Heart valves set pulses racing in biotech sector

Aortech, The world's foremost developer of artificial heart valves, is being targeted by two larger US competitors.

Aortech, The world's foremost developer of artificial heart valves, is being targeted by two larger US competitors.

The group, based in Strathclyde, is one of Britain's most successful biotechnology companies, and was among the first to bring its product from the laboratory to the market. Now, St Jude Medical and Baxter International, traditional leaders in the industry, are understood to be eyeing AorTech with a view to short cutting years of development.

AorTech's management have said that they are not in talks with either group, and have on previous occasions stated their strong reluctance to sell out. However, the two US companies have billion-dollar valuations, and could readily mount offers that would be too good for shareholders to resist.

One of the biggest challenges in manufacturing materials for transplantation into humans is to generate a substance that is completely accepted by the body. Valves made from metals and plastics have now given way to the type of device produced by AorTech.

The company currently sells valves made of pig tissue, and although this gives the group a share of the £600m heart valve market, the main purpose in producing them is to create a template for the launch of future products. It is this pipeline of projects under development that the US giants are particularly keen to get their hands on.

AorTech's much-vaunted TruCCOMS device allows doctors to monitor their patients' heart rates during and after surgery. Last month the product won European approval, having already gained approval from America's Food and Drug Administration in November last year.

The group is now rushing to hit the medical community with clinical studies of the system, which analysts at Beeson Gregory predict should start appearing in medical journals by the end of the year. As soon as they do, some analysts believe either St Jude or Baxter will take the opportunity to make its move.

The timing would be critical. Although the TruCCOMS device will be a best-seller, AorTech has generated even more industry excitement with its Elast-Eon development. This substance is a unique polymer used for coating heart devices, and has huge commercial potential, especially when it is used with AorTech's revolutionary tri-leaflet heart valve, also up-coming.

As the future earnings potential of this science filters into the AorTech share price, the stock will start looking expensive, which is why the US companies are thought to be close to making an offer now.