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MDT Expands Spine-Line in Europe

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Recently, Medtronic (MDT) received the European CE Mark approval for its latest spine device ReDuX(TM) Plier. The company also announced the European launch of this instrument.

After years of sluggish spine sales, the European approval for this surgical instrument came as a major boost for the company’s spinal orthopedic business. According to the company, this first of its kind device for a more controlled osteotomy closure for people with a severe form of spinal curvature is expected to be largely accepted in the European community.

This ReDuX Plier is an advanced instrument to perform Osteotomiesor specifically pedicle subtraction osteotomy (PSO) in spinal deformity surgeries. PSO is a complex surgical procedure for sagittal imbalance. It is a condition where the back loses the characteristic S-shape that allows the skeleton to resist gravity and keeps people standing upright. These patients can live in considerable pain, unable to stand or walk properly.

Medtronic’s Biologics business suffered from continuous declines in the sales of Infuse (following the publication in The Spine Journal). In the last reported quarter, Spine revenues fell 1% year over year (flat at CER) along with a decline in revenues from BMP (bone morphogenetic protein) (comprising Infuse bone graft [InductOs in the European Union] sales) and BKP (balloon kyphoplasty procedure).

This decline will continue until results from the Yale study are available. Any unfavorable data from this study will be a major blow for this product line. At CER, revenues from Core Spinal remained flat at $671 million. However, excluding revenues from BKP, Core Spinal grew in the low-single digit at CER.

However, it is encouraging to note that, after adjusting for bulk sales,on a sequential basis this business has been relatively stable throughout the last fiscal. Currently, the company is waiting for the publication of systematic reviews of Infuse commissioned by Yale University’s Open Data Access Project. According to Yale’s public communication, the results are anticipated to be published by the end of June. Given this backdrop, we expect the new addition to garner incremental revenues.

While spine revenues maintained its sluggish trend, the company posted overall strong results for the fourth quarter of fiscal 2013. After several quarters of weakness, the company’s CRDM franchise showed signs of improvement. Sales improvement for Medtronic’s neuromodulation business was also encouraging. The company is enjoying market share gain on the back of the Resolute Integrity DES for the treatment of coronary artery disease. The quarterly results reflect positive momentum as Medtronic seeks to recover after a string of dull quarters.

Medtronic is currently trying every means to boost growth. This includes penetrating the international markets, expansion of portfolio and restructuring initiatives, which should benefit the company over the long term.

Medtronic currently carries a Zacks Rank #3 (Hold). Other medical sector stocks that warrant a look are Myriad Genetics Inc. (MYGN), Natus Medical Inc. (BABY) and Haemonetics Corporation (HAE). All these stocks carry a Zacks Rank #1 (Strong Buy).

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