Medtronic Bets Nearly Half A Billion Dollars On Transcatheter Mitral Valve Market

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Earlier this week, medical devices manufacturer Medtronic (NYSE:MDT) entered into an agreement to purchase Twelve Inc., a medical device startup focused on the development of a transcatheter mitral valve replacement, for $458 million. [1] The acquisition is a bet on the Transcatheter Mitral Valve Replacement (TMVR) market, which is currently non-existent since no such devices have been approved so far. [2] Medtronic’s latest acquisition follows similar acquisitions by rivals Abbott Laboratories (NYSE:ABT) and Edwards Lifesciences in the race to provide the first TMVR device. [3]

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Unlikely To Have Meaningful Near-Term Impact

Twelve Inc.’s product line will be incorporated into Medtronic’s Coronary & Structural Heart segment within the Cardiaovascular division. Revenue growth for the Cardiovascular division has slowed in recent years; in fiscal 2014, its revenues expanded by 2.7% year on year, which pales in comparison to the 13.8% year on year growth witnessed in fiscal 2011. However, the growth of Medtronic’s Cardiovascular division has still outpaced that of the global cardiovascular market, resulting in gains in its market share.

Even if the device being developed by Twelve Inc. achieves CE approval, it could be a while before it results in meaningful incremental revenues for Medtronic’s Cardiovascular division. TMVR devices are a potential successor to Transcatheter Aortic Valve Replacement (TAVR) devices, which themselves are in a relatively nascent stage. TAVR devices comprise a $1 billion market which is expected to grow at over 20% through 2020, while the TMVR market doesn’t even exist as of today. [2]

Nevertheless, TMVR undoubtedly holds significant potential. Mitral valve regurgitation, the medical complication that TMVR devices are attempting to solve, afflicts 1.7% of the entire U.S. population. These patients form the largest segment of those suffering from heart valve-related complications, and not all of them can be treated by currently available procedures. [4] Therefore, if a TMVR device can be successfully developed, it could open up a major new opportunity for medical device manufacturers.

Still, early adoption rates for such a new solution are likely to be low due to an unproven track record and high initial costs. Thus, while Medtronic’s purchase of Twelve Inc. puts it in the race to develop the first approved TMVR device, the acquisition is not likely to provide notable incremental revenues to the company in the near to medium term.

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Notes:
  1. Medtronic Press Release, August 25, 2015 []
  2. Next-Generation Transcatheter Aortic Valve Replacements Will Drive Rapid Market Growth, GlobalData, March 24, 2015 [] []
  3. Medtronic to Buy California Startup Twelve Inc., The Wall Street Journal, August 25, 2015 []
  4. Transcatheter Mitral Valve Replacement: The Race to Commercialization, February 11, 2015 []