Jim Corbett Wants to Keep You Out of Surgery

He says the SpideRX Embolic Protection Device, designed to capture debris in blood vessels, is an example of this kind of development. (The SpideRX is sold in Europe, and ev3 has applications pending with the FDA.) “The device today barely resembles the product that they were doing the FDA trial on when we acquired [product creator Microvena] four years ago,” Corbett says. While that predecessor device “was probably going to produce the clinical result that would be necessary for approval, it was so cumbersome for the customer to use that we would never have succeeded with it. So we stopped the trial and redesigned it.”

Corbett describes the transformation from something that was “like a basket with a hat”—two moving parts made it awkward to use and withdraw from the artery—to a device that looks “like a windsock” and is deployed and withdrawn more easily. Would the original have functioned well enough to protect the cerebral vascular system from traveling debris? “Yes, it would,” Corbett answers his own question. “Would any customer actually use it? Probably not.”

In other cases, too, ev3 liked a company’s technology, “but we didn’t like what they were doing with it, and we changed it,” he says. “We were bringing to bear our collective experience.” With a management team of industry veterans, “after a while, you can look at something and go, ‘You know, that’s just not going to work.’”

Aside from a stock-for-stock deal completed in January that turned a controlling interest in Micro Therapeutics into full ownership, ev3 hasn’t made an acquisition in several years, Corbett notes. In that time, the company has replaced most of its acquired products with next-generation improvements. “Ninety percent of sales in ’05 were from products we internally developed in the prior 24 months with what we put together,” he says. “One of the assumptions is that we rolled up these companies for their revenue, and that’s just not true.”

There’s hardly been a year in ev3’s short history that wasn’t a big turning point of one kind or another, but in 2006, the turn Corbett expects to make is into profitability.

The IPO last June left ev3 with no long-term debt—investors converted debt to equity—and nearly $120 million in cash. (Since then, the share price has gone from an initial $14 up to around $22, down to about $12, and back to the middle.)

Corbett says ev3 is “clearly ready” to make more strategic acquisitions, probably peripheral and neurovascular technologies that are “market ready and cash-flow accretive from the beginning.” But that isn’t how he expects to meet his projection of “cash-flow profitability by Q4 this year.” Corbett believes that will come from continued growth on the company’s existing base.