Can Medtronic’s Leadless Pacemaker Improve The Company’s Share In Cardiac Rhythm Management?

In a recent clinical trial, Medtronic’s ( NYSE: MDT) wireless pacemaker, the “Medtronic Micra Transcatheter Pacing System (TPS)”, was  proven to be significantly more effective than current options with a high degree of efficacy.  Data from the findings will be used to seek approval from the U.S. regulatory authority, the FDA. ^[1] Unlike the traditional pacemakers that use a lead wire to connect to the heart, the Micra pacemaker is leadless and eliminates the complications that can arise if a lead wears out or breaks. Moreover, the device is very small and can be implanted endoscopically, rather than through conventional surgery.  By reducing the surgery costs, decreasing lead-related complications and easing the process of implantation, Micra can see increased adoption among heart patients, who depend on pacemakers to control their heart-beat. With the release of the study, moreover, fiercemedicaldevices.com and The Journal of the American Medical Association described the benefits of leadless devices on their respective website and publication.  The outlook for Medtronic’s cardio vascular group is all the more positive, suggesting the company can stabilize and even reverse the decline in its cardiac rhythm management market share with the strong adoption of leadless Micra.

Our price estimate of $70 for Medtronic is about 10% below the current market price.

See our complete analysis for Medtronic here

Micra Can See Widespread Adoption

Medtonic’s expects Micra to decrease the number of complications involved in using a pacemaker by taking lead out of the system and decreasing the size considerably, which eases the process of implantation. Unlike the traditional pacemaker that is implanted through surgery, the Micra pacemaker can be implanted through a catheter, eliminating the need of a surgical process and reducing the costs involved in implantation. According to a Berkley report, the average cost of implantation is $14,920 and the complication rates involved in a pacemaker procedure varies between 0% and 16%, with an average rate of 5%.

Also, there are fewer complications associated with Micra’s use given that it does not use lead wires, which further adds to its functionality. In fact, leadless pacemakers are expected to rapidly make their way in the U.S. and other markets are expected to follow. Due to significant advantages of Micra, Medtronic could price it higher than the traditional pacemakers, but overall cost of the process may come down due to simpler implantation and fewer complications. On the contrary, to boost volume sales and gain share in emerging markets, the company will likely position Micra competitively with the traditional pacemakers, on a total cost basis.

However, Medtronic may see increased competition from St. Jude Medical’s Nanostim, which won the CE mark back in 2013, and is waiting for the U.S. regulatory approval.  ((St. Jude reports strong U.S. clinical trial results for its leadless pacemaker, Fierce Medical Devices, Aug 31, 2015)) Nanostim’s sheath is smaller in diameter than what is required for Medtronic Micra, which eases the process by which doctors implant the device into the vein. Nevertheless, Medtronic’s Micra is the world’s smallest pacemaker and is 30% smaller in size compared to Nanostim which can give Medtronic a competitive edge.  ((Leadless Pacemaker Adoption Could Be Rapid, Medical Device and Diagnostic Industry, April 21, 2015))

Potential Upside

Medtronic’s share in the global cardiac rhythm management Market has come down from 35% in 2010 to 25.4% in 2014 due to negative reports regarding the use of ICDs (implantable cardioverter defibrillators) in the U.S. We currently forecast the company’s market share to decline marginally in the near term and then stabilize at around 24%.  ((We have calculated market share based on company’s reported revenues and estimated market size.))  However, with the launch of Micra pacemaker, which reduces implantation costs and requires less expertise from cardiologists, Medtronic can improve its share in the U.S. and can even target the underpenetrated markets, where cost and expertise play an important factor. If the company is able to improve its share in the global cardiac rhythm management market by three percentage points over the next six-seven years, there can be about 5% upside to our price estimate for Medtronic.

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research

1. World’s Smallest Pacemaker, Medtronic Micra® TPS, Meets Global Clinical Trial’s Safety and Effectiveness Endpoints, Investor Relations Medtronic, Nov 9, 2015 [↩]