Earlier this summer, the Minneapolis-based company agreed to acquire Transneuronix, a privately held medical device company and maker of the Transcend, a pacemakerlike device that is in U.S. trials to treat morbid obesity.
When the Transcend becomes a significant item on Medtronic's revenue statement, "assuming pacemaker-type pricing, the total market opportunity could easily be greater than $500 million," Glenn Reicin of Morgan Stanley wrote in a research report earlier this summer.
Jason Wittes of Leerink Swann, a biotech equity research firm, points out that the company hasn't released a selling price for the device, but he expects the Transcend to be priced at $10,000. And "for Medtronic, anything above a $500 million market opportunity would start to affect them," he says.However, Medtronic might not reap the benefits of the deal for a year or more, according to Glenn Novarro of Banc of America Securities. He doesn't see the deal materially affecting revenue and earnings until after 2006. At $52, Medtronic is a buy according to Novarro, and he has a 12-month price target of $63. Shares are now up to about $56. Banc of America Securities does and seeks to do business with companies it covers.