Leading medical devices player,
Medtronic
(
MDT
) presented positive data from the pivotal trial of its Engager
transcatheter aortic valve implantation ('TAVI') system at a
recently held meeting. The data presented revealed safety and
performance of the valve, which is delivered transapically. The
valve, which is being reviewed for CE Mark approval in Europe, is
meant to treat patients with severe aortic stenosis who are at
high or extreme risk for surgical aortic valve replacement.
Over the past few quarters, Medtronic has been focusing on
developing its transcatheter valve portfolio because of its
immense potential. The market size is expected to grow to $2.5
billion by 2020 from $700 million last year. Though the Engager
valve is in the investigational stage, the company has witnessed
significant contribution from the transcatheter valve franchise
to its Structural Heart business subsequent to the acquisition of
CoreValve and release of the Melody products.
Although CoreValve is approved in Europe, the product is yet
to get approval in the US. Medtronic has 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. Approximately two-thirds of the patients enrolled are in
the high risk study.
The transcatheter valve market in Europe is competitive with
the presence of
Edwards Lifesciences
' (
EW
) Sapien valve. Moreover, Edwards has the first mover advantage
in the US with Sapien, which received approval in November
2011.
Medtronic has also begun enrollment in the US as part of the
SURTAVI (CoreValve
Su
rgical
R
eplacement and
T
ranscatheter
A
ortic
V
alve
I
mplantation) trial. Within the SURTAVI trial, CoreValve
implantation can be performed by transfemoral, subclavian or
direct aortic access, depending on the needs of the intermediate
risk patients for open-heart aortic valve replacement.
Intermediate risk patients represent huge potential as estimates
put the patient size in this category at almost double, compared
to 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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