No Lotus élan For Boston

| About: Boston Scientific (BSX)

A flaw common to several medical devices is an unpleasant surprise at any time, but discovering it in the run-up to US approval and launch of one of the affected products is particularly unpropitious. Boston Scientific (NYSE:BSX) is recalling both models of its Lotus transcatheter aortic valves from clinical and commercial sites, delaying the US release of the Lotus Edge by at least six months.

The company says it will lose $50m from its Structural Heart unit as a result of the worldwide Lotus withdrawals, guiding the 2017 sales from this segment downwards to $250m. The snag will benefit its competitors Edwards Lifesciences (NYSE:EW) and Medtronic (NYSE:MDT), and though the effect will be temporary it is embarrassing for Boston – particularly as a similar defect has already arisen in Lotus valves not once but twice before.

The Lotus valve was CE marked for sale in Europe in October 2013, with European approval of the second-generation version, Lotus Edge, following in September 2016. Reprise III, the pivotal US trial for Lotus Edge, is due to yield data mid-year.

Boston says it has received reports of a premature release of a pin that facilitates release of the transcatheter valve from its delivery system. A similar problem necessitated the recall of 250 Lotus valves last August, and in November 2014 Boston issued another recall for 276 units of the Lotus system because the valve had become unlocked during release from the delivery system.

Postcards from the Edge

In announcing the 2016 recall Boston stated that in most cases the valve was resheathed during implantation and removed without difficulty, though this prolonged the procedure. However, there were three cases of catastrophic vessel trauma where the patients died.

This time the company made no mention of specific health consequences in the SEC filing that revealed the recall. It simply said Lotus and Lotus Edge would be back in Europe in the fourth quarter of this year, and that the US PMA submission for Lotus Edge would also occur in Q4, with US launch planned for mid-2018. Previously Boston had slated the US Edge submission and launch for Q2 2017 and Q1 2018 respectively.

Wells Fargo analysts reckon the problem is fixable and should not taint the perception of Lotus because the issue is unrelated to the valve function. They model 2017 worldwide Lotus sales of $117m, rising to $700m in 2021, at which point the products will make up 6% of Boston’s sales. As for Boston’s share of the transcatheter aortic valve market, the analysts believe this will grow from 1% this year to 13% in 2021.

Consensus sellside forecasts compiled by EvaluateMedTech are more bullish, putting global sales of the Lotus franchise at $841m in 2021 and more than $1bn the year after. Still, despite a 39% annual growth rate, the Lotus devices will not be able to catch Edwards’ Sapien range, expected to outsell them three to one in 2022.

The transcatheter aortic valve players

Global sales ($m)

Company

Device franchise

2016

2017

2018

2019

2020

2021

2022

CAGR

Edwards Lifesciences

Sapien

1,629

1,897

2,112

2,337

2,597

2,890

3,182

+12%

Medtronic

CoreValve

839

990

1,111

1,226

1,345

1,464

1,585

+11%

Boston Scientific

Lotus

140

228

382

511

676

841

1,007

+39%

Abbott Laboratories*

Portico

31

56

98

136

176

217

257

+42%

*Formerly St. Jude Medical. Source:EvaluateMedTech.

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