Artificial heart maker Carmat's future seen in hands of core backers

By Michal Aleksandrowicz, Tim Hepher and Laura Lenkiewicz

PARIS (Reuters) -Troubled artificial heart maker Carmat is appealing to key shareholders led by Airbus to invest new funds to avoid the collapse of the 30-year-old venture dating back to a chance meeting between a French surgeon and a missile magnate.

Shares in the French medtech champion plummeted 37% this week after it warned it could run out of cash at the end of October following supply issues, as it actively explores "several financing options".

Airbus is the largest shareholder after one of its own founders - late industrialist Jean-Luc Lagardere - diverted engineers specialising in precision missile parts into a new venture with prominent heart surgeon Alain Carpentier in 1993.

The company they created, whose name is forged from the opening letters of Carpentier and Lagardere's Matra Defense business, later went public and Airbus now owns 12%.

Carmat Chief Executive Stephane Piat told Reuters the participation of existing shareholders including Airbus in any fundraising would send an important signal.

"This is the message which we are giving to our existing shareholders: that we live thanks to them," he said.

"They are the ones who decide whether or not we pursue and so they have the most important role among our shareholders. We hope that (the decision) will be positive".

Funding talks are ongoing, with the French government aware of the situation, sources said.

President Emmanuel Macron has made health technology a key part of a flagship re-industrialisation roadmap for 2030 and the French venture is one of only a handful of companies developing alternatives to heart transplants amid a shortage of organs.

Sources said Carmat, which had 24 million euros cash at mid-year, was looking to raise a total of around 100 million. The company has not disclosed amounts.

The decision whether to keep investing in the firm is expected to be one of the immediate topics on the desk of new Airbus finance director Thomas Toepfer.

"(Airbus) are important because they are the first investor and co-founder and they have a key role, and I believe that they are conscious of this and are responsible," Piat said.

Airbus said this week it had invested 50 million euros in Carmat but did not address whether it would spend more.

"It’s very challenging market conditions to raise equity capital for healthcare stocks currently," said Samir Devani, managing director of Rx Securities, noting cash-burning, smaller healthcare firms have underperformed the market this year.

U.S. STUDIES

Carmat's Aeson prosthetic heart is connected to a battery and controller carried in a pouch. Currently 13 people are fitted with the device which costs some 90,000 euros to make.

It remained unclear what, if any, contingency plans may be needed to continue to support them if Carmat fails to raise the funds it needs to survive.

Carmat won European approval for "Bridge-to-Transplant" in 2020, meaning its devices can be fitted to people awaiting transplants. In December 2021, it suspended implants after quality issues and was cleared to restart in late 2022.

Feasibility studies are underway in the United States, where it plans to apply for FDA pre-market approval by end-2026.

Airbus has indicated in the past that Carmat is non-core while contributing to periodic cash calls. It most recently invested 10 million euros in March 2022.

It continues to invest in other medical research, however. In June, Airbus said it was working with Zurich University on growing human tissue in space to treat damaged organs.

Airbus's 12% Carmat stake sits in the now largely dormant Matra Defense unit inherited from Lagardere.

In the past, that business stood at the centre of some of France's most storied and sensitive dealmaking including missile sales to Taiwan in 1992.

Now, Carmat is one of two holdings in the unit where it is dwarfed by a stake in missiles giant MBDA. Matra Defense paid a dividend of 207 million euros to Airbus in 2022, filings show.

(Reporting by Tim Hepher, Michal Aleksandrowicz and Laura Lenkiewicz, Additional reporting by Stephanie Hamel and Josephine Mason; Editing by Elaine Hardcastle)