Does This Johnson & Johnson Product Have Blockbuster Potential?

JNJ's European approval for a renal denervation device was unexpected, but more work needs to be done.

Feb 26, 2014 at 9:40AM

It's not often that a single clinical trial wipes out an entire therapeutic opportunity, but that is what most sell-side analysts seem to believe about Medtronic's (NYSE:MDT) U.S. pivotal trial failure with its Symplicity renal denervation device. In the wake of Medtronic's surprising setback, both St. Jude Medical (NYSE:STJ) and Boston Scientific (NYSE:BSX) have hit "pause" on their renal denervation programs, while Covidien (NYSE:COV) has chosen to tap out, ending development of its OneShot system altogether.

There may be life in the approach yet, though. Johnson & Johnson (NYSE:JNJ) recently announced that it received European approval (the CE Mark) for RENLANE system, a multi-electrode RF ablation device that many people didn't even know was in development. That begs the question of whether this means there is opportunity yet in what was once touted as a multibillion-dollar area.

Where J&J is at
To be sure, a CE Mark is not an especially high bar to achieve – companies have to demonstrate safety, but not efficacy, to get this approval and actual commercial acceptance is usually dependent upon data from subsequent successful studies (including U.S. pivotal studies). Given that there really haven't been any significant safety issues reported thus far in renal denervation, the fact that the RENLANE is safe enough to garner a CE Mark really says almost nothing about the quality or distinctiveness of Johnson & Johnson's device.

It's also worth noting that timing can play a role. There is always a gap between a submission for CE Mark and receipt (or rejection), and it is highly likely that Johnson & Johnson submitted before the news of Medtronic's trial failure. At that point there would have been nothing to gain by pulling the submission.

What this means to me is that Johnson & Johnson's RENLANE approval is more of a reminder that they are involved than anything else. Without efficacy data there is little chance of meaningful commercial adoption – the systems developed by Medtronic, St. Jude Medical, and Boston Scientific all have CE Marks, but they are not actively commercialized.

What happens now?
Generally speaking, the renal denervation devices of these major cardiovascular companies have all showed similar blood pressure reductions in the neighborhood of 30mmHG at six months. A key caveat, as seen in the Medtronic pivotal study failure, is that these reductions have been obtained without ambulatory blood pressure monitoring (the gold standard) and a sham control group. 

It seems unlikely that any of these devices will be able to show such an impressive reduction in a rigorous study designed like Medtronic's HTN-3, particularly as though there are some differences in device design (balloon or no balloon, irrigated or not, the number and pattern of electrodes), the basic approach (RF ablation) is effectively the same.

That may not be the last word, though. If these companies aim for a lower bar of efficacy (say, around 15 mmHG reduction), it may be possible to show statistically significant efficacy. Such a reduction would limit the size of the eligible patient population and the revenue opportunity, but it would likely be enough to support multiple multihundred million dollar devices. 

Medtronic has yet to announce its plans, waiting instead to present full data on the HTN-3 study and reexamine the efficacy of the device. St. Jude had suspended its pivotal study of the EnligHTN device with the intention of redesigning it to use Symplicity as a control in a non-inferiority study. If St. Jude wishes to go forward now, it will almost certainly have to be a randomized study similar to HTN-3 with a sham control.

Likewise for Boston Scientific – management said that they were pausing their development to contemplate the significance of the Medtronic setback, but that the company intends to move forward. I would expect that Boston Scientific (as well as St. Jude, Johnson & Johnson, and perhaps Medtronic) will be examining whether they can move forward with a lower blood pressure reduction target as part of a sham control study.

The bottom line
It may be premature for sell-side analysts to take their expectations for renal denervation from $3 billion in total to zero, but such is how Wall Street works. It is not unreasonable, though, to say that this is no longer a blockbuster potential market unless and until a company can deliver the sort of blood pressure reduction seen in early studies in a rigorous pivotal study.

All of that said, there are many products out there with addressable markets of less than $1 billion that these companies pursue quite aggressively; Medtronic, Boston Scientific, and Covidien may regret the large sums they paid to buy their way in via M&A, but the opportunity to salvage a few hundred million dollars a year in revenue has not disappeared entirely just yet.

Looking for more growth stocks?
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Stephen D. Simpson, CFA has no position in any stocks mentioned. The Motley Fool recommends Covidien and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson and Medtronic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information