Why You Should Help

Children who need RVOT¹ reconstruction are suffering from repeated surgeries and interventions that are unavoidable with current devices.

Apart from PECA, no effort is being made to provide a better commercial option due to the high average cost of bringing a Class III device to market ($70M) compared with the small population affected by this procedure.

PECA's surgeon-created, clinically-validated design and HUD² status has provided a unique opportunity to reduce costs to the point of quick profitability in this niche market.

Now we need surgeon support to help bring us through FDA approval and into the operating room to start improving children's lives.

Towards the Future

Overview

MARKET

• 3200 patients per year @ $12.5K/unit (based on reimbursement)
• Two competitors; both acknowledged to be insufficient in the field
• ~100 customers in US
• $40M US Market
• $10-15M projected 2015 revenue

PRODUCT

• Intra-operative device has shown improved clinical results in 49 children after 4 years
• Translation to pre-packaged version should save thousands of children from 1-2 open heart surgeries
• FDA-designated Humanitarian Use Device (HUD)
• 3500% margins with current price point

EXIT

• Looking to raise $500K
• Expected exit late 2013 for $20-40M
• Strong precedent for acquisition by multiple large companies

Market Strategy

Although PECA Labs plans to bring the Masa Valve to market by selling the technology to a larger company, excitement and support in the field of pediatric cardiothoracic surgery is very important to ensure the best possible deal made. Early results of the Masa Valve have already been published in "The Annals of Thoracic Surgery". Mid-term results of the Masa Valve have also been accepted for publishing in the same journal, and will be published in an upcoming issue. The extremely promising results which will soon made public to all cardiothoracic surgeons will be the next step towards generating a great deal of excitement and support in the field. PECA will be attending the Society of Thoracic Surgeons Annual Conference in January of 2013.

The support of key opinion leaders is also extremely important for the acceptance of uptake of the Masa Valve. PECA will be working with such leaders to expose them to the technology and to have them act as independent evaluators of the Masa Valve. The clinical data that have been accumulated so far will undoubtedly gain support from those surgeons who are looking for new, promising answers to a currently unsolved problem. In addition to its use by its inventor, the Masa Valve is also intra-operatively constructed and used and supported by Dr. Morrell, head of cardiothoracic surgery at the Children's Hospital of Pittsburgh of UPMC.

Regulatory Strategy

PECA Labs is currently seeking regulatory approval of the Masa Valve in the US through the Humanitarian Device Exemption (HDE) pathway. This pathway involves two separate steps: becoming designated as a Humanitarian Use Device (HUD) and proving safety and probable benefit in an HDE application.

The Masa Valve has already been designated by the FDA as an HUD. We are currently finishing up the last of our in vitro analysis on the Masa Valve's performance before having the necessary data for the full HDE application. HDEs in the past have been approved with clinical data from as few as two patients. In addition, previous conduits for RVOT reconstruction have been approved through this pathway with data showing safety only up to two years. PECA will be submitting published data on the implantations in 49 patients over more than three years to show the Masa Valve's safety and probable benefit. This clinical data can be seen at the end of this document; it shows a clear improvement over the existing technologies available for this procedure.

In addition, PECA is continuing to perform a wide array of experimental and computational in vitro analysis to further support the Masa Valve's performance. Simulation and hydrodynamic testing are planned to be performed in-house, while biocompatibility, structural, and sterilization testing will be outsourced to FDA-registered contractors.

The FDA may require additional clinical data to validate the mass manufacturing process of the Masa Valve, because the original implantations were performed with intra-operative manufacturing. This is not expected because no clinical trials are required for the HDE. However, in order to prepare for this possibility, PECA will also be applying for an investigational device exemption (IDE) for the Masa Valve. The investigational device exemption requires evidence that the device can be considered safe for implantation; the successful implantations and in 49 patients and intensive in vitro testing should be more than adequate to prove this to the FDA. An IDE will allow for surgeons around the nation to implant the Masa Valve as part of further clinical trials, in the case that the FDA should require them for any reason.

Insurance Reimbursement

In order to gain revenue from a medical device, a successful insurance reimbursement strategy must be put into place. There are three different ways a device such as the Masa Valve can attempt to be reimbursed: a new code, a miscellaneous code, or becoming part of an existing code. All three options have been evaluated in order to determine the best strategy for the Masa Valve. PECA has consulted with insurance reimbursement experts to refine our strategy, and will be utilizing the procedural code already in place for RVOT reconstruction, the reasoning for which is explained below:

Obtaining a new reimbursement code for a medical device is an extremely long and difficult process, however the benefit is that a new price can be determined for the device. Normally obtaining a new code takes over two years from the time of market entry, and there is no guarantee of ever successfully obtaining one. Support from physicians in all 50 states is often required to show the necessary uptake for a new code to be written, the difficulty of which is compounded by the small market for the Masa Valve. Precedence for this difficulty has been shown by Medtronic's Contegra® Conduit, which was released in 2003 has still not been given its own code. During the process of obtaining a new code it is often difficult to gain any revenue from products, if any can be gained at all. These issues have led PECA to determine that aiming for a new code for the Masa Valve is not the best route.

New devices can also be placed under a miscellaneous code while there is no specific code available. Categorization under a miscellaneous code normally involves the initial rejection of all reimbursement charges; obtaining payment for a sold device then involves a fight with the insurance company involved; this process is expensive and draining for a small company. However without an existing code, a device must initially be placed under a miscellaneous code.