Medical Device Daily Contributing Writer
BOSTON — The gloomy economic news that pervades the headlines belies the solid performance of the majority of the companies serving the medical device sector of the economy. Most med-tech firms appear to be virtually immune to the general economic malaise and are registering solid, if not spectacular growth.
A prime example is Spectranetics (Colorado Springs, Colorado), which recently reported that its 2Q08 global revenue surged 31% to nearly $27 million. This rate of gain matched the increase it experienced in fiscal 2007 compared to fiscal 2006.
CEO/President John Schulte told participants at the Canaccord Adams (Vancouver, British Columbia) 28th annual Global Growth Conference held here last week that "we are unique in the cardiovascular space — we are the only company with an FDA approval for both peripheral vascular intervention (PVI) and lead removal."
In the most recent quarter, its PVI business grew 26% and accounted for roughly two-thirds of the company's disposables revenue, while lead management, which accounted for one-third of disposables revenue, soared 50%.
Further evidence of the health of Spectranetics' business is that its installed base of 308 nanometer excimer lasers continues to steadily grow, having doubled in the past four years to reach 800. In the second quarter alone, the company reported 33 net laser systems placements, along with eight outright sales.
Schulte, who has been CEO for about five years, pointed out that both its key markets are substantially underpenetrated. For example, he said that in the PVI sector, while an estimated 12 million people are afflicted with peripheral artery disease (PAD), only 580, 000 or about 5% are treated annually. Of the patients treated, 430,000 receive endovascular procedures, with only 80,000 or 19% managed with atherectomy devices such as Spectranetics' laser.
He indicated that various atherectomy devices, which include the Spectranetics laser, could easily grow to half of the endovascular PAD therapy market, garnering share from both balloon angioplasty and stents. In a similar vein, the lead implant business appears to have major upside potential. To wit, Schulte said that of the estimated 102,000 annual active defibrillator or pacemakers leads that are removed from service due to infection, malfunction, occlusion or upgrading, only about 15,000 per year are actually extracted.
"I believe that this market is hugely underserved and thus it offers our company a tremendous opportunity," he said Backing up these words with action, in early 2008 Spectranetics developed a dedicated lead removal sales organization, with a 31-person sales staff now in place. By year-end, this team will grow to about 40 reps. It is focusing its marketing message on changing behavior from capping of old leads to lead removal.
Clinical support for laser lead removal is growing. An article in the April issue of HeartRhythm, a highly-regarded publication directed mainly to electrophysiologists, concluded that laser-assisted extraction of leads is safe and effective. The study, conducted at Brigham and Women's Hospital (Boston), represented a seven-year retrospective analysis of data from 498 lead extraction procedures involving 975 leads.
Compared to the PAD marketplace, which has become much more competitive in the past couple of years, lead removal competition is relatively benign and if Spectranetics is successful in growing this market to its avowed goal of 50,000 leads removed per year, it will be a major beneficiary.
Schulte also outlined a very aggressive clinical program that has been designed to broaden the company's available PVI market. He outlined three ongoing trials — PATENT, SALVAGE and TAAMI — which he believes will fuel future growth.
The first two clinical trials are designed for the treatment of superficial femoral artery (SFA) in-stent restenosis, an opportunity that Schulte called "compelling." He said that "no good treatment options exist in this market segment, which is estimated to be at least 25% of all SFA procedures." PATENT is a prospective 100-patient study being conducted at up to 10 sites in Germany.
SALVAGE, which is being conducted by both Spectranetics and W.L. Gore Associates (Flagstaff, Arizona) in the U.S., also is a 100-patient prospective, multi-center trial. Whereas PATENT will solely rely on Spectranetics' Turbo-Booster and Turbo catheters, SALVAGE will evaluate a combination of the laser and the Gore ViabahnI endoprosthesis with a heparin bioactive surface. This device is currently the only stent graft approved for treating PAD in the SFA.
TAAMI is a 200-patient randomized trial involving major medical centers in Poland that will enroll two treatment groups and in the most complex myocardial infarction patients — those with a large thrombus burden presenting with ST wave elevation myocardial infarction.
With rapidly growing revenue growth, which has been proceeding at a 34% compounded annual rate the past three years, Schulte said, "we expect our profitability to improve" and pointed out that at a $30 million quarterly run rate, his company will be operating in the black.
Another company operating in the PVI space is ev3 (Plymouth, Minnesota), whose new relatively CEO Bob Palmisano could not attend but was ably replaced at the Cannacord Adams podium by CFO Pat Spangler and Director of Communications Julie Tracy.
ev3 derives roughly 70% of its current revenue from PVI, with the balance generated by its interventional neuroradiology activities. Within PVI, ev3 believes that with the acquisition of FoxHollow Technologies (Redwood City, California) in October 2007, it is the leading player in the U.S. peripheral arterial disease sector, which Tracy said is a $1.1 billion annual market. Despite fierce competition, ev3's goal is "to build the market rather than grow through taking market share from competition."
To achieve this goal, it is aggressively expanding its atherectomy offerings with the SilverHawk with MEC TEC (micro efficient compression technology). Utilizing precision laser-drilled micro vent holes, it can capture up to 30% more tissue compared to the older Silverhawk device. A second offering in atherectomy is the RockHawk device for removing calcified SFA lesions. It already has been approved for surgical use in the U.S. and ev3 hopes to launch an IDE trial, dubbed DEFINITIVE, in 4Q08. The trial will enroll 100 patients and will include the use of the SpiderFX embolic protection device, with the goal to broadening the indication to endovascular use as well. Similar to Spectranetics, ev3 is hoping to drive its PVI growth with broad clinical initiatives. Spangler noted several clinical trials that will be important to the future. Enrollment is continuing in both the U.S. and Europe in its DURABILITY stent trials.
In addition to the RockHawk endovascular trial, ev3 will soon begin enrollment in a domestic, post-market study for SilverHawk, which never underwent a rigorous clinical examination under the auspices of FoxHollow. Under Palmisano's veteran leadership, ev3 has begun to rebuild investor confidence, with numerous achievements since he was appointed CEO in April. In 2Q08, global sales exceeded its guidance, gross margins expanded, expense ratios have improved and its EBITDA loss has been reduced.
Both Spangler and Tracy praised Palmisano, noting that he has provided "focus and discipline" to the organization.