MDT Grows CardioVascular Portfolio – Analyst Blog

Medtronic (MDT), one of the largest medical devices company, has received CE Mark approval for its next generation CoreValve delivery system, which is AccuTrak technology-enabled. This technology provides physicians to conveniently place the device, which is crucial for implant procedures. Subsequent to this approval, the company launched the product. Earlier, in March 2007, the original CoreValve received CE Mark approval. However, the product is not yet available in the US, Canada or Japan.

The CoreValve system is meant to treat unhealthy aortic valves without open-heart surgery or surgical removal of the original valve. The CoreValve, delivered through the femoral artery, is used in 75% of transarterial transcatheter valve replacement procedures. We believe the launch of the latest version of the product should boost revenues of the CardioVacular segment.

Medtronic also announced the first implantation of the Resolute integrity stent system for the treatment of coronary artery diseases at Southampton General Hospital in the U.K. This product received CE Mark approval at the end of last month and was launched subsequently.

Revenues of the CardioVacular segment during the first quarter of fiscal 2011 were $717 million, up 4.1% year over year driven by growth from all three divisions – Coronary & Peripheral (up 5.4% at $372 million), Structural Heart (up 2.8% at $224 million) and Endovascular (up 2.5% at $121 million). While revenues from Coronary & Peripheral division included $35 million from the Invatec acquisition, a 13.5% growth in the international market driven by the continued adoption of Endurant abdominal and Valiant Captivia thoracic stent grafts led to growth of Endovascular revenues.
 
The drug-eluting stent (DES) market continued to decline globally during the quarter, driven by aggressive price competition. Medtronic witnessed growth in the Structural Heart division based on strong performance of CoreValve.
 
Our Recommendation
 
Medtronic has posted a disappointing first quarter with sales declining in two of its largest segments, CRDM and Spinal. Although several products with strong potential are slated for launch during the current fiscal, a manufacturing issue at one of its plant is yet to be resolved. However, the growth of the CardioVascular and Diabetes segment is encouraging.
 
Medtronic is increasing its focus on emerging markets and is targeting higher revenues from this region. Besides, acquisitions should enable the company to increase revenues in the forthcoming period. However, the company operates in a highly competitive environment and is exposed to the risk of currency movement.