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Analysts Comment on Boston Scientific (BSX) and CMS Proposed Restrictions on Watchman Coverage

November 11, 2015 9:09 AM EST
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Price: $67.00 +0.39%

Rating Summary:
    33 Buy, 7 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 20 | Down: 26 | New: 20
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Boston Scientific (NYSE: BSX) shares were in focus Wednesday after the CMS issued proposed national coverage analysis for its Watchman left atrial appendage closure device. The news sent shares lower and triggered a response from a number of Wall Street analysts. Below is a summary of analyst comments.

Deutsche Bank’s Kristen Stewart, Hold, PT $19

BSX had viewed LAAC as a global market opportunity of about $500M by 2019 and we believed the market was expecting CMS to have a less restrictive reimbursement proposal. Thus, we expect the stock to trade lower on Wednesday and we maintain our Hold rating on BSX. While STJ (NYSE: STJ) (rated Hold) also had LAA device in its pipeline, it was still deciding the fate of the program. This reimbursement decision along with other opportunities on its plate, likely drops LAA off the pipeline list.

Evercore ISI’s Vijay Kumar, Buy, PT $20

We believe that a restrictive NCD coverage decision was largely expected, and CMS’ decision was more or less in line. We think that BSX will need to initiate a registry that is approved by the CMS in order to get reimbursed, and that the site/facility requirements are not restrictive in our mind. We believe that TAVR sites meet the Watchman LAA NCD criteria, and note that there are ~400 sites in the US currently that could potentially qualify. Finally, physician training could be a gating factor, but given BSX’s commentary on ‘slow / measured ramp’ we believe that some of this has been baked into ST expectations.

Needham’s Mike Matson, Buy, PT $22

We view CED as a middle ground; the good news is that Watchman will be covered, the bad news is that BSX will need to follow patients in a registry. CMS will take public comments on its proposed NCD and the publish a final NCD. We note that both transcatheter aortic valve replacements (TAVR) and transcatheter mitral valve repair (TMVR) have seen strong growth despite CED requirements and we are maintaining our Watchman estimates for now. We remain buyers of BSX shares and would view any weakness resulting from confusion about the proposed NCD as a buying opportunity.

Leerink’s Danielle Antalffy, OP, PT $21

BSX had viewed LAAC as a global market opportunity of about $500M by 2019 and we believed the market was expecting CMS to have a less restrictive reimbursement proposal. Thus, we expect the stock to trade lower on Wednesday and we maintain our Hold rating on BSX. While STJ (rated Hold) also had LAA device in its pipeline, it was still deciding the fate of the program. This reimbursement decision along with other opportunities on its plate, likely drops LAA off the pipeline list.

Given the now-heightened near-term reimbursement uncertainty, we expect BSX shares to trade off tomorrow. However, we'd be buyers on weakness as: (1) We remain compelled by the breadth of BSX's new product portfolio even beyond WATCHMAN, including the next-gen Synergy stent and Emblem S-ICD; (2) The margin expansion story -- which is largely dependent on the CRM business -- remains intact; and (3) Ultimately, we're inclined to think the current WATCHMAN reimbursement situation resolves and -- while possibly slightly more restrictive on the addressable patient population -- BSX can deliver on what we had believed to be conservative estimates at ~50,000 total addressable patients anyway.



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