When we founded S2N in 2011, the emerging medtech world was still awed, no dazzled by the uber-generous 2010 acquisition of Ardian by Medtronic for more than $800M. Last week, Medtronic unceremoniously announced the failure of Symplicity, Ardian’s renal nerve denervation technology for severe hypertension, in the US pivotal trial. The wreckage is still smoking, and the damage extends beyond Medtronic and the other device behemoths like Boston Scientific and St. Jude that joined the RDN gold rush. Emerging med tech companies will feel the ripple effects, too.
First, a little history:
- Before the take out by Medtronic, Ardian had raised about $65M in equity (including some from MDT in Series C). By my sophisticated calculations, that’s a >10X return on capital for the VC’s. Sweet.
- Ardian turned that $65M into a successful pilot study, CE Mark, and initiation of the randomized, controlled, multicenter HTN-2 trial with 52 patients in the active treatment arm.
- On November 17, 2010, Ardian published 6-month data from HTN-2 in the Lancet showing that 84% of treated patients (vs. 35% of control patients) achieved a 10 mm Hg or greater drop in blood pressure. Five days later, the acquisition was announced.
- MDT initiated the 530-subject HTN-3 US pivotal trial in 2011 and completed enrollment in May 2013.
- Symplicity is available commercially in Europe, Asia, Africa and Australia and has been used in more than 5000 patients.
Before the Symplicity failure, the rich Ardian deal served as a big, juicy comp for med tech start-ups of all stripes defending the value of their novel gizmos. The deal also emboldened emerging med tech companies (and S2N) to point to CE mark as a critical risk-reducing milestone for potential acquirers.
Now, in the shadow of Symplicity’s demise, there will likely be some pencil sharpening on pre-FDA valuations, as well scrutiny on timelines and total investment required until exit. European regulators, left to sort out the on-market implications of the study failure, will no doubt reference the situation in support of tightening data requirements for new products.
Well before last week’s announcement, though, the Ardian acquisition was starting to qualify as an anomaly, not replicated by any company at that same stage, with structured deals and risk-sharing becoming more the norm. Symplicity’s downfall serves to remind us all that early stage technologies are just that – early. There is still significant technical risk and some products will fail when put to a scaled or real world test, regardless of whether that test is carried out by the small company or the big strategic that buys them. Safety does not equal efficacy, and efficacy is what matters in the end. Investor success is not the end of the journey (though it is for the investors!).
On the positive side, we don’t have to hear anymore “why can’t I get a deal like Ardian?” Envy isn’t generally a helpful business motivator, and every company has to carve its own path.