Smaller Staplers Mean Healthier Surgical Outcome: Wall Street Transcript Interview with Bernard Hausen, the CEO and President of Cardica, Inc. (CRDC)

Wall Street Transcript

67 WALL STREET, New York - August 16, 2012 - The Wall Street Transcript has just published its Medical Devices Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Innovation Counters Pricing Pressure - Orthopedics and Cardiovascular Medical Devices - Medtech Tax Affects Earnings

Companies include: Cardica Inc. (CRDC) and many others.

In the following interview excerpt from the Medical Devices Report, the CEO of Cardica discusses the outlook for his company:

TWST: Would you give us a brief history of Cardica as well as an overview of what the company does?

Dr. Hausen: Yes. Cardica was founded in 1997 as a medical device company with our primary focus on creating stapling technology that could be used to connect blood vessels particularly in cardiac surgery. At that point, all blood vessel connections in cardiac bypass surgery were performed using suture and hand-sewn techniques. That dates back to the start of coronary bypass surgery about 40 or 50 years ago. The idea we had was that in general surgery, plastic surgery and thoracic surgery, stapling technology had become the gold standard to connect or divide tissue. And so the question was: Could we develop a stapling technology that was miniaturized, so it could deal with blood vessels down to a millimeter?

It took us about three to four years to develop our first stapler. We went into clinical trials and showed that our stapling technology was not only small enough to do so, but could very reliably and very repeatedly connect very delicate blood vessels, such as coronary arteries. We obtained FDA clearance for various products between 2006 and 2008, and went public in 2006 to get additional funds to be able to commercialize these very promising products.

We built up a sales force, and at the time we needed more money to expand our sales force and to turn us into a profitable enterprise, the stock market crashed , which was the end of 2008 and beginning of 2009, as you very well recall. We had no choice but to downsize our cardiac organization and focused on raising additional funds to develop our proprietary miniaturized stapling technology for general surgery and thoracic surgery. In these markets, stapling had already become the gold standard, and we wanted to develop smaller and more flexible products that would allow surgeons to do more minimally invasive surgery. We maintained our presence in cardiac surgery with a much smaller sales force.

It took us roughly two and a half years to develop the first stapler, and our second Microcutter product received CE marking in March of this year. We are in the middle of doing clinical evaluations, and a European clinical trial is underway. We expect to begin selling in Europe in the very near future.

TWST: Please explain the concept behind laparoscopic technology.

Dr. Hausen: The surgery for anything in the abdominal or thoracic cavity traditionally was done through large incisions. Surgeons would take a knife and open up the abdomen or open up the chest wall and use chest retractors or abdominal spreaders and create an opening where they could get their hands in, whether they could get their needle holders and forceps in. Basically, they did whatever surgery was necessary, manually.

And about 25 years ago, this changed with the introduction of stapling technology. Stapling technology allowed surgeons to avoid an incision, and instead just put in little trocars, which are little ports between five and 15 millimeters in diameter through which they would insert instruments and use a camera to look in an inflated abdomen or chest wall or chest cavity.

Using trocars, surgeons are now able to perform the same procedures - lung resections, bowel resections, bowel diversions - whatever general or thoracic surgeons do, they can do through a minimally invasive approach. All this came to fruition with the introduction of stapling technology. Today, the largest ports used during these procedures are for a stapler. The stapling products on the market today, marketed by two major companies, require the largest ports we put into the abdominal or the chest cavity - from 12 to 14 millimeters in diameter. All other instruments - camera, graspers, suturing devices - fit through smaller ports.

Surgeons obviously say they'd rather avoid having to put that big port in, and they'd love a smaller stapler that will fit through a smaller port. The products we develop address the need to be less invasive, and thereby reduce the pain, discomfort, invasiveness and hospital stay, accelerating the time to recovery of the patients that undergo these procedures.

TWST: Last month, Cardica announced that its Microcutter XCHANGE 30 had been successfully used over a two-month period in more than 35 procedures in Germany. When will this product resume clinical study in the United States?

For more from this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers, and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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