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Heart-to-Heart: Evolving TAVR Market - Analyst Blog

Posted: 1/6/2012 5:15:00 PM
Referenced Stocks: ABT;BSX;EW;JNJ;MDT

The past few years were challenging for the medical devices companies due to widespread economic uncertainty, reimbursement pressure and declining procedure volume. The ripple effects of these events took a heavy toll on the industry across the board. The companies were forced to look for other solutions to manage their top line.  

In addition to restructuring initiatives and focus on emerging markets, the target was primarily on nascent technologies. In a sector where innovation and state-of-the-art medical technology is the name of the game, it becomes practically indispensable in a weak and languishing market.

In this context,transcatheter aortic valve replacement ("TAVR ") is a much sought after technology in the medical devices space with many players adopting the acquisition route to imbibe the know-how. With the first humanTAVR procedure performed in 2002 by Dr. AlainCribier , the technology has come a long way as an alternative option for treating patients with aorticstenosis . The FDA has hitherto approvedTAVR only for senile aorticstenosis .

What is at Stake?

Senile aortic valvestenosis is a progressive, age-related disease caused by calcium deposits on the aortic valve that cause the valve to narrow. As the heart works harder to pump enough blood through the smaller valve opening, it eventually weakens, leading to problems such as fainting, chest pain, heart failure, irregular heart rhythms ("arrhythmias"), and even cardiac arrest.

After the onset of these symptoms, more than half of the patients succumb within a couple of years. Open heart surgery seems to be the standard of care to restore the normal blood flow by replacing the diseased valve.  

However, many patients with age working against them along with myriad complications are deemed unsuitable for this surgery. As per estimates, approximately 300,000 people worldwide have been diagnosed with severe aorticstenosis , of which approximately one-third are considered ineligible for open heart surgery.

The Playing Field

To meet the urgent need of patients unfit for open heart surgery, several companies are currently working on this technology. However, it is only EdwardsLifesciences ( EW">EW ) who holds the laurel of successfully bringing to market theSapien transcatheter heart valve ("THV ") in the US (November 2011). Although theSapien was originally developed to be delivered through two approaches -transfemoral (via the patient's femoral artery) or thetransapical (via a small incision between the ribs) - the FDA approval came for the former.

Edwards thus has the first mover advantage in the US market. The largest medical devices player, Medtronic ( MDT ), is however not far behind with itsCoreValve . Enrollment in the US pivotal study ofCoreValve is currently on track and scheduled for completion in mid 2012. The European market, however, is a witness to cut throat competition with both Medtronic and Edwards in the fray since 2007. Given the stalemate in Europe, the two players are struggling to increase their respective market share.

Medtronic'sCoreValve portfolio in Europe includes26mm ,29mm and31mm valves via three access routes -transfemoral ,subclavian (through thesubclavian artery located beneath the collar bone) and direct aortic access - all based on the self-expanding platform. Approval for the23mm valve is expected in the second half of fiscal 2012.

Medtronic and Edwards were the only players targeting theTAVR market in Europe until a couple of months back. However, the competitive landscape is likely to change with the recent launches of twoTAVR systems -JenaValve from Germany basedJenaValve Technology andAcurate TA by Switzerland basedSymetis - both in September 2011. These devices are approved fortransapical procedures only.

Pipeline Candidates

Viewing the huge potential in theTAVR market, several other devices are under development. Candidates in queue includeEngager from Medtronic (through the acquisition ofVentor Technologies in 2009), Boston Scientific Corporation 's ( BSX">BSX ) Lotus valve (with the acquisition ofSadra Medical in January 2011), St Jude Medical 's ( STJ">STJ ) Portico valve, and a valve from Direct Flow Medical.

Medtronic began a pivotal trial for theEngager system (to be delivered throughtransapical approaches) in Europe in September 2011. While Boston Scientific plans to launch Lotus inEMEA in the second half of 2013, St Jude Medical is targeting a limited launch of the Portico valve in Europe before the end of 2012. CE Mark trial of the next-generation (18F ) valve from Direct Flow Medical was scheduled to begin in 2011. Well capitalized players such as Johnson & Johnson ( JNJ">JNJ ) and Abbott Laboratories ( ABT">ABT ) have stakes in this company.  

Edwards expects US approval ofSapien for high-risk ("Cohort A") patients in mid-2012 while the FDA nod forSapien XT ("Cohort B") is expected in 2014. Other products under development from theSapien line includeSapien 3, a lower profile balloon expandable valve andCentera valve, a low profile,repositionable self-expanding valve, both of which will be delivered through the14F eSheath delivery system.

Caveats forTAVR Procedures

Beyond the huge scope ofTAVR , several issues are still unresolved and need to be looked into. These issues revolve around proper selection of patients, choosing the right delivery method, and dealing with high risk complications including the overt risk of stroke. To address the high risk of stroke associated withTAVR , the FDA has asked Medtronic to include major stroke as a primary endpoint in addition to all-cause mortality for patients in the inoperable cohort.

On request from the Society of Thoracic Surgeons ("STS ") and the American College of Cardiology ("ACC"), the Centers for Medicare & Medicaid Services ("CMS"), in September 2011, decided to initiate a National Coverage Analysis forTAVR . Any unfavorable reimbursement decision from the CMS could have an adverse impact on this fledgling technology.

Study results presented at theTranscatheter Cardiovascular Therapeutics ("TCT" ) Conference (November 2011) found thetransapical procedure to be unfavorable. Results from the PARTNER trial ("Cohort A") demonstrated thatTAVR led to better quality of life compared with surgical valve replacement, but only when performed via thetransfemoral approach. Moreover, results from a study ("STACCATO") performed in Denmark demonstrated thattransapical TAVI may be inferior to surgical aortic valve replacement ("SAVR ") in operable elderly patients. The study enrolled only 70 out of the planned 200 patients and had to be terminated early due to too many events in thetransapical arm.

Although thetransfemoral approach is considered as a first line therapy, many cardiac surgeons believe that the two delivery methods cannot be compared head-to-head since patients who need thetransapical approach inherently belong to a higher risk category. With presentation of unfavorable data for thetransapical procedure, we look forward to the evolution of the two delivery methods in the real world setting.

Patient selection will also play a critical role in the device's penetration as the risk boundaries become hazy. The patients in the high risk category are inherently so weak that it acts as a deterrent to long-term survival and improved functionality. As a result, researchers believe that physicians should perform a thorough analysis while selecting the appropriate patient.

Besides, the spread of this treatment procedure requires active support and cooperation from the physician community at large. In June 2011, the ACC and theSTS published a consensus document that advocated the need of team work from cardiologists, interventional cardiologists, cardiac surgeons, noninvasive and heart failure cardiologists,echocardiographers , cardiac imaging specialists and cardiac anesthesiologists. The document also backed the necessity of the procedures to be performed in specialized centers where proper training of the physicians and staff is significant. 

Widespread rollout ofTAVR will depend on the physicians' learning curve. A study (conducted with 44 patients as part of the Partner trial) published in the December issue of the Journal of ACC found that physicians may have to perform 30 cases before they attain the desired level of proficiency. 

Who Will Win the Race?

Although theTAVR procedure is not without its shortcomings, as seen above, close scrutiny of the procedures performed and proper selection of patients are crucial for best results. TheMedTech players are all keen to have their fingers in theTAVR pie, a fact that bespeaks of the economic potential of this specialized, state-of-the-art procedure.

These devices are priced at a hefty premium to conventional surgical valves. For example,Sapien has a price tag of $30,000, way above any surgically implanted valve. However, the prevailing economic uncertainty and the adoption of austerity measures would force the players to increasingly compete on price.

Our Pick

Among so many players vying for a share of theTAVR market, we believe Edwards is in an advantageous position compared to its peers. Until recently, Edwards was the only player in the European market with atransapical procedure (approximately half of total volume) and was enjoying 100% of the market share. Although competition in this space is set to intensify with new products such asJenaValve andAcurate TA waiting in the wings, we believe Edwards with its rich experience of more than four years is well poised to take on the competition.

On thetransfemoral side, Medtronic'sCoreValve had a larger share before the introduction of Edwards'Sapien XT. While the former still has its edge, Edwards is working on closing the gap.

The current scenario in the US market is congenial for Edwards given the head-start it enjoys compared to Medtronic. The latter is still a couple of years away from launching its product,CoreValve , in 2014. By that time Edwards will also be ready to compete with its next generationSapien XT valve and, on top of it, with more than two years of experience.  

Acknowledging the shortcomings ofTAVR , we expect the technology to nonetheless succeed in deepening its penetration level. However, the developmental path will involve several modifications and check points, which we believe is only the right thing to do given the severity of the disease and human life at stake.

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