Medtronic Unnerves a Major Rival

Competition in the med-tech space is fierce, and rival executives and sales reps live to take away accounts and revenue from other companies. In markets like cardiac rhythm management, cardiology, and neuromodulation, Medtronic  (NYSE: MDT  )  is a fierce competitor to Boston Scientific (NYSE: BSX  ) and St. Jude Medical (NYSE: STJ  ) , with the latter two often getting the worse of the head-to-head battles. Now there is word that Medtronic has once again thrown a spanner into St. Jude's works, and this time, it wasn't even deliberate.

Word has come out that St. Jude is going back to the drawing board with its pivotal trial for the EnligHTN IV renal denervation device -- a product that St. Jude clearly hopes will be a winner in a battle for a market that could ultimately be measured in the billions of dollars. While this delay is not likely to be fatal to the future of St. Jude's ambitions in renal denervation, it does underline how inadvertent competition can still take a toll.

A step back before moving forward
St. Jude had begun its pivotal study of the EnligHTN IV device back in June, looking to enroll approximately 590 patients in a clinical trial that would serve as the basis for approval from the Food and Drug Administration. There were already good reasons to expect a successful outcome to this study, as not only has the EnligHTN device had the CE Mark (approval in Europe) for some time now, but data from prior studies have shown that drug-resistant hypertension patients getting renal denervation with this device experience an average 24mmHg reduction in blood pressure, with more than three-quarters of patients responding (showing a 10mmHg or greater reduction) at 18 months.

Now, though, word has come out that St. Jude has halted the study and intends to begin again at a later date after consultation with the FDA. The problem? Medtronic and its Symplicity device. Medtronic is already in a pivotal study (580 patients) of its device in the U.S., with the expectation of data in 2014 and FDA approval in 2015.

That's a problem because it now looks as though the Symplicity will be on the market during St. Jude's own trial, making it much more difficult (if not unethical) to enroll and randomize patients in the St. Jude study for a sham procedure. Seeing future enrollment as a problem, St. Jude has elected to halt this study, reconsider its trial design with the FDA, and then begin again.

First to market, but what about first *in* the market?
St. Jude is apparently hopeful that it can reach a deal with the FDA that will result in a more simplified enrollment process and perhaps shorten the overall length of the trial. Even so, I would argue that this could put St. Jude a year or more behind Medtronic.

It was not as though St. Jude was ever going to have the market to itself. Medtronic was already known to be the leader in terms of U.S. time-to-market, and both Boston Scientific and Covidien (NYSE: COV  ) are also in the renal denervation race. Boston Scientific got into the race back in 2012 with the acquisition of Vessix for $125 million and up to $300 million in future milestones. A look at interim data from the REDUCE-HTN study showed 85% of patients responding to a medically relevant degree, with an average reduction of 24.6mmHg at six months and a nearly 30mmHg reduction at 12 months for the subset of patients that have reached that point.

Covidien's device, the OneShot, which was acquired with Maya Medical for $60 million upfront and $170 million in milestones, also has the CE Mark. Considerably less data is available at this point, with a small pilot study (eight patients) showing a 42mmHg reduction at six-month follow up.

Ultimately, the market is going to come down to efficacy, safety, and ease-of-use considerations like procedure time. St. Jude hopes it has a real advantage with the latter point, offering a treatment time of about four minutes versus more than 20 minutes for Medtronic's device. With that, though, I'd remind investors that marketing punch and physician relationships are also likely to play a significant role, and this is an area where Medtronic excels.

The bottom line
This is no reason to get down on St. Jude. It's disappointing to learn that Medtronic will have a longer period of exclusivity in the United States, but I don't believe that cripples the company's ambitions. St. Jude does still have multiple positive developments happening in 2014, including the expected approval of the CardioMems device and the Nanostim launch in Europe. This news is a reminder, though, that the race to the market with a new device can be longer and more challenging than expected, and not always for reasons tied specifically to the device under study.

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