Leading medical devices player Medtronic (MDT) entered into a deal with Eli Lilly (LLY) to develop a new approach to treat Parkinson’s disease. The treatment involves the use of a proposed new medicine for the brain with the help of an implantable drug delivery system.
The deal will utilize Lilly’s glial cell derived neurotrophic factor (GDNF), with Medtronic’s implantable drug infusion system technology. However, financial details of the collaboration were not disclosed.
Parkinson’s disease is a neurodegenerative condition that leads to loss of physical stability, tremors and muscular stiffness, among other symptoms which aggravates over time. Moreover, it is estimated that 7-10 million people globally are victim of Parkinson’s disease. Although the proposed treatment is several years away from commercialization, it will be of immense importance to the huge patient population.
Medtronic’s Neuromodulation segment caters to pain, movement disorders, urological and gastroenterological, and psychological disorders. The company has developed a portfolio of therapeutic technologies for the treatment of debilitating chronic diseases that represent large, unmet medical needs.
In the third quarter of fiscal 2011, this segment generated $401 million in sales, up 2% from the year-ago period. Results were driven by mid-teens growth in InterStim and high single-digit growth in deep brain stimulation (DBS) therapies, partially offset by declines in drug pumps and pain stimulation market, which experienced softness in demand.
RestoreSensor was approved in Canada and Australia in the third quarter and the company is working to introduce some breakthrough technology for the US market.
The DBS therapy is approved for treating movement disorders like Parkinson’s disease and essential tremor, as well as dystonia under a Humanitarian Device Exemption (HDE). Medtronic’s neurostimulators — Activa RC and Activa PC — received approval from the US Food and Drug Administration (FDA) in May 2009.
Medtronic records 10% of its revenues from the Neuromodulation segment. The company has been witnessing several challenges in its two largest segments – CRDM and Spinal for the last few quarters due to pricing pressure and slower market growth.
As a result, the company has been focusing on other areas to drive its top line. Meanwhile, Medtronic is increasing its focus on emerging markets and emerging therapies and expects these to be major growth drivers going ahead.
Acquisitions should enable the company to record higher revenues in the forthcoming period. However, the company operates in a highly competitive environment and is exposed to the risk of currency movement.
We are currently Neutral on the stock which also corresponds to the Zacks #3 Rank (Hold) in the short-term.
LILLY ELI & CO (LLY): Free Stock Analysis Report
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