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Photo by Kimberly McKinzie Alexander Zapesochny, above, became iCardiac president and CEO last fall and former CEO Mikael Totterman took the role of chief innovation of?cer. (Photo by Kimberly McKinzie)
Based in Brighton, iCardiac now employs nearly 90 people, up more than 80 percent since 2011. (Photo by Kimberly McKinzie)
In the last year, iCardiac Technologies Inc. has had to grow up and be bold.
With the help of majority owner California -based Norwest Venture Partners, which came on board in February 2014, iCardiac is learning to think big. It is mulling over acquisitions and aggressively touting its technology.
The company also has new roles for its founders—Alexander Zapesochny became president and CEO last fall and Mikael Totterman, formerly CEO, took the role of chief innovation officer. The move helped harness the strengths of each executive and brought new ideas to the fore.
“We’ve never been in a better position, we’ve never had more money, forecast for the following (fiscal) year and so we certainly expect that growth will be quite significant next year,” Zapesochny said.
Brighton-based iCardiac works with seven of the top 10 pharmaceutical and biotechnology companies, in addition to several others, aiding them in the drug development process. Its technology, built on research from the University of Rochester, assesses the cardiac safety of drugs.
Given the types of studies it does, the company said it is early to estimate growth for the fiscal year that ends June 30. But based on the high booking rate and pipeline for next year, Zapesochny said that iCardiac, which continues to be profitable, expects to record 25 percent growth.
The firm now employs nearly 90 people, up from 80 a year ago and up from 55 in 2012.
The last year has been one of maturation for iCardiac, Zapesochny said.
“When you’re at the (venture capital) stage of business, your level of planning and forecasting is at a much more simple level; you’re going a little bit by your gut and things you intuitively know,” he said. “But once a private-equity player is involved, the level of forecasting and planning and detail goes to a whole different level. And that takes some getting used to just because things haven’t happened that way before, and all of a sudden you’re kind of forced to.”
Zapesochny said he learned to like the process and noted iCardiac’s transaction with Norwest happened at the right stage of the business.
“When you embark on a new investor relationship, you hope for the best,” Totterman said. “These guys are truly as intuitive as we thought they would be in terms of a thought partner and cooperator to work with.”
Ryan Harris M.D., a partner with Norwest and an iCardiac director, said his firm is pleased with the investment. ICardiac has dealt adeptly with changes and challenges.
“Businesses are kind of like life. The great businesses deal with the problems of life well, and the bad businesses fold under the pressure,” Harris said. “We’ve been really happy because many things have gone well. Some things have gone less well, but what I love … about what Alex and Mike are doing is that we’ve made adjustments and are stronger as a result.
“That’s really the measure, what’s the quality of management and how can they deal with challenges. That’s been the true test for these guys, and we’re pretty excited.”
Zapesochny is good at working with customers, he said, adding employees have a deep degree of respect for him.
“People like him and he generates a lot of followership,” Harris said. “I think for Mike (Totterman), I think it’s great for him as well. In his role as chief innovation officer, he’s really moved to do what he’s happiest doing. One of the things we love is to make sure managers are doing what they’re best at. … They’re both cofounders of this business and they work seamlessly together and that’s what we care about more.”
Totterman relishes focusing on technology.
“I love the technology component and innovation around technology, and how to position and market it. The organization was getting to a size where it was becoming much more difficult for me to focus sufficient time on that aspect of it,” said Totterman, pointing out that Zapesochny already had been spending more time running operations, making for an easy transition.
The last year included another significant event. In December 2014, the U.S. Food and Drug Administration held a meeting to reveal results of a validation study overseen by iCardiac. It used the company’s High Precision QT method to analyze electrocardiogram data. The study demonstrated the ability to ascertain cardiac safety earlier in the drug development process. It confirmed that ECGs in early phase trials can provide reliable information about a compound’s cardiac safety profile.
“This is what we’ve wanted to do from the very, very, very beginning of the company, to get to the point where we have fundamentally changed the way that cardiac safety is done to make it more efficient, more effective, less costly for the pharmaceutical companies to do,” Totterman said. “That succeeded and obviously it was a lot of effort from everybody in the organization … and kudos to the Norwest guys for having seen it.”
Said Harris: “When we invested in the company, our thought was it would be a good investment if (the study) doesn’t work and if it does work it should be … able to help iCardiac grow, hire more in Rochester, etcetera, and we seem to be on that path.”
ICardiac worked directly with industry thought leaders and the FDA on the project. The move toward trying to streamline the drug development process is a positive for iCardiac, said David Williams, president of Health Business Group, a Boston-based health care strategy consulting firm.
“What iCardiac does fits very well into the vision that the FDA and the European equivalent, the EMA and industry have for streamlining drug development,” said Williams, who also is an independent director of iCardiac.
“The FDA does not put its name on just any old document,” he added.
ICardiac is making use of the opportunity. It now offers training and certification to clinical sites and contract research organizations on conducting studies that implement the technique in the study.
“Now it’s actually a real commercial product and we expect that to accelerate quite a bit this year,” Zapesochny said.
Getting the word out about its technology and services is an important item on iCardiac’s to-do list.
“Certainly, our focus in the earlier years was to make sure that our technology and service levels were unmatched,” Zapesochny said.
Now that the company has worked through that, it aims to innovate and sharply focus its sales and marketing, he added.
In line with its goals, iCardiac decided to launch a full risk-sharing program for Thorough QT studies—Zapesochny’s idea, Totterman said. When it comes to cardiac safety evaluation in drug development, Thorough QT studies play an important role. They study a compound’s impact on the QT interval, a short, millisecond period that occurs from the time a heart beats or contracts through to its recovery phase. Medications that prolong the QT interval can be toxic to the heart.
ICardiac’s program, which has terms and conditions for the types of studies and where they are conducted, guarantees results of its study would either reflect a clean, negative result or indicate if the positive result is accurate. If neither of these outcomes is achieved, a client would pay nothing.
“It is fairly bold,” Totterman said. “The other thing that makes us excited is that I think a lot of the other competitors don’t have the type of performance we have. I think it will be really challenging for them to contemplate matching the program.”
The company also is working on plans for late phase clinical trials, which tend to be global, involve much larger studies with many patients and can be lucrative. Totterman said iCardiac will roll out a new service offering, dynamic ECG centralization, later this year. It aims to cut costs and allow trial sites to recruit patients faster and access the database quickly.
“There’s only about one out of three late-phase studies that are currently centralized, and the reason for that is it’s expensive,” Totterman said. “It’s expensive to have every single ECG looked at by a board certified cardiologist.”
“So we’ve realized that using our technology you don’t have to have a board certified cardiologist look at every single ECG, you need to figure out which ECG needs to be looked at,” he added. “What’s very exciting about that is the addressable market for that is about $250 million. … We can definitely get a much larger share of the late-stage market.”
The company also recently tapped Michael McKelvey, former CEO of its competitor eResearch Technology Inc., as its executive chairman. It was Norwest’s connections that made it possible, Zapesochny said.
Apart from the initiatives in play, iCardiac is considering acquisitions as another means of growth. Harris said the firm is thinking about a number of options. ICardiac is studying companies that offer related services and those with strong technology, Zapesochny said.
The company also could expand its prowess to include other aspects of clinical trials.
“There are other testing markets that we can potentially explore for growth outside cardiac,” Harris said. “The heart of the company, no pun intended, is cardiac right now. A lot of our competitors provide other services, and we think we can shine in other areas as well. We’re open to it.”
It is no secret that the drug development process is expensive. A late 2014 study by the Tufts Center for the Study of Drug Development estimated the cost to develop a new medicine and gain marketing approval is nearly $2.6 billion.
Given the hefty investment, pharmaceutical and biotech companies are looking to get smarter about the process, spot problems with drugs early on and keep tabs on a compound’s effect on critical body functions. Half of the medications pulled from U.S. markets over the last two decades involved cardiovascular problems, reports show.
Numbers for the size of the cardiac safety market vary. Williams estimated it is in the high hundreds of millions and could cross the $1 billion mark in the near future. The prospects for iCardiac look strong, he said, starting with that it captured Norwest’s interest last year.
“I think one of the ways to look at it is that when you have a company in Rochester that attracts investment from somebody that’s out on the West Coast, where they’re just filled with good investment opportunities, and someone says ‘Rochester is where we want to come and find something,’ that in and of itself is a good indicator,” he said.
ICardiac, which ranked No. 5 on the 2013 Rochester Top 100 list, the most recent list that it participated in, has managed to keep growing since its inception. So far, the deal with Norwest has given it quicker access to resources and contacts it did not have previously.
“This is also a year from which we hope to springboard into the coming years, not only because of the new processes and new financial wherewithal we have behind us but also the scientific advances we’ve made in the last year that we believe represent some of the largest advances overall for the cardiac safety industry in the last decade,” Zapesochny said.
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