To overcome the ongoing difficulties and challenges in the
spinal business, leading medical device player
Medtronic, Inc.
(
MDT
) is currently focusing on portfolio expansion. As part of this
strategy, the company recently initiated the U.S. launch of its ACD
Instrument Set that will be used to insert the company's BRYAN
Cervical Disc in a simplified process compared to the original
instrument set.
The BRYAN disc, one of the two clinically proven artificial
cervical discs in Medtronic's portfolio, was first introduced in
2000. Since then the company has sold 20,000 units of the same
worldwide. This disc was approved by the U.S. Food and Drug
Administration in 2009 for the treatment of single-level cervical
disc disease (radiculopathy and/or myelopathy), a common diagnosis
for neck and arm pain.
Medtronic has been witnessing disappointing performance from the
spinal implants in the U.S. market mainly due to pricing pressure
and reduced procedure volume. During the first quarter of fiscal
2013, this segment generated $786 million in sales, down 5% y/y
(down 3% at constant exchange rate or CER). The company's Biologics
business suffered from continuous declines in the sales of Infuse
(following the publication of articles in
The Spine Journal)
.
Revenues from BMP[comprising Infuse bone graft (InductOs in the
European Union) sales] declined 19% year over year (same as at CER)
during the quarter with a 20% drop in the U.S.
We are also concerned about the persisting economic
uncertainties across the world, leading to reduction in healthcare
budgets and increased pressure on utilization. This results in
fewer procedures, a trend that is expected to continue in the near
future and affect revenue growth of the company. These headwinds
have also adversely affected the company's peers including
St Jude Medical
(
STJ
) and
Boston Scientific
(
BSX
).
However, we are encouraged with Medtronic's portfolio expansion
strategies, although we believe contributions from new products are
not significant yet to drive top-line growth. The company is
currently focusing on the emerging markets, especially China,
primarily to offset the hindrances it faces in two of its largest
markets - US defibrillators and US spinal implants. Earlier in
September, Medtronic decided to acquire
China Kanghui Holdings
(
KH
), which is in sync with its focus on globalization due to the
opportunity rife in international destinations.
We have a 'Neutral' recommendation on Medtronic. The stock
retains a Zacks #3 Rank (Hold) in the short term.
BOSTON SCIENTIF (BSX): Free Stock Analysis
Report
CHINA KANGH-ADR (KH): Free Stock Analysis
Report
MEDTRONIC (MDT): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research