Boston Scientific reported today its Q2 2020 results which show a very sharp decline in earnings due to the impact of the Covid-19 pandemic. Specifically for the active implantables industry, CRM dropped from $498M in Q2 2019 to $351M this quarter (-29.4%), and likewise neuromodulation dropped from $204M to $122M (-40%).
Image Credit: Nuvectra
Back in 2013, implantable-grade component manufacturer Greatbatch Medical (now Integer Holdings) briefly entered the finished devices market with its own Algostim Spinal Cord Stimulator.
However, when Greatbatch acquired CCC Medical in 2014, having the Algostim SCS was seen as a conflict of interest by some of CCC’s SCS customers (e.g. Nevro), so in 2015/2016 Greatbatch divested its SCS business into a new company called Nuvectra.
Nuvectra never caused much of an impact in the SCS market, and trailed well behind Abbott, Boston Scientific, Medtronic, and Nevro. After limping along for a number of years, on November 12, 2019, Nuvectra filed for Chapter 11 bankruptcy.
Cirtec Medical, a competitor of Integer’s CCC in the development of implantable devices, acquired Nuvectra’s IP and assets. Cirtec intends to leverage this technology to support customers’ development of neuromodulation products, providing an FDA approved platform with a complete design history file for a variety of therapeutic applications.
The Nuvectra assets acquired by Cirtec include all owned intellectual property associated with the SCS, SNS, and DBS platforms developed by Nuvectra.
My ex-colleagues from Intermedics may remember the Benchmark Electronics plant across the street in Angleton that used to manufacture some of our external devices. Benchmark announced that it plans to close the Angleton facility within a year, impacting approximately 190 plant employees.
Benchmark Electronics was founded in 1979 as “Electronics, Inc.” in Clute, Texas, as a manufacturing subsidiary to Intermedics. The company specialized in low-volume, complex assembly of medical products. It was bought from Intermedics by its managers in 1986, and went public in 1990. In 1994 Benchmark moved its headquarters to 3000 Technology Drive in Angleton, right across from Intermedics’ headquarters.
Benchmark continued growing, acquiring along the way plants and design centers in the US, Europe, and Asia.
In 2017 Benchmark Electronics relocated its corporate headquarters to Arizona so it could consolidate corporate headquarters staff in one location, expand its engineering capabilities through a partnership with Arizona State University, and position the company closer to its aerospace and defense customers.
On June 4, 2020, Benchmark will shutter the 109,000 sq. ft. plant in Angleton at some point between Jan. 1 and Jul. 1, 2021. According to the announcement, workers from the Angleton plant will be eligible to apply for open positions in other company locations.
Image Credit: Second Sight Medical
Second Sight Medical Products, a developer, manufacturer and marketer of implantable visual prosthetics that are intended to create an artificial form of useful vision for blind individuals, announced in March that because of the impact of COVID-19 on its ability to secure financing, it would lay off the majority of its employees as a first step to an orderly wind-down of its operations.
Second Sight had created the only FDA-approved implantable visual prosthetic treatment (Argus II) for severe retinitis pigmentosa. To date, more than 350 patients have received an Argus II implant. More recently, the company developed the Orion implant, which is placed directly onto the visual cortex of the patient’s brain. Signals received from a miniature camera integrated within a pair of glasses are fed to the implant and interpreted as “vision” by the brain. At the time of the closure announcement, the company was conducting a feasibility study with the Orion device implanted in six blind patients. Second Sight had been working towards a larger “pivotal” trial of the Orion implant, while all of the patients taking part in the small-scale study had reached the 12-month mark.
The closure announcement was made shortly after Second Sight provided its 2019 financials that showed an operating loss of $34 million during the year, on sales of less than $4 million. Operating capital came mostly from $35 million cash that the company raised in a shareholder rights issue about a year ago.
On May 5, 2020, Second Sight closed an offering of its common stock worth approximately $6.8 million. Second Sight intends to use the proceeds for “accrued expenses, working capital and general corporate purposes. Those expenditures may include partnerships, business combinations, acquisitions or investments.”
Second Sight Medical’s assets are going up for auction tomorrow (June 25):
“The auction will feature Second Sight’s medical device manufacturing equipment, laboratory assets and office furniture located in Sylmar, Calif. Items available include laser systems, oscilloscopes, spectrum analyzers, scientific microscopes, laboratory refrigerators and freezers, ultrasonic cleaners, vacuum pumps, probe systems, computers, office equipment and more, according to a auction company GA Global Partners.”
Ethylene oxide (EtO) is a chemical that is used to sterilize more than 50% of all medical device types and is crucial for preventing infection in patients undergoing surgeries and other medical treatments. For active implantable medical devices, EtO is pretty much the only option for sterilization. Alternative methods such as steam, radiation, or other sterilants either damage the device or do not achieve the needed levels of sterility assurance.
The US Environmental Protection Agency has been waging a war against the use of EtO by establishing an unreasonably low value for EtO concentration in its Integrated Risk Information System (IRIS). AdvaMed (the Advanced Medical Device Association) has urged the EPA to reassess its EtO value for one that is more feasible, based on the best available science and that will not potentially endanger the public health by threatening the availability of needed medical technologies.
AdvaMed President and CEO Scott Whitaker stated:
“… EPA’s EtO risk assessment standard is unworkable and not based on the best available science. The agency’s failure to address these valid scientific concerns surrounding their value threatens not only the medical technology supply chain but the tens of millions of American patients that rely on EtO-sterilized devices. We ask the agency to follow its own scientific recommendations and develop a revised EtO risk assessment standard that will effectively protect the public health and not disrupt patient access to needed medical technology.”
Click here to read AdvaMed’s complete response to the EPA.
On February 5 Boston Scientific announced results for the fourth quarter and full year 2019. For implantable devices, the relevant numbers are:
Q4:
FY 2019:
EndoStim was a medical device company based in Dallas, Texas, and Nijmegen, The Netherlands, developing and commercializing a treatment for gastroesophageal reflux disease (GERD).
On October 15, 2019 EndoStim terminated its Clinical Investigation of the EndoStim® Lower Esophageal Sphincter (LES) Stimulation System due to lack of funding. According to a letter sent by EndoStim to its investigators, clinical and technical support will no longer be available for the devices after January 14, 2020
EndoStim terminated operations and entered into an Assignment for Benefit of Creditors under Delaware law, which is a state law liquidation procedure similar to a Chapter 7 bankruptcy.
The medical device tax is a part of the Affordable Care Act which imposes a 2.3% excise tax on the price of taxable medical devices sold in the United States.
The tax was in effect between 2013 and 2015, and caused a 29,000 decline in industry jobs, as well as decreases in R&D spending, which according to the nonpartisan Tax Foundation, led to “less innovation and as a result, worse patient care.”
The tax has been suspended since 2016, but the current moratorium will expire by the end of 2019, unless Congress extends it or repeals the tax outright.
An analysis released today by the nonpartisan Tax Foundation reports that the return of the medical device excise tax would lead to a loss of 21,390 U.S. medical technology jobs and a $1.74 billion decline in the nation’s GDP. Most importantly, it will harm patients in need of medical devices.
Although there’s broad bipartisan consensus that the medical device tax is bad for jobs, is flawed health and tax policy, and ultimately hurts American patients, representatives are too busy with politics to take care of the people who elected them.
Please call your representative and urge him/her to permanently repeal this tax before adjourning this year!
Impulse Dynamics (where I’m Executive VP of Product Development) announced today the completion of an $80.25 Million Series D financing round with major new investors, including strategics. According to the press release:
“Impulse Dynamics, developer of Optimizer® Smart System for delivering CCM™ therapy, announced the completion of an $80.25 million Series D financing with new investors. The proceeds will be used primarily to facilitate U.S. commercialization of the Optimizer Smart, an FDA-approved implantable device for treating chronic heart failure that has been proven to strengthen the heart and help it beat more forcibly. Led by well-respected medical technology investor Amzak Health Investors, the round also included Wellington Management, Kennedy Lewis Investment Management, Acorn Biosciences and Minth Holdings Limited; strategic investors Zoll Medical Corporation, Abiomed and one additional corporate investor; and the company’s chief executive and chief financial officers.”
Medtronic released its FY2020 Q2 results which show a 3.1% decrease in CRM/HF:
“Cardiac Rhythm & Heart Failure second quarter revenue of $1.426 billion decreased 3.1 percent as reported or 1.9 percent on a constant currency basis. Arrhythmia Management grew in the low-single digits, driven by mid-single digit growth in Pacemakers on continued strength of the Micra™ transcatheter pacing system, as well as low-double digit growth in AF Solutions, all on a constant currency basis. Arrhythmia Management growth was offset by low-double digit declines in Heart Failure, including high-thirties declines in sales of left ventricular assist devices (LVADs), both on a constant currency basis.”
The press release also reported a decline in spinal cord stimulation sales:
“Pain Therapies second quarter revenue of $315 million increased 0.3 percent as reported or 1.3 percent on a constant currency basis. Interventional Pain grew in the low-double digits on the strength of Kyphon™ balloon kyphoplasty and OsteoCool™ RF ablation system sales. This was offset by declines in Pain Stimulation, reflecting the slowdown of the spinal cord stimulation market.”
Boston Scientific announced today its financial results for Q3 2019. According to the press release, Cardiac Rhythm Management went up from $475M in Q3 2018 to $478M in Q3 2019.
In its neuromodulation business, Q3 2019 brought $222M compared to $189M for the same period last year.
Among recent developments, Boston Scientific “Announced the U.S. Food and Drug Administration (FDA) approval of ImageReady™ MRI labeling for the Vercise Gevia™ Deep Brain Stimulation (DBS) System to be used in a full-body magnetic resonance imaging (MRI) environment .”
Medtronic announced today its financial results for its first quarter of fiscal year 2020. As a whole, the company reported first quarter worldwide revenue of $7.493 billion, an increase of 1.5 percent.
However, Cardiac Rhythm & Heart Failure decreased 3.1 percent as reported (1.2 percent on a constant currency basis). According to the press release”
“Arrhythmia Management grew in the mid-single digits on a constant currency basis, driven by mid-single digit growth in Pacemakers, including mid-twenties growth of the Micra® transcatheter pacing system, as well as mid-thirties growth of the TYRX® absorbable antibacterial envelope, high-single digit growth of the Reveal LINQTM insertable cardiac monitoring system, and high-single digit growth in AF Solutions, all on a constant currency basis. Arrhythmia Management growth was offset by low-double digit declines in Heart Failure, including high-forties declines in sales of left ventricular assist devices (LVADs), both on a constant currency basis.”
Pain Therapies, the other area of Medtronic’s business that depends heavily on active implantable medical devices also took a hit, with first quarter revenue of $292 million decreased 7.0 percent as reported or 6.1 percent on a constant currency basis. The announcement explains:
“Pain Stimulation declined in the low-double digits, reflecting channel destocking and the overall slowdown of the spinal cord stimulation market.”
Boston Scientific’s Q2 2019 results are out, and they show very weak growth for Cardiac Rhythm Management.
According to the announcement, Q2 2019 CRM sales were $498M, compared to $494M for the same period last year, which constitutes a 0.6% increase on reported basis.
Neuromodulation grew from $202M last year to $204M, or 1.0% on reported basis.
Medtronic Reported its Fiscal Year and Fourth Quarter 2019 Financial Results, showing a Q4 Revenue of $8.1 Billion, Flat as Reported and Grew 3.6% Organic – Q4 GAAP Diluted EPS of $0.87; Q4 Non-GAAP Diluted EPS of $1.54. FY19 Revenue of $30.6 Billion Grew 2.0% Reported and 5.5% Organic.
However, Cardiac Rhythm & Heart Failure fourth quarter revenue of $1.554 billion decreased 4.8 percent as reported or 1.4 percent on a constant currency basis. Arrhythmia Management grew in the mid-single digits on a constant currency basis, driven by high-twenties growth of the TYRX® Absorbable Antibacterial Envelope, high-teens growth of the Reveal LINQ(TM) Insertable Cardiac Monitoring System, and mid-teens growth in AF Solutions, all on a constant currency basis. This was offset by low-double digit declines in Heart Failure, including high-thirties declines in sales of left ventricular assist devices (LVADs), both on a constant currency basis.
In the Restorative Therapies Group, Pain Therapies fourth quarter revenue of $342 million increased 3.0 percent as reported or 5.4 percent on a constant currency basis. The division had high-single digit constant currency growth in Targeted Drug Delivery, and mid-single digit constant currency growth in Pain Stimulation on the continued strength of the Intellis(TM) platform.
Interpreting financial results to gauge the health of our Industry used to be easier when manufacturers had dedicated CRM and other implantable divisions. Now it takes going into detailed financial statements to be able to separate the performance of implantables from other device-based therapies in the newly agglomerated divisions.
With that in mind, let’s look at Medtronic’s latest financial results (third quarter of fiscal year 2019, which ended January 25, 2019):
Overall results for Medtronic plc (NYSE: MDT):
Cardiac Rhythm & Heart Failure
“Cardiac Rhythm & Heart Failure revenue of $1.397 billion decreased 4.1 percent as reported or 2.3 percent on a constant currency basis. Arrhythmia Management grew in the mid-single digits on a constant currency basis, driven by the continued uptake of the Micra® Transcatheter Pacing System and the Azure® wireless pacemaker. Arrhythmia Management results were also driven by mid-twenties growth of the TYRX® Absorbable Antibacterial Envelope and mid-teens growth in AF Solutions, both on a constant currency basis. This was offset by mid-teens declines in Heart Failure, including mid-forties declines in sales of left ventricular assist devices (LVADs). ”
Pain Therapies
“Pain Therapies revenue of $314 million increased 4.7 percent as reported or 5.7 percent on a constant currency basis. The division had high-single digit constant currency growth in Pain Stimulation on the continued strength of the Intellis(TM) platform for spinal cord stimulation. The division also had mid-single digit constant currency growth in Interventional Pain.”