A relief rebound drove Boston Scientific Corp. up 6% on positive third-quarter earnings news. But that wasn't enough to recover all the ground that shares (NYSE:BSX) of the Marlborough, Mass.-based medical device giant lost last month on the disappointing next-generation transcatheter aortic valve replacement (TAVR) study results presented at the Transcatheter Cardiovascular Therapeutics (TCT) conference held last month in San Francisco.

Shares have currently recovered to above $40 but had reached almost to $44 ahead of TCT. The company confirmed that it does expect the revenue growth rate for that TAVR device, Acurate Neo, to slow next year based on those trial results but underscored that it is only a small part of a highly diverse revenue mix.

Defining the SCOPE

"On SCOPE I . . . we do expect there's a likelihood that growth will slow down on a percent basis in 2020," said Boston Scientific Chairman, President and CEO Mike Mahoney on the earnings call. "But we're quite confident that will grow above the Boston Scientific corporate average as well as the industry corporate average based on the followership that we have in Europe with that valve."

"Current users are very pleased with the performance of that valve. They continue to use it. They continue to increase the utilization," he continued. "We'll be anxious to get the second-generation valve approved hopefully mid-2020 in Europe. So, we feel good about that. We feel very confident in the full year guidance that we provided. The company has a very broad range of diversified portfolio products. We continue to advance ourselves in higher-growth markets, and we have a very durable high-growth outlook."

The SCOPE I trial that had data presented at TCT is an investigator-led study that pitted Acurate Neo against the Sapien 3 TAVR from Irvine, Calif.-based Edwards Lifesciences Corp. The former failed to demonstrate noninferiority vs. the latter. (See BioWorld MedTech, Sept. 30, 2019.)

Another trial, SCOPE II, compares Acurate Neo to Evolut R from Medtronic plc; results from that study are expected next year and both trials are slated to support an FDA approval for Acurate Neo that's anticipated in 2021. A European launch for the next generation Acurate Neo 2, which is expected to lower the rate of paravalvular leak, is slated for next year.

During the third quarter, Acurate Neo sales continued to grow faster than they had previously, although Boston Scientific didn't offer specific figures. But the group that houses TAVRs, Interventional Cardiology, saw sales grow 13.9% during the third quarter to $700 million.

Stent scare

Overall, Boston Scientific reported $2.71 billion sales, above the Wall Street expectation of $2.65 billion. That was an increase of 13.1% over the same quarter a year ago.

"The stock has been under pressure lately from concerns about the company's ability to exceed lofty growth targets and, additionally, from skepticism about the Acurate Neo TAVR franchise and the upcoming ISCHEMIA trial results at American Heart Association. Against this backdrop, the third-quarter performance should prompt a relief rally in Boston Scientific shares," predicted Joshua Jennings of Cowen in a note issued shortly after the call.

ISCHEMIA is scheduled as a late-breaker on Nov. 23 at the AHA conference in Philadelphia. It has enrolled more than 8,500 higher-risk cardiac ischemia patients at 400 sites and is designed to assess the relative benefits of cardiac catheterization and revascularization via surgery or stenting vs. the noninvasive standard of care. The concern is that invasive treatments will not offer a substantial benefit, which would have implications for Boston Scientific's stent franchise.

Mahoney's response to repeated analyst questions on this subject on the earnings call was upbeat; he argued that the study could, in fact, offer positive data.

"About 80% to 85% of the patients in this study in both arms have moderate to severe objective evidence of ischemia, not symptoms but ischemia on functional testing. By doing that you have the greatest likelihood of showing the benefit of revascularization," he argued. "Many previous registries and small studies have suggested the greater the burden of ischemia you have, the more likely that revascularization is a better option than optimized medical therapy."

This is the first trial to actually test that out. And despite all the potential vagaries around the trial, if that plays out, there is a possibility that it could be a positive result because we treated the right patients in this subset to actually test that question," continued Mahoney. "So, that's why I would think that there is a reason to have so much doom and gloom, because the burden of ischemia might favor an outcome that is positive."

BTG balancing

Mahoney was also grilled on the integration of and expectations for cancer visualization and treatment med tech BTG, which Boston Scientific acquired in August for $4.2 billion (See BioWorld MedTech, Aug. 20, 2019.) The deal close took three or four months longer than anticipated and commercial efforts slowed a bit during that period.

Still, Boston Scientific said it's already making up ground and expects double-digit growth from BTG Interventional in 2020. It's focused on adding more commercial capabilities, starting product registrations in Europe and Asia and delivering on product synergies. Boston Scientific expects that the prior interventional radiology Boston Scientific interventional radiology tools will mesh nicely with the new offerings from BTG.

Despite some of the difficulties, Mahoney remains upbeat for the trajectory of Boston Scientific over the next few years. "We have many different headwinds to offset, but some of these, I would say are overblown, such as ISCHEMIA, the Acurate SCOPE I, as well as BTG," he said. "We're very confident in Acurate for the long term. We're very confident with BTG. And our drug-eluting stent business, although not a key growth driver, is an important contributor.

"So, despite some of these headwinds in 2019, we expect to grow organically faster than we did in 2018, and that would clearly be our goal for 2020," summed up Mahoney. "At our Investor Day, we talked about organic acceleration in 2021 and 2022 vs. the previous three years. So, we think we have all the tools to do it, and we have a lot of confidence in our team to deliver."

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