By Omar Ford, Staff Writer
ATLANTA – The digital health market is growing. Taking in about $76.7 billion in 2015, the burgeoning space is sustained through partnerships. However, some smaller med-tech companies often have difficulties partnering with larger companies to foster innovation in the digital health market. Panelists at the Southeastern Medical Device Association (SEMDA) shared some insight on how start ups can get the attention of larger firms and forge a path in digital health.
Panelist Omer Inan, an assistant professor of electrical and computer engineering at the Georgia Institute of Technology, said that traditionally the model in academia has been to rely on grants to move innovation along – but that model is changing.
"Moving forward, I think there's an interest on the academic side and industry to do some sort of sponsored research or collaboration," Inan told the audience.
Inan pointed to a partnership between Georgia Tech and Texas Instruments Inc. as an example. Under the collaboration, Georgia Tech is using technology from the Dallas-based company for a wearable device to sense muscle fatigue.
Karan Sorensen, president of Sorensen Strategies, a Charleston, S.C.-based consulting firm, told the audience that partnership opportunities with larger companies have benefits such as capital and a strong sales force if the technology garners approval. She noted that most of the time, larger companies aren't looking to reinvent the wheel, but to find a company that could help fill in the gaps.
"Have your act together if you're going to approach a larger company [seeking a partnership]," Sorensen said. "Don't come with an idea, and don't just come with a product, you have to have a solution."
There has been some success in the space. Late last year, San Francisco-based Augmedix Inc. secured $23 million in funding. (See Medical Device Daily, Dec. 9, 2016.) The company has developed a remote scribe service based on Google Glass that is intended to re-humanize the doctor-patient relationship by eliminating the time physicians spend on mandated electronic health care documentation.
Earlier this year, Melbourne, Australia-based, Global Kinetics Corp. received the CE mark for its Parkinson's Kinetigraph system, an approved device that sits firmly in the digital health space. (See Medical Device Daily, Jan. 18, 2017.)
IBM WATSON EXPANDS THROUGH COLLABORATION
On Wednesday during the SEMDA lunch keynote speech, Don Turner, global head and senior vice president of business strategy and commercialization for Armonk, N.Y.-based IBM Watson Health said collaborations were appealing because no company could do it "on its own." He noted that collaborations were as essential to the digital health care space as a carburetor working with an engine to keep a vehicle running.
Earlier this year, IBM Watson revealed a collaboration with the FDA to define a way to exchange health data across a variety of technology platforms with an initial focus on oncology data. (See Medical Device Daily, Jan. 12, 2017.) The project is intended to empower patients with the ability to have easy and routine access to all of their own health care information, including making it portable and shareable.
Last year, the company partnered with the American Diabetes Association to combine the cognitive computing power of Watson with the organization's vast expertise, including their repository of clinical and research data, in order to build a first-of-its-kind diabetes adviser for providers, patients and caregivers.
IBM found a partner in Dublin-based Medtronic plc in a bid to develop the Sugar.IQ, a first-of-its-kind cognitive app that helps detect important patterns and trends for people with diabetes.
DIGITAL PARTNERSHIP PATHWAY
Outside of IBM Watson – Petah Tikva, Israel-based Teva Pharmaceutical Industries Ltd. and Santa Clara, Calif.-based Intel teamed up to develop a wearable device intended to continuously monitor and analyze Huntington's disease symptoms. (See Medical Device Daily, Sept. 19, 2016.) Teva agreed to use the Intel's platform as part of the phase II Open-Pride study for the treatment Huntington's disease. Patients will use a smartphone and wear a smartwatch, which will have sensing technology to measure general functioning and movement. The data will be streamed to a cloud-based platform. Algorithms then will be used to translate the data into objective scores of motor symptom severity. The study is expected to start later this year in the U.S. and Canada.
Mountain View, Calif.-based Verily Life Sciences LLC – formerly Google Life Sciences – has been highly active in digital health parnerships. Last year, Verily and Brentford, U.K.-based Glaxosmithkline plc formed Galvani Bioelectronics, which is slated to evaluate bioelectronics medicine to combat chronic conditions, starting with diabetes. Shortly after, Verily and Paris-based Sanofi SA launched diabetes-focused Onduo. That venture blossomed about a year after Verily and Sanofi reported a diabetes partnership. The agreement followed Google's agreement with San Diego-based Dexcom Inc. covering continuous glucose monitoring products. (See Medical Device Daily, Sept. 13, 2016.)
By Omar Ford, Staff Writer
ATLANTA – Cybersecurity threats are becoming increasingly prevalent in the med-tech industry. Large companies are not immune to these attacks and are in some cases more of a target than smaller firms. Earlier this month Abbott Laboratories Inc. received an FDA warning letter, citing vulnerabilities with its pacemakers. (See Medical Device Daily, April 17, 2017.) The Abbott Park, Ill.-based company was brought up as an example of the growing threat of cybersecurity breaches during a panel at the Southeastern Medical Device Association's (SEMDA) annual meeting, Wednesday.
Panelists presented data from BBR Services that showed 56 percent of the data breaches in the U.S. occur within health care. Panelist Kristen Woodrum, a partner at Baker & Hostetler LLP, said there is a lot of data flowing around, noting that it must be adequately protected.
"For medical devices, the risks and the stakes are a little bit greater," Woodrum said during the panel. "These are real life issues and actual concerns."
The fear of a hacking attempt caused Dick Cheney's doctor, Jonathan Reiner, to have the wireless functionality disabled on the former vice president's heart implant. (See Medical Device Daily, Aug. 6, 2015.) Reiner's concern was that a hacker could, in theory, access the device as part of an assassination attempt.
Medical devices are particularly vulnerable because they tend to be on outdated operating systems or systems that do not receive the same level of patching and updates as businesses. Often, device manufacturers prohibit patching or invasive monitoring, which results in malware infestations that IT and biomedical teams are not able to effectively monitor or manage.
The FDA has stepped up its efforts to combat the hacking of medical devices, said panelist Vimala Devassy, an attorney at Baker & Hostetler LLP.
"The FDA has been called in the last few years to close that security gap," Devassey told the audience. "We can only expect FDA to get more active in this area, as they are the one agency policing this activity."
In May of 2015, FDA issued guidance on the topic, which it said was intended to clarify how existing quality regulations apply to cybersecurity maintenance activities.
"These vulnerabilities may represent a risk to the safe and effective operation of networked medical devices and typically require an ongoing maintenance effort throughout the product life cycle to assure an adequate degree of protection," the FDA said in the May 2015 guidance.
Since then, the FDA has been hammering down on cybersecurity vulnerabilities in devices. Abbott inherited its cybersecurity woes when it acquired St. Paul, Minn.-based St. Jude Medical Inc. for $25 billion. (See Medical Device Daily, Jan. 5, 2017.)
The cybersecurity issues stemmed from problems with its high voltage and peripheral devices that were the subject of much back-and-forth between St. Jude and investment research firm Muddy Waters Research. St. Jude had long protested that the accusations from Muddy Waters, originally based on information from cybersecurity firm Medsec, were unfounded. But this month's FDA warning letter makes clear that cybersecurity has been – and continues to be – a problem for these St. Jude, now Abbott, devices.
"Data and security of the device is just as important now as safety," said panelist Courtney Warren, a risk consultant and property and casualty insurance broker at Rosenfeld Einstein, a Marsh & McLennan agency.
CYBERSECURITY ISSUES RAMPING UP
Cybersecurity issues are not new to the device industry, but it has been a growing concern over the past couple of years. In 2015, the FDA told hospitals not to use the Symbiq infusion pump from Lake Forest, Ill.-based Hospira Inc., now owned by Pfizer Inc., because of specific cybersecurity vulnerabilities associated with the device. The company later issued guidance on the topic to clarify how existing quality regulations apply to cybersecurity maintenance activities. The topic has also gained attention at industry events over the past year, including the annual meeting of the Advanced Medical Technology Association (AdvaMed). (See Medical Device Daily, Oct. 7, 2015.)
In October 2016, New Brunswick, N.J.-based Johnson & Johnson's Corp.'s diabetes unit warned patients that the Animas Onetouch Ping insulin pumps may be vulnerable to a cyberattack, but the probability of one of the devices actually being hacked is "extremely low," the company said. (See Medical Device Daily, Oct. 5, 2016.)
Dublin-based Medtronic plc dealt with a similar issue with one of its infusion pumps back in 2011 after security software manufacturer Mcafee alerted the company to a flaw in some models of the Paradigm insulin pumps.
At a heavily attended AdvaMed panel in 2015, Scott Rea, vice president of government and education relations at Digicert Inc., said device companies would be better off putting a plan in place for when a cybersecurity issue does happen, rather than focusing all the attention on preventing an attack.
But there is no simple answer. SEMDA panelists said device makers and health care facilities that adopt the technology need to be concerned with how the device can be protected as soon as it is used.
"It's no longer just about the design and development of the medical device," Devassey said. "It's really about how are you going to support the device through its life cycle and how are you going to [keep up with] the patches to prevent vulnerability of the device."
By Omar Ford, Staff Writer
Memed Ltd. has received a contract from the Defense Threat Reduction Agency, a branch of the U.S. Department of Defense (DoD) totaling up to $9.2 million. The contract will help fund the Tirat Carmel, Israel-based company's second generation point-of-care platform for distinguishing bacterial from viral infections.
Memed began operation in 2009 and has CE mark approval for the Immunoxpert, a first generation in vitro diagnostic blood test to determine whether a patient has either an acute bacterial or viral infection, said Eran Eden, the company's co-founder and CEO.
"When we started this journey eight years ago, we imagined this small benchtop device, that with a drop of blood and a few minutes would help a physician be able to tell a bacterial infection from a viral infection," Eden told Medical Device Daily. "That was the dream."
The second generation test will be able to be used in 15 minutes and can be used outside of medical labs, at the patient's bedside or place of treatment. It takes two hours to use the Immunoxpert.
Memed's technology addresses bacterial and viral infections that are often clinically indistinguishable, leading to antibiotic overuse and contributing to the spread of antibiotic resistance, which the World Health Organization said is approaching crisis proportions. Also the inability to rapidly differentiate infections also results in the underuse of antibiotics, estimated to occur in 20 percent to 40 percent of all bacterial infections, putting patients at risk of complications and increasing health care costs.
"This is a global problem and we need a global solution," Eden said.
Unlike most infectious disease diagnostics that rely on direct pathogen detection, Memed's assay decodes the body's immune response to accurately characterize the cause of the infection. Memed conducted research to identify three soluble proteins TRAIL, CRP and IP-10 – that are activated by bacteria or viruses. The company has developed algorithms that integrate these proteins to produce an "immune signature," a set of data that accurately identifies the cause of infection.
The collaboration with DoD opens the way to a variety of rapid multiplex-protein measurements at the point of care with lab-quality precision, which has broad applications. The project will also provide Memed the opportunity to evaluate and expand its test menu to detect early infections, even at the pre-symptomatic stage of a disease.
Memed would need to get the nod from the FDA to market the second generation test in the U.S. Eden noted it would be a while before an FDA submission.
Memed has gathered clinical data to demonstrate its first test's diagnostic prowess. Data from a study published in the March 28, 2015, edition of PLOS One showed the assay was validated in a diverse group of pediatric and adult patients at different time points after the onset of symptoms (from the first day up to 12 days) and across 56 different pathogen species. Results showed the predictive power of the assay's immune signature outperformed routine biomarker and laboratory tests.
RECENT DEVELOPMENTS IN DIAGNOSTICS
Diagnostic tests are becoming more simplistic and are able to provide outlook on a patient's condition and wide variety of diseases.
Recently, Paoli, Pa.-based Final Frontier won $2.6 million in the Qualcomm Tricorder Xprize for the creation of Dxter, an artificial intelligence-based engine that learns to diagnose medical conditions by integrating learnings from clinical emergency medicine with data analysis from actual patients.
Dxter includes a group of noninvasive sensors that are designed to collect data about vital signs, body chemistry and biological functions. This information is then synthesized in the device's diagnostic engine to make a quick and accurate assessment.
Launched in 2012, the global competition challenged teams to develop a consumer-focused, mobile integrated diagnostic device inspired by the fictional medical Tricorder of Star Trek fame.
Earlier this month, the FDA issued an emergency use authorization for Cambridge, Mass.-based, Nanobiosym Diagnostics Inc.'s Gene-Radar Zika virus test. (See Medical Device Daily, April 13, 2017.) Ultimately, the company executives said they wanted the Gene-Radar test to be a hand-held device used for sensor scanning, data analysis and recording data. Nanobiosym was quick to note it was far away from that goal, but it was getting closer each day.
Abbott Laboratories Inc. has been making waves with its diagnostic efforts. The Abbott Park, Ill.-based company recently received an FDA nod for a whole blood Zika detection test. (See Medical Device Daily, Feb. 3, 2017.) The company's Zika molecular test provides results within five to seven hours.
By Omar Ford, Staff Writer
Becton, Dickinson and Co. (BD) is set to acquire C.R. Bard Inc. for $24 billion in cash-and-stock. The acquisition values Murray Hill, N.J.-based Bard at $317 per share, a 25 percent premium over Friday's close of trading. Bard shareholders could receive $222.93 in cash and 0.5077 shares of Franklin, Lakes N.J.-based BD for each of their shares. The acquisition is expected to close in the fall of this year.
Upon news of the pending acquisition, Bard (NYSE:BCR) shares rose more than 19 percent Monday closing at $302.41. BD (NYSE:BDX) shares declined 4.4 percent closing at $177.07.
BD said it would contribute about $1.7 billion of available cash to fund the transaction, along with $10 billion of new debt and about $4.5 billion of equity and equity linked securities issued to the market.
A third segment will be created within the combined company – BD Interventional – where the Bard businesses will report both operationally and financially.
Bard brought in about $938.8 million in 1Q17 sales, with its vascular products bringing in $256 million. Bard's urology portfolio brought in $237.7 million, with oncology raking in $255 million.
"As we went through the portfolio and looked at Bard, all of a sudden the strategic rationale was more compelling than it was before," said Vince Forlenza, BD's chairman and CEO, during an investor's call Monday. "This is a great fit. We became more and more impressed with where Bard was going."
Alex Morozov, an analyst with Morning Star, said BD is certainly keen on "abandoning a predictable company moniker," and noted that this was firm's second major acquisition since it picked up San Diego-based Carefusion Corp. in 2014 for $12.2 billion. (See Medical Device Daily, Oct. 7, 2014.)
Morozov said the deal shows merit, but said it could take the focus away from BD's life science and diagnostics businesses.
"This deal makes it all but certain that BD's life science and diagnostic businesses will not see any major capital infusions in the near future to bolster their presence relative to peers," Morozov said. "BD seems determined to focus its capital on its medical surgical business, which will account for three fourths of its total sales post-Bard – a decision with which we tend to agree, given its advantaged competitive positioning."
The company also announced the appointment of Tom Polen as president of BD, effective immediately. He was previously executive vice president and president of the BD Medical segment.
"This move is not entirely unexpected given Polen's role with Carefusion and further cements investor's view of him as the heir apparent to the CEO at some point in the future," said Doug Schenkel, an analyst with Cowen and Co.
If Bard should back out of the deal, it would have to pay a $750 million termination fee.
Jefferies LLC analyst Brandon Couillard noted that there was "little risk" of competing bids or meaningful regulatory issues to impede the acquisition.
HAPPENINGS IN THE PIPELINE
The deal is expected to add about $4 billion to BD's Medical revenues, giving it a stronger position in vascular access solutions, combining Bard's portfolio of catheters – including peripherally inserted central catheters, diabetes, and oncology access – with the existing portfolio of needles, syringes, IVs, and infusion pump solutions in medication delivery.
Couillard said "in addition to providing scale, the deal will position BD as a market leader in emerging therapeutic categories through Bard's Lutonix drug coated balloon and peripheral stent portfolio of products."
Bard gained access to drug coated balloons when it acquired Minneapolis-based Lutonix Inc. for $225 million in 2011. (See Medical Device Daily, Dec. 21, 2011.) The device received approval in 2014. (See Medical Device Daily, Oct. 13, 2014.)
The Lutonix device is currently in a trial for a below the knee (BTK) treatment indication, said Larry Biegelsen, an analyst with Wells Fargo. The trial currently has 340 patients enrolled. The BTK study is scheduled for an interim analysis in the first half of this year, after which BD/Bard could decide to enroll additional patients in the trial to enhance the data. If the trial continues, then it is expected to complete in early 2018 with FDA approval possible later in the year.
"If its trial is positive and the indication is ultimately approved by the FDA, Lutonix would be the sole drug coated balloon on the U.S. market for this indication," Biegelsen said. "While competitors Medtronic plc and Spectranetics Corp. are planning their own BTK, neither has started an IDE study, which puts them [more than three] years behind."
Other trials in this space have not fared well, Bieglesen noted.
"Some of our consultants believe that the previous BTK studies failed for specific reasons – i.e., Biotronik AG study was too small [with 70 patients] and Medtronic's balloon did not work," he said. "These are factors that [BD and Bard] may be able to overcome with its larger trial and a proven effective balloon."
MEGA MERGER SCORECARD
There have been a significant number of large med-tech companies that have undergone consolidation in the past few years. Back in 2014, Medtronic revealed it would acquire Covidien for $43 billion. (See Medical Device Daily, June 17, 2014.)
Prior to Dublin-based Medtronic's announcement, Warsaw, Ind.-based Zimmer Holdings Inc. said it would acquire Biomet Inc. for $13.35 billion in cash and stock. (See Medical Device Daily, April 25, 2014.) The merger came about two months after Biomet had filed paperwork with the Securities and Exchange Commission to go public. (See Medical Device Daily, March 10, 2014). Biomet had planned to raise up to $100 million in its IPO.
Earlier this year, Abbott Laboratories Inc. completed its acquisition of St. Paul, Minn.-based St. Jude Medical Inc. for $25 billion. (See Medical Device Daily, Jan. 12, 2017.)
Abbott spent the better part of 2016 trying to close the St. Jude deal but ran into a few stumbling blocks along the way. Notably, the Abbott, Ill.-based company had to settle concerns from the Federal Trade Commission, who said the combined company would control a significant percentage of the vascular closure device market. The deal was green lit after the FTC accepted a proposal from the divestiture of St. Jude's vascular closure device business and Abbott's steerable sheath business to Tokyo-based Terumo Corp. (See Medical Device Daily, Dec. 30, 2016.)
"Bigger picture – the BD acquisition of Bard represents one more step in the march towards consolidation in the medical device sector," Biegelsen said. "The news will likely fuel speculation of further consolidation in the space."
By John Brosky, Contributing Writer
PARIS – Being first to market does not mean you have won the game. With competition heating up in a new category of in vitro diagnostics (IVDs) called syndromic testing, that lesson is being refreshed as a new case study takes shape.
Based on multiplex polymerase chain reaction (PCR) assays, syndromic testing for infectious diseases in just a few years has captured 45 percent of the $2 billion market segment for molecular diagnostics, according to Grand View Research based in San Francisco.
With a projected annual growth rate of 13.3 percent PCR-based molecular diagnostics are expected to dominate the IVD market through 2024.
The trailblazer in the field is Salt Lake City Utah-based Biofire that after breaking open a new approach for the rapid detection of multiple pathogens, was acquired in January 2014 for more than $450 million by bioMérieux, based in Marcy l'Etoile, France.
A few months later Basel, Switzerland-based Roche Diagnostics paid the same price for Marlborough, Mass.-based Iquum Inc. and in 2016 Danaher Corp.-based in Washington, D.C. paid over $4 billion for Sunnyvale , Calif.-based Cepheid Inc.
This week, a nascent entrant to the field is unveiling a new technology platform at the European Congress of Clinical Microbiology and Infectious Diseases (ECCMID) in Vienna.
The platform has yet to start its pivotal trial for a CE mark, and there is only one assay panel, acute respiratory syndromic testing targeting 22 viral and bacterial pathogens simultaneously.
The roughly $50 million in capital raised by upstart Statdx SL, based in Barcelona, Spain, sounds puny compared to the sacks of money being thrown around by the major players for novel technologies.
But the company is not making a technology play with the Diagcore platform, which it assembled using tried-and-true pathogen detection systems, thereby avoiding a long an expensive development process.
Instead Diagcore was designed by a pair of engineers to target ease-of-use and lower costs across a full menu of assays.
A fully-integrated, platform with a footprint small enough to squeeze into the crowded point-of-care (POC) competition, Diagcore combines multiplex real-time PCR with a second detection system for immuno-assays.
Requiring no sample preparation, a nurse in intensive care or an emergency department inserts the sample into a cartridge, slips the cartridge in the analyzer unit and within an hour receives a yes-or-no result across a series of probable pathogens.
The rapid qualitative result in syndromic testing has quickly swept aside the traditional practice of sequentially testing over several days each suspected pathogen with a quantitative result.
Instead of trial-and-error, a clinician can rely on the syndromic result to pinpoint what the central lab should look for and to more quickly make a decision about patient treatment.
"When we started the company, many people said we would be too late, that there were many companies already out there," said Statdx CEO and co-founder Jordi Carrera. "We have proven that wrong if you look at the attention we are capturing with the clinical community, and if you look at the investment we have attracted with their willingness to continue. These are very exciting days in diagnostics and we are happy to be part of it."
"We developed something simple without fancy technology that is published in prestigious journals. We are industry people who wanted to make a business," he said.
Formerly an aeronautics engineer, Carrera and co-founder Rafael Bru were executives with the Barcelona, Spain-based Werfen Life Group that in the early days of syndromic testing distributed both Biofire and Cepheid products for Spain, Portugal and Italy.
"We knew which products were working and why they were successful. We built our company based on these specifications, better and cheaper ways to do the same things.
Carrera said the current platforms acquired by the major companies were developed based on technologies 15 years ago. Because Diagcore development began in 2010, he said there was access to advanced real-time PCR technology that enabled them to design an open system.
"For companies with odd technologies, each new assay requires years and years of development. Because we use real-time PCR and because everyone in the world knows PCR, it makes it far easier to develop new assays. There is an efficiency in lower research and development costs, and a much faster time to market," he said.
For customers the focus on lowering costs pays off in more efficient use of reagents, which are pre-loaded in the assay cartridge.
"A major differentiator in Diagcore includes features that our competitor does not have, which become critically important for winning end-user adoption. For example, eliminating sample preparation may sound trivial but in an emergency department these added steps require more training and can lead to errors," he said.
Following on the unveiling of the Diagcore platform in Vienna, Carrera said the pivotal trial will start at four sites in Europe with a goal of winning a CE mark for commercialization by the end of 2017.
"The next step for success is to have a strong commercial arm to bring it to the markeat at the right speed. This is where we are working now to have everything in place by the beginning of 2018 to launch the product," he said.
"It is a big market with big players who have an enormous commercial reach. If we as a start up company had to build our own sales force it would take years and years," he said, adding that not all the leading IVD companies currently have a POC device for syndromic testing.
By Stacy Lawrence, Staff Writer
Abbott Laboratories is aiming to show it's back on track after a turbulent year working toward two major acquisitions. The Abbott Park, Ill.-based company closed its $25 billion purchase of St. Jude Medical Inc. at the start of last quarter, which doubled its medical device sales for the period. It also agreed last week to an amended deal with diagnostics acquisition target Alere, reducing the deal value to $5.3 billion from $5.8 billion; it's slated to close next quarter.
With the logistics of the St. Jude and Alere deals largely behind it, Abbott is focused on integration execution. First up is swiftly and completely satisfying the FDA on a recent warning letter regarding a former St. Jude manufacturing facility in Sylmar, Calif. That's expected to hinder some pending FDA approvals, offering further pressure for a rapid resolution.
ADDRESSING THE FDA WARNING
"We've been aware of the circumstances here for some time, and we've been working with our St. Jude colleagues for some time – even before close – on GMP matters at the site. So, we got a pretty good head start here on the issues and a fair amount of dialogue with the FDA about the issues. So, having said that and being clearly disappointed in the outcome, I'd say the impact will depend a lot on our response – how thorough, how effective that response is," said Abbott chairman and CEO Miles White on the first quarter earnings call.
He said he couldn't predict a time frame for resolution of the warning letter issues, but said that Abbott had good visibility on the issues and started working to address them last year. White also declined to comment decisively on how the facility warning letter would affect in-process FDA approvals for devices that would be manufactured at the Sylmar facility.
"With regard to the timing of approvals, the new products that we have under review with the FDA remain under review. We know that they're continuing to review those submissions. So that's a good thing, and so I don't think we can draw any conclusions from that, that are negative or positive. I think that it's going to depend on the quality of our response here," summed up White.
The company didn't revise any projected launch dates related to the FDA warning letter, but may do so later this year. Abbott has had a chance to inspect all of St. Jude's facilities and doesn't see indications of problems elsewhere, White said.
DX AND DIABETES STRATEGY
White was notably upbeat on Alere, after nailing down a $500 million discount on the long-beleaguered deal.
"Point-of-care testing remains an attractive growth segment within the in vitro diagnostics market, and the acquisition of Alere will significantly expand our diagnostics presence and leadership in that space," he said. But he did note that Abbott will divest "a couple of pieces" of Alere.
Abbott's existing diagnostics business grew at a 4.7 percent clip during the first quarter to almost $1.2 billion. The company recently launched four new diagnostic systems with an additional two systems forthcoming.
"Diagnostics is in the process of launching the biggest range of new systems and new products that's ever been done in the entire space in history," White said.
Last quarter, Abbott sold its Medical Optics business to Johnson & Johnson, as well as part of the St. Jude vascular closure business to Terumo Corp. in a pair of deals each for more than $1 billion.
Diabetes care was one of Abbott's top performing device categories, growing 22.9 percent last quarter as compared to the same period a year earlier to $292 million. The 30-country availability, including in Europe, of its continuous glucose monitor that doesn't require fingerstick calibration Freestyle Libre is driving this growth.
Abbott continued to refuse any specifics on the timing of and FDA submission or U.S. launch for the Freestyle Libre. It's already in use by about 300,000 patients, which White noted stacks up favorably to its competitors. He also said the device enjoys reimbursement across European countries, which he called "unprecedented." There is still some self-pay in Europe, White added, but said that reimbursement is expanding.
"We've got both great patient acceptance, great value proposition. And then as we said, payers, governments are all giving a lot of support to the product because of not only what it does, but the value proposition it represents relative to what patients can do today. It makes a heck of a difference in the care and treatment of diabetic patients and their care for themselves," said White.
NEURO, CARDIO TOP PERFORMERS
Neuromodulation from St. Jude was another top growth performer with a 51.5 percent increase last quarter driven by several recently launched products for the treatment of chronic pain and movement disorders, specifically Burst devices for the treatment of chronic pain and deep brain stimulation for the treatment of movement disorders such as Parkinson's disease.
The larger businesses in structural heart and electrophysiology also had double-digit increases for the quarter. Structural heart gained 15.5 percent to reach $256 million, while EP was up 10.9 percent to $316 million.
"In electrophysiology, we initiated the U.S. launch of our Ensite Precision cardiac mapping system, which provides physicians with improved automation and 3-D images to better treat irregular heartbeats. Growth in structural heart was led by continued double-digit growth of Mitraclip, our market-leading device for the repair of mitral regurgitation," commented White. Ensite came from the St. Jude acquisition.
Medical devices are now the largest business within Abbott at almost $2.4 billion of the $6.3 billion in first quarter sales. That's almost exactly twice the device sales in the first quarter of 2016 due to the addition of St. Jude, with an operational increase of 4.5 percent.
"The addition of St. Jude here is powerful. I mean, arguably, we've got the best stent in the world, and it's challenging for everybody in this space to incrementally improve on the efficacy and quality of stents today. We have a lead position in the stent business, and now we've broadened that across six other major cardiovascular categories," boasted White.
By Stacy Lawrence, Staff Writer
At the start of 2016, Johnson & Johnson (J&J) undertook a massive restructuring aimed at turning around its medical device business. The New Brunswick, N.J., conglomerate has been gradually swapping in high-growth device businesses and ushering out low-growth ones, a disciplined, rational effort that seems to be starting to pay off.
During the first quarter, J&J's medical device sales grew by 3 percent to $6.3 billion; that's a marked improvement over the first quarter in 2016 when they shrank by 2.4 percent to $6.1 billion.
"Medical devices are about on par now with next year, but I do think that it will be at or very close to the market growth rates for the industry overall," summed up J&J Executive Vice President and CFO Dominic Caruso on the company's first quarter earnings call.
IN WITH THE NEW
New products derived from acquisitions are key to building that growth, he underscored. Caruso said new products will accelerate the company's growth for the remainder of the year by 1.5 to 2 points, citing in particular the recent med-tech acquisition Neuravi Ltd. It's J&J's second recent acquisition that's focused on stroke, including the December purchase of Pulsar Vascular Inc.
J&J completed the acquisition of Neuravi, which focuses on neurointerventional therapy, in April.
Neuravi offers the Embotrap Revascularization Platform to treat ischemic stroke treatment via clot retrieval, while Pulsar brought its Pulserider minimally invasive cerebral aneurysm device to the table.
"We've been divesting slower growth areas or areas that we think are better off in someone else's hands and investing in higher growth areas and new technologies," said Caruso. "This particular ischemic stroke treatment from Neuravi is already on the market in Europe and expected to be approved this year in the U.S., and it provides for faster blood flow and more accurate retrieval of the clot within the neurovascular system. So we're very excited about it."
He continued, "By the way, our entire medical device business has largely been grown by these smaller tuck-in, bolt-on acquisitions with technologies that advance the standard of care and with our scale in distribution, we're able to do much better with that asset in our hands than in the hands of the previous owner."
RETHINKING NEURO, DIABETES
Interestingly, J&J seems to be otherwise largely wiping its neurosurgery slate clean with a more than $1 billion proposed divestiture of its Codman Neurosurgery Business to Integra Lifesciences Holdings Corp. that's slated to close during the fourth quarter. Both the Neuravi and Pulsar were announced via the Codman business, but were officially acquired as part of J&J's broader Depuy business.
Alongside Codman, J&J's diabetes device business may be the next target for sale. The business continues to be a major drag on growth and the conglomerate continues to evaluate strategic options for it, including partnerships and divestiture.
Last quarter, J&J also acquired electrosurgical tools company Megadyne Medical Products Inc. and gastroesophageal reflux device player Torax Medical Inc. And, most notably, completed a $4.3 billion purchase of Abbott Medical Optics (AMO), which is focused on ophthalmic surgery.
"With respect to the AMO acquisition, it's going really, really well. I mean it just obviously was integrated in February ... Coupled with the Acuvue brand, which obviously has great recognition, the innovation that we already know about and know how to do well both in manufacturing and lens technology, I think this is going to be a fantastic acquisition for us," Caruso said.
He continued, "It's off to a great start and, quite frankly, before we acquired them in the quarter, they were doing really well with new product launches growing at a rate that was double the rate that they were growing at last year's first quarter. So we're very pleased," effused Caruso. The one month sales for AMO were $124 million.
Device performance was driven last quarter at J&J by the electrophysiology products in the Cardiovascular business, Acuvue contact lenses in Vision Care and endocutters in Advanced Surgery.
Electrophysiology grew 17 percent worldwide during the first quarter over the same period a year earlier, boosted by double-digit increases in demand for atrial fibrillation procedures both within and outside the U.S. Strong adoption of newer products and advanced catheters helped to propel the business to its 29th quarter out of 30 of double-digit growth.
The contact lens business was up about 5 percent, driven by new products including Oasys 1-Day products globally and variants of the Define lens outside the U.S. Endocutters grew sales by about 10 percent last quarter. Energy sales growth was 6.9 percent last quarter, boosted by the Megadyne acquisition.
Orthopedics sales shrank by 0.07 percent due to pricing pressures, while specialty surgery also shrank and hospital medical devices saw only 2 percent growth.
J&J upped its 2017 guidance due to its recently proposed $30 billion acquisition of drugmaker Actelion. It raised its operational sales growth expectation for the year to between 5.8 percent and 6.8 percent for the year from a prior range of 4 percent to 5 percent. It also bumped up its sales guidance range to $76.1 billion to $76.8 billion from the $74.8 billion to $75.5 billion it had estimated in January.
Despite the increased guidance, Wall Street sent shares down by 3 percent the day it reported earnings. For the first quarter, J&J beat consensus EPS estimates by $0.06 at $1.83, but missed revenue expectations of $17.77 billion by $206 million. Its shares are still up about 7 percent in 2017.
Caruso remained persuasive in describing the company's aggressive, ongoing acquisition/divestiture strategy to reboot medical device sales growth.
"We're very disciplined about it. They have to be strategic, they have to return a weighted average IRR (internal rate of return) that's higher than our weighted average cost of capital," he said.
He cautioned, "It takes time to improve a business that's so widespread and diverse as our medical device business, but we're making good progress. And I would just reiterate that we expect it to have nearly a billion dollars of cost improvements in that business achieved by 2018, and we're well on our way of doing that."
By Omar Ford, Staff Writer
Medtronic plc is set to sell its patient care, deep vein thrombosis and nutritional insufficiency businesses within the Patient Monitoring & Recovery (PMR) division of its Minimally Invasive Therapies Group to Dublin, Ohio-based Cardinal Health Inc. for $6.1 billion. The transaction could close sometime by the end of Medtronic's second fiscal quarter in October.
Combined, the businesses expected to be divested in the transaction generated about $2.4 billion in revenue over the last four reported quarters. Among the product lines included in the transaction are the company's dental/animal health, chart paper, wound care, incontinence, electrodes, Sharpsafety, thermometry, perinatal protection, blood collection, compression, and enteral feeding offerings. The transaction also will include 17 dedicated manufacturing facilities.
Dublin-based Medtronic will retain its Respiratory & Monitoring Solutions business, which includes its airway, ventilators, monitors, sensors and health informatics product lines, as well as its Renal Care Solutions business, both of which are within its PMR division.
Medtronic obtained much of the PMR division when its $43 billion acquisition of Covidien plc closed in 2015. (See Medical Device Daily, Jan. 27, 2015.)
"Ultimately, we came to the conclusion that these products – while truly meaningful to patients in need – are best suited under ownership that can provide the investment and focus that these businesses require," said Omar Ishrak, Medtronic's president and CEO. "At the same time, we can put these proceeds to work, investing over the long-term in higher returning internal and external opportunities that are more directly aligned with our growth strategies of therapy innovation, globalization and economic value."
Cardinal Health distributes some of the incoming businesses' products and has been collaborative partners with the leadership of the business.
"Given the current trends in health care, including aging demographics and a focus on post-acute care, this industry-leading portfolio will help us further expand our scope in the operating room, in long-term care facilities and in home health care, reaching customers across the entire continuum of care," said George Barrett, Cardinal Health chairman and CEO.
A HIGHLY FAVORABLE DEAL FOR MEDTRONIC
Medtronic said it plans to use $1 billion of the proceeds for share repurchases in fiscal 2018, with the remainder slated for debt reduction.
The transaction with Cardinal Health is expected to result in dilution on a net basis to Medtronic's fiscal year 2018 non-GAAP earnings per share (EPS) in the range of about 12 cents to 18 cents with the exact amount primarily dependent on the closing date of the transaction.
Larry Biegelsen, a Wells Fargo analyst, said the divestiture "better positions Medtronic to achieve its goal of mid-single-digit top-line growth, while allowing the company to focus on higher return opportunities."
Cardinal Health plans to issue long-term debt to finance the transaction and has obtained a commitment letter from Goldman Sachs Bank USA and Goldman Sachs Lending Partners LLC to provide a $4.5 billion unsecured bridge loan.
Joshua Jennings, an analyst for Cowen and Co., said the acquisition isn't surprising and noted the deal was favorable for Medtronic.
"We think that, despite the associated EPS dilution, the divestiture will provide Medtronic with balance sheet flexibility to pursue higher-growth initiatives that are more in line with its current focus," Jennings said. "Given investors' scrutiny of Medtronic's top-line growth in recent quarters, we view this latest move as strategically sound and think it will be well received by shareholders."
The acquisition comes a few months after Medtronic revealed strong sales in its most recent earnings, distancing itself from previous bleak quarters. (See Medical Device Daily, Feb. 23, 2017.) The company's revenue grew about 6 percent during the three months ending on Jan. 27 compared to the same period last year. Strong sales also boosted Medtronic's adjusted income up 3.3 percent to $1.5 billion, on total sales of $7.28 billion during the quarter.
TOUGH DAY AT THE OFFICE
The acquisition comes hot on the heels of Cardinal Health updating its fiscal guidance. The company said it sees fiscal 2017 EPS at the low end of earlier guidance of $5.35 to $5.50 – a proclamation that caused shares to plummet as much as 11 percent on Tuesday. Even its rivals, San Francisco-based Mckesson Corp. and Chesterbrook, Pa.-based Amerisourcebergen Corp. saw shares dip about five percent throughout Tuesday.
Shares of Cardinal Health (NYSE:CAH) closed at $72.39.
Cardinal Health executives said the weaker EPS is a result of drug distribution going through a challenging phase as the industry continues to see a decline in the number of branded drugs going generic.
Charles Rhyee, a Cowen and Co. analyst, said the acquisition fits well with Cardinal and helps it diversify its business away from pharmaceutical distribution.
"But to fully benefit from the diversification, we need to see stabilization in the macro environment for drug distribution, which appears to be on the horizon but is further out than we had expected," Rhyee said.
Cardinal Health made a huge step toward expanding beyond drug distribution markets about two years ago when it revealed it would acquire New Brunswick, N.J.-based Johnson & Johnson Corp.'s Cordis unit for $1.9 billion (See Medical Device Daily, March 3, 2015.) The transaction gave the company greater access to the cardiovascular and endovascular markets.
By Omar Ford, Staff Writer
Public genetic databases could have a discrepancy in identifying BRCA1 and BRCA2 variant classifications, which can introduce uncertainty and diminish patient care, according to a study by Myriad Genetics Inc. and researchers from Gradishar from the Feinberg School of Medicine at Northwestern University. The study was published in this month's edition of the journal The Oncologist and results from it show that the Clinvar public database provided discrepant variant classifications more than 26 percent of the time. The Salt Lake City-based company's study evaluated 4,250 BRCA1 and BRCA2 variants.
Clinvar is a freely accessible public archive of reports of the relationships among human variations and phenotypes hosted by the National Center for Biotechnology Information (NCBI) and supported by intramural National Institutes of Health (NIH) funding.
"These research databases are not appropriate for use in any kind of clinical decision making by any labs at all," Johnathan Lancaster, Myriad chief medical officer, told Medical Device Daily. "Using Clinvar and public databases to generate clinical test results is the equivalent of using Wikipedia. Some of it's right and some of it's wrong, but without being a subject matter expert you don't know which is which."
Overall, 73.2 percent of variant classifications analyzed were fully concordant, while 26.7 percent were not. Most of the discordant classifications had definitive classifications of pathogenic or benign from Myriad, compared to "variant of uncertain significance" (VUS) classifications in the public database.
As a repository of actual patient results, data from the study shows that different labs are providing different results to patients for the same genetic mutation. The company said that by definition, this means that some patients are receiving incorrect results that may have life-changing or -threatening implications.
These findings are consistent with previously published studies. A study by Vail et al. compared the interpretation of more than 2,000 BRCA1/2 variants among five public databases and found substantial disparity of variant classifications among and within publicly accessible variant databases. VUSs in particular, there is no agreement once the variant is observed in a least four of the five databases in this study. Another study by Balmana et al. assessed conflicting interpretations of genetic variants in the Prospective Registry of Multiplex Testing (PROMPT) and found significant conflicting interpretations of genetic variants in that database. Specifically, among variants entered into the PROMPT registry database with classifications from multiple labs, 26 percent had discrepant classifications; 36 percent of which would affect patient management.
Myriad has developed the Myrisk Hereditary cancer test, a 28-gene panel that identifies an elevated risk for eight important cancers.
"Myriad's hereditary cancer testing portfolio relies on a scientifically validated robust process for variant classification, that's not mirrored in anyway by competitors and key findings confirm that," Lancaster said. "The bottom line is, if you don't invest in the science and the process to enable excellence for your hereditary cancer genetic testing, you're not going to get excellence in your hereditary cancer genetic testing.
HEREDITARY CANCER GENETIC TESTING AND BEYOND
Myriad isn't resting on its laurels when it comes to its hereditary cancer offerings. The company has just recently had a resurgence in its hereditary cancer offerings. The company's hereditary cancer test segment came in about $2.5 million above consensus, bringing in $144 million. Myriad executives noted the segment benefited from both a "seasonally stronger" quarter as well as "robust volume growth" in the oncology segment.
"Core hereditary cancer revenues grew 3 percent quarter over quarter, reversing a negative trend of the past year, helped by stability in the oncology market, which rose sequentially for the first time in 18 months," said Brandon Couillard, an analyst with Jefferies and Co.
More competition in hereditary cancer testing is emerging. In May, Madison, N.J.-based Quest Diagnostics Inc. launched two new panels for hereditary breast cancer testing: the Myvantage Hereditary Comprehensive Cancer Panel and the Qvantage Hereditary Women's Health Cancer Test.
Myriad is also stretching beyond hereditary cancer tests. In 2Q17, non-HC tests accounted for 67 percent of volumes, but only 27 percent of revenues.
In August 2016, the company entered the neuroscience market with its acquisition of Assurex Health for about $225 million up front and possibly $185 million in additional performance-based payments. (See Medical Device Daily, Aug. 4, 2016.)
Assurex Health is an informatics-based precision medicine company that provides treatment decision support to health care providers for mental health patients.
By Stacy Lawrence, Staff Writer
The FDA issued an April 12 warning letter to Abbott Laboratories regarding known manufacturing and quality control issues that include a long-nagging cybersecurity one. The problems stem from a February inspection of a Sylmar, Calif., facility that was gained via the acquisition of St. Jude Medical, which closed in early January.
Abbott Park, Ill.-based Abbott shed more than $1 billion in market cap on the news, with Wall Street analysts worried less about the rectification of these ongoing issues – and more about the potential delays this news could portend for anticipated product approvals, which could hinge on manufacturing issues being ironed out.
The warning letter largely focuses on two previously known issues: premature lithium battery depletion in implantable cardioverter defibrillators and cardiac resynchronization therapy defibrillators and cybersecurity risks with its high voltage and peripheral devices.
Abbott quickly offered reassurances that it's working to address these issues – and to note that the inspection started on Feb. 7, only a brief amount of time after the St. Jude acquisition had closed on Jan. 4.
It responded to the FDA investigator observations on March 13, with the warning letter detailing the ways in which that response was inadequate. Much of the agency's remaining criticism stem from a lack of a systematic approach and the failure to provide evidence of its efforts.
The company said it is in the process of implementing the corrective actions it proposed in March.
"We take these matters seriously, continue to make progress on our corrective actions, will closely review FDA's warning letter, and are committed to fully addressing FDA's concerns," Abbott said in a statement.
Wall Street analysts pointed out that these continuing issues could spell trouble for upcoming approvals tied to the facility. The warning letter itself says, "Premarket approval applications for class III devices to which the Quality System regulation deviations are reasonably related will not be approved until the violations have been corrected."
"The most significant concern here, in our view, is the degree to which these issues potentially slow down FDA approval of Abbott/St. Jude MRI-Safe ICD and CRT-D devices (expected by year-end 2017)," Rick Wise of Stifel said in a note. He expects that it will take several months for more clarity on this issue.
Larry Biegelsen of Wells Fargo underscored not only the PMA approval delay for these products, which he expects now in 2018, but also the potential liability and negative corporate publicity.
More optimistic is Cowen's Joshua Jennings, who argued these likely will be supplemental filings that are not subject to the same rules as full PMAs. He said there is precedent citing a similar situation at the same facility during which the FDA issued a supplemental approval in 2014. In that instance, the supplemental filing was submitted to the FDA during the week after the inspection that led to the warning letter was complete.
The lengthy letter relates to the Fortify, Unify, Assura (including Quadra) implantable cardioverter defibrillators and cardiac resynchronization therapy defibrillators, and the Merlin@home monitor transmitter from the Sylmar facility.
In addition to noting a 2014 patient death that was tied to the battery problem, the letter cited seven devices that were implanted after a recall last October instead of being returned as required.
The warning letter also scolded Abbott for not sufficiently addressing cybersecurity issues with its high voltage and peripheral devices that were the subject of much back-and-forth between St. Jude and investment research firm Muddy Waters Research.
St. Jude had long protested that the accusations from Muddy Waters, originally based on information from cybersecurity firm Medsec, were unfounded. But this FDA warning letter makes clear that cybersecurity has been – and continues to be – a problem for these St. Jude, now Abbott, devices.
In October, St. Jude characterized the Muddy Waters public cybersecurity criticisms as "unverified" and unilaterally said that it "stands behind the security and safety of our devices."
St. Jude was dismissive of cybersecurity problems at the time, but those issues have now been raised as continuing by the FDA. At best, that points to transparency issues between the company and its customers that are on the path to be addressed, if belatedly. But, at worst, Abbott itself may have been unaware of the full extent of these issues during the St. Jude acquisition for $25 billion that was initiated in April 2016.
The warning letter gives Abbott only 15 business days to complete corrections and/or corrective actions to address its listed concerns, or to provide the FDA with a reason for the delay and a timeline for rectification. Abbott will certainly need to address its progress on its first quarter earnings call, which is coming up soon on April 19.