By Carmen Ho, Staff Writer
HONG KONG – Chinese companies, many with improving technologies, continue to use acquisitions to expand their global market share. A case in point is Shanghai-based Microport Scientific Corp., which inked a $15 million investment in Lombard Medical Inc. (NSDQ: EVAR), of Irvine, Calif., a specialist in endovascular aneurysm repair.
The investment sets the stage for a strategic partnership that gives Microport the exclusive marketing rights in China and Brazil for Lombard's Aorfix and Altura stent graft products as well as the right to manufacture the products for the China market.
For Lombard, the deal has two benefits. The first and most obvious is an injection of cash to fund regulatory and commercial programs. The second will be faster commercialization of its two key products in China.
"With the aging global population and conversion from open surgery repair to interventional therapy facilitated by technology, there is a large growing endovascular aortic repair [EVAR] market worldwide with room for expansion," said Microport spokesman Chen Yi. "The China EVAR market is approximately $150 million in size and rapidly growing at a compound annual growth rate of around 15 percent."
Aorfix is the first – and to date only – stent graft with approvals to treat abdominal aortic aneurysms (AAA) with aortic neck angles up to 90 degrees.
Aorfix works by creating an internal bypass of an aneurysm and reducing the risk of rupture. Aorfix has a helical and circular design to conform to the contours of human anatomy, including aortic necks with high angulations and iliac arteries with extreme bends. Aorfix has been evaluated in three studies and used in more than 7,000 procedures. It has a CE Mark and was approved by the U.S. FDA approval in 2013.
Altura is a stent graft to treat standard AAA anatomy. It is delivered via an ultra-low profile 14F catheter and allows for repositioning during deployment and accurate placement at each renal artery, which allows physicians to use all of the available aortic neck. It also eliminates the need for cannulation, which cuts down on procedure times. The Altura system received CE mark in 2015 and Lombard launched it in the U.K. and Germany in February 2016. A broader international rollout is underway.
Part of the new deal would see Microport manufacture components for Altura and Aorfix at its facilities in Shanghai.
According to Microport, the manufacturing collaboration will make the products more affordable.
"(W)e believe our planned component manufacturing collaboration will significantly reduce manufacturing costs and increase margins for both Aorfix and Altura product lines," Lombard Medical CEO Simon Hubbert said in a release announcing the deal.
The market for minimally invasive treatment of AAA could be worth $1.8 billion. Research and Markets has forecast the stent grafts market in China will grow at a compound annual growth rate (CAGR) of 10.55 percent between 2014-2019.
However, the prevalence of AAA in Chinese patients is low, which does not support routine screening, said Jensen Poon from the department of surgery at Queen Mary Hospital in Hong Kong. This could mean that the market for Lombard's stent graft products may not be that big in China.
Through its $15 million investment, Microport acquired Lombard Medical common stock and convertible debt. Microport purchased $5 million in common stock at $0.62 per share, which represents a 29 percent stake in Lombard. Microport will also have a pro-rata purchase right on future equity offerings by Lombard.
Lombard also issued Microport a five-year $10 million unsecured promissory note at a rate of six-month LIBOR plus 4 percent, convertible into Lombard Medical common stock at a price of $0.90 per share at any time prior to maturity. Two representatives of Microport will be appointed by Lombard to serve on its board of five non-executive directors.
Microport has undertaken a series of deals over the past couple of years to reach into global markets.
In June 2014, the company completed a deal with Sorin Group, of Italy, to develop cardiology products. The aim of the deal was to develop and market cardia rhythm management (CRM) devices in China. Microport invested $10.2 million into 51 percent of the new venture. (See Medical Device Daily, June 2, 2014.)
A year earlier, the Chinese company stepped into the orthopedics market by acquiring, through a subsidiary, the Orthorecon business from Wright Medical Group Inc., of Arlington, Tenn. When the $290 million was completed in the first quarter of 2014 it was the largest by a Chinese company in the U.S. (See Medical Device Daily, June 17, 2014.)
Microport's stock on the Hong Kong stock market closed at HK$5.62 (US$0.72) on Dec. 22, down 1.4 percent. Still the stock value doubled early in the year, climbing from a low of HK$3.12 in February to top out at HK$6.22 in October.
By Michael Fitzhugh, Staff Writer
Allergan plc said it will buy Lifecell Corp., a company that makes regenerative medicine products for tissue reinforcement, from privately held Acelity LP for $2.9 billion in cash, a purchase partly driven by growing demand for reconstructive breast surgeries among women with breast cancer.
About one in eight U.S. women will develop invasive breast cancer over the course of their lifetime, and, globally, breast cancer now represents one in four of all cancers in women, the company said, citing statistics from the nonprofit Breastcancer.org.
The acquisition will add a portfolio of dermal matrix products used in breast reconstruction procedures and complex hernia surgeries to Allergan's medical aesthetics line-up, which currently includes breast implants and tissue expanders, creating new sales opportunities for the company with plastic and general surgery customers. In addition, Allergan will also gain new manufacturing and R&D operations in Branchburg, N.J.
"The acquisition of Lifecell is both strategically and financially compelling to Allergan and serves as our entry point into regenerative medicine," Allergan CEO Brent Saunders said. The acquisition is expected to be immediately accretive for Allergan, with Lifecell assets expected to generate about $450 million in 2016 revenue, growing at a mid-single-digit rate, approximately 75 percent gross margin and about 40 percent operating margin in 2016.
During the recent Citi Global Healthcare Conference on Dec. 8, Allergan CEO Saunders said that 2016 was "a rip the Band-Aid off type of transformational year" for the company, ending with the emergence of a growth-oriented firm focused on eye care, CNS conditions, medical aesthetics, dermatology and gastrointestinal disease. The year ahead, he said, would be about focusing on "a crisper message of what Allergan is." On the medical aesthetics front, though the company has achieved significant success in expanding to new indications for fillers and Botox and advancing in new areas such as undereye bags, with its acquisition of Topokine Therapeutics Inc. earlier this year, and ear prominence and symmetry, via its acquisition of Northwood Medical Innovation Ltd., "the question," Saunders said, "is do we move beyond facial aesthetics leadership into the full body?" Clearly the answer is yes.
Lifecell's portfolio includes both regenerative and reconstructive acellular tissue matrices for repair of soft tissue defects, as well as autologous fat grafting solutions. Its leading products include Alloderm, a human allograft tissue matrix, which is used to support breast reconstruction post-mastectomy procedures and other surgical applications, by providing soft tissue reinforcement; Revolve, a fat grafting product for volume enhancing procedures; and Strattice, a porcine-based tissue matrix for reinforcement of soft tissue in challenging hernia repair procedures.
In its most recent 10-Q filing, Acelity cited favorable global demographics and an aging population as a key driver of demand for its products. The global population, 65 and older, is expected to grow from about 610 million people in 2015 to about 1.2 billion people by 2035, it noted. "A strong correlation between age and more severe chronic and surgical wounds and increased frequency of hernia and other abdominal wall defects, as well as breast cancer" is likely to lead to "increasing demand for wound care and soft tissue repair products," it said.
In the same filing, Acelity pointed to increased competition due to a growing number of entrants in its key markets. Advantages the company has secured on reimbursement and safety fronts however, may have helped make its products especially attractive to Allergan.
Acelity, formed from a combination of Kinetic Concepts Inc. (KCI), Lifecell and Systagenix Wound Management BV, filed for an IPO in August 2015, but officially withdrew those plans on Dec. 7. Acelity President and CEO Joe Woody said the Lifecell sale will allow his company to accelerate and make greater investments "that focus on developing and commercializing advanced wound therapies and dressings in markets across the globe." Lifecell last changed hands in 2008, when KCI acquired it for $1.7 billion.
Neither Woody nor Saunders were available for further comment.
The acquisition, which the companies expect to close during the first half of 2017, may be the cap on a busy year of buyouts for Dublin-based Allergan. After the failure in April of its planned $160 billion merger with Pfizer Inc., soured by U.S. actions to curb corporate tax inversions, Allergan kicked off a buying spree, starting with its $90 million purchase of New York-based botulinum toxin specialist Anterios Inc. in January. Its portfolio- and pipeline-extension moves picked up momentum throughout the year with the acquisitions of Topokine, Heptares Therapeutics Ltd., Retrosense Therapeutics LLC, Akarna Therapeutics Ltd., Vitae Pharmaceuticals Inc., Tobira Therapeutics Inc. and Chase Pharmaceuticals Corp.
Guggenheim Securities and Barclays are serving as financial advisors to Allergan in its acquisition of Lifecell. Debevoise & Plimpton LLP is serving as the company's lead legal counsel. J.P. Morgan Securities LLC and Goldman, Sachs & Co. are serving as financial advisors to Acelity, while Simpson Thacher & Bartlett LLP is serving as its lead legal counsel.
Allergan shares (NYSE: AGN) fell $1.22 to close at $191.33 on Tuesday.
By Omar Ford, Staff Writer
Svenska Cellulosa AB (SCA) has entered into an agreement to acquire Luxembourg, Germany-based BSN Medical Ltd. for about $2.9 billion. The Stockholm, Sweden-based company is acquiring BSN from private equity firm EQT, and the transaction is expected to close during 2Q17. The acquisition will give SCA access to the wound care market and will be fully debt funded.
The BSN Medical buy comes on the heels of SCA revealing it would split into two distinct companies – a global hygiene firm and forest products company. SCA said that a distribution and listing of its hygiene business will create more shareholder value and incur a relatively low transactional risk with low transaction costs. Its forest products unit will retain the SCA name.
"This is another step in the journey of the hygiene part of SCA," said Magnus Groth, president and CEO of SCA, during a conference call discussing the BSN acquisition. "We've been looking at the medical solutions market ever since 2011 as an opportunity for future growth."
BSN is home to such wound care product lines as Leukoplast, Cutimed, Jobst, Delta Cast, Delta Lite and Actimove, which are long established brand leaders in key markets, Groth said. BSN has a strong go-to-market and supply chain with sales in more than 140 countries and production in 11 countries. It also has about 6,000 employees and competes directly against companies like Berkshire, U.K.-based Convatec Group plc.
"While at first sight this looks to be an unusual diversification into health care from its core hygiene business, BSN and SCA's incontinence business have complementary features, as they both use the same distribution channels and there will be opportunities for mutual cross-selling," said Adam Kindreich, an analyst with Morningstar.
Kindreich said that BSN comes with some drawbacks that he viewed as potential opportunities.
"Emerging markets account for less than 20 percent of sales, vs. 32 percent at SCA," he said. "In addition, BSN has been underperforming relative to peers with 3 percent organic sales growth, vs. 4 percent for the industry, mainly due to negative mix. Some of BSN's categories are suffering from ongoing price pressure, similar to SCA's."
BSN reported net sales for 2015 of $891 million. The reported net sales for BSN for the first nine months of 2016 amounted to $652 million.
"BSN has been a very resilient business in good times and in bad, with a steady growth in both top line and in profits," Groth said.
SCA said it expects to realize annual synergies of at least $31.2 million with full effect three years after closing. These include sales synergies from accelerated growth from cross-selling of BSN products and SCA incontinence products as well as cost synergies primarily in supply chain and administration. Restructuring costs are expected to amount to about $10.4 million and are expected to be incurred in the first three years, following completion, SCA said.
BSN was founded 15 years ago as a joint venture by Germany's Beiersdorf and London-based Smith & Nephew plc. London's Montagu Private Equity acquired BSN in 2006 for about $1.1 billion and then sold it to EQT for $2 billion.
BSN's owner, EQT had been mulling over a sale of the company for quite some time. Earlier this month, it was reported that EQT was thinking of an initial public offering for BSN.
The sale of BSN is EQT's second exit from a health care business. In May, EQT agreed to sell Malmö, Sweden-based Atos Medical AB to Pai Europe for $884 million. EQT bought the voice box prosthesis company in 2011 from Nordic Capital, also a private equity firm.
By Omar Ford, Staff Writer
Women's health care startup Femasys Inc. has raised $40 million in a series C round. The Suwanee, Ga.-based company will use the funding to support the further development of Fembloc, a non-surgical, permanent contraception solution. The transaction was arranged by Salem Partners, a Los Angeles-based investment bank, which also participated as a principal investor.
The funding comes at the same time the private company revealed it received FDA approval to launch a prospective, multicenter, trial to evaluate the safety of the Fembloc while preventing pregnancy. Femasys said the study will enroll women who desire permanent birth control by occlusion of the fallopian tubes.
The Fembloc device works by having a biopolymer sent through a catheter-based delivery system to permanently block the fallopian tubes.
"[This] financial investment enables us to conduct and complete the Fembloc clinical plan, which will support our planned PMA," said Kathy Lee-Sepsick, Femasys president and CEO.
Femasys could not be reached for additional comment.
If the company can gain FDA approval for the Fembloc, then it could easily find a position to occupy in the contraceptive market, which is set to expand at a steady 3.10 percent change of growth rate until 2020, according to a Transparency Market Research study. The report, which was released in September of this year, predicts the market will hit $19.6 billion by 2020.
Femasys' competition in the market includes Petah Tikva, Israel-based Teva Pharmaceutical Ltd; St. Paul, Minn.-based Church & Dwight Co. Inc.; Berkeley, Calif.-based Mayer Laboratories Inc.; Slough, U.K.- based Reckitt Benckiser plc.; Trumbull, Conn.-based Coopersurgical Inc. and Chicago-based The Female Health Company.
THE LITTLE START UP THAT'S GROWING
Key hires, partnerships with larger companies in the med-tech space and multiple funding rounds make up the 12-year-old company's track record.
Last year, the company picked up former ZS Pharma Inc. executive Todd Creech as CFO. (See Medical Device Daily, Dec. 15, 2015.) Creech was part of the team responsible for taking the company ZS, completing a successful secondary offering, disseminating key clinical data, and positioning the company for M&A discussions.
In 2013, Femasys made a strategic partnership with London-based, Smith & Nephew plc (S&N). Under the agreement, S&N became the sole U.S. distributor of Femasys' Femvue Saline-Air diagnostic, which is designed to help evaluate a woman's fallopian tubes to determine if she can become pregnant.
The non-radiologic device is designed to aid in the evaluation of a sono-hysterosalpingogram. In that procedure, the device is used to test the flow of saline and air through the fallopian tubes, which is visualized via ultrasound.
Femasys gained FDA approval for the device about five years ago. (See Medical Device Daily, May 4, 2011.) The partnership was a win-win for both companies. The Femvue Saline-Air diagnostic was able to reach a broader market population and was complementary to S&N's device designed to remove polyps or fibroids. Femvue could help detect both growths, which can cause infertility.
Femasys was able to get another product on the market – its Femcerv Endocervical Sampler. The device was launched in 2013 and collects a sample from the cervical canal for histological analysis. It is intended to be a less painful alternative to the current standard-of-care for cervical cancer testing, which is cervical scraping.
The company has also been increasingly aggressive with funding efforts since its formation in 2004. Last year, the firm brought in about $10.2 million in a series B round (See Medical Device Daily, April 30, 2015.) In June 2012, Femasys was able to obtain a $4 million loan from GE Capital's health care financial services arm to help with commercialization efforts.
By Stacy Lawrence, Contributing Writer
Hologic Inc. is slated to sell its profitable blood screening business, which accounted for almost 20 percent of the Marlborough, Mass. company's diagnostic revenues in fiscal 2016. The price is $1.85 billion in cash, which is much richer comparatively than other recent diagnostic acquisition comps, at least one Wall Street analyst noted.
The business will be going to Hologic's longstanding partner, Barcelona-based Grifols S.A., which is already responsible for marketing these blood screening products while Hologic is primarily responsible for manufacturing and R&D.
Under a deal that originally dates to 1998 under predecessor companies, Grifols is fully responsible for marketing worldwide—but had to pay 50 percent to Hologic for all products sold. So, the purchase will make these products much more profitable for Grifols once the business is wholly owned. The partnership between the current corporate entities started in 2014, after a series of strategic deals since the initial partnership.
For Hologic, blood screening had proven a highly profitable business, although revenues from the partnership stumbled last fiscal year. Hologic revenues from the Grifols partnership slipped almost 12 percent to $223.3 million in fiscal 2016 from $253.1 million in fiscal 2015; its fiscal year closes on the last Saturday in September. The Grifols revenues account for almost one-fifth of total diagnostic revenues at Hologic
Still, the margins on the business remained stellar – and after the acquisition Grifols could make its offerings more competitive against diagnostics giant F. Hoffmann-La Roche Ltd., which is based in Basel, Switzerland and cited by Hologic as its primary competitor in the blood screening business.
Wall Street reacts
"As competition intensified in blood screening, the relationship with Grifols left the two parties at a disadvantage to more price aggressive competitors. Grifols split the profits with Hologic, but shouldered all of the sales and marketing costs. In the end, owning the entire enterprise was important enough over the long term for Grifols to make an offer Hologic couldn't refuse," said Jefferies analyst Raj Denhoy in a recent note.
He added that Hologic had not been looking for a deal – but it had just been too good to pass up.
Last month, Hologic released its 2017 financial guidance, which it plans to update once the Grifols transaction closes. The blood screening business was included in that forecast for about $240 million in revenue, $155 million in EBITDA and non-GAAP EPS of $0.34 in fiscal 2017.
Jefferies' Denhoy noted that the price tag for the blood screening is roughly 8x its fiscal 2017 projected sales—and 12x EDITDA. That's much higher than similar comps that he cites, which are in the 4-5x sales and 9-10x EBITDA range.
"We feel this divestiture makes strategic sense for Hologic as blood screening was a non-core asset that was flat to declining and likely to face pricing pressure and possibly new competition," summed up BTIG analyst Sean Lavin in his note.
Despite analyst endorsements – Wall Street remained neutral on the deal. Early trading of Hologic shares (NASDAQ: HOLX) on the news of the sale to Grifols was almost entirely flat. Hologic's momentum on Wall Street has slowed of late; it is up only about 5 percent so far this year – but gained a whopping roughly 55 percent over the last two years.
What's next for Hologic?
"Divesting our share of our blood screening business to Grifols will strengthen our efforts to build a sustainable growth company by accelerating top- and bottom-line growth rates, while significantly increasing financial flexibility," said Steve MacMillan, Hologic chairman, president and CEO.
He continued, "We believe that the business and our blood screening employees are best positioned to succeed under a single owner, and that this sale to Grifols provides excellent value for Hologic and our shareholders."
Hologic businesses include diagnostics, which accounts for the largest share of revenues, as well as breast imaging and solutions, gynecological surgical and skeletal health products. Its remaining diagnostic offering includes cytology and perinatal as well as the high-growth molecular diagnostics unit.
The blood screening business accounted for 16 percent of Hologic's projected fiscal 2017 EPS—and only 8 percent of its sales. So, the company will have a big whole to fill in its profitability. Hologic acquired the blood screening business in August 2012, when it bought Gen-Probe for $3.8 billion. And now it could use the cash – it's been working to reduce its debt, which remained at $3.3 billion at the end of last quarter.
The deal is expected to close during the first quarter of 2017; Grifols will gain a fully paid license to Hologic blood screening products. Hologic's manufacturing facility in Rancho Bernardo, Calif. will transfer to Grifols, as well as about 175 employees, mostly in R&D and operations.
Specifically, Hologic blood screening products include the Proceleix family of assays and the Tigris system on which it runs. The assays include the Ultrio and Ultrio Plus assays, which detects HIV type-1, or HIV-1, the hepatitis C virus, and the hepatitis B virus; the Ultrio Elite assay, which detects HIV-1, HIV type-2, or HIV-2, HBV and HCV; the HEV assay, which detects the hepatitis E virus; the WNV assay, which detects West Nile Virus. and the Parvo/HAV assay, which detects the Parvovirus and hepatitis A virus.
Grifols gets ready
As for Grifols, it is counting on the deal giving it an edge in the tightly competitive field of blood services by better enabling a vertical integration of its offerings.
"It is an obvious step that allows us to strengthen a leading position that we first achieved in 2014 in transfusion diagnostics with the acquisition of assets from Novartis. The transaction enabled us to enhance our capabilities to be one of the only companies capable of offering comprehensive solutions to blood and plasma donation centers, from donation to transfusion. Now, with this new transaction, we have contributed our vertical integration process as we also have control over the production and R&D phases," said Victor Grifols, chairman and CEO of Grifols.
He said the acquisition decision was made in conjunction with the incoming co-CEOs of the family business: Raimon Grifols Roura and his son Victor Grifols Deu, who were officially tapped in early 2015 and assume control of the company on Jan. 1, 2017.
By Omar Ford, Staff Writer
Novocure Ltd. is hoping to apply its Tumor Treating Fields (TTFields) therapy to both ovarian cancer and pancreatic cancer. During the St. Helier, Jersey Isle-based firm's research and development day, it revealed top line results from two studies that showed the effectiveness of TTFields to treat these cancer patient populations.
TTFields are low-intensity alternating electric fields used to halt tumor growth. Novocure said the shape and special characteristics of rapidly dividing tumor cells make them susceptible to damage when exposed to TTFields. The company said the delivery of these fields is through a portable home use medical device. Patients will wear patches of transducer arrays that are placed on their skin on the part of the body that is being treated.
Novocure has had approval to use TTFields in its Optune therapy, for the treatment of glioblastoma patients, since 2011. Earlier this year, the company received FDA approval for the green light for the second generation of Optune. (See Medical Device Daily, July 18, 2016.)
Novocure's Chief Science Officer, Eilon Kirson said the company was fairly pleased with the INNOVATE (ovarian cancer) and PANOVA (pancreatic cancer) top-line data that was just released.
"These results are encouraging enough that we have a fairly strong efficacy and safety signal to justify larger scale testing to gain approval for ovarian cancer," Kirson, told Medical Device Daily.
Results from INNOVATE, showed that TTFields plus paclitaxel yielded median progression-free survival of 8.9 months versus 3.9 months of paclitaxel-alone historical control. Median overall survival has not been reached yet in INNOVATE compared to 13.2 months for paclitaxel-alone, while one-year survival rate was 61 percent in the trial. About half of the patients experienced mild to moderate skin irritation while two reported severe skin irritation due to Optune and had to take a break from treatment. There were about 30 patients in the study.
The company also disclosed positive data from the second cohort of its Phase 2 PANOVA study in pancreatic cancer, which showed that Optune plus gemcitabine and paclitaxel improved survival rates. The data was numerically better than that from the first cohort of the study (Optune plus gemcitabine). Specifically, the second cohort showed median progression-free survival of 12.7 months while the median overall survival had not been reached yet, compared to 8.3 months and 14.9 months from the first cohort. About 20 patients were in the pancreatic cancer study.
"I think the results are extremely exciting," Kirson, said of PANOVA. "There is such a high unmet need in pancreatic cancer treatment. There are so few effective therapies for these patients. If we can do something to help modify the disease course for patients, that would be amazing."
A phase 3 study design for the pancreatic cancer treatment is in the final stages with first patient enrollment expected in the second half of 2017.
Larry Biegelsen, an analyst with Wells Fargo, said the data could help push future adoption rates of Optune.
"We expect this growing body of clinical data supporting the safety and efficacy of Optune in various tumors to create a halo effect around TTFields for the currently approved glioblastoma indication," he said.
Biegelsen said that assuming two years for patient enrollment and 18-month follow-up, final data from PANOVA could come in 2021 or 2022 with FDA approval for the pancreatic cancer indication possibly occurring in 2022 or 2023.
Novocure is also evaluating radiosurgery alone or with TTFields in brain metastases from non-small cell lung cancer through its METIS study. The company is in the enrollment phase for the 270-patient study. METIS is the company's first pivotal trial outside of glioblastoma.
Since the company first received the nod for Optune it has seen significant growth. In its 3Q16 earnings call, the company said revenues increased to $21.7 million, compared to $9 million for the same period in 2015. Global revenues included revenues outside of the U.S. of more than $3.5 million in 3Q16 versus $0.4 million in 3Q15.
Novocure might have the market cornered on using TTFields therapy to treat tumors. Kirson noted that the company had secured patents for the therapy. When asked about possible competition, Kirson said that cancer was a disease where there wasn't a one-size-fits-all solution and that all therapies were welcome.
"I think of all therapies for oncology patients as tools that we need to use to treat cancer," Kirson said. "We need as many as many tools as possible. The more tools the better. I don't think anyone has invented the magic bullet that makes cancer go away completely and until that day comes it's going to be a battle."
By Omar Ford, Staff Writer
Insulet Corp. said Horizon, its artificial pancreas, could be on the U.S. market in late 2019. Horizon is the Billerica, Mass.-based firm's first foray into continuous glucose monitoring-automated insulin delivery. If Insulet's Horizon gains FDA approval, it would go up against Dublin-based, Medtronic plc's Minimed 670G artificial pancreas, which received FDA approval in September and is set to launch in April of next year. (See Medical Device Daily, Sept. 29, 2016.)
Even though Horizon will be two years behind the Minimed 670G's launch, analysts said this could be to the Insulet's benefit.
"While Insulet is behind its competitors on CGM-automated insulin delivery, we believe the company could ultimately end up with the most compelling long term solution," said Doug Schenkel, an analyst with Cowen and Co.
The Horizon platform will have some similarities to the Minimed 670G, such as continuous basal dosing. Raj Denhoy, an analyst with Jefferies said that Insulet should not take Minimed 670G's pending arrival in the U.S. market lightly.
"[The] 670G marks a seminal event in the evolution of diabetes technology and the possibility that Insulet is underestimating the impact remains perhaps the biggest risk to the story over the coming months," Denhoy said.
Insulet is still in the early phase of trying to get Horizon onto the market. During an earnings call last month, the company revealed that it completed its first IDE trial for the device. Insulet said it just received FDA approval for a second phase of the IDE, which will evaluate its algorithm performance in adolescents and pediatric patients.
The prospect of an artificial pancreas could help remove some of the constraints diabetes patients have with monitoring and management. Insulet's vice president and medical director Trang Ly, said that traditional tools to help manage diabetes can be quite cumbersome for the patient.
"[Diabetes management] is an enormous amount of work, time and dedication," Ly, told Medical Device Daily. "What other condition is there out there, where if you overdose [on treatment therapy], you die?"
She noted that the artificial pancreas could help eliminate some of the burden of diabetes management.
OTHER PRODUCTS IN THE PIPELINE
During Insulet's investor's day, the company outlined a plan to reach $1 billion in 2021 revenue. This is expected to be achieved by increasing U.S. and Europe penetration, geographic expansion, and the launch of products to more aggressively address the type 2 opportunity.
Insulet is most known for its Omnipod insulin management system, an all-in-one insulin pump consisting of a completely tubeless "pod" that is wirelessly controlled by a personal diabetes manager.
The company is also developing a mobile insulin management system called Dash that was unveiled at its investor's day last month. The device will be operated from a locked-down touch-screen smartphone. It will collect insulin usage and battery data via Bluetooth connectivity from a chip directly in the Omnipod; feature a redesigned food library; enable patients to control basal and bolus dosing; read data from a CGM; and provide other useful and simplifying applications. Insulet is targeting mid-2017 for 510(k) submission, with a full launch to follow.
"While questions remain in the early stages of the Dash's development, such as if and when it can be integrated as an application on a functioning smartphone, it is a meaningful development that could especially appeal to the pediatric population," Denhoy said.
It will need these tools as the pool of competition continues to grow for the diabetes market, which is set to reach $35.5 billion by the year 2024, according to a report published by Grand View Research Inc.
Besides Medtronic, Insulet also faces off against San Diego-based Dexcom Inc. and San Diego-based Tandem Diabetes Care Inc.
The growing market opportunity in diabetes is also opening the door for non-traditional health care players to come into the space.
Mountain View, Calif.-based Verily Life Sciences LLC – formerly Google Life Sciences – teamed with Paris-based, Sanofi SA, to launch the diabetes-focused firm Onduo. (See Medical Device Daily, Sept. 13, 2016.) That venture blossomed about a year after Google and Sanofi reported a diabetes partnership, which followed Google's agreement with Dexcom covering continuous glucose monitoring products. Verily also partnered with Brentford, U.K.-based Glaxosmithkline plc to form Galvani Bioelectronics, a company slated to evaluate bioelectronic medicine to combat chronic conditions, starting with diabetes.
By Omar Ford, Staff Writer
Edwards Lifesciences Corp. said its 4Q16 revenue will come in at the low end of its $750 million to $790 million guidance range, but strong developments in the company's product pipeline will give it a solid foundation long term. During its annual analyst day, the Irvine, Calif.-based company emphasized that the transcatheter aortic valve replacement (TAVR) market would be at the heart of its plans for the coming year. Analysts seemed to walk away from the event with a highly favorable perspective of the company's general direction.
"While the initial reaction to the 4Q16 guidance will likely be negative, we are highly confident that the strong 2017 guidance and robust pipeline update will be the main takeaways from the meeting," said Larry Biegelsen, an analyst with Wells Fargo Securities.
Edwards said the TAVR opportunity is expected to exceed $5 billion by 2021 with significant opportunity beyond.
The company was the first to market with a TAVR device in the U.S. when it gained FDA approval for the Sapien valve about five years ago. So far its only rival in the U.S. TAVR market is Dublin-based, Medtronic plc , with its Corevalve technology (See Medical Device Daily, Nov. 4, 2011 and Jan. 21, 2014.)
Even with a significant lead time in the market, Edwards has not rested on its laurels and has constantly been trying to seek out additional indications for Sapien.
EARLY TAVR INTERESTING BUT 'NOT A LAY-UP'
During the analyst day, Edwards shared its plan to expand TAVR therapy into asymptomatic patients with severe aortic stenosis (AS). Historically, management of asymptomatic patients with severe AS has been challenging for the medical community. Many of the patients are asymptomatic for years despite having high velocity through the valve. In addition, about half of patients with severe AS report no symptoms at the time of diagnosis.
The company is addressing these patients through its EARLY TAVR trial, which is still pending FDA submission and approval. Edwards revealed some details about the trial including screening criteria with patients ages 65 and older, negative stress test results. Patients will also be randomized 1:1 to TAVR vs. clinical surveillance with clinical and echo follow-up at 30 days (for TAVR only) and at one, two, three and five years. In terms of proposed primary endpoints, the company aims to prove superiority, two-year composite of all-cause death, all stroke, and unplanned cardiovascular hospitalization.
Analyst reactions to treating the asymptomatic patient population were mixed. While most expressed a favorable take on the potential new indication, others questioned how attainable it might be, noting that regulatory approvals could prove difficult.
"We find this new potential indication very interesting, but also wonder if it will be successful," said BITG's Sean Lavin.
If the company's Sapien 3 valve demonstrates mortality and stroke under 1 percent within the first 30 days of implant, Lavin said, treatment may well be beneficial. But, the analyst pointed out, the indication might be a tough sell to patients, making the point that "treatment would likely reduce risk, but also accelerate when an event could occur if one were to occur."
Lavin said he looks forward to seeing how the trial plays out, as it could greatly increase the potential market, but noted that "it is definitely not a lay-up."
Joshua Jennings, an analyst with Cowen and Co., offered a more optimistic opinion of EARLY TAVR.
"The long TAVR growth tale, including the eventual approval for the low-risk indication and the move into Asymptomatic severe AS patients, along with the transcatheter mitral replacement/repair opportunity, supports the sustainable double-digit revenue growth thesis for the foreseeable future," Jennings said.
MITRAL VALVE HOLDS PROMISE
Edwards also has potential for tremendous growth in the transcatheter mitral valve repair (TMVR) market. Late last month, Edwards moved forward with its push in TMVR, when it said it would acquire Or Yehuda, Israel-based, Valtech Cardio Ltd. for $340 million, with the potential for $350 million in additional milestone payments. The acquisition gives Edwards access to Cardioband, a transcatheter ring technology and sets the company firmly against Abbott Park, Ill.-based Abbott Laboratories' Mitraclip device. (See Medical Device Daily, Nov. 29, 2016.)
Edwards has not given any guidance on when Cardioband could receive FDA approval. The company said revenue contributions from Cardioband sales in 2017 could be between $10 million and $15 million – amounts that Biegelsen said could be conservative.
"We found Edward's mitral valve therapies update to be very encouraging," Biegelsen said.
Edwards also said the first patients have already been treated with its new Pascal TMVR system and that plans are underway to initiate a CE mark study in 2017. In addition, the company said it will highlight the early promising patient experience treating tricuspid regurgitation with its Forma tricuspid spacer, and expects a CE mark for that product in 2018.
The TMVR market has been brimming with activity over the past few years. In July 2015, Abbott reported plans to pay $225 million for the equity of Roseville, Minn.-based Tendyne Holdings Inc. that it did not already own at the time, making the total deal worth $250 million plus potential regulatory-based milestone payments. The company closed on that deal in September 2015. (See Medical Device Daily, July 31, 2015.)
In a separate deal, Abbott said it had invested in mitral valve repair company Cephea Valve Technologies Inc., of Santa Cruz, Calif., with an option to buy. Financial terms of the Cephea transaction were not disclosed. In late August, Medtronic jumped into the TMVR pool and agreed to pay up to $458 million to acquire Redwood City, Calif.-based Twelve Inc. (See Medical Device Daily, Aug. 26, 2015.)
By Amanda Pedersen, Senior Staff Writer
After nearly 10 months of waffling on a $5.8 billion decision, Abbott Laboratories might have spotted an emergency exit from its contract to buy Alere Inc.
"Alere is no longer the company Abbott agreed to buy 10 months ago," said Scott Stoffel, divisional vice president of external communications at Abbott.
The company cited a series of what it called "damaging business developments" that Alere has suffered since the agreement was signed in late January. Alere lost its billing privileges for a substantial division, has suffered a permanent recall of an important product platform, has been through multiple government subpoenas – including two criminal subpoenas – delayed filing its annual 10k report by five months, and admitted to internal control failures requiring restatement of its 2013-2015 financials.
Stoffel called Alere's numerous negative developments "unprecedented" and "not isolated incidents brought on by chance. He said Abbott has tried to get information to assess these issues for months, and "Alere has blocked every attempt."
Given the ongoing tension between the companies since August, analysts were not exactly surprised Wednesday after Abbott said it filed a complaint in the Delaware Court of Chancery to kill the deal, but the move did offer some clarity regarding the company's stance on Alere. Until now, Abbott executives have remained relatively tight-lipped on Alere, and had not publicly disclosed a desire to back out, although both companies have taken turns trying to sue each other for breach of contract.
In fact, during Abbott's third-quarter earnings call in October, CEO Miles White offered constrained-but-positive comments regarding his outlook on the deal. At the time, White said Abbott was pursuing all necessary regulatory approvals to close the acquisition and that the company was "doing everything we're supposed to do on the contract."
Also, in response to a question from Rick Wise, of Stifel Nicolaus & Co., White said the "noise" that had surfaced about Alere since the agreement had not come from Abbott and he confirmed that Abbott still considered Alere to be an attractive asset.
"Is the long-term, post-merger opportunity and fit there? Yes, it is," White elaborated during the Oct. 19 call. "And I've never wavered on that. And I believe that right now, even this minute." (See Medical Device Daily, Oct. 20, 2016.)
At the time, the companies were engaged in mediation as a result of Waltham, Mass.-based Alere taking its Abbott Park, Ill.-based suitor to court in August, claiming that Abbott was dragging its feet in obtaining regulatory approvals for the transaction. (See Medical Device Daily, Aug. 31, 2016.)
The Abbott-Alere story took another turn last month, this time with Abbott taking Alere to court to obtain documentation and information as promised in the companies' agreement.
According to Abbott, the terms of the merger agreement allow it to terminate the transaction if adverse events materially change Alere's long-term prospects.
"This damage to Alere's business can only be the result of a systemic failure of internal controls, which combined with the lack of transparency, led us to filing this complaint," Stoffel said.
Stifel's Wise said in a research note Wednesday that, given the adverse events that have surfaced, Abbott's attempt to call the deal off is unsurprising, and it does not impact his view on the attractiveness of Abbott's shares (NYSE:ABT), which closed at $38.48, up 0.16 percent ($0.06) and Alere's (NYSE:ALR) stock dropped eight percent Wednesday ($3.19) to close at $36.67.
While Alere's point-of-care portfolio would have been a nice bolt-on acquisition for Abbott, Wise said, the company's diagnostics franchise remains in good shape with seemingly sustainable, organic growth of five percent or more. He estimated that Abbott's products account for 23 percent of world wide sales in the diagnostics space, even without the pending St. Jude Medical Inc. deal, which is still expected to close by the end of the year. That transaction, Wise said, is a much more critical piece to Abbott's long-term growth outlook, "providing needed medical devices portfolio breadth and depth to the under-scaled device franchise."
The analyst said he expects Abbott to announce a trial date in the next couple of weeks regarding Alere and that court filings will likely be unsealed in the next several days. Wise also said resolution to this ongoing litigation is expected to occur on or before the originally anticipated April cut-off date for the deal closing.
There may be someone on the dark side of the Moon that hasn’t heard about the Senate vote for the 21st Century Cures Act, but everyone else certainly has. One might have expected the reaction to the Cures bill to be split, but the degree to which the reaction on both sides has been hyperbolic is perhaps surprising even to the veterans of the Twitterverse.
What seems to be lacking is a level-headed examination of what this legislation will and will not accomplish. Dare anyone argue that H.R 34’s net effect will drop squarely into that plump, bourgeois, middle zone between a raging success and a crash landing to rival the Hindenburg disaster?
Hope springs … yet again
First, let’s ask ourselves what the money for the Cancer Moonshot will achieve. It’s $480 million a year over 10 years, and that might seem like real money to those who don’t deal with the U.S. federal budget. Let’s not forget, though, that NCI already gets more than $5 billion a year from the taxpayer, so this is an increase of less than 10 percent.
Does anyone remember the $10 billion NCI received via the American Recovery and Reinvestment Act of 2009? The NCI blew through that amount in two years, but whether that money was well spent is not a question anyone cares to answer. Just do a web search using “GAO National Cancer Institute,” and you’ll see that the last time GAO examined contract operations at NCI was in 1981. That’s 35 years ago.
The problem with this conversation is that the emphasis is decidedly on “Cures Now,” replete with a hashtag (#CuresAct, #CuresNow), and we also keep hearing about “eradicating cancer,” as if it were some pathogen that can be bullied out into the open and put to the torch. We all know that’s not how cancer works, though.
So another $480 million a year for cancer research might generate a good treatment or two, but the difficulty here will be in determining when a new treatment or diagnostic would have come into clinical practice even without the Cancer Moonshot. It’s the classic eye-of-the-beholder problem.
Panic button always nearby
On the opposite end of the spectrum, we have a variety of sources decrying the purportedly looser standards for drug and medical device reviews encoded in the Cures bill. It’s true that the legislation includes provisions for accelerated review, but as FDA likes to point out, “faster review” doesn’t necessarily mean “approval,” and it’s not as though these accelerated review programs aren’t already at work at the FDA.
But to hear some of the bill’s critics, the next generation of drugs and devices will be mowing down patients like a bush hog going through a field of orchardgrass. The problem with refuting these critics is that any recall or adverse event will automatically confirm their suspicions, and one supposes they won’t be bothered to find the narcolepsy-inducing denominator to go with their terrifying numerator. Thus the skeptic asks: Who can resist a self-fulfilling prophecy?
Unfortunately, my crystal ball is in for warranty maintenance, and the cat laid waste to my tarot deck the other day, so I won’t be offering any predictions as to the actual impact of the Cures Act. I will predict, however, that this is not the last we’ll hear of great expectations and of falling skies. What else is there to do on Twitter?