Approval for MDT's Arctic Front - Analyst Blog

Leading medical devices player, Medtronic (MDT) has received approval from the US Food and Drug Administration (FDA) for its Arctic Front Cardiac CryoAblation Catheter system. It is designed to treat drug refractory paroxysmal atrial fibrillation (PAF). This is a type of AF where irregular heartbeats in the upper chambers start and stop suddenly on their own. This approval is significant as the company's Cardiac Rhythm Disease Management (CRDM) has been witnessing declining sales in the past few quarters.

The approval of the Arctic Front System was based on the pivotal STOP AF (Sustained Treatment of Paroxysmal Atrial Fibrillation) trial. It was observed that 69.9% of the patients treated with the Arctic Front System were free from the heart problem after one year, compared with about 7.3% of patients who were treated with drug therapy only. In addition, adverse events related to the procedure were limited to 3.1% and patients enrolled in the study experienced a reduction in the use of drug therapy and improvements in the quality of life.

The Arctic Front catheter system is already approved in many regions outside the US and has treated more than 10,000 patients. It is encouraging to note that the Arctic Front solutions business recorded more than 20% growth during the second quarter of fiscal 2011 driven by the adoption of AF Cryoballoon in markets outside the US.

Over the past few years, Medtronic has been reallocating resources towards emerging therapies to drive growth. During the second quarter, the company recorded more than 20% annual growth in revenues derived from these therapies to reach $1.7 billion, which consisted of AF among others. The company expects revenue contribution from emerging therapies to double over the next five years.

Viewing the huge potential of the AF market, Medtronic in October 2008, initiated an AF solutions business to provide breakthrough AF therapies to patients and physicians. If left untreated, AF patients face five times higher risk of stroke. More than 3 million Americans suffer from AF. To expand this business, the company acquired CryoCath Technologies (flagship product, Arctic Front) in November 2008 and Ablation Frontiers (product, ablation frontiers catheters) in February 2009.

With these acquisitions, the company has been aiming to expand its CRDM business into the under-penetrated market of catheter based treatment of AF. Medtronic is awaiting the US approval of the Ablation Frontiers catheters in calendar year 2012.

We are currently ‘Neutral' on the stock.