Modern medical technology never ceases to amaze me — specifically the rate at which it’s advancing.
There are millions of people living today that simply wouldn’t be here without the existence of medical devices invented just 6 decades ago. If you think about that for a second, it’s pretty incredible.
Anyone you know who has gone through heart surgery, wears an insulin pump, or has simply received a routine vaccination at some point may very well owe his or her life to the innovative minds of a select few.
Heart conditions are a prime example. More than half a million heart surgeries are performed in the U.S. alone during any given year, and many of these surgeries require cardiac pacing, a technology that didn’t even exist until 1950.
Today, cardiac pacers can fit in the palms of our hands, but when they first hit the medical world, they looked more like this:
Originally, these machines were used for the sole purpose of regulating a patient’s heartbeat after surgery because they were far too large to leave the operating room. But after about a decade, significant reductions in size allowed for the practical personal use of pacemakers.
Today, pacemakers are incredibly widespread — each year, nearly 1 million devices are implanted in patients across the globe. Unfortunately, methods of implantation are still far from ideal.
To install a pacemaker, doctors need to cut an incision in the chest, dig a cavity large enough to hold the device, and connect lead wires to a pulse generator generally located near collarbone. It’s become a routine procedure, but it is highly invasive and certainly doesn’t come without risk (as many as 4% of implantations result in complications).
Remarkably, one medical device company is now looking to change that…
The Mirca Miracle
Last year, my father suffered a minor heart attack and was diagnosed with atherosclerosis. Two of his arteries were close to 90% clogged, and he was given the choice between two treatments.
One option was coronary artery bypass surgery. The other was a far less invasive procedure known as angioplasty.
My father opted for the latter and received two expandable stents that would successfully open the blood flow to his heart. These stents were inserted through the femoral artery in his groin, thankfully avoiding the need for highly invasive surgery.
With recent advancements, this will soon be the approach of pacemaker implantation as well.
Just last month, the world’s smallest pacemaker began clinical trials. It’s called the Mirca TPS, and at one-tenth the size of traditional pacemakers, it’s about the size of a nickel.
The Mirca TPS is small enough to be inserted through the femoral artery just like modern stents, and it avoids a variety of complications that come with conventional pacing. Not only is the device smaller, but it is self-contained, meaning there are no lead wires and no external power source.
There are several advantages to this approach:
- Lower risk of infection
- Not visible through skin
- Minimally-invasive
- Faster recovery times
- No puncture risk from wiring
The initial trial for the Mirca TPS will recruit 780 patients across 18 countries. This global strategy represents developer Medtronic Inc.’s (NYSE: MDT) goal to achieve regulatory approval in as many markets as possible.
We should note that the Mirca TPS is single-chamber, meaning it can only be used for patients with low to moderate pacemaker indications. Patients with higher indications require dual-chamber pacemakers and make up around 60% of the market.
Fortunately for Medtronic, 40% would still be enough to bring in a fair amount of revenue. If the Mirca TPS succeeds, Medtronic will have a major advantage in a market consisting of close to 400,000 implantations every year.
Additionally, with an aging baby boomer population, annual pacemaker sales are expected to grow at a CAGR of 11%, according to industry analysts. This puts pacemaker revenue at a $5.1 billion market by 2019.
A Growing Trend
One aspect of this development we find so interesting is that Medtronic is actually working to disrupt itself. The company is already the leading global provider of pacemakers with more than 50% market share.
In other words, the Mirca TPS would be competing mostly with Medtronic’s already-established product line. Typically, this isn’t a pattern we see with Fortune 150 companies, but Medtronic clearly recognizes that the medical industry is increasingly adopting minimally invasive surgeries (MIS). The Mirca TPS is as much of a defensive strategy as it is an offensive one.
It’s not too surprising that companies developing and manufacturing minimally invasive devices drastically outperformed the market in 2013. Below are just four players focused heavily on MIS devices:
Medtronic has performed nicely as well, closing out the year with a 40% gain, but it certainly won’t offer the same growth potential as smaller caps and pure plays in 2014.
Even with the onset of the newly-imposed medical device excise tax, you can expect 2014 to be yet another stellar year for MIS device providers. Look to those with regulatory approval and clinical results on the horizon to appreciate the largest gains.
Turning progress to profits, Jason Stutman
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