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Valve Rival

Medtronic CoreValve is the other half of what could grow into one of Orange County’s greatest business rivalries.

The Irvine-based unit of Minnesota medical device maker Medtronic Inc. is squaring off against Edwards Lifesciences Corp., also of Irvine, in the budding market for a new type of heart valve that doesn’t require major surgery.

Edwards, whose Sapien valve is in a major U.S. clinical trial, is considered by analysts to have a lead on CoreValve with Food and Drug Administration approval expected late this year.

Fridley, Minn.-based Medtronic isn’t expected to launch CoreValve in the U.S. until late 2014.

Right now, the two are battling each other in Europe, where their less-invasive valves have been sold since 2007 and make up a projected 2011 market of about $525 million.

Industry watchers expect less-invasive valves—the biggest industry advancement in years—to become a multibillion-dollar yearly market.

“Certainly, there is rivalry, and I think we’re doing well,” said John Liddicoat, president of Medtronic’s structural heart division, which includes CoreValve.

European sales of CoreValve are estimated at $210 million to $225 million for the 12 months through April.

Edwards projects 2011 sales of $280 million to $315 million for Sapien.

Medtronic, which had a recent market value of about $40 billion, also makes cardiac rhythm management, spinal, ear, nose and throat devices as well as surgical navigation products and treatments for vessel diseases.

Growth Hopes

The company has big growth hopes riding on CoreValve, according to Phil Nalbone, an analyst who follows Medtronic for Los Angeles-based Wedbush Securities.

“In the U.S., it will be a much bigger opportunity,” Nalbone said. “It will be a meaningful contributor to Medtronic someday, and it had better be. This is a company that is desperately in need of growth drivers.”

Medtronic’s revenue for the three months through January was up 3% to $4 billion.

Others are expected to enter the market. St. Jude Medical Inc. of Little Canada, Minn., Natick, Mass.-based Boston Scientific Corp. and Abbott Laboratories of suburban Chicago are said to be working on less-invasive valves.

“There will be increased competition,” Liddicoat said.

Medtronic started a U.S. trial for CoreValve in December that eventually is set to have 40 sites and 1,300 patients enrolled.

Being second to market here won’t necessarily put Medtronic at a disadvantage, according to Liddicoat. Market development “done by others will be a benefit to us,” he said.

Medtronic took a big step into less-invasive valves in early 2009 when it spent $700 million to buy CoreValve Inc., a venture-backed Irvine startup. It also bought Ventor Technologies Ltd., an Israeli less-invasive heart valve developer, that same year.

“CoreValve represented a unique opportunity,” Liddicoat said.

Medtronic executives had followed CoreValve’s development for a number of years, he said.

The company estimates that the market for less-invasive valves eventually could reach $3.5 billion annually.

CoreValve and Edwards have battled in court over less-invasive valves.

Earlier this year, a federal judge ruled that Medtronic must pay Edwards $74 million in damages on a patent infringement claim covering production of less-invasive valves.

Medtronic has said it would appeal the decision. It won a victory when the court refused to grant Edwards a permanent injunction that would have blocked Medtronic from selling CoreValve in the U.S.

The patent issue is expected to fade for Medtronic by the time the company submits CoreValve for U.S. approval, analyst Alastair Mackay of Baltimore-based Garp Research & Securities Co. said.

Local operations

Medtronic’s had operations in OC for years.

The device maker runs a plant in Santa Ana that makes heart valves implanted through traditional open-heart surgery.

Those valves also compete with products from Edwards, the top maker of conventional heart valves.

Local operations serve as a Medtronic “center for excellence” for heart valves and tissue processing, according to Liddicoat.

Medtronic’s Santa Ana operation emerged from Hancock Laboratories, which was started in 1969 by engineer and heart valve pioneer Warren Hancock.

In the mid-1980s, Medtronic picked up Hancock valves from Johnson & Johnson, which bought Hancock Laboratories in 1979.

700 Workers

Medtronic has about 700 workers in Santa Ana, at CoreValve in Irvine and at a Lake Forest facility it got in its buy of ATS Medical Inc. last year.

The company is looking to consolidate local operations in one place, according to Liddicoat.

“No one site has enough capacity at this time to take on all of the device manufacturing we need to have out of Orange County,” he said. “We’re looking at ways to consolidate these facilities into a single site.”

Besides manufacturing, “The vast majority of our (heart valve) R&D is done in Orange County,” said Liddicoat, a heart surgeon by training who has been with Medtronic for five years.

Medtronic has another less-invasive valve, Melody, which got limited FDA approval in 2009 for treating congenital heart defects in children, teens and young adults.

Much of the development work on Melody was done here.

More CoreValves are on the way, said Liddicoat, who’s based in Minnesota and spends roughly a week per quarter in OC.

Bob Perry is Medtronic’s local site leader who oversees day-to-day operations here.

Medtronic plans to develop larger and smaller CoreValves, as well as a smaller valve delivery device that would allow the valves to be implanted in patients with narrow blood vessels in their legs, along with an eventual next-generation valve.

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