You win some, you lose some, as the saying goes. And for the medtech companies, devices, and concepts featured here, 2017 saw more of the latter. But 2018 is a new year, with plenty of opportunity to turn things around.
[Image courtesy of PUBLICDOMAINPICTURES/PIXABAY.COM]
Irvine, CA-based Endologix did exactly what a company should do when a manufacturing glitch was discovered during routine testing of its top-selling device for abdominal aortic aneurysms (AAA). The company promptly put a hold on all devices that could possibly be impacted by the issue and hosted a conference call to discuss the problem with analysts and shareholders.
Endologix resolved its manufacturing issues fairly quickly, but the company’s AFX2 business has not bounced backquite as much as expected in the second half of the year. In November, Endologix lowered its fourth-quarter earnings guidance as a result.
CEO John McDermott said the company’s more stable longtime users of AFX and AFX2 came right back, but the smaller accounts and the customers who were only using the products occasionally have been tough to regain.
[Image courtesy of ENDOLOGIX]
Boston Scientific’s Lotus Edge
Boston Scientific’s Lotus Edge aortic valve system may be one of the most watched products in the company’s pipeline. The device has drawn interest from the transcatheter aortic valve replacement (TAVR) community because it is expected to maintain the low rates of paravalvular leak (PVL) that the current generation Lotus valve is known for, while also reducing permanent pacemaker implant rates.
But the company has had repeated setbackswith the Lotus Edge, the latest of which came at the end of November. Boston Scientific said it has pushed back its previously reported timelines for re-introducing the system in Europe and for filing a pre-market approval module with FDA.
The company halted commercial implants of the Lotus Edge valve last year after a locking issue with one of the valve’s pins was observed in seven of roughly 200 commercial implants (4%). Then, the company recalled all of its Lotus valves from the market in February after getting reports of a similar mechanical problem.
Boston Scientific said it has implemented manufacturing process and design specification changes to the Lotus Edge delivery system, and the company had previously planned to re-introduce the product in Europe by the first quarter of 2018 and file for FDA approval by January.
The setback is likely to have a near- to medium-term impact on the business, but some medtech analysts still seem optimistic about the long-term potential of the platform. Canaccord Genuity’s Jason Mills said in a research note that he expects Boston Scientific to bounce back from the latest Lotus delay by the middle of 2019.
[Image courtesy of BOSTON SCIENTIFIC]
In August, FDA alertedhealthcare providers about liquid-filled intragastric balloon systems used to treat obesity after the deaths of five people. Four reports involve patients who had used the Orbera Intragastric Balloon System, manufactured by Apollo Endosurgery, and one report involves a patient who had used the ReShape Integrated Dual Balloon System, manufactured by ReShape Medical Inc.
All five reports indicate that patient deaths occurred within a month or less of balloon placement, according to FDA. However, the agency said “at this time, we do not know the root cause or incidence rate of patient death, nor have we been able to definitively attribute the deaths to the devices or the insertion procedures for these devices (e.g., gastric and esophageal perforation, or intestinal obstruction).”
Earlier in the year, FDA had recommendedthat patients using such balloon systems be monitored for acute pancreatitis and spontaneous over-inflation. Since issuing this letter, both companies have revised their product labeling to address these risks, the agency reported.
Apollo Endosurgery CEO Todd Newton responded to the August alert by saying“the FDA letter is an important reminder to the physician community that obesity is a serious disease and many obese patients are affected by one or more co-morbid conditions due to their obesity. In our physician training, we are diligent to emphasize the factors that support the safe and effective use of Orbera and we will continue to do so.”
Apollo’s Orbera365 did receive a CE Mark shortly after the FDA alerts. The newer device is designed to stay in the patient's stomach for 12 months, twice as long as the previous version. Newton stated that the approval serves as a "strong testimony of the relevance and significance of more than a decade of the Orbera system's safety and efficacy data as supported by more than 277,000 distributed implants and 230 published peer-reviewed papers.”
For updates, MD+DI reached out to both Apollo Endo Surgery and ReShape Lifesciences, the former name of EnteroMedics Inc., which acquired ReShape Medical Inc. At press time neither had provided an update. A post-approval studyreport on Orbera is due in February 2018, and a post-approval studyreport on ReShape Dual Balloon is due in July 2018.
[Image courtesy of APOLLO ENDO SURGERY]
Magellan Diagnostics’ Blood Lead Test
FDA launched an investigation in May to find out why a blood lead testing system manufactured by Magellan Diagnostics may provide falsely low results. Magellan is owned by Cincinnati, OH-based Meridian Bioscience Inc., and its devices are the only lead-testing products cleared by FDA.
The investigation has yet to uncover the root cause of the problem, but a stern warning letter from FDAin October cited several violations of federal law concerning the company’s handling of the situation.
According to Donald St. Pierre, acting director of the Office of In Vivo Diagnostics and Radiological Health and deputy director of new product evaluation in CDRH, the inspection found evidence that the company failed to take appropriate steps to report the issue after it was first discovered.
According to the warning letter, customers complained to Magellan as far back as August 2014 that there were discrepancies in the results provided by the LeadCare Ultra Test System, but the company failed to report the complaints to FDA within the required 30 days. Magellan did eventually notify FDA of the situation, but not until April 2015.
“The evidence uncovered during the inspection shows that the company put patients at risk after it recognized that its tests could provide inaccurate results and failed to take appropriate steps to report this issue and work through a strategy to effectively mitigate problems with the FDA,” Pierre said.
The company apparently tried to address the problem on its own by changing the amount of time that the mixture of blood samples with the reaction substance must sit before it is analyzed. FDA said the company did not get permission from the agency to market that change.
The Centers for Disease Control and Prevention recommended that children younger than 6 years, pregnant women, and nursing mothers who have been tested for lead exposure be retested if their test result was less than 10 mg per deciliter of blood.
FDA said the Magellan testing systems can still be used with blood from a finger or heel stick, as opposed to blood drawn from a vein.
[Image courtesy of PIXABAY.COM]
Going public is never for the faint of heart, but the IPO path has been an especially rocky road for medtech companies in recent years. That didn’t change in 2017.
By mid-year, only six medtech firms had taken the plunge, and among those, only two braved the U.S. markets, according to the 2017 Medtch Half-Year Review report from EP Vantage. Three others sought success in Sweden. Medtech IPOs have been similarly scarce in the second half of the year, with the total at only 21 completed deals, according to GlobalData Healthcare. Compare that with the average of 40 IPOs that took place in the years prior to the Great Recession.
For those medtech firms that went public this year, the returns were also modest. The total value of IPOs in the sector fell by more than a quarter in the first half of the year when compared with the first half of 2016, according to EP Vantage. Through early December, Medtech IPOs had raised less than $1.2 billion for the year, the lowest total in five years, according to GlobalData Healthcare.
Things could turn around in 2018, however. GlobalData Healthcare reports that Siemens Healthineers is expected to list on the Frankfurt Stock Exchange sometime during the first half of the year with an expected value of $47 billion.
[Image courtesy of ATSTOCK PRODUCTIONS/SHUTTERSTOCK]
Medical Device Tax
The medical device excise tax has been temporarily suspended for medical devices sold from January 2016 through the end of December 2017; if repeal or suspension is not addressed in the next week, the excise tax will resume January 1, 2018.
To suspend the tax until December 2022, House Ways & Means Committee Chairman Kevin Brady and Reps. Erik Paulsen and Jackie Walorski did introduce HR 4617. But until there’s definitive word on tax repeal or resumption, medical device companies remain in limbo, frustrated and unable to plan fully for 2018.
The tax reform bill that Congress passed this week did not address this tax. Consequently, AdvaMed’s president and CEO Scott Whitaker sent President Donald Trump a December 20th letter stating that “in 11 days, the medical device excise tax is set to be reinstated, meaning a massive tax increase is on its way. I am writing to you to underscore the devastating impact this tax has and will have on our industry. I know you have long supported repealing this onerous tax. I want to emphasize why, unlike other business taxes, retroactive relief from the device tax is not feasible and why action this year is essential.”
Earlier, Whitaker stated that “AdvaMed commends the leadership of House Ways & Means Committee Chairman Kevin Brady and Reps. Erik Paulsen and Jackie Walorski for their proposal to prevent this onerous tax from returning. A five-year suspension is an important first step to provide medical technology innovators with confidence that this tax will not go back into effect. With time running short, we urge Congress to adopt this suspension immediately.”
Sara Radcliffe, president & CEO of the California Life Sciences Association (CLSA), also applauded the proposed legislation: “California Life Sciences Association (CLSA) welcomes the introduction of H.R. 4617, legislation that places a 5-year suspension on the ill-conceived 2.3% medical device excise tax. Without swift enactment of this measure, the medical device tax would further hamper innovation and investment in medical technology research and development.”
Both AdvaMed and CLSA advocate for a complete repeal. “While our medtech innovators certainly welcome a 5-year reprieve from the tax, CLSA applauds this legislation as a positive first step towards full repeal of the device tax, which is critical to ensuring that the U.S. does not jeopardize our position as a global leader in medical technology innovation,” said Radcliffe.
[Image courtesy of SURASSAWADEE/SHUTTERSTOCK]
Zimmer Biomet ended 2016 on a sour note. In mid-December that year, the company received a whopping 57-page Form 483 that one Wall Street analyst told clients was among the longest and most serious a consultant for his firm had ever come across. In it, FDA called out 14 observations, including some that potentially concerned safety, as well as a repeat observation, although the company said at the time that no patient safety concerns had been identified at the Warsaw, IN, plant in question.
But the woes continued into the New Year. In February 2017, Zimmer Biomet was hit with a Class I recall affecting 3,662 of its Comprehensive Reverse Shoulder devices. In April, CEO David Dvorak admitted that shipping delays affecting Zimmer’s hip and knee implants that began in 2016 continued to stymie the company. By mid-July, the company announced disappointing second-quarter earnings results, and Dvorak was out—a move praised by some analysts.
"So, we think his departure is likely to be viewed positively and potentially as a clearing event that marks a first step toward definitely resolving the manufacturing issues and rebuilding credibility," said Needham & Co. analyst Mike Matson.
One bright spot came in September when Zimmer launched its Persona Partial Knee System, the first major new product jointly developed by the combined company since it merged in June 2015. But Zimmer Biomet was also hit with production challenges due to destructive hurricanes, and last month the company again posted earnings that fell short of expectations.
MD+DI reached out to Zimmer Biomet, which declined to comment for this story.
On December 19, the company named Bryan C. Hanson its new president and CEO, which buoyed analysts.
“The turnaround, of course, won’t happen overnight, but we’re optimistic that Zimmer is now heading in the direction and real signs of progress will be evident in 2018,” JP Morgan analysts wrote in a research note.