Leading medical devices player, Medtronic (MDT) has begun a clinical trial of its CoreValve system in Japan. The system provides a treatment option for patients with symptomatic, severe aortic stenosis who are at high risk, or are ineligible, for open-heart surgery.
The CoreValve system has been implanted in patients in more than 50 countries outside the US since it received CE Mark approval in March 2007. It is estimated that about 300,000 people are diagnosed with the disease globally, of which one-third are unfit for open-heart surgery.
The company has witnessed strong early adoption of the 31mm CoreValve that received CE Mark approval in July 2011. Medtronic anticipates receiving CE Mark approval for the 23 mm CoreValve in the second half of fiscal 2012. The companyhas presented positive data for its CoreValve system at the European Society of Cardiology Congress 2011.
It was observed that treatment with CoreValve led to positive clinical outcomes. The study enrolled 50 patients with the average age of 81 years and followed them for four years.
Last month, CoreValve received approval in Korea. Medtronic is working to get the device approved in several countries including the US, Thailand, Singapore, China, Hong Kong, and Taiwan. In Europe, the company is faced with tough competition with the presence of Edwards Lifesciences Corporation (EW). Enrollment is currently on track in the US pivotal study of CoreValve. Moreover, Boston Scientific (BSX) is working to enter the market banking on the acquisition of Sadra Medical.
Last week, Edwards’ Sapien transcatheter aortic heart valve became the first such device to receive approval in the US. As a result, Sapien has the first mover advantage in the US, a market with immense potential. Moreover, Edwards expects regulatory approvals for its Sapien XT valve in Japan and in China in 2013.
During the most recent quarter, Medtronic’s Structural Heart (within the CardioVascular business) recorded a 23% growth in revenues to $275 million. The robust growth was driven by strong adoption of CoreValve in the international markets and contribution of ATS Medical, which contributed $20 million of revenues.
Our View
Medtronic recorded a 2% growth in revenues during the most recent quarter, although sales from defibrillators and Spinal businesses continued to disappoint. Moreover, economic uncertainty is affecting procedure volume. In this scenario, the company is looking at several options to revive its top line. Acquisitions done over the past few years are contributing to total revenues, a trend that is expected to continue.
The company is banking heavily on the successful launch of the CoreValve system across the globe. Meanwhile, Medtronic’s increasing focus on the emerging markets has also borne fruit.
We are currently Neutral on Medtronic, in line with both Edwards and Boston Scientific. The stocks retain Zacks #3 Ranks (Hold) in the short term.
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