Catheter Developer Plans Public Stock Sale

CardioVascular Dynamics Inc., a fast-growing developer and marketer of catheters for treating clogged arteries, said it plans to raise about $37 million in an initial public stock sale.

In a move expected by observers, the Irvine company announced Tuesday that it intends to break off from its publicly held parent company, Pleasanton-based Endosonics Corp., and sell 3.4 million shares of common stock.

CardioVascular, which makes catheters used in angioplasty and related procedures, plans to use the money to develop products, fund clinical trials, support capital expenditures and provide working capital, according to a document filed with the federal Securities and Exchange Commission.

In a related statement, Reinhard Warnking, Endosonics’ chief executive, said that splitting the companies could enable CardioVascular to tap independent sources of financing.

Endosonics, which Tuesday reported a first-quarter loss of $1.2 million on revenue of $5.7 million, noted that $400,000 of the loss resulted from its investment in developing and launching CardioVascular’s catheter products.

*

Warnking also said the split would enable the companies’ respective managements to focus more strongly on two distinct businesses.

Michael R. Henson would remain chairman and chief executive of CardioVascular once it becomes a separate company.

Henson, Endosonics’ chairman, also served as Endosonics’ chief executive for five years before turning that post over to Warnking last year so Henson could devote himself to managing CardioVascular.

Analysts say the company’s biggest chance for success rests with a catheter that can be used to implant a stent--a small, slotted stainless steel tube--in a coronary artery wall to prevent it from collapsing. Stents represent the hottest technology among procedures for treating clogged vessels.

CardioVascular is sponsoring clinical trials across the country to test the catheter as a stent-deploying vehicle.

*

However, the company faces intense competition in the stent market and elsewhere from both large and small companies that sell products to treat cardiovascular disease. It also faces the challenge of finding a way to market its products to large cost-conscious health-care providers that prefer to buy catheters from a single supplier.

The company had revenue of $4.1 million last year, up 71% from the $2.4 million a year earlier. It reported a loss last year of $2.9 million, compared with a loss of $971,000 for the prior year.

For the first quarter, the company narrowed its losses to $377,000, from $625,000 a year ago, while revenue rose to $2 million, from $409,000.

Assuming the stock sale proceeds, Endosonics, a maker of catheters and intravascular imaging systems, would end up holding 49.27% of CardioVascular’s 8.2 million total shares outstanding.

CardioVascular expects the offering will be priced in a range of $11 to $13 a share.