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Specialist manufacturer of gastrointestinal products, Given Imaging Ltd , recently filed for the regulatory approval of its second generation visual capsule PillCam Colon 2 in Japan. The submission to the Japanese Pharmaceutical and Medical Devices Agency (PMDA) is supported by clinical trial data.

The trial evaluated the performance of PillCam Colon 2 to observe the mucosal layer of the colon to detect pathologies including colorectal cancer. Clinical studies validated the improved efficiency of using PillCam Colon 2 over standard colonoscopy, as the use of Given Imaging’s PillCam Colon 2 enabled clinicians to identify 94% polyps of at least 6mm in size.

PillCam Colon 2 will be cleared for commercialization in the U.S. only after the FDA approval and Given Imaging expects to submit the clinical trials for FDA clearance in the fourth quarter. However, the video capsule received the European CE Mark in September 2009. It is also available in Latin America, Canada and some parts of Asia.

Given Imaging expects to serve a market of roughly one million annual procedures in Japan. Given the significant addressable opportunity in the second largest market for medical devices, management believes that PillCam Colon 2 may help accelerate revenues.

Statistics suggest that about 88 million of the U.S. population over the age of 50 have a probability of suffering from colon cancer. The annual compliance rate is estimated to be in the band of 50% and 60% while the compliance rate in the European and Japanese markets are comprehensively lower. Based on these figures, Given Imaging sees a $4 billion potential market for its PillCam Colon offering.

The company remains committed to expand its geographic footprint. Revenues from the outside-U.S. market represented 41% of its total revenues in 2011. However, the company’s overseas operations make it susceptible to currency and macroeconomic headwinds.

Given Imaging dominates the capsule endoscopy market. With supportive market statistics and clinical data, the company expects this second generation video capsule to emerge as a major commercial opportunity. PillCam Colon 2 is also expected to catalyze growth in the years ahead.

Given Imaging’s competitors providing medical imaging solutions include Olympus Corporations (OCPNY), GE Healthcare, a division of General Electric (GE - Analyst Report), and the privately-owned FUJIFILM Holdings Corporation.

Given Imaging currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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