Leading medical devices player, Medtronic (MDT) strengthened its product portfolio in Japan with its decision to launch Integrity Coronary Stent System and Endurant AAA Stent Graft System. The former is meant to treat narrowed heart arteries due to atherosclerosis and the latter treats abdominal aortic aneurysms (AAA).
On the back of these imminent launches, Medtronic’s revenue from Japan, the world’s second largest market for advanced medical technology, should get a shot in the arm. Both the devices had received approval during summer. While reimbursement for the Integrity Coronary Stent is effective since September 1, for the Endurant AAA Stent Graft, reimbursement will come into effect from November 1, 2011.
Endurant AAA Stent Graft received approval from the US Food and Drug Administration (FDA) in December 2010. The device has been used to treat more than 6,000 patients in the US. In August 2011, Medtronic started a post-approval study of Endurant AAA Stent Graft System for the treatment of AAA. The long-term safety and effectiveness study will enroll about 325 patients across 25 sites in the US.
The company’s CardioVascular segment recorded revenues of $850 million in the most recent quarter, up 19% year over year (up 11% at CER) driven by growth from Coronary (up 14% or 6% at CER to $389 million), Structural Heart (up 23% or 15% at CER to $275 million) and Endovascular & Peripheral (up 23% or 16% at CER to $186 million).
Revenues at this segment increased 10% in the US accompanied by a strong international performance (11% growth), particularly in the emerging markets (30% at CER). Endovascular & Peripheral revenues recorded strong growth based on a 27% rise in the US owing to the success of the Endurant abdominal stent graft.
Medtronic is focusing more on international sales, encouraged by the rapid pace of growth seen in the emerging markets. During the most recent quarter, Medtronic’s international operations generated $1.8 billion in revenues, a growth of 19% (7% at CER) year over year. International operations accounted for 46% of total revenue during the quarter.
Given the slowdown in its core business of pacemakers and defibrillators, over the past few years, Medtronic has also been reallocating resources toward new therapies to drive profitability. Moreover, the company has adopted restructuring initiatives to align its cost structure to current market conditions to prepare the ground for long-term growth. However, the company faces tough competition from players such as St Jude Medical (STJ) and Boston Scientific Corporation (BSX). We are currently Neutral on Medtronic, in line with our recommendation for St Jude Medical, both corresponding with the Zacks #3 Rank (Hold) in the short term.
