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MDT Progresses on Renal Denervation

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Leading medical devices player, Medtronic (MDT - Free Report) has progressed with respect to its renal denervation program. The company began a clinical trial with the system in Japan for patients with treatment-resistant hypertension. The trial will be conducted across 11 centers in Japan. Patients in the trial will be equally divided to be treated with renal denervation versus no denervation. All the patients will be receiving doses of anti-hypertensive medications.

In August, Medtronic presented positive data from the Symplicity HTN-2 clinical trial that is evaluating the safety and efficacy of renal denervation. The 18-month data demonstrated that the Symplicity system continues to provide superior and sustained blood pressure reduction in patients with treatment-resistant hypertension. In addition, this particular system has exhibited the safety of renal denervation through 18 months without any device-related serious adverse events and has not reported any new vascular complications in 12–18 months. Hypertension is a primary risk factor for stroke and is costing the global health care economy $500 billion a year. The company estimated that with optimal drug therapy, 30% of the patients remain uncontrolled. Consequently, approximately 300 million patients would need some sort of additional therapy by 2020.

According to Medtronic, this indication alone holds a $2−$2.5 billion market opportunity by 2020, excluding the other potential applications of renal denervation. The Symplicity system was inducted in the company’s portfolio with the acquisition of privately-held Ardian, in January 2011. During fiscal 2013, revenue from this business is expected to almost double to $60–$70 million.

While the Symplicity system has received both CE Mark and Australia’s Therapeutic Goods Administration listing, it is yet to receive approval in the US. However, adoption of the device depends on the reimbursement status, which in turn depends on positive clinical data. We expect the company to benefit from the 18-month positive data. Medtronic’s enrollment process for the Symplicity HTN-3 US pivotal trial is in progress, and is expected to be completed during the first calendar quarter of 2013.

Medtronic is also working on developing a next-generation renal denervation system (with a firing multi-electrode catheter and advanced radio-frequency generator) and recently completed the first phase of the feasibility study. All nine patients were treated with a 100% acute success rate in accessing the vessels and delivering therapy.

We are encouraged with the company’s focus on portfolio expansion given disappointing performance from defibrillators and spinal implants in the US market. However, we are optimistic that over the long term, stability in the US defibrillator and spinal market will be the driving factors for the company. The company’s peers, St Jude Medical and Boston Scientific (BSX - Free Report) , are also following its strategy of portfolio diversification.

We have a Neutral recommendation on Medtronic. The stock retains a Zacks #3 Rank (Hold) in the short term.

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