Good News for Medtronic DBS Therapy

Leading medical devices player, Medtronic (MDT - Analyst Report) has received approval from Health Canada for the use of its Deep Brain Stimulation (“DBS”) therapy in refractory epilepsy patients. This therapy sends controlled electrical pulses to a location inside the brain responsible for seizures. While the therapy is approved in Europe, it has yet to receive approval in the US for the treatment of refractory epilepsy.

The Health Canada approval is based on data from the SANTE (Stimulation of the Anterior Nucleus of the Thalamus in Epilepsy) clinical trial. The trial, which collected data from 110 patients, evaluated the use of DBS therapy as treatment for refractory epilepsy with partial-onset seizures. The approval will benefit a wide range of patients as it has been seen that more than 30% suffering from epilepsy fail to control seizures with anti-epileptic medication.

The DBS therapy is already approved in EU and US to address the disabling symptoms of essential tremor, advanced Parkinson's disease and dystonia. Besides, it is also approved for severe, treatment-resistant obsessive-compulsive disorder not adequately controlled by medications.

The additional indication in Canada should enable more patients to benefit from the therapy besides Medtronic increasing its penetration in that region. The Neuromodulation segment has been recording robust growth over the past few quarters with DBS contributing significantly. Moreover, the DBS therapy experienced double-digit growth in new patients in the US.

Earlier this week, Medtronic announced enrollment of the first patient into the MORE (MedtrOnic Registry for Epilepsy) Registry that will involve approximately 200 patients over 2 years across Europe. The purpose of this Registry is to evaluate the DBS therapy in terms of its long-term efficacy, quality of life and safety in patients with refractory epilepsy.

Recommendation

We are impressed with Medtronic’s focus on segments such as CardioVascular, Diabetes and Neuromodulation in a scenario where its core segments consisting of defibrillators and spinal implants have been recording declining sales. The Neuromodulation business is however competitive with the presence of players such as Cyberonics (CYBX - Analyst Report) and St Jude Medical (STJ - Analyst Report).

Meanwhile, synergies from recent acquisitions will keep contributing to growth. Medtronic has also gained significantly from its focus on the emerging markets.

Longer term, we have a Neutral recommendation on Medtronic. The stock retains a Zacks #3 Rank (“Hold”) in the short term.