Behind the MicroPort acquisition of Lombard Medical: What is next?
It has been around seven months since Microport announced its acquisition of Lombard Medical; what were the reasons and motivation behind Microport making this move?
Historically, MicroPort has had a very strong performing endovascular business for our home market in China, where we are a market leaders. The endovascular business is one of the fastest growing businesses within MicroPort, growing at over 30% per annum. We considered the Lombard product portfolio to be very attractive, and a good fit from a technological as well as geographical perspective. In terms of technology, we see Aorfix and Altura as two very novel and differentiated stent grafts, that will help broaden our endovascular product portfolio and build one of the most comprehensive endovascular aneurysm repair (EVAR) product portfolios in the industry. As for the geography, Lombard is selling in markets (Europe and Japan) that are very complementary with MicroPort’s core endovascular markets.
How has the transition been, moving from the companies’ strategic partnership, to becoming one company?
MicroPort and Lombard have been working together for the prior two years through a strategic partnership that was entered into in December 2016. Through this strategic partnership, MicroPort Endovascular has helped Lombard to significantly reduce the manufacturing cost for its stent grafts by leveraging MicroPort’s Endovascular manufacturing expertise. These cost reduction initiatives have continued since the restructuring of Lombard. We expect that the improved manufacturing costs will significantly accelerate Lombard’s ability to become a profitable EVAR business.
How do you feel the restructuring has benefitted Microport so far?
We see the restructuring as benefitting both Lombard and MicroPort. Firstly, Lombard has gained a very strong strategic partner to develop its EVAR business with manufacturing expertise that has allowed Lombard to demonstrably reduce manufacturing costs and has gained the most capable commercial partner to open the China market for its products, alongside other markets including Latin America. Secondly, MicroPort has gained two very innovative abdominal aortic aneurysm (AAA) stent graft technologies to further expand its market leadership in China. In addition, MicroPort has also been able to expand its selling opportunity in markets where Lombard currently sells, such as Japan, and perhaps in the future there will be opportunities to open the US market for both MicroPort and Lombard.
How do you see Lombard Medical’s products supporting Microport in the future?
MicroPort Endovascular is currently obtaining approval from the Chinese Food and Drug Administration (CFDA) for both of Lombard’s products, to open the China market. We see this as a tremendous opportunity to continue the market leadership of the MicroPort Endovascular business in China and further differentiate ourselves from other competitors to have the broadest Endovascular product portfolio in the industry. As Lombard continues to make progress in converting European KOLs to Altura and Aorfix, this will also indirectly support China commercial efforts as more and more EVAR surgeons globally become advocates for Lombard’s technologies.
What synergies can you identify within R&D and product development between Microport and Lombard Medical?
Our MicroPort Endovascular business in China is both a market leader in AAA thoracic aortic aneurysm (TAA) procedures. Lombard’s Aorfix and Altura device only treat AAA patients. We do see the opportunity to add TAA devices to Lombard’s product portfolio for the markets it currently sells to.
What role do you think Aorfix and Altura can play in the broader endovascular device field?
Aorfix is indicated for procedures requiring high neck angles which occurs in approximately 20% of the AAA procedures. Aorfix has had a very long history of successful implantations with patients. Altura is also a very innovative AAA device that allows for same day procedures for AAA patients. We believe in the general device industry trends for more minimally invasive procedures with better efficacy outcomes for the patient. We believe Altura can be the market leader for this type of procedures because of the benefits to patients and reduction in costs to hospitals (e.g. shorter hospital stays).
What can we expect to see from Lombard going forward?
Firstly, the past is behind Lombard. The company has come out of its financial restructuring in 2018 in a much stronger financial position than it has ever been. Hospitals and clinicians should feel comfortable that Lombard is here to stay. Secondly, Lombard should be even more competitive in the marketplace as the company is able to further reduce the manufacturing costs of its two products thereby allowing more resources to be allocated towards investing and growing the top-line sales. Finally, with MicroPort as a strong strategic partner, we hope to further improve on Lombard’s existing portfolio and bring other great EVAR technologies from MicroPort Endovascular to the Western markets through Lombard.