Abbott buys rights to a vascular balloon, possibly confronting Medtronic

Roxanne (Yanchun) Liu
Medill Reports

Illinois-based healthcare giant Abbott Laboratories (NYSE: ABT) announced Tuesday that it would pay up to $92 million to secure global commercialization rights for SurVeil, a Minnesota company’s drug-coated vascular balloon designed to treat peripheral artery disease, or PAD, a niche market already occupied by muscular competitors including Medtronic PLC (NYSE: MDT).

The worldwide peripheral vascular devices market is estimated to surge to $12.63 billion by 2022 from $9.09 billion in 2017, according to a report by Research and Markets. The drug-coated balloon, also known as a drug-eluting balloon, is an alternative therapy to the market-dominating drug-coated stents. SurVeil, currently in clinical trials, would be the first PAD-targeted drug-coated balloon in Abbott’s portfolio.

SurVeil’s developer, medical device company Surmodics Inc. (NASDAQ: SRDX), has been conducting a pivotal clinical trial that tests the new device against the In.PACT Admiral drug-coated balloon, the current U.S. market-leading product manufactured by Minnesota-based Medtronic, one of the major rivals of Abbott in vascular care.

SurVeil needs to yield strong clinical profile in order to help Abbott wrestle with Medtronic, RBC Capital Markets analyst Glenn Novarro said.

“Being so late to the game, the clinical data [of SurVeil] would have to be very competitive,” Novarro said, citing the at-least-three-year process of getting approval from the U.S. Food and Drug Administration.

The prospect of drug-coated balloon technology in the field of peripheral interventions means that Abbott also has to race with other major biotech players.

Massachusetts-based Boston Scientific Corp. (NYSE: BSX) announced in early February its intention to roll out its Ranger paclitaxel-coated balloon to the U.S. market in 2020. The company claimed in its first-quarter earnings report that Ranger has demonstrated in a recent trial similar performance to Medtronic’s In.PACT Admiral in reducing vessel blockage.

International capital also has added fuel to the competition. Netherlands-based Koninklijke Philips N.V. (NYSE: PHG) closed a $2.2 billion deal in August to buy Spectranetics Corp. (NASDAQ: SPNC), shortly after the Colorado-based vascular intervention device manufacturer announced receipt of FDA pre-market approval of its Stellarex drug-coated balloon.

The Dutch company’s primary objective of the acquisition was to get control of Spectranetics’ drug-coated balloon, Lake Street Capital Markets analyst Brooks O’Neil said.

“Philips paid $2.2 billion for a drug-eluting balloon that hasn’t been tested against the market-leading product,” O’Neil said. “The implication of Surmodics testing their product against Medtronic’s product is, pretty clear we believe, Surmodics’ product is superior.”

Abbott said in a press release that SurVeil’s “Pre-clinical data showed a three- to five-times higher target tissue drug concentration, a more evenly distributed and durable drug effect, and lower incidence of downstream drug particles compared to the control drug-coated balloon.”

Abbott agreed to an initial payment to Surmodics of $25 million and additions of as much as $67 million for product development milestones, the company said in a press release.

Abbott also received options to negotiate pacts for Surmodics’ pipeline products, including below-the-knee and arteriovenous fistula drug-coated balloon devices that are in pre-clinical development, Abbott said.

Shares of Surmodics jumped 9.74 percent to $29.85 on Tuesday, up $2.65.

Photo at top: The logo of Abbott Laboratories, Illinois-based broad range healthcare corporation. (Abbott)