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Is Boston Scientific Worried About Paclitaxel and Vaginal Mesh Headwinds?

Boston Scientific celebrated a big milestone this week as FDA approved its Lotus Edge Valve, but how is the company handling recent regulatory headwinds?

Boston Scientific is feeling the impact of ongoing Paclitaxel concerns, FDA's recent decision on vaginal mesh products, and the shutdown of a third-party sterilization plant.

Boston Scientific had a lot to celebrate this week after FDA approved the company's much-anticipated Lotus Edge Valve for transcatheter aortic valve replacement. But enthusiasm for the approval was dampened during the company's first-quarter earnings call Wednesday by recent regulatory setbacks.

The company is feeling the impact of ongoing Paclitaxel concerns, FDA's recent decision on vaginal mesh products, and the shutdown of an Illinois sterilization plant that previously sterilized products in Boston Scientific's men's health business.

Here's a look at how each of these issues has impacted Boston Scientific, and how the company plans to address each of these revenue headwinds.

Expect Slower Adoption of Eluvia Due to Paclitaxel Concerns

What Happened: First, to recap, Boston Scientific received FDA approval in September 2018 for its Eluvia paclitaxel drug-eluting stent for the treatment of peripheral artery disease. The device was expected to be a key growth driver for the company's peripheral interventions (PI) business, but paclitaxel balloons and stents received some bad press in January after a meta-analysis showed an increased risk of death for patients treated with these devices.

After conducting a preliminary analysis of long-term follow-up data (up to five years in some studies) of the pivotal premarket randomized trials for paclitaxel-coated products indicated for PAD, FDA sent a letter to healthcare providers, urging physicians to seek alternatives to paclitaxel-coated devices. The agency said its preliminary review of the data identified "a potentially concerning signal of increased long-term mortality" in clinical trial patients treated with these drug-coated devices compared to patients treated with uncoated devices.

Of the three trials with five-year follow-up data, each showed higher mortality in the patients treated with paclitaxel-coated products. In total, among the 975 patients in these three trials, there was an approximately 50% increased risk of mortality in subjects treated with paclitaxel-coated devices versus those treated with control devices (20.1% versus 13.4% crude risk of death at five years).

FDA also said, however, that the data should be interpreted with caution because there is large variability in the risk estimate of death due to the limited amount of long-term data, and because these studies were not originally designed to be pooled. Also, the agency noted that the specific cause and mechanism of the increased risk of death is unknown.

What's the Impact: Although Boston Scientific's peripheral interventions business reported 11% organic growth during the quarter, CEO Mike Mahoney said the company did feel the impact of the Paclitaxel concerns, particularly in the second half of the quarter after FDA's advisory letter.

"While the Eluvia launch in Japan remains on track, we do expect the slower adoption of Eluvia to persist in the U.S. and Europe in the second quarter, and potentially throughout the second half," Mahoney said during the call, as transcribed by SeekingAlpha.

What Comes Next: FDA plans to convene a panel meeting June 19-20 to discuss and make recommendations on the paclitaxel issue. The agency has specifically asked for the panel's input regarding the presence and magnitude of the findings, potential causes, and appropriate regulatory actions associated with the findings.

"The June FDA advisory committee panel meeting will be a key next data point and we will continue our dialogue with FDA on Eluvia's unique design characteristics, which includes controlled local release of low dose paclitaxel from a safe and proven polymer as well as clinical superiority data," Mahoney said.

That said, Boston Scientific is assuming ongoing headwinds and, as a result, has cut its Eluvia revenue expectations for 2019 in half to reflect the current landscape.

Larry Biegelsen, a senior medical device analyst at Wells Fargo, asked Mahoney about the company's ability to offset a further reduction in Eluvia sales if things don't go well (from an industry standpoint) at the June advisory meeting.

"Eluvia is an important growth driver for PI. And we clearly aren't giving up on it, because we think it's a uniquely good product that helps patients," Mahoney said. "And we are seeing many customers in the U.S. continue to use it. Some have not, but many are. And in Japan, we are launching, essentially right now."

Mahoney also assured analysts on the call that the reduced guidance regarding Eluvia growth is "very conservative." He also noted that there are other strong growth drivers within the PI business that should help offset the impact, even if the June panel meeting doesn't go well for the industry.


Vaginal Mesh Market Withdrawal Will Impact 2019 Revenue by $30M

What Happened: Last week FDA ordered Boston Scientific and Coloplast to stop selling surgical mesh intended for transvaginal repair of pelvic organ prolapse. The agency said the manufacturers have not demonstrated a reasonable assurance of safety and effectiveness for these devices, which is the premarket review standard that now applies to them since FDA decided they were high risk in 2016.

Boston Scientific had two such devices on the market, the Uphold LITE Vaginal Support System and the Xenform Soft Tissue Repair System.

What's the Impact: Mahoney said FDA's decision will soften the company's 2019 revenue by $30 million, a portion of which was booked in the first quarter, including $5 million in sales reserve and related inventory write-offs.


Boston Scientific Will Now Sterilize Men's Health Products In-House

What Happened: The Illinois EPA recently shut down Sterigenics' Willowbrook, IL facility for ethylene oxide (EtO) sterilization after finding dangerously high levels of the gas in the air around the facility.

What's the Impact: Boston Scientific previously sent some of its men's health devices to that facility for EtO sterilization.  The issue is expected to result in some supply softness during the second quarter.

What Comes Next: FDA  gave Boston Scientific the green light to conduct sterilization of those products at its own in-house facilities. Mahoney said the company should return to full supply of those products by the end of the second quarter.

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