By Joseph Walker
St. Jude Medical Inc. (STJ) got approval Monday to sell its
heart-valve-replacement devices in Europe, opening a new market
that so far has been dominated by its competitors.
St. Jude's Portico device will be available immediately in
Europe for a limited portion of patients who need new heart valves
but are too unhealthy to have open-heart surgery. The devices have
the potential to create a significant new revenue stream for St.
Jude as sales have stagnated or declined in its other
businesses.
Share are recently up 1.63% to $35.60.
The company will have to play catch-up with devices from Edwards
Lifesciences Corp. (EW) and Medtronic Inc. (MDT), which have been
on the market in Europe for several years. Those companies have
already begun developing next-generation versions of their
products.
St. Jude also has advantages. It's a giant supplier of older
heart valve replacement technology and has relationships with many
cardiologists. In addition, the company says that its device gives
physicians more flexibility when implanting the devices, and could
lead to fewer health complications.
Approval for Portico "gives us the ability to address the
limitations of the other devices that are available," said Frank
Callaghan, head of cardiovascular ablation technologies.
Surgery-less procedures, known as transcatheter aortic
replacement, have created a market opportunity of up to $3 billion
for medical device companies, estimates Thomas Gunderson, a Piper
Jaffray analyst. While competitors have had a head-start in gaining
new customers, St. Jude may be able to catch up quickly.
"St. Jude knows all the top valve centers. They know all the
surgeons," said Mr. Gunderson. "They'll get a little bit more of a
running start."
In addition, the market is relatively immature, with companies
still jostling for position as they train physicians in how to use
their devices.
"You're talking about a three-way split among the major"
suppliers, now that St. Jude's device has been approved, said Mr.
Gunderson. There are several smaller companies with approval, but
aren't thought to command much of the market for the transcatheter
aortic replacement valves.
The procedures are used to treat certain patients with severe
aortic stenosis, a fatal condition where the passage of blood
between the heart and the aorta, the artery responsible for
distributing blood throughout the body, is blocked.
Open-heart surgery is considered the safest and most effective
way to implant a new heart valve, but some patients are either too
unhealthy or are otherwise considered at a risk of death or
complications from surgery.
The devices implant a new valve through a small catheter tube
inserted through the femoral artery in the leg or another artery.
While the procedure have been effective in staving off heart
failure in many patients, the procedures have shown a higher
instance of stroke and other complications like paravalvular
leak.
St. Jude's says its device allows physicians to reposition the
valves during the procedure, enabling them to more safely avoid
incorrect placements, which are often the cause of
complications.
The Portico device was approved for use with a 23-millimeter
valve and through the femoral artery in the thigh or groin, which
will enable the company to reach about 20% of eligible patients,
said Larry Biegelsen, a Wells Fargo analyst.
St. Jude expects to receive approvals for additional sizes and
delivery points next year.
"We think Portico is capable of participating in all segments of
the market," Mr. Callaghan said. "We have other valve sizes and
you'll be seeing those in 2013."
As the technology behind the devices becomes more sophisticated,
some analysts say, the procedure is likely to be expanded to a
wider range of patients who now have surgery.
Mr. Gunderson of Piper Jaffray expects that over the long-term,
about half of the procedures will be done with transcatheter
devices.
Some physicians in Europe have already begun to use the device
with patients who are eligible for surgery, some studies have
shown.
Mr. Callaghan said that he is optimistic that St. Jude will
begin a U.S. trial for device approval in 2013.
Edwards Lifesciences is the only firm to have its device
approved in the U.S. In its third quarter, Edwards said it
generated $123.8 million from its product, called Sapien, up 50%
from a year earlier. Shares are recently down 1% to $84.96.
Write to Joseph Walker at Joseph.Walker@dowjones.com
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