MDT, Ardian Target Hypertension - Analyst Blog

Leading medical devices player, Medtronic (MDT) has completed the acquisition of privately-held Ardian for an upfront payment of $800 million. Additionally, Medtronic is liable to pay milestone payments based on Ardian's revenues through 2015.  Earlier, in November, the company announced its decision to acquire Ardian, in which it was holding an 11% stake then.

Ardian develops catheter-based therapies to treat hypertension and related conditions. Immense potential exists in this market as hypertension, affecting about 1.2 billion people, is one of the leading causes of death globally.

Ardian has presented positive data from the Symplicity HTN-2 trial evaluating its flagship product, the Symplicity Catheter System. It was observed that patients treated with this device experienced a greater reduction in blood pressure after six months compared to the control group.

The Symplicity HTN-2 trial was aimed at studying the safety and effectiveness of renal denervation in patients suffering from hypertension, which could not be controlled with drugs. The trial enrolled 106 patients from 24 investigational sites. In addition, the study found the therapy to be safe, without any serious procedure-related events, cardiovascular complications and kidney-related complications.

Although the catheter system has received approval in Europe (CE mark) and Australia (Therapeutic Goods Administration, TGA), it is yet to receive approval in the US. Ardian plans to begin a pivotal study of the device for its approval in the US. The decision to acquire Ardian is based on the thesis that renal denervation as a treatment for uncontrolled hypertension has the potential to record strong growth going ahead.

Recommendation

Although Medtronic recorded a 2% growth in revenues during the second quarter, sales in two of its largest segments -- CRDM and Spinal -- dropped. These two segments have been witnessing lower sales in the past few quarters. Consequently, the company has been eyeing suitable acquisitions to diversify its revenue stream. In this respect, we consider the acquisition of Ardian as a strategic move.

We are currently ‘Neutral' on the stock, which is also supported by the Zacks #3 Rank (hold).