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On Monday, the U.S. Food and Drug Administration conditionally approved the study design for a Medtronic (NYSE: MDT ) product that company officials believe represents a multibillion-dollar opportunity.
The product is the Simplicity catheter-based system to treat hypertension, or high blood pressure, and it came to Medtronic through the acquisition of Mountain View, California-based Ardian. The Minnesota maker of new innovative medical devices bought Ardian in November for $800 million in cash with the possibility of additional milestone payments through the end of Medtronic's fiscal year 2015.
About 65 million Americans suffer from high blood pressure. Globally, the number afflicted is expected to rise to $1.5 billion by 2025, according to a 2005 U.K. report.
The Simplicity catheter system aims to manage this global health care problem through the ablation of the nerves that line the renal arteries. The product is commercially available in Australia. With Monday's announcement, Medtronic will now be able to enroll about 500 patients in a randomized clinical trial across 60 U.S. medical centers to receive either Ardian's renal denervation treatment in combination with anti-hypertensive medications, or treatment with anti-hypertensive medications exclusively.
"We view renal denervation for the treatment of uncontrolled hypertension as one of the most exciting growth markets in medical devices," said Sean Salmon, vice president and general manager of the Coronary and Peripheral Business at Medtronic, in a statement that announced the acquisition.
A day later, in a conference call with analysts, then-CEO Bill Hawkins went into further detail about why Medtronic bought the company in which it previously held an 11 percent stake.
As you saw last night, we were excited to announce our intent to acquire Ardian, an impressive company with innovative catheter-based technologies to treat hypertension. This strategic acquisition gives us a considerable head start on a multibillion-dollar opportunity in one of the biggest markets in medicine. ... We believe the Symplicity catheter shows strong potential to be a highly effective treatment for uncontrolled hypertension. We further believe that this novel therapy can play a role in reducing the estimated $500 billion annual direct costs to the global health care system by avoiding catastrophic downstream cardiovascular events that are highly associated with uncontrolled hypertension.
One of the biggest drivers of the Ardian acquisition is the efficacy of the Simplicity catheter system, something that Hawkins talked about in his remarks. In a randomized clinical trial, 106 patients were enrolled from 24 investigational sites globally and after six months, the patients treated with Ardian's device experienced an average drop in blood pressure of 32/12 mmHg compared to an increase in blood pressure of 1/0mmHg in the control group of patients treated solely with medical therapy.
It remains to be seen whether the acquisition will deliver the revenue stream that Medtronic is hoping for. Although a vastly different strategic acquisition and a much more expensive one, the highly touted $4 billion acquisition of Kyphon in 2007 has not yet panned out.