King of the Hill

The bevy of positive clinical trial results reported at the 2015 NANS meeting earlier this month caps off one of the most successful years in the young history of the neurotechnology industry [see conference report p7]. The infusion of new technologies and new competitors stands to alter fundamentally the competitive face of the industry.

Although new indications and new clinical specialties continue to emerge as target markets, there is still a considerable amount of innovation and disruption going on in the most mature segment of the industry, neuromodulation for chronic pain. Results from the SUNBURST study of burst stimulation and the ACCURATE study of DRG stimulation gave St. Jude Medical a much-needed shot in the arm in SCS. Boston Scientific is also moving forward with its Precision Spectra SCS system. And newcomers to the market Nevro, Nuvectra, and Stimwave have each introduced unique innovations that will challenge the status quo in SCS.

Suddenly, Medtronic’s SCS portfolio seems a bit outdated by comparison. Indeed, Neurotech Reports’ recently published market study The Market for Neurotechnology: 2016-2020 projects that Medtronic’s share of the SCS market will fall from 41 percent to 32 percent by 2018.

To make matters worse for the market leader, several presenters at the NANS meeting discussed the issue of SCS tolerance. According to Robert Levy, who serves as editor of the journal Neuromodulation: Technology at the Neural Interface, tolerance is responsible for 38 percent of device explants. Levy and other presenters reported that using novel forms of stimulation such as burst can reduce, though not eliminate, the problem of tolerance.

Medtronic clearly needs an infusion of new technology in this space and an acquisition might be just the ticket, particularly given the $9 billion—much of that tax savings from the Covidien deal—that is burning a hole in the company’s pockets. If none of the aforementioned newcomers is palatable to the company, perhaps an upstart like Saluda Medical with its closed-loop stimulation system would be attractive. We think such a deal could fetch $400 to $500 million, depending on timing and the value of the Australian dollar.

Medtronic was dealt more bad news with reports that BioControl Medical’s INOVATE-HF trial of VNS for heart failure failed to meet its primary endpoint. Medtronic invested $70 million in BioControl in 2010 and acquired an option to buy the company. The purchase price will be less if BioControl fails to get FDA approval, but by then another firm—perhaps LivaNova—may have already seized control of that market.

Still, Medtronic’s clout in the market and ample cash reserves could readily address any new competitive challenges the company faces and restore its status as undisputed neuromodulation market leader.

James Cavuoto

Editor and Publisher

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