STJ ST. Jude Medical, Inc.

Medical devices giant St. Jude Medical (STJ) has achieved another major clinical landmark as it has recently reported the first human implant of its next-generation Portico transcatheter aortic heart valve.

The implant was performed at the St. Paul's Hospital in Vancouver, Canada. This represents a significant milestone for the Minnesota-based company’s transcatheter aortic valve implant (“TAVI”) program.

The Portico valve, made of bovine tissue, has been geared 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.

Currently, there are no marketed transcatheter valves, which have the ability to be re-sheathed, repositioned or retrieved.

The target market for the Portico valve is the estimated 400,000 patients with severe aortic stenosis (abnormal narrowing of the aortic valve opening) 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.

St. Jude has designed the Portico valve to overcome several key limitations associated with the first-generation transcatheter valves. Some of these benefits were demonstrated during the first implant procedure.

With several growth constraints in the mature legacy markets, medical devices companies are aiming to expand into the fast-growing new therapy areas. The TAVI market, a potential blockbuster prospect, is emerging as a substantial new growth opportunity for the top-tier MedTech companies including St. Jude.

The company’s bigger rival Medtronic’s (MDT) TAVI product, CoreValve, is currently undergoing evaluation in a pivotal trial in the U.S.

St. Jude expects to commence the European clinical trial of  the Portico valve in late 2011. The company is optimistic about entering the European TAVI market by first-half 2013. The Portico valve will be available in two delivery methods, namely, transfemoral (delivered through the femoral artery) and transapical (through a small incision in the left ventricle).

While St. Jude is well placed to grow its market share on the back of new product launches, it has challenges ahead. The company and its rivals Medtronic and Boston Scientific (BSX) are increasingly in a contest for  a  share in the soft CRM market.

We are impressed with St. Jude’s solid fundamentals, strong product mix, healthy growth trajectory and operating leverage. However, we remain wary about competition-driven pricing pressure. Our long-term Neutral recommendation on the stock is in tandem with a short-term Zacks #3 Rank (Hold).

 
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