Dive Brief:

• In a surprise announcement Tuesday morning, Boston Scientific said it will discontinue its Lotus Edge transcatheter aortic valve replacement (TAVR) system following a voluntary recall of the product due to "complexities" with the device delivery system. The company said the entire Lotus product platform will be retired immediately.

• "The complexity of the delivery system, manufacturing challenges, the continued need for further technical enhancements, and current market adoption rates led us to the difficult decision to stop investing in the Lotus Edge platform," CEO Mike Mahoney said in a statement. Commercial, clinical, R&D and manufacturing activities will all cease.

• The company said the decision will likely cause a $225 million to $300 million pre-tax charge, and it will shift focus to its Acurate neo2 aortic valve system and Sentinel cerebral embolic protection system also used in TAVR procedures. Shares in Boston Scientific were down approximately 10% in early trading.

Dive Insight:

"The Lotus chapter has been a difficult one for the company," Mahoney said on a conference call Tuesday morning.

The device was only available in the U.S. for a little over a year. Lotus Edge received FDA approval in April 2019 for use in severe aortic stenosis patients considered at high risk for surgical valve replacement via open heart surgery. A few months later, predecessors Medtronic and Edwards Lifesciences simultaneously expanded their addressable market by gaining FDA approval in the low-risk patient population, again widening the competitive gap in a TAVR opportunity thought to be worth $7 billion by 2024.

Boston Scientific had spoken about prospects for the Lotus product as recently as its investor presentation at TCT and its third-quarter earnings call, both last month. The company reported Lotus Edge was in over 250 accounts globally and that a clinical trial put it on track to receive the intermediate-risk indication from FDA come 2024.

But challenges with the system used to deliver the device, which allowed positioning features that differentiated it slightly from competitors' offerings, resulted in the company announcing Tuesday morning a worldwide recall of all unused Lotus Edge inventory. Boston Scientific emphasized there are not related safety issues for individuals already implanted with the device. The device had a history of other recalls during the time between its CE marking and FDA approval.

The latest recall event was the final straw for a product line Boston Scientific has "struggled" with for years and diluted the company's gross margin, Mahoney said during the conference call. That delivery system was complicated to manufacture and scale and the discontinuation is a "difficult but necessary" decision that's better to make now, Mahoney said.

Joe Fitzgerald, who leads the interventional cardiology business, told investors the management team had to "be our own worst critics" after the product's first full year on the market, and it became apparent that without a design change, Lotus Edge "would remain a niche device" in an expensive area to operate.

While it's not the end of Boston Scientific's TAVR story, it at least is in the U.S. for a few years. That timeline is due to another recent setback to Boston Scientific's TAVR efforts.

Boston Scientific is moving forward with its other TAVR product line, the Acurate neo valve it gained from its 2017 acquisition of Symetis, having recently launched a second-generation version of that device in Europe aimed at reducing paravalvular leaking. But company management told investors during TCT the FDA wants more data and it now expects Acurate neo2 to enter the U.S. market in 2024, having previously anticipated a 2021 launch.

During Tuesday's call, Boston Scientific execs said revenues from Lotus totaled $60 million in 2019 and tracked for $75 million in 2020 and $125 million in 2021 — lower than some analysts had projected. The discontinuation is expected to slightly improve earnings in 2021 and likely be neutral thereafter.

As for the broader company, prior to COVID-19 Boston Scientific laid out a target for compound annual organic revenue growth of 6% to 9% through 2022. The Lotus and Acurate TAVR changes now bring the high end of that range down to 8%, execs said Tuesday.

Analysts at SVB Leerink said in a note Tuesday morning: "While this to us keeps [Boston Scientific] well-positioned to retain its status as a top-tier grower in large-cap MedTech, we do acknowledge that this – now in a series of what we'd characterize as mishaps (on the heels of a 4Q19 sales miss, SCOPE I/II trial readouts and ACURATE Neo 2 U.S. launch delay to 2024) – is likely frustrating for investors."

Fitzgerald said Boston Scientific will maintain an albeit smaller structural heart valve sales force in the U.S.; some sales reps may be reassigned to Sentinel, Watchman or other devices. "We're going to need that in the future when we go to launch neo2," Fitzgerald said.

This story has been updated with additional information and insight on the recall and product discontinuation.