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Medtronic Expands AF Product Line - Analyst Blog

Posted
1/17/2013 2:30:00 PM
By: Zacks.com
Referenced Stocks:AF;BSX;HAE;MDT;PAF

Leading medical devices player, Medtronic ( MDT ) has strengthened its growing atrial fibrillation (AF) business. This is on account of the fact that  it has received the U.S. Food and Drug Administration's (FDA) approval for its new FlexCath Advance Steerable Sheath for the Arctic Front Advance Cryoballoon System. Accordingly, the company also announced the commercial launch of this second-generation sheath, which provides greater flexibility and efficiency while delivering and positioning the cryoballoon catheter in the left atrium to treat paroxysmal atrial fibrillation (PAF).

Last year in August Medtronic received both CE Mark and FDA approvals for its Arctic Front Advance Cardiac Cryoballoon. This second generation system with its EvenCool Cryo technology is meant for the treatment of PAF.

The cryoballoon treatment is a minimally invasive procedure that isolates the pulmonary vein, a possible source of erratic electrical signals that cause atrial fibrillation (AF). The use of EvenCool Cryo technology allows the delivery of coolant inside the balloon, thereby making the process of isolating the pulmonary vein easier. As compared with the original system, Medtronic's Arctic Front Advance system helps physicians to better treat patients with complex anatomies.

During the second quarter of 2013, Medtronic's AF Solutions business grew nearly 20% globally (at constant exchange rates) with more than 30% growth in the U.S. market. This was driven by the strong performance of the Arctic Front cryoballoon system with EvenCool Cryo Technology, especially following the launch of the Arctic Front Advance system in both the U.S. and Europe.

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 five times higher risk of stroke and an increased chance of developing heart failure. PAF results in irregular heartbeat in the upper chambers, which start and stop suddenly on their own, usually for minutes or days at a time.

Recommendation

We are encouraged by Medtronic's focus on portfolio expansion along with its aim to boost revenues from the emerging markets. Moreover, the company is enjoying market share gain on the back of the Resolute Integrity drug eluting stent for the treatment of coronary artery diseases. Meanwhile, Medtronic continues to target returning 50% of the free cash flow to shareholders. However, unfavorable currency and macroeconomic uncertainty in Southern Europe adversely affected sales. These headwinds have also adversely affected the company's peers including St. Jude Medical ( STJ ) and Boston Scientific ( BSX ).

We have a Neutral recommendation on Medtronic. The stock retains a Zacks Rank #3 (Hold). Some of the Zacks Rank #1 (Strong Buy) stocks are Haemonetics Corporation ( HAE ) and Unilife Corporation ( UNIS ).



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