Covidien plc’s (COV) Stellarex drug-coated balloon (DCB) has received the CE Mark approval in Europe. Designed to treat patients with peripheral arterial disease (PAD), Stellarex DCB is part of Covidien’s vascular product line.
PAD affects millions of people around the world and occurs when arteries in the legs become narrowed or blocked by plaque. Covidien’s Stellarex DCB is designed to restore and maintain blood flow in the diseased arteries of such patients. The device opens up occluded blood vessels and simultaneously delivers a drug called paclitaxel onto the vessel wall to prevent the occurrence of new blockages.
Notably, the DCB’s proprietary EnduraCoat technology provides a durable, uniform coating which reduces drug loss during transit and facilitates efficient drug delivery to the treatment site.
In Nov 2014, Covidien signed a definitive agreement with The Spectranetics Corporation (SPNC), under which the latter will acquire Covidien’s Stellarex DCB platform for $30 million. We believe that Covidien went ahead with this move so that the pending $42.9 billion merger with Medtronic, Inc. (MDT) can commence under the antitrust law.
Divesture of Stellarex DCB is subject to the approval of the Federal Trade Commission and other regulatory agencies, as well as closure of the Medtronic-Covidien merger, which is slated to be complete by early 2015.
Following the European CE Mark approval, Spectranetics expects an immediate European launch of the product. Meanwhile, the company expects the device to be sanctioned by the U.S Food and Drug Administration (FDA) in 2017. Spectranetics’ management is extremely upbeat on Stellarex DCB and believes that the platform has the potential to make contributions of at least $100 million to its annual revenues within two to three years of commercialization in the U.S.
While Covidien has an extremely strong vascular product line featuring directional atherectomy and CTO devices, stents and PTA balloons, it has to counter significant competition from similar products in the market.
Covidien is facing increased challenges as rival C.R. Bard (BCR) continues to strengthen its foothold in the market with the introduction of new products. Notably, C.R. Bard’s Lutonix 035 catheter was the first DCB to be cleared by the FDA for percutaneous transluminal angioplasty in Oct 2014.
Moreover, difficult macroeconomic conditions are adversely affecting Covidien’s top line. Weakness in capital purchases and procedure volume also remain a cause for concern.
Currently, Covidien carries a Zacks Rank #3 (Hold).
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