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.DL) 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.