It has all been coming together for Sunshine Heart (SSH) over the past couple of months as some serious milestones have been met and essentially put the company on the map as a potential big player in the medical device arena, specifically in the treatment of heart failure. Already, Sunshine has received CE Mark approval in Europe for its C-Pulse Heart Assist system that treats patients of Class III and ambulatory Class IV heart failure. Additionally, the US FDA just this week authorized for use the next-generation C-Pulse device that was designed based on patient feedback from the original device and will be used in an upcoming pivotal trial in the United States that is due to commence later this year with an FDA approval in mind.
The next-generation device will also be used in the continuation of the ongoing North American feasibility trial and was likewise approved by Health Canada earlier this year.
On Wednesday morning another little tidbit of news was revealed in an amended S1 filing with the SEC that drives home the theory that the continued successes of C-Pulse could attract the attention of a larger player in the medical device sector and result in a potential buyout or partnership. Although the identity of the new investor has yet to be revealed, according to the S1, it looks like Sunshine is in the early stages of a significant partnership that could pan out into something bigger later on down the road, should C-Pulse continue to prove successful.
According to the filing:
"A strategic investor, which is not a current stockholder of our company, has indicated an interest in purchasing approximately $3 million of our common stock in this offering at the public offering price. However, because this indication of interest is not a binding agreement or commitment to purchase, the underwriters may determine to sell more, less or no shares in this offering to this investor, or this investor may determine to purchase more, less or no shares in this offering. The underwriters will receive the same discounts and commissions from any shares of our common stock purchased by this strategic investor as they will from any other shares of our common stock sold to the public in this offering. In connection with this investment, we intend to enter into an agreement with this investor pursuant to which it will have the right to designate a board observer, who would be entitled to attend all meetings of our board of directors, and all committees thereof, in each case subject to customary exclusions, as well as the right to review certain of our clinical and regulatory data. The investor would maintain these observation and inspection rights for two years following the date we receive approval from the FDA to sell our C-Pulse System in the United States so long as it beneficially owns at least 50% of the number of shares purchased in this offering."
As noted in the filing, the new investor will send a "board observer" to Sunshine who will monitor developments and who could then be able to recommend that the initial monetary investment should turn into something a little bit bigger, such as a partnership or all-out buyout. Such a move is standard operating procedure for large players of the sector who are looking to potentially evolve an initial investment into a potential new revenue stream of their own. Sometimes big-money funds will also send a representatvie of their own to the board of a company just invested in, but with SSH still trading at relative "developmental levels," common sense would indicate that a big player in the medical device industry may be looking to make an early move on C-Pulse, where a 'first right of refusal' for a potential sale or partnership could more easily be achieved.
Significant progress has already been made this year - with the approval in Europe and encouraging one-year review of the North American feasibility trial - so it was only a matter of time, in my opinion, before the big boys started paying attention.
Nonetheless, the new development revealed in Wednesday's filing should give investors some additional validated confidence that larger players in the sector are taking notice of this company's success thus far and are willing to start taking monetary stakes in the potential of C-Pulse as the future becomes now.
After running big just weeks ago on positive news developments, Sunshine shares may again entered "second chance" territory. Shares traded relatively flat after the filing on near-average volume.
A developing story worth watching.
Disclosure: No position.
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