Medical Device Daily Associate Managing Editor
SAN FRANCISCO — The 23rd edition of the JP Morgan Healthcare Conference kicked off here yesterday with a pair of heavy hitters leading off the medical technology side of the lineup.
Speaking separately to packed audiences in the Grand Ballroom of the crowded-as-usual Westin St. Francis Hotel were Medtronic (Minneapolis) CFO Robert Ryan and Boston Scientific (Natick, Massachusetts) CEO Jim Tobin.
Addressing his company's continued opportunity for growth, Ryan said that in the areas where Medtronic has a presence, there is the potential for more than $100 billion in additional revenue in the coming years.
He said the company will reach this expanded growth potential through a threefold strategy to “first, extend our leadership in current markets; second, to expand the size of the markets to meet their potential; and thirdly, to explore advanced technologies.“
The second important topic that he stressed was the company's continuing need to innovate. “This is the engine or the lifeblood of Medtronic,“ he said. “This is what drives our growth and this is what enables each one of our strategies.“
To enhance this innovation potential, Ryan said that during this fiscal year, the company would spend more than $1 billion on research and development, with a “significant portion“ of that going toward product development and clinical trials. A critical piece of the “new development“ puzzle, according to Ryan, will be the rise of hybrid products. “We believe that ultimately, medical technology will converge with biotechnology and/or information technology.“
He said that Medtronic is currently leading this convergence, citing the example of the Infuse bone morphogenic protein being used in spine and, potentially, other areas. On the information technology side, he mentioned the company's CareLink system, currently used in cardiac rhythm management (CRM) products and which he said will probably be used in other company businesses down the road.
A third important area, according to Ryan, is to renew Medtronic's current growth platforms.
“Medtronic is well-positioned in a number of large, growing and underpenetrated markets,“ he said.
One of the company's strongest sectors is CRM, where Ryan said it enjoys a No. 1 market share in both the high-power and low-power segments. The most significant new launch for Medtronic in this sector came with the November (Medical Device Daily, Nov. 10, 2004) introduction of the InSync Sentry system with OptiVol fluid monitoring, which the company calls the world's first implantable medical therapy offering automatic fluid status monitoring in the thoracic cavity, where fluid accumulation is a primary indicator of worsening heart failure and is a precursor to frequent hospitalizations.
Ryan said that over the next 18 months, the company will introduce five new low-power pacemakers, eight new lead systems and seven new high-power devices. Addi- tionally, he said that he believes the results of the Sudden Cardiac Death in Heart Failure Trial (SCD-HeFT) will give Medtronic “a significant opportunity to expand the [CRM] market.“
Ryan said he expects the CRM implantables market, which currently accounts for roughly 45% of the company's revenues, to grow by 15% to 17% over the next five years.
He also addressed the only market in which Medtronic does not hold a No. 1 market share, the highly profitable coronary vascular market. He said the company's Endeavor drug-eluting stent (DES) program is progressing, with the ENDEAVOR III clinical trial completed last September and enrollment in ENDEAVOR IV expected to begin in the next few weeks. He also noted that Medtronic expects to get the CE mark for its Endevor DES in the March/April timeframe.
Ryan said that the company has “multiple growth drivers“ in the vascular business to go along with its DES program, and cited among them the recent acquisition of Angiolink (Taunton, Massachusetts), a company developing wound closure solutions for vascular procedures (MDD, Nov. 5, 2004).
Another promising sector for Medtronic is the global diabetes market. Ryan said the company is on the road to developing the world's first artificial pancreas by fiscal 2008. “This road is built upon the convergence of our Paradigm insulin pump platform and our Guardian continuous glucose monitoring system,“ he said.
A key component to the realization of the artificial pancreas, he said, would be the release of the Guardian RT system in fiscal 2006, which will be able to display real-time glucose values every five minutes. “The convergence of pumps and continuous sensors is key to developing an artificial pancreas,“ Ryan added.
It will be hard for Boston Scientific to outdo this past year's success story, spurred on by the U.S. approval in March of its wildly successful Taxus DES system. However, according to Tobin, that is exactly what the company intends to do over the near-, mid- and long-term.
He said that Boston Scientific was able to grow its business by roughly $2 billion over the past year largely due to the DES program, an almost unheard-of feat for a medical device company. Using a baseball analogy, he acknowledged that while it is considered “poor form to stand there and admire your dingers when they go . . . this is a hell of a year.“
In testimony to that, he said that even if Boston Sci doesn't add any new products or acquire additional companies through 4Q05, the company would still grow 15% next year. “We've got pretty good momentum going here,“ Tobin said, noting that “[DES] stents are as big as the whole company was just two-and-a-half years ago.“
While he said that 2004 was a great year, particularly for the DES business, 2005 and 2006 are shaping up to be great years as well, with the pending European launch of the company's next-generation DES product, the Liberté, this year and a U.S. launch for that product the following year.
He said that until probably 2007, only Johnson & Johnson (J&J; New Brunswick, New Jersey) and Boston Sci would have a DES product on the U.S. market. Even more importantly, he said, “We'll have our second-generation Taxus Liberté on the market before J&J has their second generation or anybody else has their first, and that is to me perhaps the most important thing I can say.“
In a wry aside, he added: “We actually know what we are doing here, folks.“
Tobin said that Boston Scientific is not content to rest on its laurels, and has invested heavily in promising companies. “We have kissed every frog out there for years now and have been making balance sheet investments in new technology.“
He said that in addition to spending nearly $600 million a year on R&D, the company is spending nearly that much on balance sheet investments.
Tobin briefly looked at areas where Boston Sci either wants to expand its presence or protect its position from competitors during the coming years.
Obviously, he said, it needs to protect its DES franchise, a market that is the cornerstone to advances in all the other markets because of the revenue it produces. “We have to protect that franchise — that's what is generating $2 billion a year.“
Aside from drug-eluting stents, Tobin described other markets that he tabbed as potentially having a size of more than $1 billion, including vascular sealants, abdominal aortic aneurysms, CRM and “endovations.“
In the $500 million to $1 billion range, he placed bifurcation stents, carotid solutions, spinal chord stimulation and migraine therapy.