FoxHollow Technologies, Inc.
FoxHollow Technologies, Inc.
740 Bay Road
Redwood City, California 94063
Telephone: (650) 421-8400
Toll Free: (888) 758-7495
Fax: (650) 421-8781
Web site: http://www.foxhollowtech.com
Incorporated: 1996 as ArterRx, Inc.
Sales: $128.1 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: FOXH
NAIC: 339112 Surgical and Medical Instrument Manufacturing
FoxHollow Technologies, Inc., makes medical devices used to treat peripheral artery disease, marketing its technology under the name "SilverHawk Plaque Excision System." The single-use device is sold to hospitals through a direct sales force and used by interventional cardiologists, vascular surgeons, and interventional radiologists. The device uses a tiny blade that rotates 8,000 times per minute, shaving away plaque from artery walls. FoxHollow sells its device in the United States and in Europe. Through a collaboration agreement with Merck & Co., Inc., the company analyzes atherosclerotic plaque in an attempt to identify new biomarkers for atherosclerotic disease progression. The company's manufacturing facility has the capability to produce 100,000 units annually.
FoxHollow was one commercial manifestation of Dr. John B. Simpson's pioneering work in the medical field. Simpson, an interventional cardiologist by training, turned his research and discoveries into more than a half-dozen different companies, each achieving sufficient success to attract the attention of deep-pocketed suitors, which enriched the revered doctor and validated the worth of his scientific inquiry. A professor of clinical medicine at Stanford University, Simpson began his academic career in agriculture, earning an undergraduate degree from Ohio State University. From there, he turned to the field that would become the focus of his life's work, earning his medical degree from the Duke University School of Medicine, as well as a master's and a doctorate in biomedical science from the University of Texas. Simpson's prolific academic career would be matched by his achievements in the business world, as he helped to advance cardiovascular science and market new technologies through his commercial start-ups. Fox-Hollow benefited from the reputation of its founder, becoming a commercial entity of great interest well before it had a marketable product.
Before founding FoxHollow, Simpson worked on the technology that would underpin the company's stance in its market, developing devices for surgery that represented significant advances in the field of cardiology. His first major breakthrough came out of research conducted during the mid-1970s that led to his invention of the first over-the-wire balloon catheter, a superior device used in angioplasty procedures. The innovation spawned a company, Advanced Cardiovascular Systems, that Simpson founded in 1978. Advanced Cardiovascular Systems quickly established itself in the medical device community, becoming a competitor coveted by its larger rivals. In 1984, global pharmaceutical giant Eli Lilly & Company acquired Simpson's company, the same year Simpson started another medical device maker. In a field later known as directional atherectomy, the removal of fatty and cellular material from the coronary artery, Simpson again played the role of a pioneer by developing the first atherectomy devices, instruments that were sold by his company, Devices for Vascular Intervention. The company became another commercial success for Simpson, selling an innovative concept that, like Advanced Cardiovascular Systems, had the same seductive effect on Eli Lilly & Company. In 1990, Eli Lilly & Company acquired Devices for Vascular Intervention, purchasing each of Simpson's companies during their sixth year of operation (the companies later operated alongside one another after being acquired by Guidant Corporation).
Simpson, the clinician and entrepreneur, wasted little time before donning both of his hats, founding Perclose, Inc., the first company in the field of interventional cardiology to make a suture-based closure device for the femoral artery. Perclose, which became a public company in 1995, attracted a suitor as well, marketing a product that Abbott Laboratories wanted as its own. The more than $10 billion-in-sales, Illinois-based company acquired Perclose in 1999, by which time Simpson's most recent entrepreneurial creation, FoxHollow, was celebrating its third anniversary.
With FoxHollow, Simpson brought his distinguished track record to bear on peripheral arterial disease, or PAD. Afflicting an estimated 12 million people in the United States, PAD is caused by the accumulation of plaque in the arteries, an occurrence known as atherosclerosis, which causes arteries to narrow, reducing the flow of oxygenated blood to tissue and organs. Left untreated, patients suffering from PAD face increased risk of heart attack, stroke, and death. The disease leads to 700,000 surgeries in the United States each year and forces at least 150,000 amputations annually. Simpson formed FoxHollow to find a way to manage PAD more aggressively, endeavoring to take a more comprehensive approach than existed in the medical device community when he founded the company in September 1996. "You can try to poison the plaque, irradiate it, or push it aside with stents, but it still remains inside the vessel," Simpson explained on Fox-Hollow's web site. "For decades, we've had to settle for treating the symptoms plaque creates, but now we have the opportunity to both treat the symptoms and address the problem."
FoxHollow was a company with a mission but without a product when it started operating in the fall of 1996. The company, which operated under the name ArterRX, Inc., during its first month, settled into offices and laboratories in Redwood City, California, and began work on developing a device to treat PAD, with Simpson spearheading the efforts to produce a minimally invasive plaque excision tool. The research-anddevelopment phase took nearly four years to complete, years in which expenditures mounted with no product sales to offset the losses. Simpson and his team of scientists completed the major part of their development efforts by 2000, when they announced they had produced a plaque excision device, the SilverHawk Plaque Excision System.
FIRST PRODUCT IN 2000
The SilverHawk represented a new approach to the treatment of PAD. The device was a minimally invasive, single-use catheter system designed for the removal of plaque from artery walls with minimal vascular trauma. The system involved inserting a tube through a small incision into an artery. Once the tube reached a blockage, a switch activated a small blade that, like a plane on wood, shaved away plaque, rotating 8,000 times per minute along the length of the lesion.
FoxHollow Technologies is a dynamic, cutting-edge medical device company that designs, manufactures and markets products that focus on the treatment and eventual eradication of peripheral arterial diseases.
Once Simpson had developed his innovation, the process of gaining approval from the Food and Drug Administration (FDA) began. After nearly four years of investing in the development of the SilverHawk, Fox-Hollow would have to wait nearly the same amount of time before gaining regulatory approval. The company posted a net loss of $5.2 million in 2000, followed by a $5.4 million loss in 2001 and an $8.2 million loss in 2002. Although the company would continue to lose money after 2002, hopes for achieving profitability brightened considerably when the FDA approved the SilverHawk in June 2003. FoxHollow, after nearly nine years of preparatory work, was ready to begin selling its first product.
Using a direct sales force, FoxHollow began selling its device once it received the nod of approval from the FDA. The company sold the SilverHawk to hospitals, but its target customers were surgeons who requested hospitals to purchase medical devices. FoxHollow primarily focused on cultivating business with interventional cardiologists, but the company also offered sales presentations to vascular surgeons and interventional radiologists. By the end of 2003, after less than a halfyear of operating as a commercially active company, FoxHollow collected $2.5 million from the sale of its plaque excision devices, a total that would increase exponentially after full production commenced in January 2004 and word of Simpson's new innovation spread throughout the medical community.
INITIAL PUBLIC OFFERING: 2004
As FoxHollow completed its transition from a researchand-development firm to a manufacturing-andmarketing enterprise, the company recorded encouraging revenue growth. Sales reached $38.5 million at the end of 2004, increasing substantially from the previous year's total. Profits, however, continued to elude the company. FoxHollow registered a net loss of nearly $30 million during the year, perpetuating financial worries. The company sought temporary relief from financial pressures by converting to public ownership during the year, completing an initial public offering of stock in October. Once in the public spotlight, however, Fox-Hollow faced meeting the expectations of shareholders who would not put up with mounting losses for long. Simpson, serving as chairman, looked to his chief executive officer, Robert Thomas, to give shareholders what they wanted: a profitable medical device company.
Orders poured in as the company entered its second full year of production. Revenues in 2005 more than tripled, jumping to $125.3 million. During the year, as demand for the SilverHawk increased, the company expanded its manufacturing operations, lifting annual production capacity from 60,000 units to 100,000 units. The expansion program was completed by September, the same month FoxHollow began working with Merck & Co., Inc., a more than $20 billion-insales pharmaceutical company based in New Jersey. The two companies launched a program to analyze the atherosclerotic plaque removed from arteries. The goal of the analysis was to identify biomarkers for atherosclerotic disease progression. At around the same time FoxHollow and Merck began working together, tempers began to flare at the company's executive offices in Redwood City. Simpson reportedly was not happy with the way Thomas was running the company. Thomas announced his retirement in December 2005, effective January 1, 2006, but Forbes Global, in its November 13, 2006, issue, reported that Simpson fired Thomas. The pair, according to the article, differed over what was the most important area to concentrate on to promote FoxHollow's growth. Simpson argued that technology was central to the company's growth, while Thomas favored focusing his efforts on the company's sales force. In the wake of Thomas's departure, Simpson relinquished his title of chairman and became interim chief executive officer, taking over day-to-day management of the company until a replacement was found.
- In September, Dr. John Simpson founds ArterRX, Inc., which changes its name to FoxHollow Technologies, Inc., the following month.
- FoxHollow unveils its first product, the SilverHawk Plaque Excision System.
- The Food and Drug Administration approves the commercial release of the SilverHawk Plaque Excision System.
- FoxHollow completes its initial public offering of stock.
- Manufacturing capacity is increased from 60,000 units per year to 100,000 units per year.
- Merck & Co., Inc., acquires an 11 percent stake in FoxHollow and agrees to invest a further $100 million in the company.
During FoxHollow's 10th year of business, there was cause for celebration and cause for concern. Achieving profitability remained the company's overarching concern, dominating the minds of executives in Redwood City. FoxHollow sold 49,000 SilverHawks in 2005, counting more than 1,000 hospitals in the United States as customers, but the year ended with an $11.6 million net loss. Simpson, who was named permanent chief executive officer midway through 1996, hoped the increase in manufacturing capacity would help turn net losses into net income. FoxHollow's collaboration agreement with Merck fueled optimism for the future. In September 2006, Merck purchased $95 million worth of FoxHollow's stock, taking an 11 percent stake in the company, and agreed to invest an additional $100 million over a four-year period to fund the two companies' analysis of atherosclerotic plaque. The deal provided welcomed financial relief, support that would be needed as the company prepared for its second decade of business and faced increased competition.
FoxHollow faced numerous competitors, but one in particular, Spectranetics Corp., presented what promised to be a formidable challenge. The Colorado Springs, Colorado-based company marketed technology that used a laser, which projected a beam up to 2.5 millimeters in diameter that was well suited to cut through plaque of the small arteries of the lower leg and foot. FoxHollow's blade cut a larger swath, which made it ideal for the large arteries of the upper leg, but in September 2006 the company introduced a version of the SilverHawk with a smaller diameter that was capable of navigating in narrower arteries. In response, Spectranetics announced plans to introduce a larger-bore excision device, scheduled to debut in 2007, that set the stage for a direct battle on two fronts against FoxHollow. In the years ahead, as FoxHollow focused on achieving profitability and winning the war of spinning blade against laser, those suffering from PAD figured to be the ultimate victors. "The part of my job that I find absolutely compelling," Simpson wrote on FoxHollow's web site, "is the really dramatic outcomes we see in patients who don't have any other good alternatives. That's why I started FoxHollow. It's exciting, and I believe it's our responsibility. Our sole purpose as physicians is to help patients, and I think we have a genuine obligation to do that."
Jeffrey L. Covell
Spectranetics Corp.; Medtronic, Inc.; Boston Scientific Corporation; Guidant Corporation.
Barakat, Matthew, "FoxHollow Tech CEO to Retire," America's Intelligence Wire, December 12, 2005.
Elliott, Alan R., "FoxHollow Technologies, Redwood City, California; It's Pumped Up Over Move to Profitability," Investor's Business Daily, October 26, 2005, p. A6.
"FoxHollow to Acquire Kerberos for $32M," AFX Asia, August 28, 2006.
"Merck Buys Stake in FoxHollow," Europe Intelligence Wire, September 27, 2006.
Stone, Andy, "Leg Man," Forbes Global, November 13, 2006, p. 106.
Wade, Steven, "Simpson Named Chief Executive of FoxHollow," America's Intelligence Wire, June 6, 2006.