Test seen unlikely to crimp defibrillator sales
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Medicare’s decision to pay for a test that determines whether someone needs an implantable heart defibrillator will likely have little immediate impact on the $10 billion market for the devices, analysts said.
Medicare, the federal health insurance program for the elderly and disabled, Tuesday agreed to pay for the test, developed by Cambridge Heart Inc., a tiny company based in Bedford, Massachusetts.
Cambridge Heart has estimated that about one-third of the 1.3 million Americans with abnormal heart rhythms do not need implantable cardioverter defibrillators, or ICDs. But some ICD makers and industry analysts think the test could actually help sales.
The stopwatch-sized devices that detect dangerous heart rhythms and deliver a shock to restore a normal rhythm are key to the fortunes of the world’s biggest medical device makers, including Medtronic Inc., St. Jude Medical Inc. and Guidant Corp., which is being acquired by Boston Scientific Corp.
“We believe the impact on the ICD market will be limited,” JP Morgan analyst Michael Weinstein wrote in a research note. He noted that the Medicare specifically said the test should not be used as a prerequisite screen for ICD eligibility.
Medtronic, the biggest maker of ICDs, does not see a major impact from the test.
“I think it is wrong at this point to assume that this will have some negative affect on implants. We think the opposite is true and that more patients could be identified through this mechanism,” said Medtronic spokesman Rob Clarke, who noted that many patients who could benefit don’t get the devices.
Morgan Stanley analyst Glenn Reicin agrees: “The ICD market probably has more to gain than to lose from T-Wave Alternans.”
Cambridge Heart’s T-Wave Alternans test is designed to determine which patients are most at risk for sudden cardiac death, typically the result of a dangerous heart rhythm in which the heart beats so quickly it cannot circulate blood efficiently.
Both Medtronic and St. Jude Medical are conducting clinical trials to further assess the predictive value of the Cambridge Heart device.
Sales of ICDs have already been hurt by a spate of recalls and legal troubles involving Guidant ICDs, which have depressed 2006 growth projections. St. Jude last month said it sees average annual ICD growth of 20 percent, but for 2006, it sees market growth of 15 percent to 20 percent because of “disruptive market dynamics.”
But industry analysts don’t see the Medicare decision for the Cambridge Heart device as a further drag on growth.
“We continue to expect an ICD market turnaround in the second half of 2006 or 2007 and view this market as attractive longer term,” Morgan Stanley’s Reicin said in his note to investors.
Shares of Cambridge Heart were trading up 31 cents, or 10.6 percent, to $3.23 in late morning trading on the over-the-counter market.
Shares of ICD makers were mixed. Medtronic was up 33 cents, or less than one percent, to $53.44;. St. Jude was up 40 cents, or nearly one percent, to $44.65; Boston Scientific was down six cents to $23.51, all on the New York Stock Exchange.
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