MedTech Monitor – DexCom (DXCM), Paragon 28 (FNA), Integra LifeSciences (IART)
DexCom (DXCM) – Earlier today, the company’s partner in Japan, Terumo, said that the Japanese medical insurance system granted reimbursement for G6 for all insulin users, which was an improvement from the prior coverage for just Type 1 patients and select Type 2 insulin intensive patients at high risk.
According to JPMorgan, Dexcom’s G6 now has coverage for the 1M insulin users in Japan, which is a fairly large improvement vs. the roughly 200K or so patients that they believe were previously covered, and the hospital eligibility and authorization process is eliminated. “CGM is still in the relatively early stages of adoption in Japan, with usage primarily in Type 1 patients (G6 and Abbott’s Libre), and some insulin using Type 2’s, where Abbott received approval earlier in 2022 on the Libre Gen 1 platform. With materially improved reimbursement and a nascent Japanese market with very low rates of penetration, we view this as just another nice growth driver for Dexcom (and Abbott) in 2023+, and continue to see material upside to Dexcom Street forecasts heading into next year.”
Paragon 28 (FNA) – This foot and ankle company was covered a couple weeks ago after its Q3 earnings report (See HERE). In an 8-K filing today, the company announced that it had reached an agreement to settle all patent infringement lawsuits with Stryker (SYK).
According to the filing, Paragon is settling the Colorado Complaint, the Delaware Complaint and any company counter claims for a total amount of $26M paid by the company to Stryker. This settlement amount will be paid by Paragon in three separate installments consisting of: (i) $5M on or by December 16th, (ii) $8M at any time between January 1st, 2023 and January 16th, 2023, and (iii) $13M at any time between April 1st, 2023 and April 17th, 2023. The settlement agreement does not impact the company’s ability to continue operating its business and does not require any changes to the company’s existing product lines. The settlement is the only consideration being paid, and Paragon is not required to make any future payments to Stryker.
BofA, in a note, said they do not view these lawsuits as a major overhang on the stock, but they think the decision to settle is a smart one for the company. Management distraction and legal expenses were likely to ramp next year as one of the lawsuits was set to go to trial in 2023. Management maintains that the company did not do anything wrong but, ultimately, made a financial decision to avoid incremental legal costs and the uncertainty that comes from a jury trial.
Integra LifeSciences (IART) – This company develops and manufactures surgical implants and medical instruments for use in neurosurgery, extremity reconstruction, and general surgery. This morning, the company announced the acquisition of Surgical Innovation Associates, which develops, markets and sells a product called DuraSorb, a resorbable synthetic matrix for plastic and reconstructive surgery.
JPMorgan commented on how with the addition of DuraSorb, Integra’s existing plastic and reconstructive surgery portfolio will now have both xenograft (SurgiMend) and resorbable synthetic offerings across a roughly $600M addressable market. “Today, there are no surgical matrices approved by the FDA for use in implant-based breast reconstruction procedures (IBBR). With SurgiMend, Integra is the only manufacturer to have submitted a PMA for surgical matrix for use as soft tissue support in IBBR and is currently under review by the FDA with approval expected in 2024. SIA is conducting an investigational device exemption (IDE) study in the US for DuraSorb, with the goal of also obtaining a PMA in IBBR and market entry in 2025/26. Given the attractive double-digit growth profile of the ~$600M global breast reconstruction market, we like the optionality that these two distinct product solutions provide to surgeons, with management expecting ~$200M in combined revenue by 2030 from these two products.”