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Medtronic CEO: Still Waiting For FDA Move On Warning Letter

By Jon Kamp Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- Medtronic Inc. (MDT) is still in a holding pattern awaiting the lifting of a Food and Drug Administration warning letter that is blocking approval for key heart-rhythm devices, the company's chief executive said Tuesday. Meantime, Medtronic doesn't agree with the spinal-market commentary recently offered by smaller competitor NuVasive Inc. (NUVA), Medtronic Chief Executive Bill Hawkins said in an interview. NuVasive cited a big increase in efforts by insurers to block certain spinal-fusion procedures, which could hurt an already strained sector. Medtronic is facing common pressures in the $200 billion U.S. medical-devices industry: slow growth in key markets and downward pressure on product prices. New products that garner higher prices can offset these pressures, but the industry is also dealing with a tougher regulatory environment at the FDA. Medtronic is waiting in the U.S. for the ability to sell pacemakers designed to work safely in MRI scanners as well as defibrillators that cut down on unnecessary shocks. But the company can't launch these products here--they are approved in other markets--until it resolves the warning letter the FDA issued last year for problems it found at the company's heart-rhythm headquarters in Minnesota. The agency can withhold approval for new products covered by warning letters until the problems are resolved. "We're in constant dialogue with FDA" but don't have insight into where the agency is in its review process, Hawkins said, speaking on the sidelines of the Wall Street Journal CEO Council conference. The agency has completed a reinspection of the Minnesota site, and Medtronic is awaiting a response. The company has given the FDA lots of information in response to issues raised by the agency, and "they're reviewing all that data and we're waiting for them to make a decision," Hawkins said. The new heart-rhythm devices are among dozens of products Medtronic highlighted at an investor meeting in June, when the Minneapolis-based company also said it plans to spend up to $10 billion on research and development in the next five years. That outlook framed Medtronic's plans to grow from within rather than relying on large-scale acquisitions. Hawkins said Tuesday that Medtronic always has its eye out for so-called "tuck-in" purchases, and he noted recent smaller-scale deals. The challenge for the company is that more than 60% of sales come from businesses that are unlikely to grow in the next three to five years and face pricing pressure, JPMorgan analyst Michael Weinstein said in a recent research note. He expects Medtronic to once again lower fiscal-year guidance when it reports second-quarter results next week; Hawkins had no comment on guidance ahead of that report. On the spinal front, where Medtronic is the biggest player in a $7.1 billion market, the company has struggled for several quarters. Some unfavorable medical studies have hurt the business, and a general market slowdown linked to the struggling economy and sliding product prices have also played a role. Medtronic in August joined other spinal-implant makers by calling out increased pressure from insurers as another negative factor. As reported, some insurers have raised scrutiny on spinal-fusion procedures used to treat pain amid their view such procedures are overused, making it tougher to pre-approve patients for surgery. A late-October report from NuVasive indicated this issue has recently gotten much more acute, with procedures getting canceled as insurers increase requirements for preauthorizing procedures. A particular target is back pain without pain radiating out to other places, NuVasive said. But Hawkins said Tuesday that he doesn't agree with NuVasive's assessment. "I don't know what compelled them to be so dramatic," he said. He also noted that Medtronic's spinal devices are used for many procedures beyond fusion for treating pain--areas he said are "underpinned by good evidence." He added that from a high level, demand for better spinal therapies remains high. Medtronic shares recently traded down 1% to $34.32. -By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

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