Scientia Med Devices Cardiovascular Fall 08
- 1. All Materials copyrighted and can not be used without explicit permission 2008 Scientia Advisors, LLC Boston ■ Palo Alto Scientia Advisors LLC One Main Street, 7th Floor Cambridge, MA 02142 www.scientiaadv.com Medical Devices: Cardiovascular Overview By Scientia Advisors LLC All Materials copyrighted and cannot be used without explicit permission
- 2. All materials copyrighted and can not be used without explicit permission - 2 - Agenda • Medical Device Definitions and Classifications • World Wide Medical device Market Analysis » Sizing and Segmentation • Cardiovascular Medical Device Market » Introduction » Stents » Cardiac Rhythm Management » Valves » Catheters • Catheter Drill Down • Conclusions 1 2 3 4
- 3. All materials copyrighted and can not be used without explicit permission - 3 - What are Medical Devices*? • Definition: Approved medical technologies (not primarily dependent on chemical action or metabolism), which are used for diagnostic, treatment, and monitoring purposes. These technologies are either used in patient procedures by healthcare providers or directly used by patients. *Medical Devices include devices, instruments, materials and supplies within Cardiovascular, Diabetes, Respiratory, Neurology, GI & Urology, Surgical Equipment, Imaging, Orthopedics, Ophthalmology, Orthodontics, ENT, Hospital Supplies and Patient Monitoring and Assessment applications Applied Markets, certain Wound Care products (therapy surfaces), certain Infection control products (gloves, masks, drapes, sheets), sterilization equipment, waste management and in vitro diagnostics (IVD) are not included.
- 4. All materials copyrighted and can not be used without explicit permission - 4 - Classification of Medical Devices Medical Device Classification Guides Level of Regulation by the FDA • The Food and Drug Administration (FDA) regulates medical devices in the United States. » Medical devices are classified into Classes I, II, and III, with the regulatory control increasing in ascending order. » About 90% of medical devices fall into either Class I or II. Gloves, Bandages Infusion Pumps, Surgical Drapes Stents, Implantable Pacemakers Source: Scientia analysis, company 10‐K’s, Various analyst/industry/research reports • Class II devices are not innately benign by design. » General controls alone are insufficient to assure safety and effectiveness; existing methods must be available to provide such assurances. » They must comply with general controls and are also subject to special controls. Most Class II’s require a Premarket Notification (510K). • Class I devices are subject to the least regulatory control. » They present minimal potential for harm and are generally simpler than Class II or III. » Only general controls and labeling are required. About 5% of Class I devices require submission of a Premarket Notification (i.e.: 510K) before marketing. • Class III devices are of substantial importance in supporting, sustaining human life. » Safety and effectiveness cannot be secured solely through general or special controls. » Virtually all Class III devices require a Premarket Approval (PMA), which is more involved than a Premarket Notification (510K) . Class I Devices Class II Devices Class III Devices Class I 47% Class II 43% Class III 10%
- 5. All materials copyrighted and can not be used without explicit permission - 5 - Agenda • Medical Device Definitions and Classifications • World Wide Medical device Market Analysis » Sizing and Segmentation • Cardiovascular Medical Device Market » Introduction » Stents » Cardiac Rhythm Management » Valves » Catheters • Catheter Drill Down • Conclusions 2 1 3 4
- 6. All materials copyrighted and can not be used without explicit permission - 6 - 0 100 200 300 2007 2012 Cardiovascular Diabetes GI/Urology Orthopedics Neurology Hospital Supplies Respiratory Dental and Orthodontics Patient Monitoring & Assessment ENT Opthalmology Surgical Equipment Medical Imaging Worldwide Medical Devices Market A highly diverse, competitive market driven by innovation $189 B $288B • As the US population ages, the number of diseases and illnesses that require advanced medical equipment rises. As a result, medical devices is now one of the fastest growing segments in the health care market • Due to the highly competitive nature of the market, medical device companies must invest heavily in R&D and/or be acquisitive • Historically, growth in the medical devices industry has been mainly driven by the cardiovascular, diabetes and orthopedic segments • Cardiovascular, orthopedic and hospital supplies represent over 50% of the medical device market • The cardiovascular segment is the largest segment in the medical device industry but growth has slowed over recent years • Orthopedics, neurology and hospital supplies are expected to be the fastest growing markets in the medical device industry over the next few years The Global Medical Devices Market ($B) Key Trends and Growth Drivers 9% Source: Scientia analysis, company 10‐K’s, Various analyst/industry/research reports
- 7. All materials copyrighted and can not be used without explicit permission - 7 - Medical Devices Competitive Overview 48% of sales is generated by 10 major companies, and no company offers products in all segments • Highly fragmented. The medical devices market is highly fragmented; 48% of revenue is generated by the 10 major companies, with about 100 other companies making up the remainder » No single company plays across all segments • Traditional segments have entrenched market leaders. Consolidated players such as Boston Scientific and Medtronic will continue to dominate the market in traditional segments such as cardiovascular. Nevertheless, future product recalls and quality issues are likely to result in continually changing market shares. • Highly competitive market. Over the last several years, R&D expenditure and industry consolidation have increased as large companies, such as Boston Scientific and Medtronic look to bolster their product portfolios.Source: Scientia analysis, company 10‐K’s, Various analyst/industry/research reports Key Take‐Aways2007 WW Medical Devices Market : ~$189 B J&J Medtronic Baxter Covidien (Tyco) Phillips Healthcare Boston ScientificBecton Dickinson Stryker Alcon GE Zimmer St Jude Medical Smith & Nephew Toshiba Medical SystemsOlympus Bard DENTSPLY International Inc. Siemens Medical Invacare Carl Zeiss Other Sales
- 8. All materials copyrighted and can not be used without explicit permission - 8 - Medical Devices Geographical Split 75% of the market is in US and EU, but emerging markets are rapidly growing US 50% EU 25% Japan 10% ROW 15% • Europe and the US account for the majority of sales as they are the most advanced users and tend to adopt new technologies faster • Japan, a top global Medical Device market, has suffered from downward pricing recently as reimbursement s have been cut by the Ministry of Health, Labor, and Wellness • Established markets are growing moderately due to an aging population and expansion of fast growing segments such as orthopedics and neurological devices • The emerging markets are showing rapid growth: » Asia‐Pacific accounts for >50% of worlds’ elderly population » Health insurance markets are growing in India and China 2001‐2005 with a CAGR of 31.6 and 30.5% (health insurance purchases) » In China, only around 22% of the population is insured, and only 10% in India. Favorable trends such as reduction of market entry barriers in the health insurance markets/sectors of both these countries is expected to make healthcare services more accessible, thus enabling wider penetration.Source: Scientia analysis, company 10‐K’s, Various analyst/industry/research reports Key Take‐Aways2007 WW Medical Devices Market : ~$189 B
- 9. All materials copyrighted and can not be used without explicit permission - 9 - Agenda • Medical Device Definitions and Classifications • World Wide Medical device Market Analysis » Sizing and Segmentation • Cardiovascular Medical Device Market » Introduction » Stents » Cardiac Rhythm Management » Valves » Catheters • Catheter Drill Down • Conclusions 3 1 2 4
- 10. All materials copyrighted and can not be used without explicit permission - 10 - Orthopedics Medical Imaging Opthalmology Surgical Equipment Dental and Orthodontics GI/Urology ENT Patient Monitoring & Assessment Neurology Respiratory Diabetes Cardiovascular, Other Hospital Supplies, Other Cardiovascular Catheters Stents Cardiac Rhythm Management Valves Medical Device Market Segmentation Cardiovascular and Hospital Supplies Comprise ~25% of the Medical Device Market Source: Scientia analysis, market research reports, company reports and presentations Segments of ~189 B WW Medical Device Market Sub Segments of Cardiovascular Medical Devices Selected for Further Analysis
- 11. All materials copyrighted and can not be used without explicit permission - 11 - Cardiovascular Health Cardiovascular disease is a major problem in the US and an even bigger problem in the rest of the world Source: Scientia Analysis, www.medtronic.com, www.cdc.gov • US Prevalence of Cardiovascular Disease » 6.5% of Americans have had a history of myocardial infarction, angina, or coronary heart disease » Cardiovascular disease results in $300 B annually in health care expenditures (including medication) and lost productivity » Cardiovascular disease causes 36% of all deaths in adults over 25 years of age » One American will suffer from a coronary event about every 29 seconds, and one will die from a coronary event every minute • Worldwide Prevalence of Cardiovascular Disease 14% 9% 31%15% 11% 20% African Region Region of the Americas South-East Asia Region European Region Eastern Mediterranean Region Western Pacific Region 0 100 200 300 400 500 Africa Americas Southeast Asia Europe Eastern Mediterranean Western Pacific Prevalence of Cardiovascular Disease (per 100,000 people)
- 12. All materials copyrighted and can not be used without explicit permission - 12 - Cardiovascular Disease Cardiovascular diseases are interrelated and can be treated by a variety of methods, including medication, implantable devices, and surgery Stenotic valves in the heart, aorta, or pulmonary artery cannot open properly because the valve opening has narrowed. As a result, blood flow is obstructed. Valve stenosis is treated by replacing the defective valve with a tissue‐based or mechanical valve. Source: Scientia Analysis, www.medtronic.com, besttreatments.bmj.com, www.nlm.nih.gov, www.cdc.gov Atherosclerosis includes narrowing or hardening of the blood vessels due to plaque build‐up. Blood clots formed in the area can occlude the vessel completely. Treatment options include stent delivery or atherectomy via functionalized catheters. Atrial fibrillation occurs when the SA node, the heart’s pacemaker, emits irregular electrical signals, and causes the atrium to contract too quickly. As a result, the ventricles pump blood inefficiently. This is treated with ICDs or other cardiac rhythm management devices. Thrombosis is the blockage of an blood vessel due to a blood clot. It can cause myocardial infarction and can be associated with atherosclerosis. It is treated with anticoagulant, broken into small pieces, or aspirated to prevent clot fragments from occluding downstream vessels. VALVE STENOSIS ATHEROSCLEROSIS FIBRILLATION THROMBOSIS
- 13. All materials copyrighted and can not be used without explicit permission - 13 - Cardiovascular Health Segments The segments of interest are stents, catheters, and cardiac rhythm management Source: Scientia Analysis, analyst reports, company websites, www.fda.gov/cdrh/ode/guidance/1382.html, www.cdc.gov Stents are hollow metal mesh cylinders that keep blood vessels open in case of occlusion due to atherosclerosis or vessel damage. Drug‐eluting stents have been dev eloped to reduce the high rate of restenosis, or recurrent narrowing of the vessel, associated with bare metal stents. Despite safety issues surrounding drug‐eluting stents, companies such as ABT and MDT continue to launch new products in this area CRM tools are used to diagnose and correct an irregular heart rate through implantation of pacemakers or internal cardiac defibrillators. The ICD market is traditionally a robust market and stands to benefit from a growing customer base, however, it has recently been impacted by product recalls Stents Cardiac Rhythm Management Artificial valves replace malfunctioning valves that regulate blood flow between heart chambers or prevent blood in the veins from flowing away from the heart. Mechanical valves are made of biocompatible plastic, ceramic‐like materials, or polymers and require the continuous use of anticoagulants. Tissue valves can be constructed from allograft or porcine tissue, and may or may not have stents to provide support. Valves Catheters are thin tubes that are threaded through vessels to the heart for diagnosis or therapy (i.e. ablation or stent delivery). The torquing, flexibility, and inner/outer diameters are among the most important factors surgeons consider. Catheters should have large inner diameters to allow blood flow or instrument delivery but small outer diameters to traverse small vessels. Catheters Products used in cardiovascular surgery not described above include hemostats, platelet separators, flowmeters, retractors, and autotransfusion separators. Hemostats prevent excessive blood loss, resulting in fewer transfusions and lower cost. Extracorporeal circulatory support systems (“heart lung machines”) and oxygenators are used to keep blood oxygenated and flowing through the body in procedures when the heart is arrested. Other
- 14. All materials copyrighted and can not be used without explicit permission - 14 - Cardiac Rhythm Management The CRM market is expected to grow modestly as pacemakers and implantable defibrillators have matured Key Trends and Growth Drivers • Long‐term market growth may be partially driven by expansion into other indications. For instance, Boston Scientific doubled the eligible patient population for ICDs by expanding indications to include post‐MI patients without ventricular tachycardia. • The US market is currently saturated, and most growth is expected from international markets • Clinical trials are underway in order to stratify patients based on their risk for complications and screen them for eligibility. The results of the trials could increase sales if more patients are screened into the potential market. • The combination of CRM and remote patient monitoring follows the overall medical device trend of regularly monitoring patients to identify problems early. Key Success Factors • Good customer service • Ease of placing leads Unmet Needs • Electrical leads that will not fail after implantation; lead quality and durability is a concern The Cardiovascular Catheter Market ($B)Key Take‐AwaysCardiovascular Health Segments($B) 2007 WW Market, Major Players Source: Scientia Analysis, analyst reports • St Jude Medical • Medtronic • Boston Scientific 0 5 10 15 20 25 30 35 40 2007 2012 Cardio. catheters Stents CRM Heart Valves $24 B $35 B 8%
- 15. All materials copyrighted and can not be used without explicit permission - 15 - Stent Market The overall stent market is expected to decline very slightly, while the DES market is expected grow slowly and may face future competition from resorbable stents Key Trends and Growth Drivers • Coronary artery disease is still a major medical problem, driving the growth of this product category • Safety concerns around drug eluting stents have led to a decrease in demand from cardiac surgeons, however, recent studies have alleviated these concerns, and stent sales (particularly DES) are expected to pick up • The large stent players (Including Boston Scientific, Abbott, etc) are partnering with or purchasing small companies that are developing bioabsorbable stents • Bioabsorbable stents (still in development) are stents made of resorbable polymers such as Poly Lactic Acid (PLA), which can be coated or uncoated and present significantly less risk of complications such as thrombosis. They also offer a potential role as a drug delivery platform Key Success Factors • Long‐term studies demonstrating safety and efficacy • Ability to deliver stent to the site of occlusion Unmet Needs • Stents that do not persist in the vessel and as a result increase the risk of restenosis The Cardiovascular Catheter Market ($B)Key Take‐AwaysCardiovascular Health Segments($B) Note: The market share data was based on analysis from several different sources. 2007 WW Market, Major Players Source: Scientia Analysis, analyst reports, www.ptca.org In May 2008, MDT captured 20% market share with the launch of its new ENDEAVOR stent approved by the FDA in February. ABT’s new product is expected to be approved this year, which may also alter the competitive landscape. DRUG‐ELUTING STENTS • J&J • Medtronic • Abbott • Boston Scientific 0 5 10 15 20 25 30 35 40 2007 2012 Cardio. catheters Stents CRM Heart Valves $24 B $35 B 8%
- 16. All materials copyrighted and can not be used without explicit permission - 16 - Valves Market The valves market is a small market split between rapidly-growing tissue valves and declining mechanical valves Key Trends and Growth Drivers • Physicians have recently shifted to tissue valves because data has established long‐term durability comparable to mechanical valves. In addition, patients prefer tissue valves since mechanical valves require lifelong anticoagulation therapy. • The growth of the tissue valve market may be partly due to greater promotion of these valves, which tend to be more profitable than mechanical valves • The tissue valve market has been driven by technological innovation. While there are steady innovations in tissue valves, particularly to increase their durability, there have been few improvements in mechanical heart valves over the past 25 years. • Valve delivery to the heart is trending to minimally invasive approach rather than traditional open procedure. This could increase the number of patients indicated for valve replacement, driving market growth. Key Success Factors • Anticalcification coatings on tissue valves improves durability • Long‐term data proving safety and efficacy of valves • Transcatheter placement of heart valves that can be used in minimally invasive procedures The Cardiovascular Catheter Market ($B) Source: Scientia Analysis, analyst reports Key Take‐AwaysCardiovascular Health Segments ($B) 2007 WW Market Share, Major Players • Edwards Lifesciences • Medtronic • St Jude Medical • Other 0 5 10 15 20 25 30 35 40 2007 2012 Cardio. catheters Stents CRM Heart Valves $24 B $35 B 8%
- 17. All materials copyrighted and can not be used without explicit permission - 17 - Drill Down into Cardiovascular Catheters
- 18. All materials copyrighted and can not be used without explicit permission - 18 - Cardiology: Catheter Ablation Surgical procedure that corrects cardiac arrhythmias ARRHYTHMIAS » Arrhythmias (or dysrhythmias) issues that affect the electrical system of the heart muscle, producing abnormal heart rhythms » They can cause the heart to pump less effectively and potentially lead to serious conditions and/or high risk of heart disease, stroke and sudden cardiac death CATHETER ABLATION » One of several procedures for arrhythmia correction » Catheter Ablation is a procedure to restore normal rhythm by destroying very small, carefully selected parts of the heart that cause an arrhythmia Source: http://www.americanheart.org Abnormal heart rhythms Ablation Catheter Normal ECG Abnormal ECG
- 19. All materials copyrighted and can not be used without explicit permission - 19 - Cardiac: Catheter Ablation Catheter ablation requires a specialized catheter that delivers energy to destroy problematic tissue TECHNIQUE » A catheter is threaded into the heart. The tip of the catheter is guided to the area of heart tissue that is causing the abnormal heart rhythm. Then the catheter emits a pulse of painless radiofrequency energy or intense cold that destroys the abnormal tissue and corrects the irregular heartbeat. CATHETER USE » The cardiac ablation catheter is inserted into a blood vessel (artery or vein), usually through a site in the upper leg or neck. The tube is advanced through the blood vessels until it reaches the heart. The catheter is navigated by images created by fluoroscopy (x‐ray based) » Inside the heart, electrodes at the catheter tip gather data that pinpoint the location of faulty tissue (electrical mapping). Once the site is identified, the device delivers either radiofrequency energy (RF ablation) or intense cold (cryoablation) to destroy the small section of tissue Left Atrium Left Ventricle Right Atrium Right Ventricle Area producing abnormal signalsAblation Catheter Source: http://www.americanheart.org www.medtronic.com www.fda.gov Ablation Catheter
- 20. All materials copyrighted and can not be used without explicit permission - 20 - 0.0 1.0 2.0 3.0 4.0 2007 2012 2017 Ablation Catheters Cardiac: Catheter Ablation Catheter Ablation is the best alternative for arrhythmia correction 2007 Ablation Catheters (US $ B) Medtronic JNJ Boston Scientific BardSt Jude Others Definition Catheter ablation is a type of treatment for cardiac arrhythmias correction. During the procedure, a doctor inserts a catheter into the heart. A special machine delivers energy through the catheter to tiny areas of the heart muscle that cause the abnormal heart rhythm. This energy “disconnects” the pathway of the abnormal rhythm Key Market Drivers The Ablation Catheter market is driven by the increase in heart rhythm diseases and disorders » Atrial Fibrillation (a form of cardiac arrythmia): There are more than 2 million cases in the U.S. and about 160,000 new cases are diagnosed each year, making it a very common heart rhythm disorder. » Although it isn't life threatening, atrial fibrillation can lead to other rhythm problems, chronic fatigue, stroke, sudden cardiac death and congestive heart failure Cardiac catheter ablation is a relatively non‐invasive procedure. It has proven successful for many types of arrhythmias, (~98 % of cases) thus eliminating the need for open‐heart surgeries or long‐ term drug therapies Movement for ablation as first line treatment. Novel mapping techniques for surgical ablation have been developed over the last years further increasing the use of this procedure CAGR: 13% $2.0B $3.8B $4.3B Source: Scientia analysis, Kalorama , http://my.clevelandclinic.org http://www.americanheart.org, http://www.hrspatients.org 2007 Major Players in Ablation Catheters SCIENTIA CONFIDENTIAL
- 21. All materials copyrighted and can not be used without explicit permission - 21 - Agenda • Medical Device Definitions and Classifications • World Wide Medical device Market Analysis » Market Channels, Value Chain » Sizing and Segmentation • Cardiovascular Medical Device Market » Introduction » Stents » Cardiac Rhythm Management » Valves » Catheters • Catheter Drill Down • Conclusions4 1 2 3
- 22. All materials copyrighted and can not be used without explicit permission - 22 - Scientia Thesis • The global medical device market is a $192 B market growing rapidly at 9% per year • The cardiovascular segment of the medical device market is the largest, but orthopedics, neurology, and hospital supplies are the fastest‐growing • Western medical device markets (US & EU) dominate, however, emerging markets are growing rapidly • From a competitive standpoint, the medical device market is highly fragmented; the 10 biggest companies control only 48% of the market share and no company offers products in all segments. • Cardiovascular disease is a major problem both in the US and the rest of the world • Cardiovascular diseases can be treated with medication, implanted devices, or surgery, with trends towards minimally invasive surgery. • The fastest‐growing subsegments within the cardiovascular segment are cardiac rhythm management and cardiovascular catheters. • The important characteristics of cardiovascular catheters and their guidewires are torquing, flexibility, and dexterity. Source: Scientia Analysis
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