Executive has Revived Cardiac Science
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By VITA REED
Chief Executive Raymond Cohen has delivered a shock to Irvine-based defibrillator maker Cardiac Science Inc. since his arrival five years ago.
Cohen joined Cardiac Science in 1997, when the company traded on the low-profile over-the-counter exchange and counted just two employees. Cardiac Science came about after a 1991 spinoff from Medstone International Inc., a medical device company now based in Aliso Viejo.
“I was really looking for new technology and new products,” said Cohen, who had logged some 20 years selling medical devices by the time he came across Cardiac Science.
What caught Cohen’s eye, he said, is what’s now Cardiac Science’s core product,the Powerheart cardiac defibrillation device. The portable Powerheart delivers an electrical shock to the heart of someone suffering cardiac arrest.
“It was a quite attractive concept,” Cohen said. “But (the company) didn’t have money, it didn’t have people, it didn’t have products and it didn’t have FDA approval. Other than that, it was great.”
Cohen has built Cardiac Science up on several fronts, starting with what he called a “trade” of his previous company, Diagnostic Monitoring, for 500,000 shares of Cardiac Science stock. That allowed Cardiac Science to have some cash flow, as well as extra employees, he said.
Then Cohen set out to raise money, which he said was tough because Cardiac Science already was public. Venture capitalists weren’t interested. Most other investors balked because there was no quick way to cash out of the company’s lightly traded stock.
Instead, Cardiac Science secured funding from investors in Switzerland and Australia, including a $2 million infusion in 1997. According to Cohen, $88 million has been put into the company through October. Swiss institutional investors now hold about 20% of Cardiac Science’s shares, he said.
Cohen’s other feats included securing final Food and Drug Administration approval for Powerheart in 2000, and building a domestic and global sales force.
Acquisitions have been part of the mix. Last year, Cardiac Science bought a larger Minneapolis-based competitor, Survivalink Corp., for $71 million. It also snagged Sweden’s Artema Medical AB for $15 million. In 2000, Cardiac Science acquired Cadent Medical Corp. for about $22 million worth of stock.
Under Cohen’s watch, Cardiac Science’s market value has risen from around $5 million to more than $200 million at recent check. Cardiac Science’s stock, which trades on the Nasdaq NewMarkets exchange, has traded in a range of 2 to 5 this year.
For the fourth quarter, Cardiac Science saw sales rise 424% to $7.7 million. The company’s still losing money, though its operating loss narrowed from $7.7 million a year ago to $5.1 million in the quarter.
Does the turnaround make Cardiac Science an acquisition target itself?
“Are we for sale? No,” Cohen said,
Cardiac Science has focused its marketing and sales efforts on several main channels. Those include hospitals and the public sector. Public-sector customers include police departments, fire departments and municipalities, such as the city of San Diego.
“(The devices) are $3,000 apiece. It’s not like they’re that expensive,” Cohen said, mentioning statistics showing that around 465,000 Americans die of cardiac arrest a year. “That’s more than car accidents or cancer.”
As for selling, Cohen said it was more challenging to sell Cardiac Science’s defibrillators to hospitals: “The hospital is the most complex and bureaucratic (environment),change happens very slowly.”
By contrast, he said, government agencies usually have one central person who is responsible for making the decision to purchase automated external defibrillation machines.
Cardiac Science also is upgrading Powerheart. Federal regulators just cleared the device maker to market a new Powerheart designed to boost accuracy in the detection and treatment of patients with abnormal, life-threatening heart rhythms.
Cardiac Science developed the latest Powerheart to make using it “as easy and unimposing as possible for first responders or good Samaritans” who were attempting to save the life of a person who was suffering cardiac arrest, Cohen said.
The automated external defibrillation market could reach $650 million by 2006, up from $140 million in 2000, according to Frost & Sullivan, a Mountain View-based marketing consulting firm that follows the medical device industry.
Schools also are becoming part of Cardiac Science’s efforts. Last month, the company said it sold nearly 200 of its Survivalink devices to schools in New York, New Jersey, Massachusetts, Wisconsin, Illinois and Ohio.
Having automated external defibrillators within school systems protects children and their teachers, Cohen said. “Politically, it is very attractive.”
