Company Overview

From the Sunshine Heart Inc (NASDAQ:SSH) website

The C-Pulse Heart Assist System leverages the known concept of counterpulsation.

The C-Pulse system applies this concept in an innovative way. Through the application of a balloon wrapped around the outside of the aorta, the C-Pulse System inflates and deflates the balloon in rhythm with the natural heartbeat, applying a “secondary pulse” with the intent to augment (strengthen) the heart’s function.

The C-Pulse is designed to improve the heart function in three ways:

  • Increase coronary blood flow with more oxygenated blood flowing to the blood vessels and heart muscle
  • Decrease cardiac afterload reducing how hard the heart has to work to pump blood through the body
  • Increase cardiac output with more blood being pumped from the heart to the rest of the body

The C-Pulse system is also designed to reduce clinical symptoms associated with moderate to severe (Class III/ambulatory Class IV) heart failure. These symptoms include shortness of breath, dizziness, fluid retention, and limited ability to perform and/or engage in normal day-to-day activities.

The Investment Case – An Alpha Opportunity

The following factors suggest that Sunshine Heart is an Alpha investment opportunity –

  1. Sunshine Heart is currently undervalued – The current market valuation of $73M is miniscule compared to a potential future value in the $billions, based on meeting an unmet need in a target market in the tens of billions.
  2. The C-Pulse path to commercial approval is largely de-risked – The progression to FDA PMA approval is largely de-risked from a technology efficacy and safety point of view. While rate of enrollments of patients in the Pivotal Trial remains a concern, this is a timing issue only and does not put successful completion of the trial at risk.
  3. The C-Pulse represents a “Paradigm Shift” in HF treatment – Despite major improvements in the treatment of virtually all cardiac disorders, heart failure (HF) is an exception, in that its prevalence is rising, and only small prolongations in survival are occurring. Sunshine Heart C-Pulse has demonstrated the ability to bring a paradigm shift to HF treatment.
  4. The Lance Armstrong Effect – Rests and repairs the heart muscle and improves the performance and stamina of a failing heart.
  5. The immediate improvement felt by C-Pulse patients after implant
  6. “Promising new therapies” fail while C-Pulse superior efficacy goes largely unrecognized – Despite showing great efficacy in trials, Sunshine Heart has so far not had the publicity accorded to various “promising new therapies” that have not lived up to their hype. This lack of recognition of C-Pulse has created opportunity for savvy investors.

Below I set out the detailed case for C-Pulse under the above headings.

1. Sunshine Heart is currently undervalued

1.1 Current market share price –

The current share price of ~$4.00 per share is close to all-time lows.

Analyst 12 month price targets

Consensus estimate from analysts is $11.50 per share, almost three (3) times the current share price with a high target of $16 (4 times) and a low target of $9 (over 2 times).

If meaningful progress is seen in enrollments in the short term, I would expect to see the share price quickly reach and maybe surpass these price targets.

1.2 Longer term valuation projections –

The Sunshine Heart C-Pulse addresses a huge unmet need in the NYHA Class III and ambulatory Class IV heart failure market.

Additionally, it has the potential to extend its reach into an even larger NYHA Class II HF market with the fully implantable version, while there is a whole other market for treating angina with the fully implantable model.

The HF market in the US and EU that Sunshine Heart C-Pulse is currently targeting is estimated to total 5.2M HF patients in NYHA Class III and ambulatory Class IV. Of this estimate of 5.2M HF patients there are 1.5M in the US and 3.7M in the EU.

Table 1 below is designed to provide some idea of the potential future value of C-Pulse at various levels of uptake.

It can be seen that only tiny percentage shares of the target market are required to achieve significant multiples of the current share price, even after making allowance for issue of additional shares. The estimate of 25M additional shares is purely arbitrary. But even at the current low share price, that number of shares should be more than adequate to fund operations through to cash flow break even.


2. The C-Pulse path to commercial approval is largely de-risked

2.1 C-Pulse efficacy –

Five (25%) of these late stage heart failure patients, in the Sunshine Heart C-Pulse 20 patient Feasibility trial, progressively improved and became asymptomatic for heart failure after being implanted with the C-Pulse device.

What is more, the trial included some patients eligible for LVAD or heart transplant. It was not the intention of the trial to enroll such patients, who would likely be too far advanced for reversal of HF (see here).

Three of these were successfully bridged to transplant, one being supported for 22 months prior to transplantation.

A further 3 patients were successfully bridged to LVAD.

Table 2 below shows efficacy results for the C-Pulse Feasibility trial, before and after exclusion of those patients who were likely too far advanced in HF for C-Pulse to reverse their heart failure or who died from non-device related causes.


2.2 Rate of enrolments in the C-Pulse Pivotal trial –

Investors have likely been disillusioned by a very slow start to enrollments for the Pivotal Trial, and just when enrollments were picking up, a pause was called to review enrollment criteria.

The modifications made during the pause, together with the FDA approval of an Interim analysis, will likely result in an earlier and more successful end to the trial.

As of 11 June, 2015, two of the current twenty-two activated centers were up and enrolling again, with the remainder still completing the process of approval of changes through their Investigational Review Boards.

There could be a surprise to the upside for June quarter enrollments, as centers have been in a position to continue to vet potential enrollees, just not enroll them until the IRB process is completed.

So, conceivably, if most or all 22 activated Centers complete IRB approval before 30 June, then each could be in a position to immediately enroll one, two or more candidates.

3. The C-Pulse represents a “Paradigm Shift” in HF treatment

There have been many claims of a “New Paradigm” for various new HF therapies undergoing clinical trials, when at best these therapies had shown indications of reducing mortality by further slowing the rate of progression of HF.

While any new therapy that slows the progression of HF is certainly most welcome, it is surely necessary to halt or reverse the progression of HF to claim a paradigm shift is taking place.

I think it is fair to say, there is no other HF therapy targeting NYHA Class III HF patients, whose HF is progressing despite receiving optimal medical therapy, and Pacemaker and CRT-D therapy where indicated, that has shown the capability to produce “Super Responders” becoming asymptomatic for HF in the way C-Pulse has.

That is why it can be confidently said that C-Pulse represents a “New Paradigm” in HF treatment.

4. The Lance Armstrong Effect

4.1 Blood doping to deliver extra oxygen to muscles for increased stamina and performance

Lance Armstrong won the prestigious Tour de France an unprecedented seven straight times, from 1999-2005, before being stripped of those same titles in 2012 after investigators concluded that he had used blood doping to win (see here).

The World Anti-Doping Agency (WADA) gives this definition of blood doping,

Blood doping is the misuse of certain techniques and/or substances to increase one’s red blood cell mass, which allows the body to transport more oxygen to muscles and therefore increase stamina and performance.

More oxygen to his muscles enabled Lance Armstrong to win 7 grueling Tour De France races, despite the massive “insult” to his muscles in each of those 7 races (see a graphic example of “insult” to a Tour De France rider’s body here).

4.2 C-Pulse delivers increased oxygen to the heart muscle to increase stamina and performance

The amazing thing is that Sunshine Heart’s C-Pulse has actually shown that it can continuously perfuse a HF patient’s heart with more oxygen rich blood, 67% more in one study (see here and here).

This is similar to the effect of blood doping used by Lance Armstrong to achieve the extraordinary feat of winning 7 successive Tour De France races.

This is why I call the additional perfusion of the heart muscle by the C-Pulse “the Lance Armstrong effect”.

4.3 C-Pulse delivers increased amounts of blood to the heart muscle to assist in repair and restoration of function

A presentation by Dr. Mandeep R. Mehra, MD entitled, “Acute Decompensated Heart Failure Today: Patient Characteristics and Practice Patterns (Slides with transcript)” concludes that,

We also know that there is ongoing silent and insidious cardiac injury,…


My feeling is that it is this cardiac injury that, in fact, begets progression of heart failure, that sets up a vicious cycle and a vicious loop that we have failed with our current treatment constructs to address appropriately.

This National Institute of Health article states –

Damaged tissue that does not get enough blood flow also tends to heal more slowly.

The corollary to this is that increased blood flow will heal tissue more quickly, and so additional perfusion by the C-Pulse of an injured heart might be a treatment construct that does appropriately address that “ongoing, silent, and insidious cardiac injury”, referred to by Dr Mehra.

The healing nature of this additional perfusion of blood, together with an increase in oxygen supply to increase stamina and performance (“Lance Armstrong effect”), is I hypothesize, a powerful combination to combat the progression of HF.

A powerful combination that has produced “Super Responders” who have become asymptomatic for HF, not only in the 20 patient C-Pulse Feasibility trial, but also in the ongoing post market trial of C-Pulse in the EU (see here).

5. The immediate improvement felt by C-Pulse patients after implant

Now, and this is very important for those who think that C-Pulse is unexciting because it might not immediately significantly improve hemodynamic and other measurements like an LVAD.

At baseline, the patients in the C-Pulse Feasibility trial were all on optimal medical therapy and CRT therapy where indicated. Those who were unable to maintain minimum sufficient cardiac output were on inotropes to make their heart work harder.

The purpose of C-Pulse is not to take over from the heart, as is the case with the LVADS from Heartware and Thoratec.

The purpose of C-Pulse is to assist the heart with its workload and to assist in that “missing element” in other HF therapies, the repair of that “ongoing silent and insidious cardiac injury” referred to by Dr Mehra (see above).

Understandably, the full effect of that repair, that reversal of heart failure, is not immediate; it will take time.

But the evidence that the process starts immediately after implantation is seen in the comments of patients soon after implantation.

View and hear what Feasibility trial patients have to say about their HF condition before and after C-Pulse implant –

  • Emmette from Fort Deposit, Alabama (see here),
  • Seabrun from Grandview, Missouri (see here), and
  • UK patient Ross Swift (see here).

And learn more about the C-Pulse Pivotal trial, currently in progress (see here).

6. “Promising new therapies” fail while C-Pulse superior efficacy goes largely unrecognized

It is a source of wonder to me, that in the search for a “new paradigm” that will halt and reverse heart failure, all the attention is given to emerging technologies that are easy to deliver, without real scrutiny and assessment of the evidence in plain view.

These include gene and stem cell therapy that can be delivered by infusion, and drugs that can be taken orally.

I have seen Celladon’s Mydicar and Novartis drug Serelaxin hailed as “paradigm shifts”, when there were never grounds for such claims.

They lacked either that “essential element”, the ability to do good for the heart itself rather than the symptoms, or the supposed evidence of efficacy in early trial results did not stand up to close scrutiny.

Summary and conclusions

Sunshine Heart C-Pulse technology is based on long proven IABP intra-aortic counterpulsation therapy applied in an extra-aortic way.

This allows the C-Pulse therapy to be applied long term if needed, as compared to IABP which can only be applied for short periods due to the stroke and other dangers of it being located in the blood stream.

Strong efficacy has already been shown in the C-Pulse 20 patient Feasibility trial and in the ongoing post market trial in the EU. This suggests a very high probability that the current Pivotal trial will succeed at Interim Analysis, leading to PMA approval as early as 2017.

The single biggest uncertainty remains the rate of enrollment in the Pivotal Trial.

Acceleration of enrollments in the period ahead, and continuing progress with the fully implantable version would likely remove any remaining uncertainty as to the huge prospects for this technology. I do believe the need to implant C-Pulse leads to concerns it might be a “hard sell” and this will limit uptake.

My belief is once it receives PMA approval and becomes “main stream” any such concerns will evaporate. After all, it can be implanted in a minimally invasive operation that is far less invasive than current operations for bypass and heart valve operations, which are considered quite routine.

I believe Heartware did not face these concerns as it was entering a market where the use of LVADs was already well established and therefore “main stream”.

I consider an investment in C-Pulse is low risk from a technology point of view and at the current share price represents an alpha opportunity.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stock/s mentioned. Past performance of the company/s discussed may not continue and the company/s may not achieve any projected earnings or dividend growth. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. I do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for their specific situation.

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