The past week has been eventful for the healthcare sector.
During the week, Abbott Labs (
) got conflicting responses relating to the pending approval of
MitraClip. While the FDA staff recommended against approving the
device seeking more data, an advisory panel to the FDA voted in
favor of the device saying benefits outweigh risks.
Meanwhile, Intuitive Surgical (
) announced an increase in its stock buyback program by an
additional $1 billion amidst a steep decline in its stock
Abbott's MitraClip is used in patients with mitral regurgitation
(one of the most common heart valve conditions), which is estimated
to affect almost 1 in 10 individuals aged 75 and older. The device
improves the heart's efficiency to pump blood. W
hile MitraClip is already available in various markets following
European CE Mark approval in 2008, it is still an investigational
device in the major U.S. market pending FDA approval. On Monday,
the FDA staff made negative comments about MitraClip seeking more
data to show the device's safety and effectiveness. However, on
Wednesday, an eight members advisory panel voted unanimously to
recommend the device's safety. But, efficacy for its intended use
remained under questioned with a 4-4 vote. Overall, the panel voted
5-3 saying that the device's benefits outweighed its risks. The FDA
usually follows advisory panel's recommendation in issuing
While we expect the device to get the approval, it will mostly
be limited for the patients who are at high-risk for surgery.
Recently, the device showed a huge 96% implant success rate in
patients at high-risk to be treated with surgery. The device also
exhibited a few adverse effects along with a lower-than-expected
The diversified health maker has been facing near term headwinds
in its vascular division due to weakness in the U.S. drug-eluting
stent market and growing competition. Approval for new products
like MitraClip will lend support to its vascular franchise.
However, if the FDA decides to pay heed to its staff recommendation
and wait for data from another study (expected by 2019), Abbott's
market share may remain under pressure.
See our complete analysis for Abbott Labs
Intuitive Surgical has increased its stock buyback program by $1
billion taking the total amount for stock buyback to $1.21 billion.
The move comes with an aim to win back investors' confidence as
concerns are rising about the safety and cost effectiveness of its
robotic surgery system called da Vinci. In the last couple of days,
Intuitive Surgical's stock has been hit by a wave of selling due to
various reports. First, a new comprehensive study by Columbia
University suggested that surgery through the system costs
significantly higher than the standard minimally invasive
procedure, and that too without any major benefits.
Further, the da Vinci system has seen a significant increase in
adverse event reports including many incidences of deaths and
injuries. The news that the FDA is asking surgeons at major
hospitals to list complications witnessed with the surgical system,
triggered selling in the stock as investors feared potential
backlash from the FDA. Adding to the selling pressure was also an
adverse comment from the American Congress of Obstetricians and
Gynecologists, stating that robotic surgery for hysterectomies
doesn't improve outcomes and it should not be the first choice of
procedure. A group of surgeons, however, rebutted the comment in a
public letter released during last weekend. We recently discussed
impact of these events in a note
Downside Risks To Intuitive Surgical's $600 Fair Value.
The medical device maker should be comfortable in funding its
$1.2 billion stock buy-back program considering nearly $3 billion
in cash and cash equivalents it has been sitting on. The buyback is
expected to begin on April 23 after Intuitive Surgical reports Q1
See our complete analysis of Intuitive Surgical
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