Covidien Plc said it would stop making a device for treating high blood pressure due to weak demand for the product, raising more doubts about the future of the novel technology.
The decision comes less than two weeks after Medtronic Inc said it was halting clinical trials for its high blood pressure device after the treatment, known as renal denervation, failed to prove effective in a key U.S. study. Medtronic's move surprised many observers.
The devices, which are not available in the United States, take a new approach to treating hypertension and are aimed at patients resistant to traditional drug-based therapies. Some analysts had predicted the technology, which works by deadening nerves in the kidneys, could evolve into a $2 billion market by providing an alternative to drug therapy.
Covidien said the decision to exit the business was a result of its regular review of strategic programs.
"The company took a close look at the renal denervation market and realized it really is growing much slower than expected," said Covidien spokesman Peter Lucht. He declined to comment on whether Medtronic's study outcome played a role in his company's decision.
S&P Capital analyst Phillip Seligman said the failed clinical trial of Medtronic's product likely influenced Covidien's decision but noted sales of the device were modest. He maintained a "strong buy" rating on Covidien shares.
Covidien's device, called OneShot, was sold in Europe and the Middle East. In Europe, where the product was approved in February 2012, adoption of such devices has run into reimbursement hurdles as governments have been reluctant to pay for the new technology.
The devices work by creating tiny scars along nerves in the kidneys - organs that play a pivotal role in regulating blood pressure by sending signals to the brain that can cause blood vessels to constrict.
Following its decision to halt clinical studies of its renal denervation system, Medtronic said it would form an independent panel of experts to make recommendations on the future of the product, called Symplicity.
Medtronic continues to sell the product in 85 countries. It has been approved in Europe since April 2010.
St Jude Medical Inc and Boston Scientific Corp also sell renal denervation products in Europe and other markets. Boston Scientific acquired its system through the purchase of Vessix Vascular Inc in November 2012.
A Medtronic spokeswoman said it was too soon to determine the next steps for Symplicity. "We don't know if we would consider another clinical trial. We don't know anything yet," said spokeswoman Wendy Dougherty.
Covidien said it expects to record after-tax charges of $20-$25 million as a result of exiting the program.
The company's shares fell 1 cent to $68.19 on Tuesday.
(This January 21 story was corrected to fix name of Medtronic hypertension product to Symplicity, not Ardian, paragraphs 9, 12)
(Additional reporting by Esha Dey in Bangalore; editing by Jonathan Oatis)