This Healer Of Hearts Pumps Out Profits

The way Medtronic plunged from 99 a share at the beginning of the year to 65 in late April, it looked as if this leading producer of cardiac pacemakers was in dire need of one of its own resuscitators. Then a few big investors started buying in, and Medtronic started to recoup, rising to 74 by May 26. Now some pros believe Medtronic is on its way to a full recovery.

The reacceleration, they argue, will be spurred by Medtronic's new Pacer-Cardioverter-Defibrillator, or PCD. The device will be approved for marketing by the Food & Drug Administration as early as August, say some pros.

Up to now, pacemakers regulate a heart that beats too slowly. This new defibrillator is designed to treat patients who suffer from a too-rapid heartbeat--ventricular tachycardia--or the more serious ventricular fibrillation. The latter leads to sudden death. Says analyst John Calcagnini of Seidler Amdec Securities: "Medtronic's PCD device offers a staged therapy to treat tachyarrhythmias," or very rapid heartbeats. The PCD unit could "be on the market by September and generate sales of $100 million in its first year," he figures. They are priced at $20,000 each, says Calcagnini. The device, which Medtronic has been successfully marketing in Europe since March, 1991, received a favorable recommendation from an FDA panel in February.

ELECTRIC PULSE. Calcagnini says the market for pacemakers that defibrillate a too-rapid heartbeat should grow to $1 billion over the next five years. It's now estimated at around $250 million worldwide. "We expect this market to become a major source of growth for Medtronic," says Calcagnini, who notes that about 500,000 Americans each year suffer sudden cardiac death, usually caused by an abnormal heart rhythm, or arrhythmia.

Medtronic, which posted revenues of $1.04 billion in 1991, controls some 45% of the $1.4 billion market for bradycardia pacemakers, used in the treatment of heartbeats that are too slow. Pacemakers consist of implantable pulse generators that produce electrical impulses and leads, which are conducted to the heart. The generator is implanted in the chest or abdomen. Medtronic also makes prosthetic heart valves, angioplasty catheters, and oxygenators.

Medtronic, scheduled to release fiscal '92 results in June, is expected to report better-than-expected earnings. Analysts expect fiscal '92 earnings of $2.65 to $2.78 a share. Calcagnini expects earnings to climb to $3.13 a share in 1993 and to about $3.90 in fiscal 1994. He thinks the stock could trade at 115 a share in the next 12 months.

Analyst Alan Sebulsky of Morgan Stanley says Medtronic appears poised to wrest the lead in the defibrillator market from Eli Lilly once Medtronic's PCD device gets FDA approval. With Medtronic's experience with pacemakers and marketing muscle, it's likely to dominate the U.S. market within two years of approval, he says.

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