The past week has been eventful for the healthcare sector, impacting two medical device companies under our coverage. During the week, Boston Scientific (NYSE:BSX) released data from a clinical trial called “Prevail”, where its Watchman devices produced better safety results than what the earlier trial had suggested. However, its efficacy was similar to standard blood thinner Warfarin in preventing stroke in atrial fibrillation patients.  Meanwhile, Abbott Labs‘ (NYSE: ABT) MitraClip heart valve showed positive results in patients with conditions considered high risk for surgery. 
Watchman is implanted in atrial fibrillation (irregular heartbeat) patients to reduce the risk of strokes. In the highly anticipated “Prevail” clinical trial data released last week, Watchman posted a significant drop in serious complications (build-up of fluid around the heart and stroke) rate compared with the previous “Protect AF” trial. While in the “Protect AF” trial, Watchman demonstrated similar efficacy as Warfarin, a standard blood thinner, the data showed a high rate of complications, compelling the FDA to hold back approval. With the new results, the company will hope the FDA will grant approval for the new device soon.
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The device has already seen a huge uptake in international markets with implants growing over by nearly 65% on a year-over-year basis (Read Boston Scientific Revised To $8 On Acquisitions, New Products & Cost Cutting Efforts). If approved, it will be the only device of its kind in the U.S. at this time and will have the first mover advantage in a potentially large market. Atrial fibrillation affects almost 3 million people in the U.S. alone.  However, what can limit the device’s potential is that it has no major efficacy over Warfarin. Without demonstrating that, the use of the device is expected to remain limited to patients with high risk of bleeding, a serious side-effect of Warfarin.
The device is part of the CRDM division, which includes products like implantable cardioverter defibrillators (ICDs) and pacemakers, in our model. The division has witnessed a sharp decline in revenues due to weak demand for its ICDs. Going forward, we expect the device maker’s market share to continue to decline, although at a slower rate. This is mainly due to products like Watchman.
Abbott’s MitraClip is used in patients with mitral regurgitation, one of the most common heart valve conditions. The device improves the heart’s efficiency to pump blood. According to a recent trial data, MitraClip showed a massive 96% implant success rate in patients at high-risk to be treated with surgery.  The device also exhibited a few adverse effects along with a lower-than-expected mortality rate. 
Abbott’s Vascular division is facing near-term challenges due to weakness in the U.S. drug-eluting stent market and growing competition. Further, the healthcare company’s contract to supply Promus stent to Boston Scientific expired in mid-2012 and the latter started manufacturing a new version of Promus internally since then. All these factors have dragged down growth as Abbott generates a significant chunk of Vascular revenues from its stents.
However, with new products like MitraClip, we expect Abbott to improve its market share going forward. Mitral regurgitation is estimated to affect almost 1 in 10 individuals aged 75 and older.  While MitraClip is already available in various markets following European CE Mark approval in 2008, the major U.S. market still evades it. With the impressive efficacy in patients at high-risk to be treated with surgery, Abbott can certainly hope to get approval for the patients group very soon, if not for all the patients.Notes:
- WATCHMAN® Device Continues to Demonstrate Positive Clinical Outcomes for Patients with Atrial Fibrillation, Boston Scientific, March 09 2013 [↩]
- Abbott’s Minimally Invasive MitraClip® System for Mitral Regurgitation Demonstrates Positive Clinical and Quality- of-Life Results for Patients Too High Risk for Surgery, Abbott Labs, March 10 2013 [↩] [↩] [↩] [↩]
- Boston Scientific atrial fibrillation device proves safe -study, Reuters, March 09 2013 [↩]