CE Mark for MDT’s Epilepsy Therapy – Analyst Blog

Recently, Medtronic (MDT) received CE Mark approval for its Deep Brain Stimulation (DBS) therapy as adjunctive treatment for partial-onset of seizures in adults with medically refractory epilepsy. The approval is a significant step towards the treatment of epileptic patients who have not responded properly to current available treatments.

 

The approval was based on patient (110) data from SANTE (Stimulation of the Anterior Nucleus of the Thalamus in Epilepsy) trial that was implanted with a DBS system. Following this approval, Medtronic plans to bring in this therapy in European epilepsy centers by the year-end.

 

Although the approval of the DBS therapy in Europe is encouraging for Medtronic, it is yet to receive approval in the US. Recently, the US Food and Drug Administration (FDA) asked for additional data to support the pre-market approval (PMA) application for which additional clinical studies will be required.

 

The DBS therapy is currently approved in both Europe and the US to treat disabling symptoms associated with tremor and advanced Parkinson’s disease. While, the therapy also is approved for dystonia and obsessive-compulsive disorder (OCD) in Europe, it is approved in the US for the same indication under a Humanitarian Device Exemption (HDE).

 

Medtronic’s Neuromodulation segment, catering to the area of neurological, urological, and gastroenterological disorders, accounted for 10% of total revenues in the second quarter of fiscal 2011. This segment generated $370 million in sales in the latest reported quarter, marginally down from $373 million in the year-ago period.

 

In another development with respect to the Neuromodulation segment, Medtronic provided data from a trial according to which occipital nerve stimulation (ONS) holds potential for chronic migraines, which require further studies. Based on this preliminary data, pivotal clinical trial will be conducted to support market authorization. 

 

 

We believe going ahead, Medtronic’s Neuromodulation segment should record increased revenues based on the European approval of the DBS therapy for epilepsy. However, the company has a long way to go before the ONS treatment gets approved. Although the contribution from Neuromodulation is only 10%, improved performance for this and other smaller segments such as Diabetes, Physio-Control and Surgical Technologies is significant since Medtronic’s two largest segments – CRDM and Spinal − are reporting declining sales.

 

The company expects to revive these segments by several product launches with strong potential. However, the launch of the much-awaited CRDM products such as Revo MRI pacemaker and Protecta ICDs in the US depend on the resolution of a manufacturing issue associated with its Mounds View facility. Moreover, economic uncertainty is negatively impacting the company as patients are postponing elective surgeries. The primary reason for disappointing performance of Medtronic during the latest quarter has been slower market growth. Given these near-term challenges, the company currently has a Zacks #4 Rank (short-term Sell rating).

 

However, Medtronic is increasing its focus on emerging markets and is targeting at increasing revenues from this region. Besides, suitable acquisitions should enable the company to record higher revenues in the forthcoming period. As a result, in a long-term perspective, we have Neutral recommendation on the stock.