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Urologist Survey Good for Teleflex, Bad for Axonics

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Medtech analysts at Needham & Co. surveyed 25 urologists who reported performing an average of 30 sacral neuromodulation procedures per year. While the implications of the investigation weren’t necessarily bad for Axonics, the company ultimately decided to downgrade its rating on the company’s stock from “buy” to “hold”, noting that the stock looks quite valued. at this stage.

Medtronic pioneered the sacral neuromodulation market more than 20 years ago with its InterStim device, used to treat various bladder and bowel conditions. Axonics Modulation Technologies came to challenge the market leader in 2019 with FDA approval for a rechargeable version of a similar device. This sparked an ugly war of words between the two companies as well as a long patent battle.

Here are some key takeaways from Needham & Co.’s recent urologist survey, and what analysts think the results imply for the sacral neuromodulation market and for Axonics.

  • Urologists surveyed told the company they expect Axonics sacral neuromodulation devices to grow from 37.4% of their procedures in the last 12 months to 41.6% of their procedures in the past 12 coming months.
  • The urologists surveyed also expect their volumes of sacral neuromodulation procedures to increase by 2% over the next 12 months.
  • Together, these results imply that the Irvine, Calif.-based company could see sacral neuromodulation growth of 14% over the next 12 months, which compares to the 2023 consensus estimated growth for the space of 24%.
  • It will be difficult for Axonics to increase the consensus revenue estimate for 2023, Needham & Co.’s Mike Matson wrote in a report this week.

The FDA approved Axonics’ no-recharge sacral neuromodulation implantable neurostimulator, called F15, earlier this year. This approval filled an important gap in the company’s portfolio, but also came on the heels of Medtronic obtaining FDA approval for InterStim X, the next generation of the no-recharge device in the InterStim portfolio. of the society.

The Axonics F15 No-Recharge Sacral Neuromodulation Implantable Neurostimulator operates on a primary battery and is designed to last 15+ years at typical stimulation settings and 20+ years at lower energy settings. The device is 20% smaller than Medtronic’s InterStim X device, according to Axonics, and is MRI compatible. The F15 also comes with a no-recharge keychain featuring the company’s SmartMRI technology, and an algorithm recommends optimal stimulation settings based on intraoperative responses.

“We believe that [Axonics’] The launch of F15 enabled it to gain shares of [Medtronic] and served as an important engine of growth,” Matson wrote. “We believe this has been a key factor in the year-to-date outperformance [Axonics] shares, but I think that is now largely reflected in its share price. »

The analyst also noted that Axonics has submitted a premarket approval request for the fourth generation of its R15 (the rechargeable device) which requires less frequent charging (once every six months instead of once). per month). Still, Matson said he didn’t expect it to be as significant a growth driver as the F15 has been for the company. All of this leads the company to believe it will be difficult for Axonics to increase the consensus 2023 revenue estimate, Matson noted, justifying the downgrade.

Urologists still prefer Teleflex UroLift

Needham & Co.’s survey of urologists has positive implications for Teleflex and its UroLift system, which is used to treat lower urinary tract symptoms due to benign prostatic hyperplasia (BPH).

“Despite all the concerns about Teleflex’s UroLift, we believe the results show that the procedure is very popular with urologists and should continue to see double-digit growth (admittedly less than the observed hyper-growth previous years),” Matson wrote. in a separate report released on Monday.

The analyst also noted that the “sharp decline” in Teleflex shares made the company particularly attractive at its current valuation level.

Of the five types of BPH procedures included in Needham & Co.’s survey, the analyst noted that UroLift is the most commonly used. UrolLift’s market share is expected to increase by 1.1% (from 41.2% to 42.3%) over the next 12 months. Respondents expect to perform 10% more UroLift procedures over the next 12 months. While Teleflex’s consensus estimates for 2023 already imply UroLift’s 10% growth ($364m in 2023 vs. $332m in 2022), the analyst said buy-side expectations were lower than that. .

Matson also points out that UroLift launched in Japan in April and is expected to launch in China later this year, and a reimbursement update in France also begins later this year. Thus, the company should see further growth of UroLift from new adopters in the United States and international markets.

Need Ham & Co. asked urologists to rate five BPH procedures in terms of six characteristics on a scale of 1 to 7 (where 1 is very bad and 7 is very good), and UroLift has was ranked highest out of six criteria, including favorable cost-effectiveness of reimbursement/practice, ease of procedure, safety/complication rate, and patient preference/feedback.