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Medical devices major, St. Jude Medical, Inc.’s (STJ - Analyst Report) recently won European CE Mark approval for its 23 mm Portico Transcatheter Aortic Heart Valve Implant (“TAVI”) and Transfemoral Delivery System. The clearance has positioned the device from the company’s Cardiovascular and Ablation Technologies Division to garner incremental revenues from the European market.
 
The Portico valve, made of bovine tissue, has been designed to improve physicians’ control and accuracy in valve placement. The valve has the unique ability to be completely re-sheathed (the process of bringing the valve back into the delivery catheter), repositioned at the implant site and retrieved before it is released from the delivery system. St. Jude has designed the Portico valve to overcome several key limitations associated with first-generation transcatheter valves.

The European approval is supported by positive results from a clinical trial, where it was established that the Portico valve is safe and efficient to treat heart complications. St. Jude further plans to initiate a European study to evaluate its 25 mm Portico valve to win CE Mark clearance before year end. 

The target market for the Portico valve are patients with severe aortic stenosis, considered to be at high-risk (or inoperable) for the legacy open-heart valve replacement surgery. The valve can be implanted using a transcatheter technique rather than through open-heart surgery.

With several growth constraints in the mature legacy markets, medical devices makers are aiming to expand into the fast-growing emerging therapy areas. The TAVI market is emerging as a substantial new growth opportunity for the top-tier MedTech companies. St. Jude’s larger rival Medtronic Inc.’s (MDT - Analyst Report) TAVI product CoreValve is currently approved for marketing in Europe.

With a market cap of $11.01 billion, St. Jude is a leading medical device manufacturer maintaining a solid rate of growth over the past decade. We believe that new product development and penetration into emerging markets will drive long-term growth for the company.

However, we are wary of internal as well as external shortcomings at the company’s core Cardiac Rhythm Management (“CRM”) business. A weak foreign exchange, competitive pressures along with the ongoing difficult macroeconomic environment continue to affect the company’s results.

Our long-term ‘Neutral’ recommendation on St. Jude is in agreement with a short-term Zacks #3 Rank (Hold).
 

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