BSX shares were trading at $17.20 apiece in mid-day activity today, up 3.6%, as investors reacted to the decade-long odyssey Boston Scientific undertook in getting Watchman on the U.S. market.
Pre-market approval from the FDA came only after an unprecedented 3 advisory panel meetings to evaluate Watchman, which is designed to lower the risk of stroke by closing off the heart’s left atrial appendage. One analyst today said the approval is good news not only for Boston Scientific but also rival St. Jude Medical (NYSE:STJ) and its Amplatzer cardiac plug.
"We view the Watchman label, which is relatively ‘broad’ versus what some investors feared, as a key positive not only for BSX, but also for STJ, who can now design a trial to randomize against Watchman (vs. an event-driven trial) and get approval for a reasonably large estimated population," Barclays analyst Matthew Taylor wrote.
"BSX continues to view LAA as a $500 MM market (~10 MM patient with AF; ~50% with an elevated risk for stroke; ~30% eligible but not well controlled or able to take warfarin; ~5% annual penetration rate; resulting in ~75 K procedures). BSX continues to believe that Watchman is a good option for patients to get off their pharma regimen and reduce stroke risk and live a more normal lifestyle," Taylor wrote. "For reference, this is actually how STJ defined the market at its 2013 analyst day, but BSX has made similar cuts at the market to come up with its estimate."
Leerink Partners analyst Danielle Antalffy agreed that the FDA’s indication is "relatively broad" but that adoption will be gated by reimbursement.
"Watchman was approved with a relatively broad label, with the FDA essentially leaving it to the physician and patient to decide whether the device is appropriate," Antalffy wrote. "While the FDA label is relatively broad, CMS could limit adoption by restricting reimbursement. Assuming, however, that CMS reimburses per the FDA-labeled indication, Watchman could ultimately address a significantly larger patient population than the ~50,000 cited by BSX."
Sterne Agee’s Gregory Chodaczek disagreed on the label, calling it "slightly restrictive," but concurred that reimbursement is a gating factor.
"While we think Watchman could eventually reach $500 million in sales, we continue to believe the timeline is longer than that of the company’s due to the lack of reimbursement, the lack of long-term data, a slightly restrictive label and a slow, methodical U.S . rollout," Chodaczek wrote.