Here Is Why Boston Scientific Should Expand Its Foothold In The VAD Market

In an effort to improve their market share and reduce costs for the product development, medical device companies have been taking the route of mergers and acquisitions in recent years. One of the notable acquisitions that was announced recently was Medtronic’s proposed  acquisition of Heartware. With this acquisition, Medtronic has marked its entrance into the ventricular assist device (VAD) market. St. Jude’s acquisition of Thoratec in 2015 was also a similar one. Now that Abbott Laboratories is acquiring St. Jude Medical, it will also be able to gain foothold in the VAD market. Out of the three major cardiovascular device makers — Boston Scientific, Abbott Laboratories and Medtronic — only Boston Scientific has yet to enter the VAD market. Below we discuss the reasons as to why Boston Scientific should consider expanding its foothold into this market:

Maintain Leadership Position In The Cardiovascular Device Market

Boston Scientific is a major player in the coronary stent market and cardiac rhythm management products. In order to maintain its leadership position in this market, it should be able to expand its offering to all the latest and advanced heart-failure devices that hold the potential to change the market dynamics in future. The ventricular assist device (VAD) market is one such area.

A Ventricular Assist System includes an implantable blood pump, which is a continuous flow blood pump capable of pumping up a high volume of blood per minute. This provides circulatory support for patients in the advanced stage of heart failure. Such a system can be implanted adjacent to the heart, which can help avoid abdominal surgery.

Any investment by the company’s to enter this market will likely pay-off in the future. This comes from the fact that with an aging population and the high costs required to cure heart failure, the healthcare expenditures in the U.S. are expected to rise and reach approximately $39 billion per year. This makes it one of the largest expense areas in the healthcare system. It is also worth noting that the number of patients with heart failure could exceed 8 million by 2030. Due to this, the ventricular assist device (VAD) market, which is currently sized at $800 million, is expected to grow at a double digit rate post 2017. ((Medtronic to Expand Heart Failure Portfolio with Acquisition of Heartware International, Medtronic Investor Relations, June 27, 2016). 

Another factor that would drive growth for this market is the fact that there is a significant shortage of heart donors. It must be noted that cardiovascular diseases can cause heart failure, which necessarily requires heart transplant at its most advanced stages. According to reports, a ventricular assist device might remove the need of a heart transplant. While the rate of growth in a cardiovascular disease has increased significantly in the last few years, the growth in number of heart donors has remained low. This further supports the growth in the VAD market.

Effectively  Compete With Peers

In the table below we show the cardiac related product revenues for some of the big players operating in this segment in the year 2015 and 2014.

We can observe from the above table that while the total market grew in the low single digits, Boston Scientific’s revenues from cardiovascular segments declined. In order to protect/expand its market share, Boston Scientific must expand the breadth of its portfolio by entering new segments. Owing to the  fact that the VAD market is in its nascent stage and has high growth prospects, the company can get the required boost for its revenues by entering this market.

Capitalize The Fully Implantable VAD Opportunity

The current VAD devices use a driveline to connect the heart pump in the body to an external power device for energy transfer and monitoring. A large number of players in this market are trying to develop a fully implantable VAD, which would remove the need of a driveline by having a wireless connection to the external device. It must be noted that there are no such devices in the market currently. And, once the feasibility of such a device is established, there is a high chance that the VAD market size would expand at a higher rate. This can be due to the fact that the VAD therapy will likely see higher adoption after the introduction of a fully implantable VAD. If Boston Scientific were to enter this market, it would be able to capitalize on this growth opportunity as well.

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