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Medtronic Introduces CoreValve Evolut R System in Japan

MDT BAX NXTM BVX

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Medical device major, Medtronic plc (MDT - Free Report) recently announced the receipt of reimbursement approval from the Japanese Ministry of Health, Labor and Welfare (MHLW) for its transcatheter CoreValve Evolut R System. This approval will particularly benefit patients with severe aortic stenosis (AS) who are unfit for a surgery and for whom transcatheter aortic valve implantation (TAVI) is the best treatment option. Thus, it is the first and only Recapturable TAVI System to be introduced in Japan.

We note that, Medtronic has been undertaking initiatives to strengthen its foothold in the growing medical device market of Japan of late. Before this reimbursement approval, Medtronic received the Shonin regulatory approval from the MHLW in November for the CoreValve Evolut R.

Medtronic has been going through a rough phase since its earnings release in November. While its share price has consistently remained above the broader Medical product industry over the last six months, the mixed second-quarter performance disrupted the trend. As per the latest movement, the stock is down 10.7%, wider than the loss of 7.2% for the broader industry of Medical Products over the last six months.

Additionally, Medtronic has seen 13 downward revisions with no upward movement for the full year over the last one month. Similarly, for the same period, current year estimates have slid 8 cents from $4.65 to $4.58. However, we believe that the company’s latest initiatives to expand portfolio and strengthen its position in the global market are expected to boost the stock price.

Notably, Medtronic's earlier version of CoreValve System was approved in Japan in Mar 2015. The new system consists of the CoreValve Evolut R transcatheter valve and the EnVeo R Delivery System, which features an Enveo R InLine.  The Evolut R System, with its self-expanding nitinol frame, is designed to optimally fit within the native aortic valve, using its supra-annular valve position to normalize blood circulation.

Aortic stenosis is a condition where the aortic valve narrows and reduces blood flow from the aorta to the rest of the body. Thus, the TAVI procedure has successfully continued to grow as a less invasive treatment for inoperable AS patients in Japan. The use of CoreValve Evolut R System during this procedure has demonstrated exceptional clinical results in studies globally. Evolut R gives physicians more confidence and provides various advantages which are not currently available in other TAVI systems.

Globally, the heart valves market is estimated to grow at an impressive CAGR of about 14% by 2020, according to a Technavio report. There is growing demand for less complicated cardiac treatment procedures as normal invasive ones cause complications in patients. The latest launch can be a boost for Medtronic’s global commitment to build a market-leading innovation pipeline in the transcatheter space as Evolut R's entrance into the Japanese market was expected in the second half of fiscal 2017. In the recently concluded quarter, Medtronic reported revenues of $753 million on the back of growth in transcatheter heart valves as a result of strong customer adoption of the CoreValve Evolut R.

Zacks Rank & Key Picks

Medtronic currently carries a Zacks Rank #4 (Sell). Better-ranked medical stocks are NxStage Medical Inc. (NXTM - Free Report) , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation (BVX - Free Report) . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NxStage Medical surged 22.5% over the last one year compared to the S&P 500’s 6.9% over the same period. The company has a four-quarter average positive earnings surprise of 50.00%.

Baxter International rallied 18.3% over one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.

Bovie Medical recorded a 116.5% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.

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