The CE Mark approval for leading medical devices player,
) Affinity Fusion oxygenation system has strengthened its
Structural Heart portfolio. The system is meant to function like
temporary lungs by oxygenating and removing carbon dioxide from
blood during various open-heart surgical procedures. While it is
not yet available in the US, the company is working to get it
The approval of the device would benefit a huge patient base. As
per estimates, approximately 1 million patients would undergo
cardiopulmonary bypass globally this year.
Revenues from Structural Heart have been growing over the past
few quarters and came in at $280 million during the last reported
quarter, which was up 7% at constant currency. Growth was driven by
strong international sales of the CoreValve transcatheter aortic
heart valves, partially offset by reduced sales of surgical heart
valves in the US due to competitive pressures and challenging
While the CE Mark approval of the Affinity Fusion oxygenation
system is encouraging, Medtronic's Structural Heart segment is
working to develop the CoreValve portfolio in the US. This is
) is already present in the US market with its Sapien transcatheter
In August 2012
Medtronic completed the enrollment of high-risk patients in the
CoreValve US pivotal trial. More than 1,500 patients have been
enrolled with severe aortic stenosis in two studies - high or
extreme risk - for aortic valve surgery. The company also received
conditional approval from the US Food and Drug Administration to
study the CoreValve system on patients at intermediate risk for
open-heart aortic valve replacement. Intermediate risk patients
represent a huge potential as according to estimates the patient
size in this category is almost twice the existing patient
population that has been studied so far in the pivotal study.
We are encouraged by Medtronic's focus on portfolio expansion
along with its aim to boost revenues from emerging markets. This
becomes essential as sales from defibrillators and spinal implants
have been on a declining trend over the past few quarters.
Meanwhile, Medtronic continues to target returning 50% of free cash
flow to shareholders. However, unfavorable currency and
macroeconomic uncertainties in Southern Europe adversely affected
sales during the recently reported first quarter.
We have a Neutral recommendation on Medtronic. The stock retains
a Zacks #3 Rank (Hold) in the short term.
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