As a positive development for Medtronic’s (MDT) CRDM segment, the US Food and Drug Administration (FDA) has approved its Revo MRI SureScan pacemaker, designed to ensure safety in certain Magnetic Resonance Imaging (MRI) scans. The company expects to begin shipment of the product immediately.
Following this approval, patients with pacemakers will be able to go for MRI, helping detect and treat a wide variety of medical conditions. Due to potential adverse events associated with MRI in such patients, procedures were not being carried out on them.
Per estimates, approximately 200,000 pacemaker patients in the US are forced to forgo MRI scans due to the possible interference of the machine’s magnetic field with the operation of the pacemaker.
The FDA approval comes after reviewing results from a trial conducted with 464 patients who were implanted with the device and randomized to receive MRI. No complications were found in 211 patients who underwent MRI scan.
Although the approval of the MRI safe pacemaker is a positive breakthrough for Medtronic, the warning letters regarding the company’s Mounds View manufacturing facility are yet to be dealt with. The company is working with the agency to sort out the issue.
Medtronic’s CRDM segment has been recording lower sales for the past few quarters due to slower market growth coupled with pricing pressure. In the second quarter of fiscal 2011, this segment generated $1,248 million in sales, down 2.3% compared to the year-ago period’s $1,278 million.
Revenues are derived primarily from Pacing Systems and Defibrillation Systems, which were at $472 million (down 5.2% year over year) and $745 million (down 1.2%), respectively.
During the quarter, Medtronic recorded pacing revenue of $210 million (down 5%) in the US and $262 million (down 5.4%) in the international market. Overall the market for the pacing systems declined in mid-single digits in both the domestic and international market. The company had been expecting an improvement in pricing and market share in the US market with the launch of the Revo pacemaker.
Recommendation
Sales from Medtronic’s two largest segments, CRDM and Spinal have been declining in the recent past. However, the extent of the decline in the last reported quarter was less than the previous one. The approval of the Revo pacemaker should boost revenues going ahead, although the yet -to- be solved manufacturing issue looms over the company.
We are currently Neutral on Medtronic which also corresponds to the Zacks #3 Rank (hold).
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