Market is constricted for Reva's novel bio-absorbable stent

How to spin bad news into good news?

Just ask Reggie Groves, who runs Reva Medical (ASX:RVA) which has developed a novel stent for keeping arteries open.

Reva recently disclosed global medical products distributor Boston Scientific had backed out of a deal to handle its new bio-absorbable stent – only a matter of months after it had received approval to begin selling its product in Europe.

Unsurprisingly, Reva’s shares sank on the news. The potential loss of sales momentum will complicate plans to list its shares in the US — which would have helped raise another chunk of capital to fund further trials needed to get in the door to sell in the key US market.

Trading at around 80c prior to the news, Reva’s shares fell swiftly to 65c as securities analysts who track developments at the company warned their clients revenue growth would fall short of estimates — resulting in higher losses.

Despite the gloom, Reva’s Groves said losing Boston Scientific was actually good news.

“We’re not surprised … we’re not disappointed, either. In fact, we’re delighted,” she said following the disclosure.

From where she sits, while a deal with Boston Scientific would have opened some doors, it wasn’t the right partner, since the industry is continuing to focus mainly on using metal stents to keep diseased arteries open, to avoid blockages to blood-flow and heart attacks.

Despite their popularity, metal stents have a rising risk of failure the longer they’re in place.

As a result, there has been ongoing research to develop new stents using materials which are fully absorbed by the body.

US healthcare conglomerate Abbott was first to market, with a product priced at more than $US1000 per unit.

But product failures resulted in Abbott withdrawing its product from some markets, and recalling product in others.

Abbott’s problems prompted Boston Scientific to pull back from developing its own stent, which it disclosed at the same time as it walked away from working with Reva.

This raised caution that the market for novel products like Reva’s, which uses a polymer-based material, may take much longer to evolve.

Even so, Reva has achieved good results from its product trials for its so-called Fanthom bio absorbable stent, which paved the way for approval to launch in Europe, which it received early April.

Reva is now ramping up sales in the key markets of Germany, Switzerland and Austria It is considering launching sales into parts of the UK, French and Nordic markets, with sales likely in Italy and the Middle East via a distributor.

Separately, it is awaiting approvals to begin sales, again via a distributor, in Brazil.

A strong safety profile has prompted Reva to price its stent at a premium to the Abbott product, as it also now begins to extend its product line-up, with shorter, and longer, stents, for example, as well as units to differing widths.

Reva’s shares closed yesterday at 72c, giving it a value of $308.5 million. Reva’s shares have traded between 65c and $1.32 over the past year.