--Medtronic's kidney procedure treats drug-resistant high-blood pressure
--Treatment not approved yet in U.S., but Medtronic is global market leader
--Company sees a multibillion-dollar opportunity with treatment
Medtronic Inc.'s (MDT) shares have slumped since the recession, but a novel way to treat drug-resistant high blood pressure could help to re-energize the stock.
Renal denervation is a procedure that singes tissue in the walls of arteries leading to the kidneys, affecting nerves linked to high blood pressure, or hypertension. The treatment isn't approved yet in the U.S., but has long been available in Europe.
Medtronic projects renal denervation sales of $60 million to $70 million next year, or double this year's sales, and is considered the market leader. The Fridley, Minn., company sees the treatment as a multibillion-dollar opportunity for the rest of the decade--an important catalyst for a company whose shares remain nearly a third lower than they were in October 2007.
"I would say that of the near-term opportunities, this is probably the biggest one," said Raj Denhoy, analyst at Jefferies & Co.
Medtronic, though, faces increasing competition globally and isn't expected to launch the treatment in the U.S. until sometime during its fiscal year ending in April 2015. Until then, Medtronic has said it will use patents and product innovation to preserve its lead in the European market and ensure it dominates in the U.S., where it is expected to launch ahead of others.
Patents are partly what made Ardian attractive, said Sean Salmon, president of the coronary and renal denervation business at Medtronic, in a recent interview. "What really gave us pause is just the strength of the [intellectual property] portfolio. It's really, really strong."
High blood pressure is normally treated with drugs, but some people can't control the condition with medication. Renal denervation represents a potentially viable new option for these patients. Kidneys play a vital role in regulating blood pressure, sending signals that tell the brain to raise and lower blood pressure. Deactivating the nerves reduces that activity and lowers blood pressure in patients with hypertension.
"It's the first time we have a technique that may control the blood pressure--with medicine, of course, but with much less medicine," said Issam Moussa, chair of cardiovascular diseases at Mayo Clinic in Jacksonville, Fla. Mayo Clinic is one of the centers participating in Medtronic's trial in the U.S.
Patients with chronic high blood pressure are at greater risk of heart attack, stroke and organ damage, Dr. Moussa added. They may also experience regular symptoms such as headaches and weakness.
Medtronic has estimated that roughly 300 million patients will need treatment by 2020, making renal denervation a $2 billion-to-$2.5 billion market opportunity in that time period. That makes it an important growth driver for the company, which has dealt with sluggish sales in key heart device and spine markets as well as a slumping stock price.
Shares of Medtronic are down 1.8% to $37.55 so far this year.
The market for renal denervation is still in its early stages of development as governments in Europe have been slow to reimburse for the treatment. Medtronic's catheter, which is used in the procedure, on average costs $4,500 to $5,500.
Nonetheless, more competitors are jumping into the market. Both St. Jude Medical Inc. (STJ) and Covidien PLC (COV) received European approval, or a CE mark, for treatments this year, and Boston Scientific Corp. (BSX) expects to launch its own therapy in 2013.
"In some ways, [Medtronic] may want these other companies to be in the market because it's going to help develop the market," said Michael Matson, analyst at Mizuho Securities.
Still, in the long term, "the company will need to innovate to avoid being passed by," said Michael Weinstein, analyst at J.P. Morgan Chase & Co.
Medtronic said earlier this month that it is working on a next-generation system with a multiple electrode design meant to shorten procedure times. Competitors' products already have this feature. The company expects to get a CE Mark for the system--currently called "Smurf"--in its fiscal year 2014.
The company built its renal-denervation position in part by buying privately held Ardian Inc. for $800 million in January 2011, with the possibility for additional payments through April 2015.
(Anjali Athavaley covers medical device companies for Dow Jones Newswires. She can be reached by email at firstname.lastname@example.org.)
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