HeartWare Issues Voluntary Device Correction, Releases Q1 Financial Report

Framingham, Mass-based HeartWare International Inc. has issued a voluntary urgent medical device correction related to all HeartWare ventricular assist system batteries, product codes 1650 and 1650-DE.  In letters to clinicians and patients, the company reports an observed increase in complaints related to earlier-than-expected battery depletion and routine battery handling.

HeartWare is providing information to assist patients and clinicians in monitoring battery performance, recognizing abnormal behaviors and reinforcing proper power management. The company fears premature or unrecognized deterioration of battery capacity or lapses in recommended power management which pose a risk to the patient.

No deaths have been reported to HeartWare that were directly related to a faulty battery.  However, between January 1, 2011 and March 31, 2014, three deaths were reported that were potentially related to power source management.  Of those, two patient deaths occurred after both sources of power were simultaneously disconnected; the third patient had batteries that far exceeded their expected useful life.  A fourth death was originally reported as possibly related to power management, but was later determined to be more likely related to an accidental disconnection of the driveline.

This report comes simultaneously with HeartWare’s first quarter 2014 financial report. The company sold a record 665 ventricular assists systems worldwide in the quarter that ended March 31, which exceeded the previous quarterly high of 549 units. In the first quarter of 2013, 482 units were sold. U.S. revenues hit $33.9 million, a 29 percent growth from the corresponding quarter last year. International revenues were $32.7 million, a whopping 42 percent growth from the same quarter last year.

“Reflecting expanded global adoption, our team generated sales of more than 300 units in both the U.S. as well as international markets, for the first time in our history,” said President and CEO Doug Godshall. “We continue to see enthusiastic support of the HeartWare system around the world, with the addition of 12 international and five U.S. customers during the first quarter, increasing our global customer base to nearly 250 hospitals. During the quarter, we continued to make investments in clinical trials related to the ongoing HVAD destination therapy study, recently initiated Japan trial and upcoming MVAD CE Mark studies. Additionally, enrollment in our supplemental destination therapy study in the U.S. continues to gain momentum, with 48 sites receiving institutional review board approval and more than 80 patients currently enrolled.”

Total operating expenses for the first quarter of 2014 were $60.0 million, as compared to $38.6 million in the first quarter of 2013.

Research and development expense was $32.6 million for the first quarter of 2014, as compared to $22.1 million in the same period of 2013.  Increased development costs are primarily attributable to the addition of a full quarter of expenses from CircuLite, which was acquired by HeartWare in December 2013, as well as preparations for human clinical testing for MVAD and associated peripherals and increasing clinical activity.

Selling, general and administrative expenses were $24.2 million in the first quarter of 2014, compared to $16.5 million in the first quarter of 2013.  The increase in selling, general and administrative expenses reflects a full quarter of CircuLite expenses, the expansion of sales and marketing activities, increased employee expenses and other administrative expenses.

“The integration of CircuLite has gone quite well and our combined teams are off and running,” said Chief Financial Officer Peter McAree during a May 1 conference call discussing earnings. “The final step will be the transfer of manufacturing operations into our Miami Lake facility towards the end of the year. And just to recap, immediately following the transaction in the fourth quarter, we eliminated several overlapping senior management positions.”

Net loss for the first quarter of 2014 was $19.4 million, or a $1.15 loss per basic and diluted share, compared to a $13.0 million net loss, or a loss of $0.87 per basic and diluted share, in the first quarter of 2013.  Net loss decreased on a sequential quarter basis, from a net loss in the fourth quarter of 2013 of $22.0 million.  The first quarter results included CircuLite’s operations, as well as approximately $7.5 million of acquisition and related restructuring costs.