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Tickers in this Article: MDT, EW, MYGN, HAE
It seems that the flow of good news for medical devices major, Medtronic (MDT), remains uninterrupted. Recently, as per news by Bloomberg, the company won a patent infringement case over its peer Edwards LifeSciences (EW). As per the German District Court of Mannheim, Medtronic’s aortic valve does not violate Edwards’ Cribier patent.

A court spokesperson, over a telephonic interview, stated that Edwards’ Cribier patent does not cover Medtronic’s CoreValve device. At present, there are two more pending cases related to different patents between these two stalwarts in Germany. The verdict on these ongoing cases is likely to be out by late 2013 or early 2014.

In Aug 2012, Edwards filed a lawsuit against Medtronic in the German District Court of Mannheim claiming that Medtronic's CoreValve and Evolut valves infringe two of Edwards' transcatheter valve patents. These patents were issued by the European Patent Office and were validated as national patents in various European countries, including Germany.

In Apr 2013, Edwards included a third transcatheter valve patent to the lawsuit. An infringement hearing was held in Apr 2013 for one of the original patents, and the hearing for the second patent was held in May 2013.

CoreValve: Current Scenario

The CoreValve transcatheter aortic heart valvescontribute a major part of Medtronic’s structural heart business. In the fourth quarter of fiscal 2013, the company reported $310 million of structural heart revenues, up 8% year over year, including mid-teens growth in transcatheter valves.

In May, the company also received the pivotal CE mark for valve-in-valve (VIV) procedures using the CoreValve and CoreValve Evolut(TM) transcatheter aortic valve implantation (TAVI) systems in degenerated bioprosthetic surgical aortic valves.

The company expects the international transcatheter valve market to grow approximately 10%, and believes that the CoreValve and CoreValve Evolut devices shall maintain leading market share in the international transfemoral market.

Following the robust fourth-quarter 2013 results, the German court ruling in its favor has definitely come as a major win for Medtronic. The company had lost one of the CoreValve related litigation to Edwards in the last quarter (in the US District Court for the District of Delaware).

According to Bloomberg, the company generates $75 million or earnings of 5 cents a share from CoreValve sales in Germany. Therefore, a verdict against Medtronic would have been favorable to Edwards’ revenues by boosting its annual earnings by 20–30 cents a share.

However, persistent headwinds like the weak economic conditions, tough competition, segment pressure and currency fluctuations keep us on the sidelines. Medtronic currently carries a Zacks Rank #3 (Hold). Other medical sector stocks that warrant a look are Haemonetics Inc. (HAE) and Myriad Genetics Inc. (MYGN). All these stocks carry a Zacks Rank #1 (Strong Buy).

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