With its core segments of stents and defibrillators struggling, leading medical devices player Boston Scientific Corporation (BSX) is targeting other emerging therapies with high potential to drive its top line. One such product, Watchman, was recently implanted in the first patient in Latin America.
Watchman was incorporated in Boston Scientific’s portfolio with the acquisition of Atritech earlier this year. Watchman is employed to close the left atrial appendage in patients with atrial fibrillation (AF) who are at risk of ischemic stroke and are eligible for long-term oral anticoagulation therapy such as warfarin.
The therapy will be beneficial to a sizeable number of patients as AF affects approximately 15 million globally. It is a disorder that disrupts the heart’s ability to beat regularly and pump blood efficiently. Traditional treatment for AF patients who run a higher risk of stroke was confined to the use of anticoagulants. Watchman has been developed as an alternative to anticoagulation therapy.
In the PROTECT AF clinical trial carried out on 800 patients, Watchman was found to be non-inferior to warfarin and demonstrated a 38% relative risk reduction for a combined measure of stroke, cardiovascular death and systemic embolism. Although the device has received CE Mark approval and was commercialized outside the US in 2009, it is yet to receive approval in the US.
Meanwhile, patient enrollment in the PREVAIL study (a confirmatory study to receive US approval) is on track and is expected to be completed in the first quarter of 2012. Boston Scientific expects to launch the device in selected Latin American markets this quarter.
Our Take
Despite witnessing significant pricing pressure and loss of market share in the core segments, Boston Scientific is confident about its growth prospects. Besides suitable acquisitions, the company has resorted to restructuring initiatives and focusing on emerging markets. During the most recent quarter, the company recorded double-digit sales growth in the three largest emerging markets of Brazil, India and China.
Nonetheless, economic uncertainty in the US and Europe is taking a toll on procedure volume, affecting the medical devices industry on the whole. Boston Scientific’s competitor, Medtronic (MDT) is due to announce its results next weak. Medtronic is also experiencing challenges in its two biggest segments – Cardiac Rhythm Diseases Management and Spinal.
We are currently Neutral on both Boston Scientific and Medtronic. The two stocks carry Zacks #3 ranks (hold) in the short term.
