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Boston Scientific’s WATCHMAN Could be a Potential Winner, Despite Headwinds
Stock Analysis & Ideas

Boston Scientific’s WATCHMAN Could be a Potential Winner, Despite Headwinds

A global medical technology company, Boston Scientific (S&P 500: BSX), is focused on transforming lives through innovative medical solutions to improve the health of patients globally. Accretive acquisitions and an updated pipeline of the company’s products instill optimism in investors. Therefore, Boston Scientific has performed decently year-to-date, recording a gain of around 25%.

Furthermore, the company has strong footing in emerging markets, including Brazil, China, India, and Russia. Recently, the company received a CE Mark (European health and safety approval) for the EXALT Model B Single-Use Bronchoscope. It is a single-use device, which is designed for bedside procedures in the intensive care unit, operating room, and bronchoscopy suite.

This April, the company revealed positive 12-month results of the PINNACLE FLX clinical trial in circulation. It demonstrated the next-generation WATCHMAN FLX Left Atrial Appendage Closure (LAAC) device, which seems to be a safe and effective alternative solution to oral anticoagulation therapy for stroke risk reduction in patients. These patients are sufferers of non-valvular atrial fibrillation and have a high risk of bleeding. (See Boston Scientific stock chart on TipRanks)

Commenting on the positivity of the device recently, Needham analyst Michael Matson said that Boston Scientific’s LAAC device seems to be “one of the most important growth drivers” for the company.

Matson estimates WATCHMAN sales to be $734 million in 2021, up 78% year-over-year. The device is expected to add around 260 basis points to Boston Scientific’s organic revenue growth this year, and an average of about 160 bps to annual organic growth through 2023.

At its 2019 investor day, Boston Scientific put forward its expectation of the overall structural heart market to reach approximately $8 billion in 2022. Furthermore, the company expects the overall LAAC market to accomplish about $1 billion in 2023, driven by “penetration into high bleeding risk patients,” and more than $2 billion in 2025, driven by “penetration into low-to-moderate bleeding risk patients,” according to the analyst.

However, the analyst is concerned about the competitive aspect. Notably, Abbott Laboratories’ (ABT) Amulet can be its first domestic competitor. Amulet expects to receive FDA approval in the second half of this year.

According to the analyst, although Amulet received a CE Mark in 2013, around 8 years after WATCHMAN received its CE mark, Amulet was successful in Europe around 3 years post-launch. Additionally, the meta-analysis of the two devices reflects very similar safety and efficacy, Matson added.

Though the U.S. market is huge and underpenetrated, the 5-star analyst views that the launch of Amulet in the U.S. could prove to be a headwind for WATCHMAN’s growth trajectory. “While WATCHMAN has had exclusive access to the US market since its FDA approval in 2015,” Matson believes that “the European experience indicates that Amulet could see rapid adoption in the US.”

Furthermore, Johnson & Johnson’s (JNJ) LAAC device, which is likely to get approval in late 2023, can be another competitor, he added.

Therefore, maintaining a Hold rating on the stock, Matson believes that Boston Scientific’s diversified portfolio and the pipeline are likely to yield high-single-digit revenue growth. He expects product mix, cost reduction efforts, and operating leverage to boost earnings growth into the double-digits.

Consensus among analysts is a Strong Buy based on 15 Buys and 4 Holds. The average Boston Scientific price target of $49.56 implies 12.8% upside potential from current levels.

Bloggers Weigh In

TipRanks data shows that financial blogger opinions are 100% Bullish on BSX, compared to a sector average of 69%.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your analysis before making any investment.

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