CareFusion To Challenge Medtronic In Spine-Repair Market

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By Jon Kamp, Of DOW JONES NEWSWIRES

CareFusion Corp. (CFN) is planning to soon roll out products for repairing spinal fractures that will create fresh competition for Medtronic Inc.’s (MDT) spine franchise.

CareFusion, a recent medical-devices spinoff from Cardinal Health Inc. (CAH), is aiming to enter the U.S. market for so-called Kyphoplasty procedures in April pending final regulatory approval, Chief Executive David Schlotterbeck told analysts Tuesday. Launches outside the U.S. are expected later in a staggered fashion, he said.

Kyphoplasty is a procedure for repairing compression fractures in the spine in which a small balloon is used to open space for bone cement.

This is a $500 million to $600 million global market that Medtronic currently commands following its acquisition of the company Kyphon in late 2007, although Medtronic has struggled with some integration-related challenges since then.

JPMorgan analyst Michael Weinstein said “CareFusion’s aggressiveness is apt to create a new challenge” for Medtronic. CareFusion’s plan to use lower prices to drive product adoption may be most concerning, he said.

Schlotterbeck said CareFusion hasn’t settled on pricing for his company’s Kyphoplasty products yet, although he said “it is going to be aggressive.” He commented on CareFusion’s Kyphoplasty plans during the company’s fiscal second- quarter earnings call.

Despite these plans, Morgan Stanley analyst David Lewis doesn’t foresee a material, near-term threat to Medtronic. Kyphoplasty represents about 7% of earnings at Medtronic, which has a “much larger distribution force” and is unlikely to see much market-share loss, Lewis said.

Medtronic, for its part, noted in a statement Wednesday that it is the “only company with a commercially available product in the U.S. for this procedure and the only company with level-one evidence to support the technology.”

Additionally, the company said it “has and will vigorously defend its intellectual property rights in all of our markets, including Balloon Kyphoplasty.

On this point, Schlotterbeck said CareFusion has “done our homework.”

“We feel very confident that either the patents that had been in play are expired,” or that CareFusion doesn’t infringe any other patents, he told analysts.

Shares of CareFusion recently traded up 65 cents to $26.90. Medtronic shares were up 9 cents to $42.45.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

Source: http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201002101345dowjonesdjonline000600&title=carefusion-to-challenge-medtroninc-in-spine-repair-market

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