Axonics Modulation Technologies has acquired Contura for $200 million upfront, plus the potential for future milestone of $35 million, to give its sales team another product to pitch to urogynecologists and urologists.
Contura sells Bulkamid, a treatment for stress urinary incontinence (SUI) in women that won FDA approval last year. The targeted prescribers of the urethral bulking agent are the same physicians who use Axonics' implantable sacral neuromodulation to treat urinary disorders.
By leveraging its 220-person transatlantic team of sales reps and clinical specialists, Axonics contends it can grow annual sales beyond the low-double-digit levels seen so far. A Baird analyst note on Friday called the business logic behind the Contura deal "sound" and made the case that entrance into the SUI market "transitions Axonics from a single product company to an incontinence/women's health pure play."
Axonics' bet on Contura is underpinned by evidence that there are millions of women with untreated SUI in the U.S. Based on a review of the literature, Axonics estimates there are 11 million women in the U.S. who have SUI symptoms but have never sought treatment. A further 9 million women have gone to their physicians and chosen conservative therapy.
Alternative bulking agents to Bulkamid are available, as are mesh and sling devices. However, many women are reluctant to undergo a sling procedure, according to Axonics. Bulking agents are simpler to administer and can create a watertight seal to the urethra. However, existing particulate-based treatments are linked to downsides including foreign-body granulomas, erosion and loss of bulk. Bulkamid, a non-particulate hydrogel, is designed to be less prone to those shortcomings and give physicians more control.
The device received a CE mark in 2003. By 2019, Contura had grown European sales to $12 million. FDA approval arrived in 2020 and over the second half of the pandemic-disrupted year Contura made $2 million in U.S. sales and gained "several dozen" accounts. Medicare and commercial payers cover the device.
Contura made its initial inroads into the U.S. using a five-person sales team. Globally, Axonics has 220 people who can help commercialize Bulkamid. The Axonics sales reps are currently focused on selling a sacral neuromodulation implant for conditions such as overactive bladder, putting them in contact with potential buyers of Bulkamid.
Axonics expects the acquisition to be accretive to revenue growth and margins in 2021 and beyond. Given the potential to use existing sales reps to promote Bulkamid, Axonics sees the takeover as a chance to "meaningfully expand contribution margin."
SVB Leerink analysts in a Friday note said the Contura buy could strengthen Axonics' competitive positioning, enabling the company to "leverage Bulkamid to gain access" to Medtronic "loyalist centers" potentially driving upside to sales longer term.
At the same time, SVB Leerink analysts wrote that Axonics is facing tougher competition from Medtronic and InterStim Micro than the company did previously. "We see a long runway for growth as awareness increases and technology continues to improve," they said.
In the fourth quarter, Axonics, which competes with Medtronic in sacral neuromodulation, generated sales of $34.8 million, up from $9.9 million in the same period of 2019. Axonics achieved the growth despite the cancellation of 320 implant procedures due to COVID-19. The cancellations wiped around $5 million off fourth quarter sales. Axonics received FDA approval for its third-generation implantable neurostimulator earlier this month.
Looking ahead, Baird sees potential for "an improved backdrop" for sacral neuromodulation as 2021 progresses.
"Fundamentally, our proprietary doc survey work is clear: the SNM market should be substantially larger than it was historically and Axonics seems well positioned to earn a fair share. Our suspicion is this thesis may see warmer embrace as 2021 unfolds," according to the Baird analyst.