. At the time,

Chobotov ran a design consulting firm

with fellow PhDs Robert G. Whirley and

Joseph W. Humphrey (now TriVasculars

vice presidents of research and develop-

ment and manufacturing technologies,

respectively). Working from wine country,

the group had been doing challenging

engineering simulation and analysis work

for several Fortune 100 companies, includ-

ing Ford Motor, Lockheed Martin and Fuji

Heavy Industries, across the globe. Quite

selfishly we thought, Gee, itd be great to

have some clients that we didnt have to fly

halfway around the world for all the time,

so lets see whos in Santa Rosa, Cho-

botov recalls. The trio approached Arte-

rial Vascular Engineering (now MedtronicCardioVascular), the company ultimately

acquired by Medtronic for $3.5 billion, as

one possible client. The visit suggested

that maybe some of the methods and

things we were doing in aerospace werent

COMPANY DEVICE COMMENTS

Boston Scientific Vanguard/Stentor Pulled from market due to problems with fabric wear and a high rate of

device-related complications.Edwards Lifesciences LifePath Development shelved in 2004 when company declined to exit the AAA

graft market and could not find a buyer for the technology. The deviceunderwent a recall and substantial redesign in 2000.

Guidant/EndovascularTechnologies

Ancure Pulled from market in 2003 after problems with delivery system andcompanys failure to report incidents to FDA, which led to felony chargeand $92.4 million fine.

Cordis/J&J Teramed Ariba Withdrawn from European market after durability problems surfaced.Company elected not to pursue US marketing approval.

SOURCE: Medtech Insight

Exhibit 1

Disappointments in AAA

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MEDICAL DEVICES/ENDOVASCULAR ANEURYSM REPA

really being adopted or utilized in the medi-

cal device space, he says. Conversations

with others in the device field confirmed

the conclusion, so the trio opted to set out

on their own device venture rather than

work with an existing company.

SMALL B, BIG M

The medical device industry clearly isbuilt upon engineering solutions to me-

chanical problems, but finding something

capable of clinging to vessel walls as blood

pulsed down the aortic artery is one thats

perfectly suited for engineers with an aero-

nautic bent. As mechanical engineers we

thought the cardiovascular space sounded

very interesting, Chobotov explains. The

disease strikes millions of people and draws

million of dollars in investments. Chobotov

tapped a college roommate Geoffrey Ru-

bin, MD, a Stanford University faculty

member who specialized in computed

tomography imaging and 3D reconstruc-

tion, to help identify an area within cardio-

vascular disease. Through this analysis, the

three engineers pinpointed endovascular

aneurysm repair (EVAR) as a mechanical

engineering-intensive problem. Chobotov

explains: Its the largest artery in the body.

Its very close to the heart. Its a small b

big M in terms of being a biomechanical

device. While the challenge in cardiovas-

cular stenting is restenosis, and there are

biological challenges that are addressed

with drugs and the like, with endografts for

aortic repair, its really mechanical in na-

ture more so than the biologic response,

he says. If the device stays put and seals

its a success.

Endovascular aortic aneurysm repair is a

growing and underserved market. A rareoccurrence in the general population, the

incidence of aortic aneurysms increases

with age as aging and disease breaks down

the elasticity of the aortic wall. AAA patients

more often are men then women and have

a family history of the disease. Smokers

also are more susceptible. Roughly 90% of

aortic aneurysms occur in the abdominal

aorta. According to industry estimates,

there are over 1.6 million people in the

US age 55 and older living with an AAA

and some 200,000 to 300,000 new cases

are diagnosed annually. Of these, less than

100,000 per year are treated with either

surgical or endovascular repair. Aneurysms

generally have to be larger than 5 centime-

ters in size to warrant treatment.

Its worth noting that EVAR was no sure

thing when TriVascular started. The field

was in its infancy. Juan Parodi, an Argentine

physician, had performed the first endovas-

cular implantation of a graft just seven years

earlier. As in any industry, the first-generation

devices were flawed, forcing redesign afte

redesign. Early on, nearly half of the EVAR

patients suffered from leaks. The success rate

improved with each version, bringing the

percentage of patients with leaks down to

single digits by the time TriVascular formed

But issues such as stent migration plague the

grafts to this day, requiring regular follow-up

visits to ensure the grafts remain in placeThe challenge facing most grafts is balanc

ing flexibility with fixation. Grafts must be

strong enough to remain in place, but smal

enough to be able to be delivered through

narrow vasculature accessed by a cut down

in the groin.

The challenges are particularly acute

for patients with shorter aortic necks the

distance between the point where the rena

arteries branch off from the aortic artery and

the aneurysm. The FDA hasnt approved an

endograft to handle anything shorter than

10 mm. In a recent paper published in the

Texas Heart Institute Journal, Maaz Ghouri

MD, and Zvonimir Krajcer, MD, write that

the the accepted criterion for secure en

dograft fixation is an infrarenal neck length

of greater than 15 mm; but this has been

challenged recently, and a minimum neck

length of 10 mm has been stipulated as

sufficient to produce good sealing of the

stent-graft. Vascular surgeons, looking to

spare their patients the considerably highe

morbidity of open surgery, often advocate

for use of an existing endograft allowing with

some adjunctive procedures, like the use of

a Palmazstent to ensure the graft remains inplace. These patients are required to undergo

extensive follow-up after the surgery to

ensure the stents remain in place, to check

for leaks, separation or fractures of the com-

ponents, Mehta says. TriVasculars Ovation

endograft stent could provide an appealing

option with a minimum neck length of only

7 mm, a 30% reduction that could make the

procedure an option for new patients.

Today, vascular surgeons have their choice

of five FDA-approved devices: Cook Medi

cal Inc.s Zenith (Cook Medical is a division

ofCook Group Inc.), Medtronics AneuRxAAAdvantageand Talent, WL Gore & As

sociates Inc.s Exclude R AAA Endoprosthesis

and Endologix Inc.s Powerlink. But none

appears to be a final solution, which has led

theNational Institutes of Health to suppor

a comparative effectiveness study aimed a

developing better tools for assessing the use

of endografts. (See sidebar, Comparativ

Effectiveness Aims at AAA.) A decade ago

the TriVascular team undertook a simila

approach to finding solutions to many o

COMPARATIVE EFFECTIVENESS AIMS AT AAAThe National Institutes of Health committed $500,000 for a comparative ef-

fectiveness study by Christopher K. Zarins, MD, at Stanford University, according

to an online report of the study.

The 12-month study is scheduled to conclude in September. According to

the report, the analysis will examine the effectiveness of endovascular procedures,

which it suggests are prone to late failure while admittedly reducing morbidity

and mortality rates tied to open surgery.

Specifically, the study is eyeing endograft migration as a result of the pulsatile

forces of blood flow. Endograft failure results in costly secondary procedures,

conversion to open repair, long-term surveillance, and death. Understanding the

biomechanical environment experienced by endografts in vivo is a critical factor

to ensure correct functioning and long term durability of the device, it reads.

The study has been set up with two goals. First, develop and apply a set of

tools to characterize the mechanical behavior of endografts in vivo with the goalof determining the likelihood of migration. Second, Zarins group will create 3D

segmentation techniques to generate patient-specific computer models of AAA

with implanted endografts. The models will be used to evaluate the hemodynamic

forces acting on the implants. The computer-based studies will calculate the pres-

sure put upon these implants by the flow of blood while measuring the abilities of

the current five AAA endografts to withstand those pressures. This research will be

the first attempt to characterize the problem of migration of AAA endografts using

a combination of best-in-class imaging, CFD and Computational Solid Mechanics

tools, the summary states. Furthermore, this work will provide the first compara-

tive effectiveness study of the five current FDA approved AAA endografts.

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MEDICAL DEVICES/ENDOVASCULAR ANEURYSM REPAIR

the problems still plaguing AAA endografts

today. Tighter fit. Smaller profile. Solid

constructions. Aerospace engineers are no

strangers to these problems. For engineers

like Chobotov, AAA simply presented a very

challenging plumbing problem. The chal-

lenges have primarily been mechanical in

nature. And the profile was a real mechanical

engineering challenge: how do you makesomething durable? Chobotov says. And

although its being placed in the largest artery

in the body, you want [the graft] to come

through a fairly small femoral artery to get

there, he says, adding that the iliac some-

times is very tortuous and occluded as well.

Constructing a sound endograft is therefore

like building a ship in a bottle, Chobotov says,

a successful design balancing stability with

small profile to fit through a small opening.

Being fresh to the device sector, the trio

couldnt tap into a professional lifetime

of experience with clinicians, investors or

industry executives. But Chobotov claims

the trios unorthodox origin was a strength.

We were able to use a clean-sheet ap-

proach to thinking about it, he says. In

fact, our early efforts to get started were

aimed more at studying the problem and

understanding the requirements than

they were about quickly coming up with

a design and sort of testing it against

various models. They employed the same

systems-engineering approach used in

aerospace design. Chobotov, for example,

had helped design communication satel-

lites. You dont get to build and test thesethings before you fly them, he says. And

you cant replicate Zero G environments

very well on the ground. There are a lot of

simulation tools and virtual methods that

have been used for a long time in that

field [AAA] sounded to me as if it had

a lot of engineering challenges. This was

an opportunity to try out some of these

methods weve used in other fields.

The FDA served as an able tutor of the

ways of the medical device industry. The

TriVascular team attended the agencys

panel meetings where the first two en-dografts Guidants Ancureand Medtronics

AneuRx were approved for treating AAA in

the US. (The agency approved both devices

in September 1999.) We felt early on that

understanding the agency and working with

them was an important thing, Chobotov

says. Whirley would go on to join the ISO

Standards Committee for the AAA devices

around the same time. The engineers felt

they could contribute something to the

field in terms of bringing that perspective

of analysis, tests and an engineering ap-

proach. And they thought that this might

be a great way to understand the direction

of the regulatory thinking in this space while

also making a useful contribution to the

standards being developed.

TriVasculars trio sought to solve two

basic, seemingly contradictory problems.

A successful endograft needed to be du-rable or at least as durable as existing

products but also present a smaller profile

that enabled it to more easily fit through

the narrow arterial passages leading to the

aortic artery. The challenge: to slim down a

device that needs the strength of support of

a metal cage and hooks to remain affixed

within the artery. In its early stages, the

company worked on several prototypes,

finally deciding upon a system that did

away with the metal frames all together.

TriVasculars endografts instead employ

a fill polymer thats injected into the en-

dograft after its deployed. The polymer

winds its way through the network of

tubes and channels through the endograft,

eventually expanding the endograft until

it fits firmly against the walls of the artery.

The endografts still use metal barbs at the

proximal end of the graft, but the company

says the polymer which hardens to a

rubbery consistency enables the graft to

remain in place without the need of a larger

stent implanted as an anchor. The polymer

has a three-dimensional, non-isotropic

structure, Chobotov says, so it can be

designed to withstand different forces andstress from every angle. Its also visible on a

fluoroscope, so the formation of the graft

can be viewed during the procedure.

FINDING BELIEVERSChobotov now can present an actual ver-

sion of the TriVascular endografts to people

interested in learning the companys ap-

proach. But at the very beginning, the com-

pany offered potential investors little more

than a vision and a computer simulation

demonstrating how three California Insti-

tute of Technology engineers intended ontaking on the medical device giants. Jim Sha-

piro, now a general partner at Kearny Ven-

ture Partners, was one of those receiving an

early glimpse of TriVasculars future. Shapiro

first saw TriVascular present to a meeting of

the North Bay Angels in 1998. Shapiro, at

the time a banker with Alex.Brown, already

had enjoyed his first forays into AAA, having

helped orchestrate Medtronics acquisition

AneuRx (now Medtronic AneuRx Inc.) in

1996 and Guidants acquisition of Endo-

Vascular Technologies Inc. in 1997. He said

he hadnt necessarily been looking to jump

into that arena again, questioning whether

lightning could strike again, but he had

been taken with TriVasculars presentation.

Not everyone listened to what was being

said. It was a pretty raw presentation at

that point, Shapiro recalls. They didnt

have anything much other than a computersimulation, but they had carefully identified

the issues with the current devices and inge-

niously addressed them.

Shapiro followed up the presentation

with a meeting at TriVasculars offices,in

the same building from which the founders

had run their design consulting firm. Once

again, the trios engineering backgrounds

stood out as uniquely positive. I remem-

ber going into their offices and there was a

Gulfstream Jet pilot seat because they had

been doing engineering work on the thing,

Shapiro said. He was struck and remains

impressed with the approach they took

to solving problems, any problems they en-

countered. Its pretty rare to find people so

open-minded, Shapiro said. I remember,

back in the early days, theyd encounter a

problem like the graft wasnt deploying. By

two in the afternoon that day they would

have five potential solutions to the problem

and theyd prototype three of them by

seven in the evening. They were fast. They

were methodical, and they were what en-

gineering is about. They dont have a bias

about what they think is going to work

best. They just figure out what is going towork best. TriVasculars polymer approach

made sense to Shapiro. In his eyes, it had the

potential to resolve the conflict of develop-

ing an endograft that was small enough to

simplify delivery while ensuring a tight seal

against leaks. They made it clear what the

solution was and that it was really a superior

way to go, he recalls. Shapiro invested his

own money in TriVascular. Eventually, ABS

Ventures, the venture group affiliated with

Alex. Brown, would follow. (See Exhibit 2.)

TriVasculars origins and approach elicit-

ed confidence that not only allowed peopleto look past any concerns about the found-

ers lack of device experience but also to go

against what might have been conventional

wisdom at the time. Delphi General Partner

Doug Roeder had just joined the firm as an

associate charged with sourcing new deals

that fit the firms investment guidelines.

At the time, the medical device venture

industry was still recovering from two years

of underperforming IPOs and a sudden as-

set switch to Internet-based investments.

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MEDICAL DEVICES/ENDOVASCULAR ANEURYSM REPA

As the device industry retrenched, Delphi

decided to pursue lower-risk investments

in companies led by experienced device

executives who were developing products

that required only 510(k) approval.

Roeder had worked with Shapiro at Alex.

Brown, so he was contacted when the com-

pany was raising a follow-on round. When

I described the project to the partnersthere were certainly some questions about

investing in a company with a PMA implant

being led by three guys who dont know

anything about devices, Roeder says. But

when the company came in and presented

they clearly had the energy and drive that

we look for in a start-up team. They had

prototypes. They assembled a team of the

right clinicians. They were doing all the right

things. Delphi invested leading a $6 million

Series B in 1999. Roeder and General Partner

David Douglass joined the board.

The TriVascular team didnt win everyone

over. Ryan Drant, general partner at NEA,

says the firm did well as an investor in An-

euRx after it was purchased by Medtronic.

So it knew and liked the AAA space. But,

frankly, at the time [TriVascular] was a

bunch of really smart guys from the aero-space industry who were coming in to try

to make a new AAA stent graft, Drant

recalled. I found them very impressive,

but it was early so we just didnt get there

on making the investment.

Computer simulations and problem-

solving capabilities are nice, but the real

way to turn investors into believers is per-

formance. And TriVasculars team delivered

on the promises theyd set forth in the late

1990s. TriVascular developed a uni-body

graft that would cover the portion of the

aortic artery from just below the rena

arteries into the two branches of the iliac

arteries that follow different directions in

the pelvis. TriVascular ran the graft through

Phase I trials, treating 78 patients from

2002 to 2004. The graft performed wel

enough to attract the interest of BostonScientific, which was looking to bulk up its

endovascular offerings.

Boston Scientific first obtained the ex

clusive worldwide marketing rights to the

AAA graft in 2003. The deal involved an

equity investment and an option to buy

a fairly standard formula Boston Scientific

had applied to business development deals

at the time. Boston Scientific exercised that

right two years later, paying $65 million

(coincidentally the same amount the inves

tors paid to spin out the company again) to

acquire the entire company. The earn-outs

for the deal were considerable. (Boston Sci-

entific, in its 2006 annual report, reported

a $130 million cost associated with the

TriVascular acquisition.) No one would con-

firm exact amounts but wouldnt deny they

approached $1 billion if the company hit

all of its milestones. We could have made

up to 30 times our money, said Delphis

Roeder. So we were disappointed to make

north of 2X, but we still made money.

But things didnt go well. In 2006, Boston

Scientific and TriVascular revealed the pres

ence of fractures in nearly one-third of its

Phase I trial participants. Chobotov viewedthe fractures as just another problem with

a solution. TriVasculars team re-engineered

the stent so it would be ready to proceed

into the pivotal trials. Then Boston Scien

tific opted to shut down the program. In

its annual report, management said the

shutdown was due principally to forecasted

increases in time and costs to complete

the development of the stent-graft and to

receive regulatory approval. The company

recorded a $20 million charge associated

with shutting down the plant and an ad

ditional $10 million in severance and othelabor costs. Chobotov and others concede

the AAA business would be costly, but the

redesign wasnt an insurmountable prob

lem. The re-engineering of the stent, that

work had all been done, and we had actu

ally vetted that internally as well as outside

the corporation, Chobotov said. But since

he wasnt part of the discussion that led to

the shutdown he said he didnt want to

argue over Boston Scientifics rationale fo

doing it. I think it was fortunate that [the

Exhibit 2

TriVasculars Timeline

1998 TriVascular founded.

Raised $762,000, led by Vertical Group and Asset Management.

1999 Raised $6 million Series B led by Delphi Ventures.

2001 ABS Ventures led a $13 million Series C round.

2002 Boston Scientific signs licensing agreements with TriVascular,including equity stake purchased through a Series D financing andoption to buy.

TriVascular starts Phase I trial.

2004 Phase I trial complete

2005 Boston Scientific buys the remainder of TriVascular for $65 million up-front payment; with earn-outs transaction can potentially total closeto $1 billion.

TriVascular first discovers presence of fractures in some implantedabdominal grafts implanted in Phase I trial.

2006 Boston Scientific purchases Guidant.

TriVascular completes redesign of fractured stent.

Boston Scientific decides to shut down TriVascular program, citingcost of continuing the project.

Discussions begin to spin out TriVascular.

2008 Trivascular2 spins out of Boston Scientific, raising $65 million.

2009 TriVascular brings in $30mm through its Series B round.

2010 TriVascular beginning CE Mark Trials in Europe and pivotal trials in US.

TriVascular hopes to release Ovation abdominal stent graft systemoutside the US.

2012 TriVascular eyeing FDA approval for Ovation.

SOURCES: TriVascular; ElsevierStrategic Transactions

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MEDICAL DEVICES/ENDOVASCULAR ANEURYSM REPAIR

design flaws] had been completed prior to

the shutdown because the re-launch of the

spin-out would have been more problem-

atic if that work was still left to be done.

The new investors understandably

needed convincing. As MPM Managing

Director Jim Scopa notes, venture capital-

ists should be extra wary when investing

in a program thats been shut down. Butthe potential led MPM to be aggres-

sive on the deal. AAA represented such

a huge opportunity, and Scopa knew the

players well: hed worked with Shapiro

(and Roeder and Jake Nunn, the partner

representing NEA) at Alex.Brown in the

1990s, when the firm handled Medtron-

ics acquisition of AneuRx. Its one of

the bigger markets in cardiovascular.

It has pharmaceutical-like margins and

the rationale for the patient and for the

payor is compelling, he says. Surgery is

far more dangerous than endovascular

procedures for the elderly sufferers of

aortic aneurysms, and the unique design

and construction of TriVasculars stent

could make those procedures easier for

surgeons and safer for patients.

But Scopa needed assurances and

understanding. We had to understand

why [Boston Scientific] didnt want to

move forward, he says. From the outside

it was clear the device maker was going

through a huge transaction and trying to

figure out how to pull that off. But it was

also publicized that TriVascular had some

fractures in its initial device, which werenot of clinical relevance to those patients.

We had to understand that, he says.

As MPM drilled down, Scopa recognized

that the company had indeed worked

out the kinks in the device, not only with

Boston Scientific but, more importantly,

with the FDA.

TWO BIG WORDSWhat won Scopa over? In two words:

expanded polytetrafluoroethylene (ePT-

FE). Or at least TriVasculars use of the

polymer framework in the graft. Thepolymer accomplishes two crucial tasks

in the design of stents. First, it narrows

the profile of the device. Second, it

strengthens the implant, enabling the

stent to fit snugly into the aortic artery,

according to the company. TriVascular has

eliminated the metal, spring cagework

used in other grafts and replaced it with

a series of tubes and channels. The tubes

and channels are empty at the start of

the operation, allowing surgeons to fit

the AAA graft into a 14-French catheter

(each French equals one-third of a milli-

meter). This is considerably smaller than

20-plus-French catheters required for

other endovascular grafts. TriVascular is

able to achieve the smaller size by giving

the endograft its form after its implanted

in the aortic artery. Once the graft is in

place, the surgeon pumps a polymergel into the tubes and channels, which

inflates the tube within the artery. The

polymer presses the graft tightly against

the walls of the artery, forming a tight

fit. Then it quickly hardens into a rubber

eraser-like consistency. Basically, if you

looked at it under a microscope, it looks

like a sponge, Chobotov says. There

are a lot of little fibers and nodes in the

structure and you can design the mate-

rial to have many different mechanical

properties. Each stent actually contains

many different kinds of ePTFE, with each

demonstrating a different quality.

Also, as the aortic body is filled with

polymer, O-rings tighten and seal off each

end of the graft. Chobotov presents a

version of the companys thoracic aneu-

rysm graft stent. The word TriVascular

is clearly molded into the polymer in one

of the rings, a demonstration of how

TriVasculars device conforms to irregular

surfaces, in this case a plastic model of

an aortic artery with the 11 raised let-

ters. Inside an actual aortic artery, a stent

is likely to come up against a calcified

plaque along the artery walls. It couldbe as hard as porcelain, like a coffee cup,

says Chobotov. Thats called porcelain

aorta. Sometimes itll break needles when

surgeons are actually trying to suture

through it, he says. TriVasculars polymer

will press the graft stent into each bump,

crevice and cranny on the surface of the

artery, presenting a tighter fit. In a way,

this design mimics the current use of bare-

metal Palmaz stent to hold graft stents in

place in patients with tough anatomies.

In fact, TriVascular executives see its Ova-

tion graft as becoming the go-to graft forpatients with short aortic necks the dis-

tance between the branching of the renal

arteries and the aneurysm. With currently

available products anyone with less than

10 mm between those two points either

cant be treated with a graft or surgeons

can try to reinforce the graft stent with

the bare-metal stents. The importance

of this device is it will allow us to treat

more patients by endovascular means,

says Mehta.

The narrower profile creates an open-

ing for endovascular rather than open

surgical delivery of grafts in people with

partially occluded or tortuous iliac arter-

ies running from the groin to the aortic

artery. It also makes percutaneous delivery

possible. In fact, the company is running

clinical trials in Europe where the Ova-

tion could be delivered percutaneously,rather than via an endovascular opening.

In the clinical trials, the decision to gain

femoral access via a surgical cutdown or

a percutaneuos approach is left to the dis-

cretion of the clinician. Michael D. Dake,

MD, chief of interventional radiology at

Stanford School of Medicine, says per-

cutaneous delivery could eliminate many

of the complications tied to cutting into

the vasculature. The smaller the delivery

profile the less perturbing its going to be

to the underlying arterial anatomy, he

says. And if you can do it percutaneously

you could use different anesthetics. Some

cases might allow you to do it with local

anesthetics, which would enhance the

recovery time. Ultimately, the patient

and doctor will decide which procedure

to use, but a percutaneous device poten-

tially could open the door for non-surgical

interventional specialists to perform more

of the procedures now done almost ex-

clusively by vascular surgeons.

TOUGH TALKSScopas enthusiasm for getting the deal

done rivaled those of Delphi and Kearny theearlier investors who wanted TriVascular to

have another shot of reaching commercial-

ization and generating higher returns. The

company clearly evolved into a different

type of investment than in 1998. But it was

also reflective of the evolution of the entire

device sector. To succeed, TriVascular would

need significant capital. To generate accept-

able returns it would need to become a

commercial force in the EVAR industry. The

investor syndicate was confident it could

provide the former and believed TriVascu-

lars team and technology were capable ofdeveloping into the latter.

Boston Scientific, looking to manage

its debt, clearly had incentive to deal, but

negotiations took nearly two years, consider-

ably longer than anyone had expected. The

reshuffling at Boston Scientific lengthened

the talks as the investors sometimes had no

one to negotiate with over terms. Ultimately,

Scopa says, they dealt directly with the top.

Then-CEO Jim Tobin felt that an effort should

be made to try to keep this program alive

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MEDICAL DEVICES/ENDOVASCULAR ANEURYSM REPA

in some fashion, Scopa says, which made it

possible to continue the discussion. Accord-

ing to Scopa, Tobin asked Jim Gilbert, who

had recently been appointed executive vice

president of strategy and business develop-

ment to guide the negotiations.

Throughout the talks, TriVasculars ex-

ecutives and would be-investors remained

committed to the project and each other.We basically got married, Scopa says. We

werent going to do it without the manage-

ment, and management had two investors

that it had known for a long time, and then

two more that were sufficiently capitalized to

carry the day. Just as the investors and exec-

utives recognized they needed each other to

move forward, both parties were equally sure

TriVascular wouldnt be a viable investment

unless Boston Scientific was willing to sell the

roughly $30 million in manufacturing equip-

ment that it had custom-built before shutting

down the company. Were extremely verti-

cally integrated out of necessity, Chobotov

says. Its not as though we wanted to build

this highly vertically integrated major opera-

tion. Its because the processes that we do

and control really arent done on any regular

basis, or at all in some cases, outside of our

plant. TriVascular had generated a lot of

methods of manufacturing and manufac-

turing technology for which it also claimed

novel IP. The equipment represented years

of development time and millions of dollars.

If you had to spend millions and wait years

just to restore that capability after spinning

out, that would have made that [the spin out]economically prohibitive, he says. The entire

transaction could have broken apart over the

question of the plant. TriVasculars investors

were willing to commit $65 million plus a

promise of another $30 million, and they

wanted assurances that the company and the

equipment would have a long-term home

in the form of a stable lease. The two sides

ultimately came to terms. (See TriVascular2:

A New Beginning,START-UP, April 2008.)

TRIVASCULAR 2: THE SEQUEL

Two years later, TriVascular is goingstrong. The company is running clinical

trials in South American and Europe and

a pivotal study in the US. Even more im-

pressive, the FDA agreed to waive Phase

I trials for its redesigned abdominal en-

dograft stent, which now sports a modular

three-piece design, rather than the single

uni-body device implanted in the Phase I

trial. The company is now beginning to

enroll for a 150-patient pivotal trial, with

an eye toward finishing enrollment by the

end of this year and possibly receiving FDA

approval in 2012. Meanwhile, if the Euro-

pean trial goes well, the company hopes

to obtain its CE mark for the Ovation stent

and stage a commercial launch in Europe

by the end of this year. The FDA also gave

the company a green light for a clinical

trial of its secondary product, an endograft

to treat thoracic aortic aneurysms, but itwill concentrate its efforts on AAA initially.

To fund this development, TriVasculars

investors did provide the second round of

capital, a $30 million Series B, late last year.

Company executives anticipate raising a

third round before the end of 2010.

Investors and executives are justifiably

proud of the companys ability to get into

trials and move toward commercializa-

tion just two years after the restart. But

the company did enjoy a long taxi on the

runway prior to this ascent. Whats even

more impressive: the three self confident

engineers who thought they could step

into the medical device industry and do

what others have not done are still pilot-

ing the plane. Typically, the scientific or

technical evangelists who develop the

vision of a product may lead the company

for a time before handing the reigns over

to someone with commercial experience.

But TriVascular remains very much in the

hands of its three engineer founders, and

investors are happy to have it that way.

To assist with the companys develop-

ment theyve scored an impressive support-

ing team. Vivek Jayaraman, vice presidentof commercial operations, joined TriVascu-

lar last fall from Medtronic CardioVascular

where hed been vice president of global

markets. Shari Allen, the companys vice

president of clinical affairs, regulatory af-

fairs and quality control, joined at the same

time, bringing her experiences from Aptus

Endosystems Inc. where she guided that

companys AAA through clinical trials. The

additions speak to the confidence Chobot-

ov, Whirley and Humphrey project while

also garnering considerably loyalty. TriVas-

cular successfully brought back a majorityof the workers whod been laid off after

Boston Scientific shut the company down

in 2006. Were trying to build a team that

has all the capability that we need, Scopa

says. When you go from the close of a

transaction in 2008 to recruiting patients

for pivotal trials in the US and Europe by

March 2010 to being commercial by the

end of 2010, there are a lot of things that

have to be done by many different people. I

cant tell you how focused and paranoid we

are about trying to make all that happen

Were trying not to fall off the rocket.

But while its true TriVasculars founders

dont hail from the device industry, itd

be unfair to say theyre now not medica

device executives. Drant, who passed on

the first version of TriVascular, doesnt see

an engineer in Chobotov but an executive

He is quite seasoned, Drant says. Hesgotten not one but multiple IDEs approved

Over 100 patients implanted. Hes been

through a big acquisition and a divestiture

Hes quite an experienced guy at this point

There is a pretty small universe of people

who have the technical skills, the organi-

zational wherewithal and the pure powe

of persuasion to pull off what hes done in

terms of starting this company, attracting

the clinical advisors, raising all the money

and selling to Boston Scientific in what was

quite an attractive deal.

Chobotov has followed the industry as

long as nearly anyone and sees the finish

line. When he started out, the industry

generated $40 million sales worldwide

Now its $1.2 billion and there have been a

lot of programs out there. This is a mara

thon, not a sprint, he says. I believe you

need to be committed for the long-term

and thats a commitment that resonates

with people. TriVascular executives are

intent upon completing what they started

in a brainstorming session in a Santa Rosa

office over a decade ago to build a new

kind of endograft stent that can provide

a better treatment for people with aorticaneurysms. That is our mission and its

not just something were doing until we

find something else to do. I think tha

single-minded dedication and vision reso

nates with key stakeholders external to the

company and is the key to attracting the

talent we need to excel, he says. It also

puts TriVascular on path to be a rarity: a

sequel superior to its original.

[A#2010800059]

IV

COMMENTS: Email the author: T.Salemi@Elsevier.com

RELATED READING

TriVascular2: A New Beginning, START-UP, April 2008[A#2008900068]

In Search of the Perfect Aortic Endograft, Medtech Insight,March 2008 [A#2008400024]

Boston Scientific Shuffles and Sells in Bid to Right Ship, INVIVO, December 2007 [A#2007800191]

Staying the Course in Endovascular AAA Repair, IN VIVO,July 2003 [A#2003800131]

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