), the world's leading spinal technology company, announced the
launch of the latest addition to its cervical surgical technique
portfolio at the 40th annual meeting of the Cervical Spine
The company diversified its portfolio with Cervical FaceliftsM
ID/S, a breakthrough surgical technique that stabilizes the
cervical spine and decompresses the neural foramen indirectly.
The placement of the Cornerstone Facet MicroGrafts in the
posterior cervical facet joints supports carrying out the
innovative technique. Medtronic's recent launch should improve
cervical surgery patient outcomes.
The launch underlines Medtronic's focus on portfolio expansion to
overcome ongoing challenges in its spinal business, one of its
core franchises. The company has been witnessing disappointing
performance from spinal implants in the U.S. market mainly due to
pricing pressure and reduced procedure volume. This, in turn, has
impacted Medtronic's overall performance. The domestic spine
market (accounting for 14% of company-wide revenues) continues to
be dragged down by declining Infuse sales.
The U.S. core spine market showed signs of stability in the
second quarter of fiscal 2013. It improved modestly over the past
three quarters. We expect the company to benefit from improving
trends in its core markets.
The sluggish growth in Cardiac Rhythm Management segment is
another area of concern. Medtronic's peers including
St. Jude Medical
) are also adversely affected by these headwinds.
However, increased focus on innovation and emerging markets
should help dilute the impact of these challenges. Medtronic
expects contribution of 150 to 200 basis points from emerging
market for fiscal 2013. By fiscal 2016, the company targets 20%
of revenue mix to come from emerging markets.
We are optimistic about revival of solid growth as the company
aggressively expands its portfolio and gains a foothold in
emerging markets. This should offset softness in the domestic
market for spinal implants and defibrillators; two of the largest
markets served by Medtronic. We currently have a long-term
'Neutral' recommendation on the stock which carries a short-term
Zacks #3 Rank (Hold).
Moreover, Medtronic should gain from the upbeat business
environment in the neuromodulation market.
), the company's peer in the neuromodulation market carry a Zacks
#2 Rank (Buy).
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