Label Expansion for Medtronic's CRT-Ds - Analyst Blog

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Leading medical devices player, Medtronic ( MDT ) has received clearance from the US Food and Drug Administration (FDA) for expanded indication of its cardiac resynchronization therapy with implantable cardioverter defibrillators (CRT-D). Following this approval, the cardiac resynchronization therapy can now be used at an earlier stage in mildly symptomatic heart failure patients. This in turn is expected to improve survival of patients, reduce hospitalization, and prevent disease progression.

The expanded indication will come to the aid of New York Heart Association ('NYHA') Class II heart failure patients. Approximately 200,000 Americans and 620,000 people globally fall and under this category. Medtronic's CRT-D devices were already approved to treat certain patients with moderate-to-severe heart failure (NYHA Class III and IV).  The company will begin a post-approval study to further substantiate the clinical benefits of CRT-D treatment in Class II heart failure patients.

The latest FDA approval that expanded the usage of defibrillators is based on data from two trials - REVERSE (REsynchronization reVErses Remodeling in Systolic left vEntricular dysfunction) and RAFT (Resynchronization/Defibrillation in Ambulatory Heart Failure Trial). These studies demonstrated that defibrillators can benefit mildly symptomatic heart failure patients by reducing mortality and heart failure hospitalization rates.

While the expanded indication for Medtronic's defibrillators will result in higher sales, we do not consider the contributions to be significant. Over the past few quarters, the company is witnessing declining sales from its Cardiac Rhythm Disease Management ('CRDM') and Spinal segments.

Acknowledging the challenges at play, Medtronic is in the process of launching several new products that are likely to drive growth in this difficult scenario. Among the recently launched products, the Revo MRI pacemaker created a stir in the pacing business, registering 4 points of market share gains in the US in the last reported quarter. Other products with potential include the Symplicity catheter system for renal denervation, Core Valve (US launch scheduled for fiscal 2014), the RestoreSensor spinal cord stimulator and the Enlite continuous glucose monitoring sensor.

We are also encouraged by Medtronic's focus on globalization due to the opportunity rife in international destinations, especially in the emerging markets. This strategy has been adopted by other players in the MedTech space such as Boston Scientific ( BSX ) and St Jude Medical ( STJ ), among others. Emerging markets, a key focus for the company, recorded 16% growth during the last quarter, a trend that is expected to continue over the forthcoming period.

We have a Neutral recommendation on Medtronic. The stock retains a Zacks #3 Rank ('Hold') in the short term.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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