Dive Brief:

• Establishment Labs Holdings has received a U.S. Notice of Allowance for a patent covering its breast implant surface technology, the company said Monday.

• Analysts at Cowen framed the news as a positive for Establishment Labs’ efforts to claim a slice of the breast implant market in the wake of the safety problems that have blighted Allergan.

• Establishment Labs disclosed details of the patent alongside news that it has filed for 510(k) clearance of a tissue expander that could open up the breast reconstruction market.

Dive Insight:

Allergan’s worldwide recall of Biocell textured breast implants and tissue expanders and the wider safety concerns with that class of products have disrupted a major market. Establishment Labs, also known by the stock ticker ESTA, is developing a different type of implant with a surface technology that, on the basis of current evidence, is associated with a lower complication rate than rival devices.

Now, the U.S. Patent and Trademark Office has issued a Notice of Allowance for a patent covering the implant surface technology, leading Cowen analysts to believe Establishment Labs can benefit from the difficulties of its competitors. 

"These recent shortcomings of ESTA competitors highlight the antiquated nature of their technology, which hasn’t incorporated any incremental materials science innovation in decades," Cowen analysts wrote in a note to investors. "With a patent now in hand for their SmoothSilk surface, ESTA will be able to protect their novel IP that will serve as the foundation for the company to gain traction in the coming months and years."

The analysts expect Establishment Labs’ Motiva​ implant, which features the SmoothSilk technology, to "emerge as the clear favorite among plastic surgeons looking to provide their patients with the safest implant available." However, the analysts also warn that Establishment Labs could face headwinds that might derail its progress.

For example, any delay to Motiva's development would hurt Establishment Labs by pushing back the potential FDA approval date beyond the current target of late 2022. Establishment Labs would be hurt even more if safety issues are linked to the use of Motiva​, particularly as that is a key differentiator of the implant.

While Establishment Labs is still generating data to support premarket approval of Motiva​, it has already filed for 510(k) clearance of a tissue expander that uses the same surface technology as the implant.

Establishment Labs is also awaiting receipt of a CE mark for the tissue expander. That European regulatory milestone could open up the breast reconstruction market, which currently accounts for a tiny fraction of Establishment Labs’ sales. The situation in the U.S. is less clear. 

"It should not be assumed that ESTA will launch their tissue expander in the U.S. prior to receiving approval for their implant. The company is still weighing their strategic options and will provide further detail to investors before making decisions on official launch timing," the Cowen analysts wrote.

Outside the U.S., the analysts expect the tissue expander to make a meaningful contribution to sales from 2020 onward.