By JIM STOMMENCDU Executive Editorand HOLLAND JOHNSONCDU Associate
Cardiovascular companies and cardiovascular topics captured much of the spotlight in healthcare investor conferences that took place last month a little more than a week apart at opposite ends of the country. The 22nd annual JPMorgan Healthcare Conference, which occupied its traditional first-of-the-year spot and traditional Westin St. Francis Hotel venue in San Francisco, and the 16th annual Piper Jaffray Health Care Conference, in its own venerable locale, the Hotel Pierre across 5th Avenue from a snow-covered Central Park, provided the podiums from which industry firms competing in that space and noteworthy clinicians could discuss what's happening in the cardiovascular arena.
At the JPMorgan (New York) gathering, noted interventional cardiologist Martin Leon, MD, of Lenox Hill Heart and Vascular Institute (New York) took a look at the future of his medical specialty and took several hundred healthcare investors with him. Serving as a featured luncheon speaker, Leon in effect told his audience to keep their dollars handy. "You'll see a lot of activity in this sector," he said, after touching on anticipated developments in 10 segments of interest to those involved in interventional cardiology.
He cited the rapid growth of the specialty, pointing to statistics from the Transcatheter Cardiovascular Therapeutics (TCT) conference, sponsored by Leon's Cardiovascular Research Foundation (New York). TCT was launched in 1988 with fewer than 200 registrants; by contrast, last September's edition of what has now become a "must attend" conference, drew 10,500 attendees.
While emphasizing that there's more to interventional cardiology than stents, Leon bowed to the "stent mania" that continues to grip the sector. "Last year, 92% of all interventional procedures involved a stent," he said. The net result of the addition of stents to an interventionalist's toolkit, Leon added, "is that angioplasty now is predictable."
And the advent of drug-eluting stents (DES), he said, in outlining some of the key findings of DES clinical trials, is that restenosis "the Achilles heel of angioplasty for 25 years is no more."
Leon saluted the extensive and ongoing clinical trials of such DES products as the Cypher from the Cordis unit (Miami Lakes, Florida) of Johnson & Johnson (New Brunswick, New Jersey) and the Taxus from Boston Scientific (Natick, Massachusetts). "The clinical trial process has been fundamental to which systems have been approved and are being used," he said.
In all, he said 42 clinical trials of drug-eluting clinical trials of DES products are going on worldwide, and he cited two important new studies about to get under way. The HORIZON trial, involving 3,400 patients, "will redefine acute myocardial infarction," Leon said, and the $30 million FREEDOM trial, sponsored by the National Institutes of Health (Bethesda, Maryland), will measure the effectiveness of DES vs. coronary artery bypass grafting in some 7,400 diabetic patients with heart disease. "These trials will have a profound impact on how we proceed," he said.
Moving forward, Leon said that it makes obvious sense "to utilize stents to alter the natural history of less-severe heart disease," given their success in treating more severe forms. He noted that the annual DES market is projected to grow to $7 billion, comparing that to just under $1 billion for angioplasty at its peak. Putting it another way, Leon said fully 70% of the entire interventional cardiology market will be in DES.
For the future, he sees "incredible competition" in the DES sector, with "iterative designs" from a number of manufacturers. He also anticipates "better delivery systems, improved drug carrier vehicles and new drug classes," the latter including "combination approaches."
But drug-eluting stents are just one of several areas of development Leon identified as having important implications for his specialty is practiced.
Among the others:
Vulnerable plaque. "The early detection of vulnerable plaque would be a major breakthrough," he said, with many different techniques being studied. "It will take time for us to get the proper answers," he added. "This may be a five- to 10-year process."
Structural and valvular heart disease. "Treatment of mitral valve disease will change dramatically by the end of the decade," Leon predicted.
Imaging innovations. "Imaging developments such as virtual histology and 3-D imaging will modify how we work in the cath lab," he said.
Endovascular therapies. "Carotid stenting will become the preferred therapy," Leon said.
Congestive heart failure. "Device therapies are taking over from traditional drug therapies," he noted.
Leon especially cited structural heart disease, device-based CHF treatment and vulnerable plaque as areas particularly ripe for technological solutions.
"It's a great time to be an interventionalist," he said. "The opportunity to provide solutions to important medical problems is great."
Panel debates drug-eluting stent use
In the last week of January, one of the features of the Piper Jaffray (Minneapolis, Minnesota) gathering was a well-received panel on drug-eluting stents and how they have fared under real cath lab conditions in the U.S. since the approval of the Cordis Cypher sirolimus-eluting stent last April.
Providing a payer perspective on the uptake in usage of DES was Keith Folkert, MD, of Blue Cross and Blue Shield of Minnesota (Eagan, Minnesota). He said there has been a 5% increase in all types of stenting procedures and, notably, a 30% decrease in use of non-drug-coated stents. Currently, he said, "about 43% of the stents that we cover are drug-eluting stents."
Presenting one doctor's perspective was Manish Parikh, MD, of Weill Cornell Medical Center (New York). His cath lab did 2,015 interventions in 2003. When the hospital first received the Cypher in May, cardiologists were allotted 25 of the new devices a week. "They would come in on Tuesday, [and] they would be gone by Wednesday morning," he said. Since last summer, the allotment has been increased to 50 Cypher stents a week. To illustrate the dramatic uptake of the devices, he noted that since that May introduction through the beginning of December, "we have used 1,227 drug-eluting Cypher stents in 700 patients." He noted that this averaged out to between 1.7 and 1.8 stents per patient.
Parikh said the results thus far with the Cypher have been very good. He said there have been seven sub-acute stent thromboses out of the 700 patients that received the devices. Of those seven cases, he said three of those patients died because they discontinued taking Plavix.
The overall rate of use in 2003 for the Cypher at Weill Cornell was 63%, Parikh said. "I can tell you that if I had every size, every length on the shelf, I would use it. I think it is the best technology out there." He also said he believes that sirolimus and related drugs in that class will be the winners. However, he said he looked forward to the approval of Boston Scientific's Taxus stent, the next DES stent in line for U.S. approval, expected soon. "Why? Because I need more sizes and I need more stents on the shelf."
Adding a somewhat different perspective to the panel proceedings was Lloyd Klein, MD, assistant director of cardiology at Rush Presbyterian-St. Luke's Medical Center (Chicago, Illinois). "As a practitioner, I agree that the stent has had a major impact on patients not coming back for repeat procedures; it's been really remarkable." He noted that utilization has been, in part, artificially decreased because there are not enough products on the shelf. While he readily agreed with Parikh that the Cypher would see increased adoption when more product becomes available, he also thinks there will be a competitive aspect to the Cypher vs. the Taxus and other future drug-eluting stents. "I think that both stents can't be used in the same lab. You won't get the volume benefit on the price."
Because the stents are still in relatively short supply, it has been a struggle for hospitals to decide which patients get one and which do not, and according to Klein, the current literature may not help in making that determination on a device that is not only in short supply but also has a hefty price tag of just over $3,000 apiece. "The studies that have been done don't really match a lot of the utilization that we do in the lab," he said. For example, he said there are no studies in acute myocardial infarction, vein grafts or specifically in acute coronary syndromes. With bare-metal stents, Klein said, it was easier to try out the devices in different groups. However, because of the cost of DES, he said that many hospitals have taken an evidence-based approach to utilization, though that has turned out to be somewhat subjective and can vary from hospital to hospital.
When asked which factors will affect the utilization of the Cypher and other drug-eluting stents the most, Klein did not hesitate. "I don't need to tell anyone in this room that there are two sides to this issue, one is cost and one is reimbursement." He said that he predicted during a similar panel held at last year's Piper Jaffray conference that if Medicare doesn't increase its reimbursement levels, or the price of DES don't come down substantially, use will not go beyond a 50% threshold as compared to bare-metal stents.
Parikh said he thinks the overall use for DES is going to be 70% to 75%. He said that once availability and price and reimbursement come into line, whether it be through increased competition or some other avenue, overall use will increase. "I do not see, as an operator, ethically being able to use a bare-metal stent in place of a drug-eluting stent for the numbers of applications that we now use stents for," he said. "The results are quite overwhelming for drug-eluting stents. It's difficult not to use this product."
Major cardio firms beat the drums
Boston Scientific Chief Financial Officer Larry Best reflected the good times the company has enjoyed due to the international success of its Taxus platform during his presentation at the JPMorgan conference. Best cited the "stunning" clinical data from the various TAXUS trials and used the word liberally as he walked a Grand Ballroom audience at the Westin St. Francis through a lengthy list of positive developments for Boston Sci in 2003 and outlined reasons behind his bullish outlook for the foreseeable future. "We've had great momentum," Best said, "and that momentum continues in a very robust fashion."
Noting that Boston Scientific is 40% owned by insiders, Best said company management takes a long-term view of things. "We look out four or five years," he said, adding that with such a view, things look good for the company. "Growth is broad and deep," Best said. "It's a good time [to be] at Boston Scientific." Citing preliminary fourth-quarter and full-year financials released that morning, he noted that international sales were up 33% in the year, a whopping 45% in the quarter. European revenues were up 57% in the quarter to $195 million.
"Europe has just taken off," Best said, driven by Taxus sales, up 314% in the quarter. He said Taxus has taken the No. 1 market share position in Europe, with its 31% share, shunting Cordis/Johnson & Johnson's Cypher device to second in that market. In fact, declared Best, "Taxus clearly is becoming the No. 1 coronary stent in the world," even without yet being approved for sale in the two largest global markets the U.S. and Japan. He noted that Boston Scientific is hoping for FDA approval of the Taxus platform late this month or next after last fall's recommendation for approval by an agency advisory panel. And it is looking for approval in Japan in the first half of 2005.
Best, known for his positive attitude when presenting the Boston Sci story at investor gatherings, got worked up in extolling the virtues of the company's coated-stent efforts. "Taxus with paclitaxel is in a league of its own," he said. "We're really feeling this momentum throughout Boston Scientific." Running through clinical data that he described as "simply stunning," Best noted that Taxus has proven effective across the board of lengths and diameters and even in the most difficult of patients, diabetics, where trial data showed a restenosis rate of just 5.2%. "Taxus has exceeded all of our expectations," he said, "and we think it will do so for at least three years."
Beyond that, he said Boston Scientific has "a very deep pipeline in drug-eluting stent technology. We think we have the ability to be the leader in DES for a long time to come." Best said one of the company's goals for its DES portfolio is to leverage the outstanding results achieved by its paclitaxel coating in coronary stents into other non-coronary applications.
He said one future growth area may be in biomaterials, which would allow Boston Scientific into larger markets outside its traditional focus on interventional technologies.
Even given the sharp revenue growth that the company has enjoyed in recent years, culminated by a fourth quarter in which the company topped the $900 million mark for the first time, Best sees "enormous growth occurring over the next several years "growth never [before] seen at a medical device company." Saying that Boston Scientific is bringing "a breakthrough technology to a very large market," he described this as a "very exciting time" to be in the medical technology business.
Guidant (Indianapolis, Indiana), one of Boston Sci's major competitors in the interventional cardiology business, said during its presentation the previous afternoon that it, too, will be a major player in the drug-eluting stent sector, despite the fact that it seems at this point to be substantially trailing first-to-market Cordis and Best's company.
Guidant President and Chief Executive Officer Ron Dollens said his company's strength in bare metal stents will translate to gaining market share in the DES sector when it gets to the point of commercialization of those products. "We think there are clear paths to markets for both first- and second-generation DES products," he said. "We have confidence in being able to bring these products forward."
Dollens said Guidant sees the coated-stent market growing exponentially from $1.6 billion in 2003 to $5.8 billion in 2006 and that the company's just under 50% share of the U.S. metallic stent market will propel it to a significant market presence in coated stents when it gets products to market, likely by early in 2006.
In the meantime, Guidant has continued to show strong growth, almost undeterred by its absence from the DES market. That growth has been paced by its strong showing in implantable cardioverter defibrillators, a space Dollens sees growing at a 20% or higher rate "for the foreseeable future."
He said the company expects to remain a strong competitor in the cardiac rhythm management market, in which he anticipates $8 billion growth worldwide over the next four years. "We operate in attractive markets," Dollens said. "It's a great space to be in." One that will be even greater once the company gets drug-eluting stents approved.
For its part, Johnson & Johnson (J&J), presenting at the Piper Jaffray conference, dwelled on its first-to-market position in the DES world. While Michael Dormer, worldwide chairman of the medical devices & diagnostics (MD&D) group at J&J, acknowledged that the launch of the Cypher device in the U.S. last year contributed significantly to the growth of his group, "our [overall] growth was actually well-balanced across the board." He also noted that the Cypher line, as a whole, "represents less than 10% of total MD&D sales."
Dormer added that "Johnson & Johnson is proving itself as the world's most comprehensive and broad-based healthcare company with almost $42 billion in sales last year," noting that sales growth for the company as a whole was 15.3% for 2003. The MD&D group, he said, was a "key contributor to these results," achieving sales last year of $14.9 billion, an 18.5% increase over 2002. This, he said, represented, more than a third of J&J's revenue last year, "and it was the fastest-growing group in 2003."
While the MD&D group was successful last year, Dormer said his unit would not be content to rest on its laurels. "We will stay focused in large product categories, therapeutic areas with high levels of unmet patient need, [and] areas where high technology can have a significant impact." He also noted that over the past five years, the company's research and development spending has increased at a compound annual growth rate of 14%, "a growth rate that exceeds even that of pharmaceutical R&D spending."
While outlining growth opportunities across his group's five device businesses, including a rapidly diversifying orthopedics component, Dormer acknowledged that Cordis is both the fastest-growing and most-talked-about component of his group. Beyond the obvious cardiology applications, he said Cordis is actively developing stent applications across a number of therapeutic areas. "These include programs like stents for bile duct, endovascular, neurovascular and peripheral vascular treatments."
Cordis already is developing next-generation products in its Cypher line. Next up is the Cypher NxT system, which the company expects to launch next year in the U.S., Dorner said. Further back in the pipeline is the Cypher Select, which already is receiving a positive reception outside the U.S. where it is in use. Still further back is the Cypher Steeplechase platform, a cobalt-alloy stent that is opaque to radiation. U.S. trials have not begun on the latter two products, although Dormer said Cordis is working with the FDA on requirements for each of them.
St. Jude eyeing big gains
St. Jude Medical (St. Paul, Minnesota) President and Chief Operating Officer Dan Starks edged Medtronic (Minneapolis, Minnesota) Chief Financial Officer Robert Ryan in the decidedly unofficial "rapid delivery" race during their respective presentations an hour apart at the JPMorgan conference, with both completing their presentations in just a little over 15 minutes. Starks, who will succeed St. Jude Chief Executive Officer Terry Shepherd at the company's annual meeting in May, gave a rapid overview of the firm's major businesses, with major focus on one where it is not yet competing.
Noting that St. Jude is "constantly meeting" its top- and bottom-line growth goals, Starks added, "and we're poised to enter the $1.5 billion-plus CRT [cardiac resynchronization therapy] market." The company filed its premarket approval application (PMA) with the FDA in mid-December for the Epic HF and Atlas HF CRT devices and two companion leads, and is anticipating approval during the second quarter.
Those anticipated approvals, coupled with the continued strong performance of its other business lines, earned St. Jude its second straight "top pick" from JPMorgan, which said it expects the company's "highly competitive" CRT devices to capture significant market share from existing competitors Medtronic and Guidant.
With JPMorgan anticipating that St. Jude will capture about 15% of the CRT market, it is projecting a 20% surge in the company's cardiac rhythm management revenues in 2005 and an added 75 to 80 cents a share in earnings by 2006. With major growth forecast for the cardiac resynchronization defibrillator market (St. Jude sees it growing to $3 billion by 2006), those estimates may be conservative. One thing is certain: St. Jude is entering the market with very competitive products. Relative to the products marketed by Medtronic and Guidant, "our devices are smaller, have higher output and have full pacing capability," Starks said.
In his view, the St. Jude story is very simply put: "We have good momentum and a strong new growth driver."
Starks also cited the company's strength in international markets, with 40% of total revenues coming from outside the U.S.
From the same podium just an hour earlier, Ryan emphasized Medtronic's strong financial performance (at nearly $9 billion in estimated fiscal 2004 revenues, it is far and away the largest pure medical device company), growth platforms and healthcare market fundamentals. He noted that revenues and earnings both have grown at about 18% a year since 1998, a period in which the company has gone from $3.4 billion in sales to the revenue-producing juggernaut it is today.
Ryan characterized Medtronic's growth as "very broad-based," with annual gains of 20% or more in its Cardiac Rhythm Management, Diabetes and Spine businesses. "They represent 60% of our total business," he said. Fully two-thirds of the company's revenues are generated by products or therapies introduced within the past 24 months, so it is apparent that Medtronic keeps its pipeline full. That in part is the result of the industry's most significant financial commitment to research and development just under $250 million in fiscal 2003. And the products that come out of that pipeline command huge margins, approaching 76%, Ryan said.
He characterized Medtronic as "much more diversified than just a few years ago." Founded on pacemakers and very much a cardiovascular-centric firm until the latter half of the 1990s, the company now has a large presence in diabetes, neurostimulation, spine and other markets. Ryan said Medtronic is "the clear leader in eight of the nine growth platforms within which we operate." (For those who are counting, it's No. 4 in the vascular sector.)
As for cardiac resynchronization therapy, the sub-sector St. Jude is looking to enter perhaps by the time of the North American Society for Pacing and Electrophysiology meeting in the latter part of May, Ryan said Medtronic's market share is "north of 50%." He said the company will introduce three new CRT products this year, giving it a good opportunity to continue to dominate a market that is both growing dynamically and still substantially unpenetrated.
Stent coatings just the beginning
Bill Hunter knows that everyone including the investors gathered behind him in the Colonial Room of the Westin St. Francis Hotel wants to hear about his company's paclitaxel coating for coronary stents, about to make its commercial bow in the U.S. But there's more to the Angiotech Pharmaceuticals (Vancouver, British Columbia) story than just the drug it has licensed to Boston Scientific, due to become the second company to receive FDA approval for a drug-eluting stent.
So Hunter, Angiotech's chief executive officer, spent much of his allotted 25-minute presentation time during the JPMorgan conference outlining the company's other activities. "There's an awful lot of breadth and depth to this company," he told his standing-room-only audience. "We ran six non-stent clinical trials last year."
This company's pipeline, Hunter said, includes peripheral stent coating to address restenosis in synthetic vascular grafts, a paclitaxel vascular wrap and a coated anastomotic connector for coronary artery bypass grafting surgery. A little further back is work on drug-loaded implantable devices, intended to make drug delivery much more site-specific.
While Boston Scientific's success in international markets with the paclitaxel-coated Taxus coronary stent platform and looming presence in the U.S market bring both substantial licensing revenues and attention to Angiotech, Hunter said the potential markets beyond stents are very enticing. "Stents only make up 1 million of the 120 million implantable devices left behind in patients each year," he said. "That's a potential $75 billion market [for device coatings] in the U.S. alone."
He said the "next frontier" for medical technology companies "is to use chemicals to make their devices work better." The question to be answered, he said, is "how do we make the body respond better to implanted devices?"
Looking at restenosis and other particular problems "as a biology company," Hunter said, "we discovered that many common device problems were common problems addressed by pharmaceuticals," including inflammation, infection and tissue overgrowth. Angiotech has screened a number of drugs in its discovery program. "Paclitaxel is a nice drug," he said, "but it doesn't solve all problems, so we have found other drugs."
Angiotech also has found other companies that matched up well with its strategic direction, acquiring Cohesion Technologies (Palo Alto, California) and STS Biopolymers (Henrietta, New York) in 2003. Cohesion, with its experience in collagen carriers, brought both the FDA-approved products (Costasis, Coseal and Adhibit) and technologies that could be linked to Angiotech's device coatings for more effective delivery. STS brought proven drug-coating technology, including an ultrasonically visible coating and a heparin-coated catheter.
What the acquisitions mean for the larger picture is new permutations of existing products and combinations resulting in entirely new products in Angiotech's drug/device pipeline. Two other areas of interest for the company are rheumatoid arthritis and psoriasis, but clinical efforts in those indications are still in the relatively early stages.
Almost as an "oh, by the way" presentation, Hunter devoted a few minutes to the Boston Scientific coated stent, citing clinical trial results showing only a 3% failure rate in the Taxus stent vs. an 11.3% rate in the bare-metal stent cohort. The Taxus stent system featuring Angiotech's drug also showed what Hunter described as "excellent efficacy" in dealing with heart patients who also have diabetes, recording a 5.1% failure rate, regarded as outstanding results in a most-difficult-to-treat patient population.
Companies wind up, make convincing pitches
Thoratec (Pleasanton, California), which is addressing device solutions for end-stage heart failure patients attracted a standing-room crowd of investors to its JPMorgan presentation. For Thoratec Chief Executive Officer D. Keith Grossman, the throng of listeners that spilled out into the hallway outside the meeting room at the Westin St. Francis represented an opportunity to tell of a year of significant accomplishments and a future of promise in a market whose surface has barely been scratched.
While Thoratec's HeartMate vascular assist device (VAD) operates within the "bridge to transplant" market for patients waiting or hoping for a heart transplant, the relatively small number of donor hearts available to such patients makes that essentially a secondary line of business. Where Thoratec is pegging its growth is in use of its HeartMate XVE, the latest model, which features no fewer than 40 engineering improvements over its predecessor with more on the way. The destination therapy indication, which received FDA approval last year, was supported by the results of the National Institutes of Health-sponsored REMATCH trial which saw a tripling of the two-year survival rate for those implanted with the Thoratec device vs. those who received standard drug therapy in the control group.
In addition to the noteworthy improvement in survival rates, the trial "showed great improvement in the quality of life for these patients," said Grossman, who noted that end-stage heart failure patients are a "very sick group who would have difficulty walking to the door at the other end of this room."
He also cited the gains made by Thoratec during 2003 in the reimbursement area, including the approval of a new DRG (diagnosis related group) for the destination therapy indication and a national coverage decision for Medicare coverage under the Centers for Medicare & Medicaid Services (Baltimore, Maryland).
With the NIH pegging the number of potential destination therapy recipients at 100,000 out of the total U.S. congestive heart failure population of some 5 million, Grossman noted that just 1% of those 100,000 patients receiving a HeartMate implantment would generate $75 million in product sales for Thoratec. Considering that the company's total VAD sales in its most recent fiscal year totaled about $100 million, the potential for significant growth is obvious. "We think we'll reach between 5% and 15% of the total market," he said.
Add to that the fact that Thoratec has relatively little immediate competition, holding some 90% of the bridge-to-transplant market and seeing no competitor getting approved for destination therapy for at least three years and likely even longer it's easy to see why investors flooded to Grossman's presentation. With development of HeartMate II and HeartMate III rotary flow pumps moving well along, Thoratec isn't resting on its accomplishments to date.
Grossman also cited the company's activities in vascular access grafts and in point-of-care diagnostics through its International Technidyne (ITC; Edison, New Jersey) subsidiary. While ITC "has surprised us with its growth" and accounts for about a third of Thoratec's total revenues, he added that the percentage of business on the cardiovascular side of the company's balance sheet would continue to grow. That growth will be driven by technological improvements, "dramatic progress on the reimbursement front" and what Grossman called "an eager clinical setting that is looking for answers" for its end-stage heart failure patients.
At the Piper Jaffray conference, Michael Mussallem, chairman and chief executive officer of Edwards Lifesciences (Irvine, California), affirmed his company's status in the heart valve space, saying that Edwards expects to sell more than $400 million worth of heart valves in 2004. "And we are poised to extend our leadership position [in tissue and repair]," he said, also noting that percutaneous technologies that the company is developing "will expand the heart valve market."
Citing a clinician preference shift away from mechanical heart valves in recent years toward tissue valves because of the better quality of life that they offer, Mussallem said a primary reason for this shift is his company's Perimount bio-mechanically engineered heart valve, touted by Edwards as the No. 1 heart valve in the world. He said the Perimount has demonstrated "incredible durability," adding, "We have 20 years of data in the aortic position and 16 years of data in the mitral position [with the Perimount]. This is unparalleled."
The company will now focus on further penetration of the declining mechanical valve market by the Perimount, and Mussallem said there are several opportunities for the device, particularly for use in the aortic position in younger patients. He also noted that outside the U.S., the markets are still more than 50% mechanical valves "so there's still a lot of opportunity to grow outside the U.S."
Edwards recently began selling an improved version of the Perimount in the U.S., called the Perimount Magna. He said the new product is a notable improvement on what is already a "best in class" device. "It uses all the technology that has 20 years of data, but it has a design change that allows us to get a larger-size valve in the same size patient." He said that new valve would be sold at a 20% premium to the older device.
Continuing the Perimount theme, Mussallem said that the company also introduced in 3Q03 a system specifically for mitral valve repair, called the Perimount Tricentrix, which he termed "the most durable mitral tissue valve available."
On the percutaneous valve repair and replacement front, Edwards has great ambitions. "If you could do this by a non-surgical method in a cath lab," said Mussallem, "we think that you would dramatically expand this market," causing a potential paradigm shift for heart valve therapy. He termed it a potential $1 billion market by itself in 10 years.
Aiding the company in its percutaneous ambitions is the purchase of Percutaneuous Valve Technologies (PVT; Fort Lee, New Jersey) by Edwards, completed the day prior to his presentation for $125 million plus a potential of $30 million in royalties. PVT's product combines balloon-expandable stent technology with a percutaneously delivered tissue valve. Mussallem said the FDA has indicated that this PVT system could be a candidate for a humanitarian device exemption (HDE). He said the company be on track to offer the therapy in the U.S. by sometime in 2006 if the HDE is granted.
In another presentation at the Piper Jaffray gathering, Zoll Medical (Chelmsford, Massachusetts) said it was on pace to gain market share in what it termed the "hot" cardiac resuscitation market. Richard Parker, president and chief executive officer, cited the "very big need" for such devices in the world today. The reason that this is such a hot market, Parker said, is due to one statistic: "More than 450,000 people die every year in the U.S. of sudden cardiac arrest. Only about 5% of those who suffer [such an] event survive."
Zoll breaks the market down into three sectors: hospital, emergency medical services and public-access defibrillators (PAD). The first two sectors currently account for 85% of the company's business and are considered professional segments. "These are the segments that use defibrillators that are priced somewhere between $7,000 and $12,000," Parker said. He called these "slower growth" segments. The emerging sector for Zoll and its competitors is the PAD sector. "These are really AEDs [automated external defibrillators], which are simple automated devices that cost about $2,000 that are sold in non-traditional locations," such as airports, hotels, sports arenas and shopping centers.
The compelling story for Zoll, according to Parker, is the company's ability to access this high-growth PAD market. He said Zoll still has a lot of potential upside there, since it only entered the public-access sector in 2002 with what it believes is a better device than those currently on the market from competitors such as Medtronic PhysioControl (Redmond, Washington) and the Heartstream (Seattle, Washington) unit of Phillips Medical Systems (Andover, Massachusetts).
Abbott looks to med-tech as growth driver
In the leadoff spot of one day's schedule at the Piper Jaffray conference was diversified medical products company Abbott Laboratories (Abbott Park, Illinois). John Thomas, divisional vice president of investor relations for Abbott, said that the medical products group of the company grew about 10% in 2003 and saw strong growth in vascular devices, molecular medicines and pediatric nutritionals.
While the company last year said it would spin off the bulk of its hospital products group into a new company to be called Hospira, it said this move was a way to more tightly focus its efforts on high-tech products, which have a higher return, and it also confirms Abbott's recently announced initiatives to change the operating model for the medical products group to drive higher growth.
Thomas cited last month's acquisition of hand-held blood test products maker i-STAT (East Windsor, New Jersey) and the pending deal for blood glucose monitoring innovator TheraSense (Alameda, California) as proof of Abbott's commitment to higher-growth, higher-margin products. In particular, he said that the acquisition of TheraSense "helps us become, when we close that deal, the No. 3 player in blood glucose monitoring," a market he said is growing at about 10% per year.
Another priority for the new year, according to Thomas, will be to continue to advance Abbott's drug-eluting stent program (DES), including initiating clinical trials with its anti-restenotic compound, ABT-578, which also is licensed to Medtronic (Minneapolis, Minnesota) for its own DES program.
Surgical robotics company Intuitive Surgical (Sunnyvale, California) made a case for increased investor attention before a substantial crowd at the New York conference. In his introduction, senior Piper Jaffray managing director Tom Gunderson joked that "if you think it's hard trying to work for [Donald] Trump selling lemonade on Fifth Avenue, imagine trying to sell million-dollar robots to cash-strapped, budget-strapped hospitals and doing it as well as these guys are doing." While the company has been able to sell its systems to premier institutions such as the Mayo Clinic (Rochester, Minnesota) and the University of Minnesota (St. Paul, Minnesota), Gunderson quipped that his tipping point came when he learned that Intuitive had sold one of the systems in Fargo, North Dakota.
Aleks Cukic, vice president of business development, provided an overview of Intuitive in its current iteration, which includes last summer's acquisition of its primary competitor, Computer Motion (Goleta, California), maker of the Zeus system. "The robotics market is one of the fastest-growing segments within medical device industry," Cukic said, noting that the company had a five-year compounded annual growth rate of 74%.
At the end of 3Q03, the company had 192 installed da Vinci systems worldwide, not only in the university hospitals, but importantly, also in community hospitals, as Gunderson had noted previously. Cukic noted that there are only 150 academic- or university-based medical schools in the U.S., but there are more than 4,000 community hospitals. In order to take Intuitive to the next level, he said the company needs to penetrate that community hospital market to a greater extent: "We believe that in order to effectively cross the chasm with this technology, we have to penetrate community-based hospitals."
Cukic said the markets that the company serves are primarily complex, minimally invasive surgeries within cardiac, neurologic and general surgery specialties, including use in urological procedures such as radical prostatectomy.
While Intuitive derives substantial revenue from the initial sale of the systems that cost $1 million apiece, the revenue model for the company is a razor/ razor blade setup. The "razor blade" in this system is a recurring revenue stream based on a set of limited -life instruments that are used in conjunction with the da Vinci, which is a remotely controlled 3-D visualization operating system. The company launched a fourth arm for the system in 2Q03, which can be purchased as an upgrade and retrofitted to the system or it can be purchased as part of a four-armed system.
Unmet needs translate to rosy future
Getting investor attention at a conference dominated on the medical technology side by the sector's larger players isn't easy for smaller, less-well-known firms. But having an interesting solution in what potentially could be a huge market is one way to have those who listened to your presentation exit that meeting saying things like, "That's pretty cool" and "Man, he sure seems to have a lock on this."
That's what some of those who attended a presentation by NMT Medical's (Boston, Massachusetts) John Ahern on the closing day of the JPMorgan conference were saying as they left the meeting room. Ahern, NMT's president and chief executive officer, told his audience that his company "believes we're on the next major growth platform in medical technology." That platform addresses non-surgical repair of what he termed a "common heart defect" affecting some 25% of the population and associated with "embolic stroke, transient ischemic attack and migraine."
The NMT technique uses the fourth-generation STARflex device to repair the patent foramen ovale (PFO), a flap between the right and left atrial chambers of the heart that in three-quarters of the population closes after birth, but in the other one-quarter can provide a dangerous pathway for blood clots to find their way to the brain, causing stroke. The STARflex approach looks very much like two tiny umbrellas introduced via a guidewire and balloon to the area where the flap has not naturally closed, popped open and pulled together from each side of the flap, where endothelial growth helps seal the defect.
Already commercialized in Europe and other international markets, and the subject of the 1,600-patient CLOSURE I trial in the U.S. which will reassure the effectiveness of the STARflex device vs. current "gold standard" drug therapy, the STARflex procedure and its CardioSEAL predecessor for septal occlusion already have been carried out some 18,000 times outside the U.S. Enrollment in the trial, which is to be conducted in some 100 cardiac centers, will take 18 months and results will receive two-year follow-up, with a PMA filing seen occurring a year after that. All of which means that NMT isn't expecting FDA approval until the middle part of 2007, a far cry from what the company might have been expecting when the product went before an advisory committee of the agency in September 2002
The panel turned thumbs-down, which sent NMT back to the drawing board to develop the design that now wears the CLOSURE I tag. Ahern pegged the potential market at 700,000 cases a year. "Even [being conservative and] cutting that in half it's a $1.5 billion to $2 billion-a-year opportunity," he said. And if you add in a potential migraine headache application, with studies indicating as many as 50% of those with ongoing migraines have PFOs, the opportunity mushrooms into what he estimated at as much as $9 billion a year.