Shares of HeartWare International Inc. HTWR plunged more than 20% to close at $35.21 on Oct 13, after the company disclosed in an 8K filing that it may not resume patient enrollment for the MVAD (miniaturized ventricular assist device) CE Mark clinical trial in November, as was expected earlier.
On Sep 9, HeartWare provided an update on the trial at the Wells Fargo Healthcare conference announcing the discontinuation of patient enrollment (11 were enrolled so far) owing to some manufacturing issues with the controller. At that time, the company had provided an estimate of 8-10 weeks to resume normal supply of controllers.
However, in the latest filing, HeartWare reported that it is conducting an inquiry into certain adverse events observed in some patients during the MVAD trial, which may result in further delay in the restarting of enrollment. The company will provide an additional update during its third-quarter earnings call scheduled on Oct 29.
HeartWare noted that adverse events noted in some patients are quite common in clinical trials of ventricular assist devices such as MVAD. However, this failed to soothe the nerves of investors resulting in the sharp share price slump. Notably, the shares touched a 52-week low of $34.85 intra-day on Oct 13.
The CE mark trial had commenced in July this year. The trial was supposed to enroll 60 patients across 11 sites in the U.K, Austria, Australia, France and Germany. In the trial, patients will be implanted with the MVAD Pump via sternotomy or thoracotomy, and the device will be evaluated for short- and long-term use. The primary endpoint is survival at the end of six months.
MVAD has been touted as a game changer for HeartWare’s product portfolio. MVAD is based on the same technology platform as the HeartWare ventricular assist device (HVAD) but adopts an axial flow, rather than a centrifugal flow configuration and is being developed in multiple designs. The MVAD pump is less than half the size of the HVAD pump and can provide partial or full support.
Moreover, MVAD incorporates a pulsatility algorithm called the qPulse Cycle that helps physicians to customize the device for each patient, providing four pulse settings designed to enhance aortic valve function and reduce chronic bleeding events. MVAD is primarily suited for minimally invasive implant techniques as it requires less thoracic space.
HeartWare believes that the MVAD launch will help it to gain market share and also improve its competitive position against St. Jude Medical STJ, post its acquisition of Thoratec.
HeartWare also submitted an Investigational Device Exemption (IDE) to the FDA seeking approval to commence an MVAD System clinical trial in the U.S. Similarly, Health Canada is reviewing a submission for a 15-patient, three-center study, which is expected to commence in late 2015.
In such a scenario, we believe the enrollment pause will be a major concern for HeartWare in the near term. The company is also trying to address a FDA warning letter relating to its operating facilities. Moreover, its recently announced Valtech takeover has been opposed by one of its top 20 shareholders – Engaged Capital.
Currently, HeartWare carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same space include Masimo Corp MASI and Cyberonics CYBX. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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