St. Jude Inks New Collagen Deal – Analyst Blog

Leading medical devices maker St. Jude Medical (STJ) has forged a new pact with its supply partner Kensey Nash Corporation (KNSY). Under the two-year (from January 1, 2011 to December 31, 2012) supply deal, Kensey Nash will be the exclusive outside vendor of collagen (a protein) plugs, one of the key components of the Angio-Seal vascular closure device, a leading arterial puncture closure product.

 

Originally developed by Kensey Nash, the Angio-Seal device was licensed to St. Jude, which exclusively manufactures and markets the product worldwide. The device consists of three resorbable components: a polymer anchor, a collagen sponge and a suture along with a delivery system, which works in tandem to close and seal the puncture, thereby, arresting artery bleeding.

 

St Jude and Kensey Nash entered into an Angio-Seal component supply agreement in June 2005, which is slated to expire on December 31, 2010. Under this deal, Kensey Nash is currently the exclusive supplier of collagen plugs and partial supplier of the anchor component. The company books a 6% royalty on Angio-Seal’s net sales by St. Jude.

 

Kensey Nash will no longer supply polymer anchors under the newly signed deal effective Jan 1, 2011. However, the new supply agreement does not affect the existing royalty arrangements between Kensey Nash and St. Jude.

 

The new deal calls for minimum order levels (for calendar year 2011) equivalent to roughly 25% of annual sales of collagen plugs. St. Jude is expected to achieve revenues of roughly $17 million and $1.9 million from collagen plugs and polymer anchors, respectively, in fiscal year 2010 (ending June 30).

 

Angio-Seal is currently the leading product in the vascular closure devices market in terms of sales, having generated more than $350 million in revenues for St. Jude in fiscal 2009. Revenues from this device are expected to grow at a low-single digit rate annually, moving forward.