Historical Stock Chart
2 Years : From Aug 2012 to Aug 2014
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
Subscribe to WSJ: http://online.wsj.com?mod=djnwires