Boston Scientific’s Watchman Device Ready To Enter U.S. Market

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Boston Scientific

Boston Scientific (NYSE:BSX) has finally received FDA approval for its Watchman Heart Device after two failed attempts. [1] The device, which has been in markets outside of U.S. since 2005, has struggled to gain approval after complications stemming from efficacy and complexity during implantation. The device was finally able to satisfy the FDA following the results of the company’s PROTECT AF and PREVAIL trial, which established that the Watchman device could reduce the incidence of stroke in patients who could not take the standard anticoagulant, warfarin, due to its side effects such as high risk of bleeding.

Boston Scientific acquired the rights to the Watchman after it bought out Atritech in 2011, and added the device to its Cardiac Rhythm Management (CRM) division. The CRM division includes pacemakers, implantable cardioverter defibrillators (ICDs), and other products used to treat heart conditions.

We have a price estimate of $15 for Boston Scientific, which is slightly below the current market price.

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See our full analysis for Boston Scientific

How it Works

The Watchman device is implanted on the left atrial appendage of the heart, which is the source for 90-95% of strokes. It helps prevent blood clots from circulating into the body and traveling into brain, causing a stroke. After installation, most patients would not be required to take any blood thinners. The device serves an alternate solution to anticoagulants and is expected to treat patients diagnosed with abnormal heartbeats, also known as atrial fibrillation.

Estimated Market Size

In 2013, the global Atrial Fibrillation market was around $7.5 billion, and it is expected to grow at a CAGR of 13.2% over the period 2014-2020 to reach $16.17 billion. North America accounts for approximately 42% of the total market share.  Atrial fibrillation can be categorized into pharmacological and non-pharmacological product divisions. The non-pharmacological division, under which the Watchman device falls, comprises of around 45% of the total Atrial Fibrillation market in terms of revenue. [2] At least 3-5% of people over 65 suffer from this condition. In the U.S. alone, there are over 2.5 million people with atrial fibrillation. The average lifetime cost of treatment with the Watchman device is around $21,000, compared to the commonly used oral drug Warfarin, which has an average lifetime cost around $16,000. [3]

Impact on Boston Scientific

According to the CEO of Boston Scientific, the company expects to have incremental growth of around $500 million in annual revenues; driven by U.S. sales of the Watchman device.  The CRM division accounts for about 26% of the total revenues generated by the firm.  Total sales for the CRM division stood at $1.9 billion in 2014.  An addition of $500 million would increase current revenues by around 6%. This could positively impact the valuation of the company, as CRM is the second biggest revenue source for Boston Scientific.

Potential Obstacles

The Watchman could potentially face headwinds from existing anti-coagulants like Xarelto, Pradaxa, Eliquisas, and the commonly used Warfarin.  Even though the FDA gave its approval, the FDA advisory committee also reported that the Watchman device lacked efficacy compared to Warfarin in preventing the most common type of stroke caused by blood clots.  The device did receive a vote of confidence, however, as it provided an alternative for patients who are ineligible or refuse to take Warfarin.

The Watchman still has to prove its superiority to Warfarin.  If it cannot, the use of this product would be limited to patients who are ineligible to use warfarin. In another study, it is estimated that around 40% of patients with atrial fibrillation are not prescribed these blood thinners, or they have reservations about taking them. [4] This could potentially open the market for Watchman as an alternate solution. The company is also in talks with the government for reimbursement options for the Watchman device. If this device does not qualify for reimbursement, health care providers will not readily adopt this procedure, as it will significantly reduce the market demand for the product.

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Notes:
  1. FDA Approves Boston Scientific’s Watchman Device, Wall Street Journal []
  2. Atrial Fibrillation Market Will Be Worth $16.17 Billion By 2020: New Report By Grand View Research, Inc., GlobeNewswire []
  3. LAA Occlusion More Cost-effective Than Both Warfarin and Dabigatran for A-fib Patients, tctmd.com []
  4. Boston Scientific Receives FDA Approval for WATCHMAN™ Left Atrial Appendage Closure Device, CNN Money []