MDT

Can Boston Scientific's Pain be a Boon for Edwards & Others?

The transcatheter aortic valve replacement (TAVR) market, which is projected to witness CAGR of 18.3% between 2017 and 2022 (per a report by Azoth Analytics published on ReportsnReports), has been constantly under the radar of market experts, courtesy of the stir caused by one of the forerunners within this space - Boston Scientific Corporation BSX .

Last February, the company voluntarily recalled all its core Lotus Valve devices, including Lotus with Depth Guard. This dragged down its shares by 9.4% in the pre-market trading session (per an article on Medical Device and Diagnostic Industry).

Sadly, again in November, Boston Scientific announced a further delay in the re-launch of the LOTUS Edge Aortic Valve System after it failed to meet the committed timeline, hurting shareholder sentiments even more. Per an article on the Medical Device and Diagnostic Industry, the company had opted out from the Piper Jaffray healthcare conference in New York on the same day, pulling down the stock by 7.5%, which was followed by a decline in its market cap by around $2.9 billion.

Meanwhile, rejoicing at this situation is Edwards Lifesciences Corporation EW , a leading player in the TAVR market. Encouragingly, the company's shares have soared 45.4% since Lotus Valve devices' recall last February.

Let's take a sneak peek into what's brewing in this market for investors who are keen to effectively put in their money in the healthcare space.

The Backdrop

Boston Scientific has been consistently dominating headlines on developments in the Lotus Valve devices, though for all the unpleasant reasons. Last February, the company had to call back all Lotus Valve devices due to issues related with the premature release of a pin which connects Lotus Valve to the delivery system. However, this was not the first time when the company had to face such a situation.

Earlier in 2016, the company had to retract the Lotus Edge Valve system on similar grounds. Even in 2014, it had to face the brunt of the FDA's order and withdraw 278 units of Lotus Valve from circulation in Europe, due to the Lotus Valve getting unlocked from the delivery system during release.

The company has also been disappointing investors by continuously delaying the filing of the premarket approval (PMA) with FDA for the Lotus Edge Valve system.

Currently, the company expects LOTUS Edge to be back in the European market not before 2019. It also intends to roll out the same in the United States in the same year.

Nevertheless, some major market analysts believe such numerous product missteps have always ended up tarnishing the brand image, along with deviated customer and clinician interests.

Edwards Lifesciences -Seizing the Opportunities

While Boston Scientific hit a rough patch on issues surrounding its Lotus Valve devices in 2017, Edwards Lifesciences reaped the maximum benefits from its solid Transcatheter Heart Valve Therapy (THVT) platform. During the company's annual investor conference, its chairman and CEO Michael A. Mussallem noted, "As we come to the end of 2017, our performance and accomplishments this year significantly exceeded our expectations, and we expect 2018 to be another strong year for Edwards Lifesciences." "The primary factor driving the company's global growth is the prospering transcatheter aortic valve therapy business," he further asserted.

In this regard, management currently projects sales of $2.1-$2.4 billion in Transcatheter Heart Valve Therapy in 2018.

Moreover, Edwards Lifesciences expects the global TAVR opportunity to be more than $5 billion by 2021. And to make the most of it, the company has been firing on all cylinders, lately.

In line with this, Edwards Lifesciences has its near-term product pipeline on track. It expects that the new SAPIEN 3 Ultra system, featuring an on-balloon delivery system and next-generation sheath technology, will be launched in the United States and Europe later this year. Also, the company anticipates to begin the U.S. pivotal trial for the CE Marked CENTERA valve system in 2018. Furthermore, Edwards Lifesciences expects results from its PARTNER 3 trial of the SAPIEN 3 valve to be presented at ACC 2019, followed by the FDA's approval later that year.

We note that some market speculators believe Edwards Lifesciences' solid global presence, particularly in high-potential regions like Europe and Japan, along with delay in the comeback of some key competitive products like Boston Scientific's Lotus Valve, will help the company further cement its hold in the highly potential TAVR space.

Other Major Players Riding the Gains

Medtronic plc MDT , with its CoreValve Evolut TAVR platform comprising the CoreValve, CoreValve Evolut R and the CoreValve Evolut PRO systems, has well maintained the company's position as a formidable player in the TAVR space. Per an article by Reuters, shares of Medtronic had inched up 1% on Boston Scientific's announcement of the withdrawal of Lotus Valve devices, last February. Notably, the company recorded TAVR growth in the mid-20s in the United States and low 40s in international markets, in the last reported quarter.

Furthermore, post the acquisition of St. Jude Medical in 2017, Abbott Laboratories ABT integrated the popular CE Marked Portico TAVR of the former into its Structural Heart portfolio and is expected to gain momentum in this space.

Boston Scientific - A Rebound in the Cards?

As Winston Churchill had rightly said,"All men make mistakes, but only wise men learn from their mistakes."

Unwilling to let go of the bountiful opportunities in the TAVR market, Boston Scientific acquired Symetis SA, a structural heart company focused on minimally-invasive TAVR devices, in 2017. The company has started selling ACURATE neo Aortic Valve in Europe. It is also working on designing the ACURATE neo 2 Aortic Valve System equipped with an enhanced outer sealing skirtfeature.

Moreover, Boston Scientific is looking forward to leveraging on its existing LOTUS infrastructure to enhance the ACURATE neo AS Valve system through better field support, geographic expansion and next-generation products. The company plans to invest in the United States and Japan trials as well.

Will ACURATE Replace Lotus?

However, several opinions have been making rounds in the TAVR space, of late. Some market experts believe the company will eventually replace the Lotus Valve devices with the Symetis' portfolio, while others speculate that the deal has been clinched to cushion it from the jitters which might stem from the Lotus Valve devices' withdrawal. A few analysts are also of the opinion that Boston Scientific expended the huge amount on the Symetis buyout deal to use it as a contingency plan in case the Lotus Valve device issue remains unresolved.

Nonetheless, dismissing all such speculations, Boston Scientific has been consistently emphasizing on the Symetis acquisition as a move to broaden its TAVR suite and not a replacement of Lotus Valve devices.

To end all speculations, let's wait and watch to find out whether or not Boston Scientific's Lotus (valve) will find the right weather to bloom again.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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