Medtronic’s Renal Denervation System Stumbles

The latest results from a study on Medtronic's (NYSE: MDT  ) Symplicity catheter system, announced on Jan. 9, raised a few eyebrows in the medical and investment community. The system under study performs renal denervation, a procedure that emits a radio frequency to knock out the renal sympathetic nerves, which play a role in drug-resistant high blood pressure. While earlier studies showed a small number of patients responding well to the procedure, the latest trial, SYMPLICITY HTN-3, did not meet its primary efficacy endpoint.

What did the study show?
The study used 535 patients with a starting systolic blood pressure (BP) over 160 mm Hg. While normal BP has a reading at or below 120 systolic and 80 diastolic, or 120/80 mmHg, patients with high BP have a reading greater than 140/90 mmHg. Doctors regard the reduction of high blood pressure as an effective way of reducing the risk of cardiovascular death.

The results derived from patients that underwent the procedure were regarded as no better than those of a "sham control group", or patients that did not receive treatment. Patients in the sham control group are similar to patients in other trials who receive a placebo rather than the actual drug being tested.

Patients who underwent the procedure did not experience lower blood pressure through six months. Earlier trials testing Medtronic's and other renal denervation systems did not incorporate a sham control group, so its inclusion in this study is believed to have affected the results. Data from the trial is still under review and full results should be available by the end of March.

Study results surprising to many docs
The results are a surprise based on the positive results from SYMPLICITY HTN-2, a smaller and earlier trial where blood pressure reductions at 30 months were as good as the reductions achieved in the first few months after the procedure. It's important to note that the system isn't regarded as a cure for hypertension but rather a complementary treatment to BP medication.

Some researchers believe the results from this study do not mean the end of renal denervation as a method for treating drug-resistant high blood pressure. Some smaller human trials have shown that the procedure can still be a viable way of reducing resistant hypertension. There's also a possibility that the failure is this latest trial may be related to the system under review, but it's too soon to make that determination .

Not all renal denervation systems are created equal
A different renal denervation system, the ENLIGHTN I manufactured by St. Jude Medical  (NYSE: STJ  ) , uses multiple electrodes to emit the necessary radiofrequency rather than the single-point catheter used in Medtronic's device. New data presented in October 2013 showed that 18 months after patients underwent the procedure, there was a reduction in average systolic blood pressure of 24 mm Hg. The study treated 46 patients in Australia and Europe .

St. Jude Medical's cardiovascular segment, which includes the renal denervation product, is expected to earn $350 million during fiscal 2013's fourth quarter, an increase of 4% compared to last year. The company expects fiscal 2013 fourth quarter net sales of about $1.42 billion for the period ended Dec. 28, 2013. EPS guidance was raised by $0.02 and is expected to be between $0.97 and $0.99. The market predicts that fourth quarter revenue will be $1.38 billion and EPS of $0.97, about $0.05 higher than EPS from a year ago.   . St. Jude Medical will report full year results on Jan. 22.

According to statistics quoted by Covidien  (NYSE: COV  ) , another provider of renal denervation therapies, high blood pressure is expected to grow by 30% by 2025. The company's renal denervation system, called OneShot, had favorable results in small clinical trials. However, the company announced today it would be exiting the renal denervation business, possibly due to low demand in Europe, where the device is approved for use. Covidien expects to record a $20 to $25 million after-tax charge. The news did not impact Covidien shares.

The company's latest fourth quarter numbers show their medical devices segment up 3%, earning $2.13 billion and making up the bulk of the quarter's total net sales of $2.6 billion. Net sales in this segment is expected to grow 2% to 5% in fiscal 2014, the same growth expected for overall sales. Covidien's strongest product lines are endomechanical instruments and energy, which grew 8% and 7% during the fourth quarter. For fiscal 2014, analysts are predicting revenues of approximately $10.6 billion, 3.7% higher than last year. EPS estimates range between $3.93 and $4.06.  .

My Foolish conclusion
While smaller human clinical trials show positive results on the use of renal denervation, larger and more rigorously conducted trials show the opposite. After the Jan. 9 results were reported, Medtronic shares dropped 2.4% to close at $59.36. For fiscal 2014, the company is expecting revenue growth of 3% to 4% and diluted EPS to range between $3.80 to $3.85. Analysts are predicting earnings growth of 2.5% with average revenue totaling $17 billion. Analyst EPS estimates are in line with the company's guidance.

While the Medtronic study results are still being evaluated, the jury is still out on whether renal denervation will effectively treat drug-resistant hypertension and provide Medtronic and St. Jude Medical with a return on the research conducted so far.

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