This spring, viewers in four US metro areas — Tampa, Detroit, San Diego, and Phoenix — saw the first television commercial aired by Boston Scientific Corp., a 38-year-old maker of medical devices.
The ad, aimed at families of the millions of older Americans with irregular heartbeats, portrays a distraught adult daughter driving her father to the hospital. A doctor tells them about one of the Marlborough company’s newest products: an implantable device called Watchman that seals a pocket in a patient’s heart chamber to prevent blood clots that can trigger strokes.
Such televised pitches are rare for medical device companies, which, unlike prescription drug makers, traditionally have steered clear of consumer marketing. But they are part of a strategy by Boston Scientific to promote a new generation of products designed to propel it into a top position in the markets for cardiac, endoscopic, urological, and other devices.
“Hospitals want to drive great outcomes, and they also want to save money. So what they’re typically doing is reducing down the number of suppliers that they work with,” chief executive Mike Mahoney said in an interview at Boston Scientific’s new headquarters. “What’s most important to us is to have very differentiated products so that when Mass. General or whoever picks partners, we’re part of the answer.”
Boston Scientific’s product rollouts are designed to position the company as a survivor in a health care business shakeout that is shrinking the number of players in markets ranging from drug stores to health insurers to pharmacy benefit managers, said Vijay Kumar, medical supplies and devices analyst for the Evercore ISI research firm in New York.
“The end customers are trying to get smarter about pricing,” Kumar said. “It’s a new reality for the industry, and it’s going to benefit the larger players. You’re going from 15 to 20 [medical supply] vendors to less than five. So it’s important for companies to scale up.”
Boston Scientific’s chief medical officer, Ian Meredith — an interventional cardiologist and researcher recently recruited from Australia — conceded there was “a lot of hand-wringing” over whether to launch the television commercial. Ultimately, the company decided it was important to educate patients with atrial fibrillation, who bruise and bleed from the “anti-coagulant” blood thinners typically prescribed to dissolve clots. Executives are gauging the ad’s effectiveness before determining whether to air it in additional markets, such as Boston.
“This is a very socially impactful ad,” Meredith said. “It’s really identifying that there’s an alternative for people who can’t take anti-coagulation or who are struggling with anti-coagulation [medicines]. And a lot of primary care doctors don’t realize this option’s available.”
Watchman, approved two years ago by US and European regulators, is the fastest-growing of Boston Scientific’s thousands of products. With no similar devices available in the United States and just one competitor in Europe, Boston Scientific expects it to eventually ring up about $1 billion in annual sales.
The company is also rolling out dozens of other new products and technologies, from a minimally invasive heart valve replacement technique to a spinal cord stimulation system that can reduce chronic pain leading to opioid addiction.
“They have one of the most compelling new-product cycles in the industry,” said Danielle Antalffy, senior medical supplies and devices analyst at the Boston health care investment bank Leerink Partners. “They’ve been more nimble in innovating than other companies.”
Boston Scientific still lags behind medical technology giants Medtronic PLC and Johnson & Johnson, however, and doesn’t compete in the lucrative markets for orthopedic or general surgery devices.
It also may lack the financial resources for a mega-acquisition, such as the $43 billion Medtronic buyout of Covidien in 2015, that could catapult it into the industry’s top ranks.
That’s partly because the company has spent much of the past decade paying down debt from its 2006 purchase of Guidant Corp. Market-watchers saw that takeover as disastrous; while it made Boston Scientific a player in pacemakers and defibrillators, it saddled it with years of product recalls and litigation. The company also continues to spend money defending itself in separate suits by patients claiming injuries from its vaginal mesh devices.
Boston Scientific “is in a better financial position than they were five years ago, but they still have a lot of liabilities,” Antalffy said. “They don’t have the cash to do a Covidien-like deal. But they can do a lot of smaller ‘tuck-in’ acquisitions, and they’ve made them work.”
Indeed, some of Boston Scientific’s most promising new products, including Watchman and Lotus, its device for transcatheter aortic valve replacement, came from smaller acquisitions.
The company has acquired more than a dozen companies in the past five years, most recently completing a $435 million buyout of Symetis SA, a private Swiss company developing another type of aortic valve replacement. Its largest deal came two years ago, when it paid about $1.6 billion for American Medical Systems’ men’s health and prostate health businesses.
Boston Scientific expects to launch its Lotus product in Europe by the end of the year. It will compete with older-technology products from Medtronic and Edwards Lifesciences Corp. The company is awaiting Food and Drug Administration approval for US sale of Lotus by the middle of next year. Growing demand for aortic valves inserted through the leg with a catheter rather than through open heart surgery is projected to create a multibillion-dollar market over the next five years.
Mahoney called Lotus a “second-generation platform” that is thinner and more flexible than competing products, making it easier for heart surgeons to implant.
At a scientific conference in Paris this past spring, Boston Scientific reported findings that showed its procedure was more effective than the Medtronic valve replacement system in a clinical trial.
“We’re starting from zero, so this will be a tremendous growth opportunity,” Mahoney said. “We’re entering a market that will be $5 billion by 2021 with a very disruptive platform.”
With its new product portfolio, Boston Scientific is eyeing market niches that could generate a combined $13 billion in annual sales by 2020. The company’s revenues in those categories now total only about $300 million. But rival device makers are also targeting these areas, so there’s no guarantee that Boston Scientific will come out on top.
“What we focus on is growing share in our current markets and then moving into these faster-growing markets,” said Mahoney, who cited the company’s sales push in Asia as well as the United States and Europe. “The goal is to continue growing faster than our peers.”