Massachusetts-based Boston Scientific (BSX, Financial) earned one of the top seats on the S&P 500 soon after its long-awaited approval for the "Watchman heart device" came in from the FDA last Friday. In fact, after having rejected approval for the same device twice in a row, finally this time the U.S. FDA gave a green signal to this device which would help to prevent stroke in patients suffering from a heart rhythm disorder. Analysts speculating the stock rejoiced at the news as the stock climbed about 4% to $17.24 soon after the news of the approval got announced from the company headquarters. Let’s get into the facts and assess how this approval reflects a better future for Boston Scientific in the U.S.
Treating heart disorders easily with the device
It seems as if a struggle which has continued at least for a decade in terms of development and seeking approval for the device came to an end last Friday when news flew in regarding FDA’s ultimate approval for Boston Scientific’s device. With this innovative device, Boston Scientific urges to target the patients suffering from non-valvular atrial fibrillation (AF) which causes irregular heart rhythms leading to blood clots, severe chest pain and high palpitations.
It has been noted that AF patients have five times greater chance of getting strokes than normal patients, and currently the only treatment available for such patients in the Warfarin therapy which has several side effects, such as internal bleeding. Also about 20% of the U.S. population currently suffers from AF disorder, which leads to sudden stroke. Thus, the watchman heart device can really help those who suffer from several side effects after taking the Warfarin therapy; or even serve those looking for better AF treatment alternatives in the medical arena.
This device is a small umbrella shaped product that works by closing the left atrial appendage (LAA) of the heart capturing clots and preventing them to ascend the brain, thereby minimizing the risk of strokes and systemic embolism. In fact, the LAA is responsible for more than 90% of the heart clots that leads to stroke in patients suffering from AF. So the device sits on the LAA preventing such an incidence and is a better way to tackle AF than the Warfarin therapy which does not suit everyone affected by such a disorder.
Company reaction remains extremely positive on the news
An analyst with BMO Capital Markets Corp. reacted soon after the FDA approval and commented in a research note, “After three FDA Panels, the product prevailed; we had been concerned that if/when approved it would arrive with a relatively narrow label – but the label was actually quite broad – “for patients with non-valvular AF who are increased risk for stroke and systemic embolism and are deemed by their physicians to be suitable for warfarin, and have an appropriate rationale to seek a non-pharmacologic alternative.”
Several analysts are of the opinion that this device which is currently selling in Europe since 2005 and in 70 other international locations would witness relatively high demand in the U.S. if it’s is priced appropriately. Though the company management has yet not revealed the price of the product, analysts have estimated that it would be in the range of $10,000-$20,000.
The management optimism has been recently shared during an investor update where it has been stated that this device could possibly generate $500 million in sales over the next five years in the U.S. alone, since several U.S. patients are seeking for better treatment alternatives for their AF disorder. In 2014, the device sales fetched around $41 million for the company from Europe and other countries where it is being presently sold, and now with the U.S. FDA approval the sales figure will dramatically show an uptick in the coming years.
Parting thoughts
Boston Scientific stands to gain from all ends after this approval and this device will serve as a magical wand for those who have been waiting for better options to be released for treatment of AF disorder in the long run. Let’s stay tuned to catch up with the improvement in the device sales that will be reflected in the upcoming quarter results of the fiscal year after the company begins to sell the device in the home turf.
