Weekly Healthcare Notes: Medtronic & Merck

by Trefis Team
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The past week has been a handful of events for the healthcare sector impacting many healthcare companies under our coverage. Medtronic‘s (NYSE:MDT) brain stimulation devices have shown impressive efficacy in early-stage Parkinson patients. [1] Meanwhile, news of Merck (NYSE:MRK) shelling out over a half billion dollars to settle two class-action lawsuits in the U.S. relating to its cardiovascular drug Vytorin made the rounds. [2]

Medtronic

In a recently concluded clinical trial, Medtronic’s implantable deep brain stimulation devices (DBSs), Kinetra or Soletra, showed strong efficacy in treatment of early-stage patients of Parkinson’s disease. According to the study, the quality of life improved significantly for patients treated with both drug and DBS, whereas conditions worsened marginally in patients only on drugs. [1]

About 1.5 million people in the U.S. have Parkinson’s disease and the figure could double by 2030 mainly due to the aging population. [3] Currently, DBSs are used in patients with advanced Parkinson’s that don’t respond consistently to the drug treatment. With the impressive clinical trial data, Medtronic can now hope for extension of DBSs to millions of early-stage patients. And, with the large patient base, any success here could bring in huge additional revenue.

The device is a part of Neuromodulation division in our model. Going forward, we expect a declining market share as an increase in the company’s sales may not be in proportion to the increase in global neuromodulation market which is expected to grow at a very high rate throughout the Trefis forecast period. Medtronic, however, is currently the only medical device maker with FDA approval for its DBSs to treat advanced Parkinson’s disease. [4] And, should the regulatory agency decide to recommend use of DBSs in early-stage patients, it will be well placed to gain market share. Also, it will have the clinical data to back its claims.

We have a $46 price estimate for Medtronic, in line with the current the market price. 

See our complete analysis of Medtronic here

Merck

Merck has agreed to settle two class action lawsuits for a whopping $688 million dollars. The lawsuits alleged that the drug maker withheld poor results of a clinical trial called “Enhance” which was conducted to determine the efficacy of Vytorin. And, Vytorin sales have been declining since the results of “Enhance” came out in 2008.

However, the settlement could be one of Merck’s efforts to douse controversies around the drug as investors are eagerly awaiting the results of IMPROVE-IT, a large study that is being conducted to prove efficacy of Vyotrin. The data is expected to be released before June 2013 and any positive outcome there will put the drug back on growth trajectory. With multi-billion dollar potential of the drug, Merck can gain back what it has lost in the class action lawsuits.

We are revising our price estimate for Merck to reflect full year results and recent developments.

See Full Analysis For Merck

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Notes:
  1. New Research Shows Significant Benefits of Medtronic Deep Brain Stimulation Earlier in Progression of Parkinson’s Disease, Medtronic, Feb 14 2013 [] []
  2. Merck to pay $688 million to settle Enhance lawsuits, Reuters, Feb 14 2013 []
  3. Basic Info About PD, American Parkinson Disease Association []
  4. Medtronic’s Brain Device Improves Early-Stage Parkinson’s, Bloomberg, Feb 14 2013 []
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