Leading medical devices player,
) has strengthened its growing atrial fibrillation ("AF") business
as it has received both CE Mark and US Food and Drug Administration
approvals for its Arctic Front Advance Cardiac Cryoballoon. This
second generation system with its EvenCool Cryo technology is meant
for the treatment of paroxysmal AF.
The cryoballoon treatment is a minimally invasive procedure that
isolates the pulmonary vein, a possible source of erratic
electrical signals that cause AF. The use of EvenCool Cryo
technology enables the delivery of coolant inside the balloon,
thereby making the process of isolating the pulmonary vein easier.
Medtronic's Arctic Front Advance system will help physicians to
better treat patients with complicated anatomies, compared to the
The company has been witnessing disappointing performance from
defibrillators and spinal implants in the US market, although some
signs of stability are evident. Amidst this background, the
double-digit growth expected in the areas of transcatheter valves,
AF ablation and peripheral interventional product lines is
During the first quarter of 2013, Medtronic's AF Solutions
business grew nearly 19% globally (at constant exchange rates) with
more than 30% growth in the US market driven by the strong
performance of the Arctic Front cryoballoon system. The launch of
the Arctic Front Advance system in both US and Europe should drive
this segment further.
According to the company, AF is the most common and one of the
most under treated heart rhythm disorders, affecting more than 7
million people worldwide. Furthermore, approximately half of the
diagnosed AF patients fail drug therapy, and if left untreated,
patients have up to a five times higher risk of stroke and an
increased chance of developing heart failure. PAF results in
irregular heartbeats in the upper chambers, which start and stop
suddenly on their own, usually for minutes or days at a time.
We are encouraged by Medtronic's focus on portfolio expansion
along with its aim to boost revenues from emerging markets.
Moreover, recently launched Resolute drug eluting stent continued
to drive market share. 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. These headwinds have also
adversely affected the company's peers including
St Jude Medical
We have a Neutral recommendation on Medtronic. The stock retains
a Zacks #3 Rank (Hold) in the short term.
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