Small Caps | Jun 03 2013
-REVA opens opportunity in stent market
-Device to start CE Mark trial
-Potential to spark major biotech interest
By Eva Brocklehurst
There's a large market opportunity in the global stent market. This area of medical devices is worth US$4-5 billion and is dominated by three main players, Boston Scientific, Medtronic and Abbott. There's an Australian listed player, REVA Medical ((RVA)), that has developed a product which has the potential to expand this category of medical products, given favourable clinical data.
REVA has a bioresorbable scaffold called ReZolve2 which is now in a pivotal European trial. The pilot study conducted last year produced favourable 12-month angiographic data and the second generation product, which is 20% thinner and exhibits 30% more radial strength, was placed into a CE Mark pivotal trial in March. This trial should recruit 135 patients by September 2013 and the company hopes for CE Mark approval late next year. The primary end points are Major Adverse Coronary Events (MACE) at six months and 12 months as well as late loss at nine months, where the goal is non-inferiority compared to a metal drug-coated stent. The trial is being conducted at 30 sites in Brazil, Europe, Australia and New Zealand.
Why is REVA's product so revolutionary? Until recently stents used to treat coronary artery disease have been made of metal. Two years ago Abbott gained CE Mark approval for ABSORB, the first coronary stent that was bioresorbable. This helped reduce the instance of stent-related thrombosis. Stents such as these gradually disappear over time. Bell Potter sees the scaffold – preferred term to stent -reinvigorating the market over time and potentially adding another US$1-2 billion in sales.
REVA was listed on ASX late in 2010 and Medtronic owns 8% of the stock. Bell Potter believes this latest development may spark global interest in REVA from the established stent market. The broker believes the pilot clinical trail of ReZolve proved the scaffold worked as intended and as a result has significantly de-risked REVA. The scaffold is made from a tyrosine-derived polymer that dissolves at the right rate and is able to expand in a clinically-relevant range through the use of a ratchet system, called slide-and-lock. It is designed with a spiral architecture that delivers the radial strength.
Bell Potter believes there are three possible outcomes after the CE Mark is approved. REVA could sell directly, marketing off the back of the clinical data, one of the established stent companies could acquire the stock to get the jump on competitors or, under a 2007 distribution agreement which is still outstanding, Boston Scientific could negotiate terms for worldwide distribution. The latter is a valuable and potentially profitable feature of the REVA story, in Bell Potter's view. REVA could be in a position to leverage the global footprint of the world's largest cardiology marketing organisation with very profitable margins.
Abbott's ABSORB and a new stent from Elixir Medical called DESolve, which gained CE Mark last month, have paved the way for commercial success of REVA's stent from 2015. What gives REVA a competitive advantage is that its scaffold has X-ray visibility and a more versatile expansion range compared with DESolve and ABSORB.
Bell Potter values REVA Medical on a base case at $2.67 and an optimistic case at $4.35. In valuing the stock the broker assumes the company does not partner ReZolve but brings it to market itself. Also, only European and US sales are assumed. REVA is based in San Diego and raised $85 million through the ASX IPO, issued at $1.10. The IPO was designed to fund an initial 5-subject product validation clinical study as well as a pivotal trial for CE Mark.
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