Anyone with a heartbeat in the cardiology space understands the tremendous disruption that percutaneous aortic valve replacement (referred to as TAVR), is causing in the market for the treatment of aortic stenosis. It is well accepted that a minimally invasive approach is equivalent to open surgery in high-risk surgical patients (>15% mortality risk) and in patients deemed inoperable. Aortic valve replacement in these patients is one of the most powerful treatments in medicine. The risk of death in within two years declines over 20% when aortic stenosis is repaired in these patients.
The two main leaders in this field are Edwards Lifesciences (NYSE:EW) and Medtronic (NYSE:MDT). The Edwards Sapien Valve and the Medtronic CoreValve are both approved for this indication; the Edwards valve has been in widespread use in the United States since 2011, and Medtronic was 'welcomed' to the field in January 2014 (welcomed with a patent lawsuit from Edwards and a temporary injunction against sale of the valve. This was quickly removed). Medtronic released data indicating that the risk of stroke was lower in patients with extreme risk undergoing TAVR when compared to the Edwards valve (4.1% vs. 4.6%), but other studies have suggested the risk is equal.
The current market is just the tip of the iceberg
While the Medtronic valve has been popular with surgeons, it is essential to note that these high risk and inoperable patients are only 10% of the market for TAVR.
The true financial impact of these technologies will be felt when a device is approved for patients who are less sick. 30% to 40% of patients are intermediate risk, and ~60% are low risk for surgery. With a cost north of $30,000 per valve , and approximately 360,000 patients with aortic stenosis in the United States, the lucrative portion of this market is still for the taking.
The growth of TAVR is driving the value of the valve repair market well over $1 billion dollars annually in the United States. The global market is expected to top $2 billion by 2015. The number of cases will continue to explode as the population ages.
While extreme risk patients comprised the initial work in this industry, the future investment focus needs to be on anticipating which firms will come to dominate the market for patients who are at intermediate risk for open surgical repair. Two trials are currently ongoing in this space; the PARTNER2 trial (Edwards) and the SurTAVI (Medtronic) trial are both evaluating this patient population.
The race to intermediate risk patients
Analysis of trial data demonstrates that the patients receiving the valve have had lower risk scores and lower event rates than would be expected for a group deemed 'intermediate risk'.
The implications of this are clear: TAVR will expand into the low-risk market in the next few years. Many clinicians are already pushing the envelope to use this minimally invasive option. Low risk patients, many of whom do not have the comorbidities that drive adverse outcomes, are walking into the office asking for this technology.
Innovation required for TAVR to reach low risk patients
A close reading of the literature will demonstrate that the primary issue with TAVR compared to open surgery in low risk patients is the degree of 'paravalvular leak' (leaking around the replaced valve), that occurs in patients, particularly those at low risk of complications from a traditional open surgery. Paravalvular leak has been demonstrated in some studies to be an independent risk factor for death in TAVR cases. The FDA would not look kindly on excess death in patients who get TAVR but were low-risk for death by a traditional, open surgical approach. I anticipate that paravalvular leaks will be reduced as imaging, valve sizing, deployment technologies, and material science improve.
I expect Edwards to be the early winner in the intermediate market, given the company's experience in this space. The smart Fool must then ask: 'which companies are innovating to solve the problem of paravalvular leak and to improve material design of these valves so there is justification for expanding TAVR further into the low surgical risk patient with aortic stenosis (60% of the market for valve replacement)?' Keep reading, Fools. Keep reading. But stay tuned, because this enormous opportunity could make a big difference for these stocks over the long haul.