Lombard Medical is pulling out of the U.S. after failing to gain traction the U.K.-based company announced Monday.
Lombard Medical, which makes the Aorfix Endovascular Stent Graft to treat abdominal aortic aneurysms, has eliminated its entire U.S. sales force — the remaining 10 that were there after a reduction earlier this year, executives confirmed in its second-quarter earnings call. The company, whose U.S. base was in Irvine, California, also announced that it has shifted its entire commercial operation to the U.K., and hired an investment bank to explore an asset sale, including the sale of the entire company.
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Lombard Medical laid the blame for its Americexit on an FDA decision that would require it to perform a 50-patient IDE (investigational device exemption) trial for the U.S. approval of its next-generation IntelliFlex delivery system.
“Unfortunately the feedback from the FDA that was surprising to us that was that we needed to conduct an IDE study quite a significant study in fact to 50 patients, which really meant that the approval timeline, the approval itself was of course at risk and the timeline would be push back at least a year to the back end of 2017 and we really had to make a decision as to where to focus our resources and we are very disappointed and sad to have to make the decision to exit the U.S. market,” said Simon Hubbert, Lombard Medical’s CEO, in a conference call with analysts, according to a transcript from Seeking Alpha.
But unexpected regulatory demands, that even surprised an analyst, were only part of the story.
“The decision [to exit the U.S. market] is at least in part a result of the requirement from the FDA for an IDE study for the approval of the next-gen IntelliFlex delivery system, which would delay any potential approval, but was also likely due to very poor sales in U.S.,” wrote Sean Lavin, an analyst with BTIG in a research note Monday. “On one hand, this is incredibly disappointing since great expense was put into the U.S. launch. On the other hand, after quarters of disappointing sales and execution in the U.S., it was probably the smart move in order to preserve capital and leave Altura OUS as a remaining shot on goal.”
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Aside from Aorfix, the Altura stent is the company’s other aortic endovascular stent graft and Lombard Medical, which trades on the Nasdaq, will now focus on regions where the IntelliFlex delivery system is commercially approved as well as Altura. Those are Europe and Japan and other overseas markets, the company noted.
There are glimmers of hope there, it appears.
“Direct sales markets in Europe grew revenue 42.6% (year-on-year), likely driven entirely by Altura,” Lavin wrote in his research note. “We do not have the exact number of procedures for Altura in the quarter. It is early on in the launch and hard to say how this will grow beyond a small number of first adopters, but we believe there’s a small chance the company can make this launch successful or sell the assets.”
That doesn’t sound like a ringing endorsement for the future.
In the U.S., another public company sells products to treat abdominal aortic aneurysms. Endologix based in Irvine, California sells the AFX Endovascular abdominal aortic aneurysm system and its second-quarter U.S. revenue jumped 26% to $36.3 million, excluding the impact of a merger due to strong adoption of a next-generation AFX product. The company’s stock has jumped to about $11 in August, from around $9 in January, although it was higher in between but took a hit due its own regulatory challenges.
Lombard Medical’s stock meanwhile has languished. Back in 2014, initial reports about the company’s intent to go public show that the medical device company was hoping to raise $80 million. It later set its IPO price lower — at $11 per share — hoping to raise $55 million. But the stock closed at $10 on April 25, 2014 and currently trades at just over $1, essentially making it a penny stock.
