Leading devices player Medtronic’s (MDT) Canada unit, Medtronic of Canada Ltd., recently presented favorable data for kyphon balloon kyphoplasty procedure (BKP) for the treatment of spinal fractures in cancer patients.
It was observed that patients treated with the BKP got better results compared with non-surgical care after one month of treatment. The study was published in the March 2011 issue of ‘The Lancet Oncology.’
The study (Cancer Patient Fracture Evaluation or CAFE) was conducted with 134 cancer patients suffering from vertebral compression fractures (VCFs) in the US, Europe, Australia and Canada. This new treatment option will cater to a large population of cancer patients with VCF, where almost 24% with multiple myeloma, 14% of breast cancer, 8% of lung cancer and 6% of prostate cancer have such complication.
Positive data from the BKP study will be beneficial for treating this huge patient population and provide pain relief and improved quality of life.
Spinal and Biologics is Medtronic’s second largest segment after Cardiac Rhythm Disease Management (CRDM) which contributed 21% of total sales during the third quarter of fiscal 2011. This segment has struggled over the past few quarters before returning to growth in the third quarter.
This segment generated $861 million in sales during the quarter compared to $842 million in the year-ago period, up 2%. Revenues from Core Spinal and Biologics were $626 million (down 0.6% year over year) and $235 million (up 10.8%). Metal constructs’ revenues recorded a 2% growth during the quarter.
With regard to the global spinal market, Medtronic regained some stability with growth remaining in the range of 3%-4%, on par with the previous two quarters. In January 2011, the company sped up the launch of Solera, which is having a positive impact on its market share and pricing.
Revenues from BKP declined 5% during the quarter (same as the second quarter) and were flat on a sequential basis. We believe revenues from BKP should increase gradually with greater acceptance of the procedure based on favorable data.
Several products are slated for launch in the Spinal segment, which should ensure higher revenues going forward. Although orthopedic medical devices companies were witnessing challenges in the form of pricing pressure and lower procedure volume arising from economic uncertainty, the situation is gradually stabilizing.
However, we note that the market for spinal products gets highly competitive with the presence of players such as Zimmer Holdings (ZMH) and Johnson and Johnson (JNJ) in the fray.
We are currently Neutral on Medtronic, which also corresponds to the Zacks #3 Rank (Hold) in the short-term.
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