Sometimes the major annual medical meetings are jam-packed with significant and market-moving data. And then sometimes they’re like this year’s American College of Cardiology conference, with relatively limited useful data from an investing perspective.
While there was some incremental data relating to significant emerging growth markets like transcatheter valve replacement and renal denervation, the most significant data concerns one of the more uncertain market opportunities – left atrial appendage occlusion/closure.
Boston Scientific – Nobody Got To Watch The Watchman
Those who have followed med-tech for a long time will likely understand what I mean when I say it just feels like nothing ever goes easy to or quite to plan when it comes to Boston Scientific (NYSE:BSX).
While analysts and investors were looking forward to what should have been a routine (albeit significant) data presentation on the PREVAIL study of the Watchman LAA closure device, that didn’t happen.
Boston Scientific dithered on precisely what they were going to present and ultimately released a preview of the data only hours before the scheduled presentation – which put the ACC into a snit and led to them canceling the presentation altogether for violating the data embargo.
Kerfuffle aside, the PREVAIL data was basically a success for the company. The study was designed to address lingering safety concerns and reconfirm the efficacy seen prior studies, and it did so. Two of the 3 primary endpoints were met and the 3rd was missed not because of poor device performance, but rather an unexpectedly good outcome in the control group. While missed endpoints are never a good thing, I would think Boston Scientific should be able to get FDA approval on the basis of its accumulated data package, with approval likely coming around mid-to-late 2014.
Speaking of the data, the PREVAIL study showed a serious complication rate of 2.2%, with 60% of those complications being pericardial effusions. Overall vascular complications were 4.4% – nearly half the level seen in the prior PROTECT-AF study.
Now … Can They Sell It?
With this latest clinical update, Boston Scientific seems to have a relatively clear runway to FDA approval. The path to wide market adoption may be significantly longer or rockier, though. Although everybody acknowledges that the stroke risk that comes with atrial fibrillation is serious, there’s substantial disagreement on how doctors will approach the treatment.
Anticoagulants, particularly the newest generation of Pradaxa (Boehringer Ingelheim), Xarelto (Johnson & Johnson (NYSE:JNJ)), and Eliquis (Pfizer (PFE) and Bristol-Myers (BMY)), will almost certainly be the front-line treatment of choice. The question, then, is how many patients ultimately end up migrating through the treatment options and end up undergoing an LAA procedure.
LAA optimists highlight numbers that suggest as many as 40% of AF patients will be contra-indicated for anticoagulant therapy and that the LAA closure market will grow into multiple billions of dollars per year. Skeptics believe the actual percentage of patients that will make it to LAA procedures will be closer to 1% or 2%, due in part to other treatment alternatives and patients’ desire to avoid interventional procedures.
For it’s part, Boston Scientific has been talking about a revenue opportunity in the neighborhood of $500 million in 2017, with sell-side estimates ranging from as little as $150 million to over $700 million. BSX will certainly have the weight of data on its side, as more patients have been treated with the Watchman in studies than the competing approaches combined. Likewise, St. Jude Medical (NYSE:STJ) hasn’t had the cleanest or most encouraging data from its Amplatzer platform.
Whatever the real size of the LAA market, it’s likely to be dominated by Boston Scientific and St. Jude. AtriCure (NSDQ:ATRC) has had FDA approval for its AtriClip device for some time, but the company’s more limited marketing resources and more invasive procedure are likely to be limiting factors.
Incremental Data On Transcatheter Valves And Renal Denveration
Two of the most exciting opportunities in the cardiology space right now are transcatheter valves and renal denervation, and there was a little bit of incremental data at the ACC on each.
In transcatheter valves, Edwards Lifesciences (NYSE:EW) presented data from the PARTNER 2B study of the Sapien XT valve. There weren’t really any surprises here, and the data indicates that the Sapien XT is a pretty good option for sick patients. That said, the rate of paravalvular leakage did look a bit high. While nobody has yet drawn a straight line between paravalvular leakage and mortality, I wonder if this could become a point of differentiation in the market down the road. Boston Scientific and St. Jude in particular could see this as an incremental benefit in catching up with Edwards and Medtronic, provided their clinical data shows an edge.
On the renal denervation side, there was little news. Medtronic still expects to finish the HTN-3 U.S. pivotal study of the Simplicity system this summer. As such, I would think data would be available at the next ACC meeting in 2014, with approval also possible in 2014. There was also information to indicate that the benefits produced by renal denervation with Simplicity appear durable, with a 31mm reduction in blood pressure at two years.
Investors and analysts have gotten excited that renal denervation may be one of those long-awaited new multi-billion dollar treatment markets, and the data has been encouraging. At the same time, the competition will be fierce with Medtronic, St. Jude, JNJ, Covidien (NYSE:COV), and Boston Scientific all looking to enter the ring. With efficacy looking broadly similar so far, I would think that commercial market share will come down to the details – the size of the device, the ease of use, how the device delivers energy (relevant to safety) and so on. To that end, Medtronic and Johnson & Johnson may have an edge with the Simplicity and ThermoCool, respectively, due to the ability to use a 6F delivery sheath (the size often used in diagnostic procedures). On the other hand, St. Jude’s EnLighHTN requires a bigger sheath (8F), but the energy delivery pattern could offer some advantages in manageability and safety.
The Bottom Line
All in all, this was a quiet ACC meeting. Boston Scientific’s data on the Watchman was expected to be positive and it was, and the bigger question of the real size of the LAA market is still very much up in the air. In the meantime, companies addressing the cardiology market continue to face some challenging realities, as both the cardiac rhythm management and stent markets continue to trudge along. Likewise, markets like transcatheter valves and ventricular assist devices are still just getting started. While the med-tech market continues to offer some measure of consistency relative to sectors like technology or industrial goods, the primary challenge is still delivering strong organic growth in an environment of weak procedure growth and strong pressures on pricing.
Stephen Simpson CFA is a former sell-side and buy-side analyst who focuses most of his professional attention on financial and investment writing. In addition to a decade of work as an analyst, Mr. Simpson has worked as a wet-bench biomedical researcher and a consultant in the med-tech industry, as well as writing on a freelance basis for over 10 years. He can be reached via email at tuonela.fool@gmail.com.