Good News for EW - Setback for MDT

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Of late, the flow of good news for medical device marker Edwards Lifesciences Corporation (EW) remains uninterrupted. After winning a patent infringement case over medical devices major Medtronic (MDT) in Germany, Edwards disclosed that the injunction against Medtronic’s transcatheter heart valves has gone into effect on Aug 26, 2013.

On Jul 12, the German District Court of Mannheim declared that Medtronic’s CoreValve and CoreValve Evolut systems infringe Edwards’ Spenser patent for transcatheter heart valve technology. This ruling forced Medtronic to recall and discontinue the sale of the products in Germany.

The news is a material upside for Edwards as Medtronic’s CoreValve is a close competitor for the company in Europe. Moreover, Edwards’ Spenser patent EP2 055 266 B1 is effective through 2022. The injunction of a major competitive product in the German market for almost a decade presents an opportunity for vast market proliferation for Edwards.

However, on humanitarian ground, Edwards has allowed exceptions to the injunction ruling in patient cases where its Sapien XT valve is not indicated. This will ensure accessible transcatheter therapy for all affected patients in Germany, subject to Medtronic’s cooperation. Furthermore, the company will not seek indemnity for such cases in the country. According to findings, such compassionate cases are estimated to roughly come to 40 on a monthly basis.

According to the company, over 80% of the transcatheter valve centers in Germany utilize Edwards Sapien XT valve at present. Additionally, Edwards is working to increase adoption rate for Sapien XT valve at all German centers where physicians do not have experience with Edwards’ valve.

Round-the-world updates on Sapien XT

Last week, Edwards gained approval of Japan's Central Social Insurance Medical Council (Chuikyo) to provide reimbursement for the Edwards Sapien XT transcatheter aortic heart valve in the country. The reimbursement in Japan will be effective from Oct 1, 2013. Earlier, in June, the company won the regulatory clearance for the Sapien XT valve in Japan. Edwards plans to begin the complete launch of the product following the reimbursement approval.

While Sapien XT is still under regulatory review in the U.S., it is the leading transcatheter aortic heart valve in the European market. Positive data from post-approval studies across Europe continues to demonstrate the clinical competency of the Sapien XT valve. Meanwhile, the company continues to enroll patients in the intermediate risk cohort (Cohort A) of The Partner II Trial in the U.S. The enrollment is expected to complete in October.

With submission of Cohort B clinical results from The Partner II Trial for the U.S. Food and Drug Administration (:FDA) pre-market approval in late April, Edwards envisages the U.S. approval to come through in mid-2014.

Medtronic faces the heat

In the most recent quarter, Medtronic witnessed strong CoreValve transcatheter aortic heart valve sales in the international market. This led the upside in its Structural Heart business. Furthermore, sales of CoreValve in Germany were encouraging. During the first-quarter earnings call, management at Medtronic asserted that the injunction against CoreValve in Germany is a major setback and will hurt sales in the region.

As per management, the CoreValve along with renal denervation system for treatment resistant hypertension and Admiral drug-eluting balloon (already available across Europe) are meaningful growth drivers with a significant impact on fiscal 2015 outlook for Medtronic. The launch of CoreValve in the U.S. is expected in the first half of fiscal 2015.

Our Take

It is seen that the launch of Edwards Sapien XT in the U.S. is almost neck to neck with that of Medtronic’s CoreValve. Meanwhile, notwithstanding the macroeconomic climate, Europe presents a large and growing market for the valves. Further, the market opportunity is likely to grow significantly on the back of demographic trends and increasing awareness.

Currently, both Edwards and Medtronic carry a Zacks Rank #3 (Hold). On the other hand, its peer St. Jude Medical (STJ), carrying a Zacks Rank #2 (Buy) is worth considering. Another Zacks Rank #2 medical stock is LeMaitre Vascular, Inc. (LMAT).
 

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