With a key FDA approval in hand for its cardiac ablation technology, device maker AtriCure (NASDAQ:ATRC) has its sights set on grabbing market share from industry giant Medtronic (NYSE:MDT).
In December, AtriCure’s Synergy ablation system became the first medical device to receive U.S. Food and Drug Administration approval for the surgical treatment of atrial fibrillation (AF), the most common type of heart-rhythm disorder. The ablation system is approved for use in open-heart AF procedures that are performed in conjunction with other operations.
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That approval has AtriCure CEO David Drachman thinking that his Cincinnati-area company is poised to expand its lead over Medtronic in the open-heart ablation market.
“In terms of competition, we believe Medtronic is the No. 2 domestic competitor,” Drachman said last month in a call with analysts. “We believe that Medtronic is the target in terms of bipolar ablation technology and that most of our share gains would likely come from Medtronic bipolar users.”
Matt Dolan, an analyst with Roth Capital Partners, said AtriCure already controls about half of the open-surgery cardiac ablation market, with Medtronic the second-biggest player. That means Drachman is correct that any share gains that AtriCure achieves are most likely to come at Medtronic’s expense.
“Being the only player with that label is clearly a competitive differentiation within the field that’ll have a revenue impact down the road,” Dolan said.
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Dolan sees AtriCure’s gains likely to play out in two phases: First, the size of the market for open-heart ablation technology will increase, and then the second phase involves grabbing share from Medtronic.
However, AtriCure has a “lot of work to do in the near term” before it can really start capitalizing on the new label, Dolan said
As a condition of FDA approval of the new label, AtriCure must conduct a post-approval study that assesses the safety and efficacy of using the Synergy ablation system in a procedure to treat persistent AF. Additionally, AtriCure has agreed to train and certify existing users of the ablation system within 18 months, and train new users prior to their purchase of the system.
Still, more spirited competition with Medtronic probably isn’t at the top of most AtriCure shareholders’ wish lists — but an acquisition by Medtronic or another device giant likely is. When that’ll happen is anyone’s guess, but a strong case can be made that now’s the time.
“AtriCure is a high gross-margin business that fits perfectly with any of the big cardiac surgery players,” Dolan said. “There’s a lot of synergy to be had with any number of companies.”
[Photo from flickr user cliff1066]
