10.14.15
Talk about money well-spent.
Medtronic plc’s fiscal first-quarter (2016) revenues jumped 12 percent to $7.3 billion, beating Wall Street estimates of $7.1 billion and far exceeding the $4.27 billion generated during its courtship with Covidien plc in Q1 FY15. Contributing at least partially to the better-than-expected performance was an extra selling week, though company bigwigs were hesitant to directly link the two.
“Our first quarter results represent a strong start to fiscal year 2016, with all four of our groups contributing to revenue growth that was at the upper end of our goal when adjusted for the extra week,” said Omar Ishrak, Medtronic chairman/CEO. “We are driving solid growth in the United States and seeing broad acceptance of our therapies around the world.”
Nearly all of Medtronic’s reporting segments beat Wall Street expectations; analysts particularly were impressed by the company’s strong implantable cardioverter-defibrillator sales, which grew in the high single digits (after adjusting for the extra week). The solid performance perhaps was most imposing when compared with soft results from rivals like St. Jude Medical Inc. and Boston Scientific Corp., and taking into account the doubling of services (lead by CardioCom, a key element of Medtronic’s strategy).
Analysts also were pleasantly surprised by the continued growth of the Reveal LINQ cardiac monitor, currently facing more difficult year-over-year comparisons since its February 2014 launch hit its anniversary.
One weak spot was spinal product sales, which expanded a meager 2 percent yet still managed to meet Wall Street’s low growth expectations. Such miniscule gains confirm that Medtronic continues to lose market share to upstarts like NuVasive Inc. and Globus Medical Inc.
As a whole, however, Medtronic’s first fiscal quarter (ended July 31) was a lucrative one for the firm—its third consecutive quarter of mid- to high single-digit sales growth since the Covidien acquisition closed in late January. “Growth did slow modestly in fiscal 1Q 2016 vs. the prior quarter’s 7 percent organic pro forma sales growth rate, but we’re inclined to chalk this up to a seasonably slower summer quarter,” Leerink Partners LLC analyst Danielle Antalffy wrote in a research note.
Nevertheless, that “slower summer quarter” yielded some lucrative results:
Cardiac and Vascular Group
Medtronic’s Cardiac and Vascular Group (CVG) includes the Cardiac Rhythm & Heart Failure, Coronary & Structural Heart, and Aortic & Peripheral Vascular divisions. CVG global revenue jumped 15 percent to $2.56 billion in the first quarter (high single-digit growth when adjusted for the extra week) or 14 percent as reported. CVG sales, bigwigs said, were driven by strong balanced growth across all three divisions.
Cardiac Rhythm & Heart Failure sales ballooned 17 percent to $1.36 billion, or 9 percent as reported thanks to robust growth in high power products, mid-single-digit growth in low power devices, above-market increases in AF Solutions, and a near doubling of revenue in Services & Solutions, which includes the company’s Cardiocom and Cath Lab Managed Services businesses.
Coronary & Structural Heart proceeds spiked 12 percent to $788 million (3 percent reported) due mostly to solid gains in structural heart and coronary products. Medtronic executives attributed the Structural Heart business growth to solid demand for transcatheter heart valves in the United States while the Coronary business benefitted from strong drug-eluting stent sales, bolstered in part by the recent European launch of Resolute Onyx and the continued popularity of Resolute Integrity in America. The Coronary branch also profited from the launches of the differentiated NC Euphora and SC Euphora balloon dilatation catheters.
Aortic & Peripheral Vascular revenue jumped 11 percent to $410 million (77 percent reported) due to double-digit growth in peripheral vascular devices, particularly strong demand for the IN.PACT Admiral drug-coated balloon. The gains in peripheral vascular, however, partially were offset by declining aortic product sales.
Minimally Invasive Therapies Group
The Minimally Invasive Therapies Group includes the Surgical Solutions and the Patient Monitoring & Recovery divisions. Sales in this group climbed 11 percent to $2.45 billion, driven by solid gains in both divisions.
Surgical Solutions revenue surged 14 percent to $1.35 billion thanks to single-digit growth in advanced surgical products and strong sales of both general surgical and “early technologies” innovations. Likewise, across-the-board spikes in respiratory and patient monitoring devices, nursing care solutions and patient care/safety products helped boost Patient Monitoring & Recovery proceeds by 8 percent to $1.1 billion. Patient monitoring sales were particularly strong in the United States, as the firm’s nursing care business capitalized on strong enteral feeding proceeds.
Restorative Therapies Group
Strong performances from the Neurovascular and Surgical Technologies divisions lifted first-quarter revenues 10 percent (to $1.8 billion) in the Restorative Therapies Group, which also includes the Spine, and Neuromodulation sectors. Though all four divisions reported gains, the latter two barely improved upon FY15 earnings, struggling to achieve low single-digit growth, even with the additional selling week.
Spinal revenue rose 7 percent to $763 million—3 percent as reported or low single digits when adjusted for the extra week. While bone morphogenetic protein proceeds rebounded, core spinal sales were flat globally and declined in the United States; interventional spinal sales declined globally and fell sharply in the United States.
Strong demand for gastro/urology and deep brain stimulation products kept Neuromodulation revenue (barely) in the black, boosting it 1 percent as reported to $485 million, according to Medtronic’s latest earnings report.
Solid gains in advanced energy, neurosurgery, and ear, nose and throat device sales fueled a 15 percent increase (10 percent reported) in Surgical Technologies revenue (to $420 million), while double-digit growth in flow diversion products and stents sent neurovascular sales surging 31 percent to $138 million. Flow Diversion sales were driven by strong demand for the Pipeline Flex device for intracranial aneurysm treatment. Stent revenue, on the other hand, was well-served by the Solitaire FR revascularization device for stent thrombectomy, thanks mostly to the publication of several positive clinical studies in The New England Journal of Medicine, including Swift Prime, earlier this year. Use of the Solitaire FR and Pipeline Flex devices also boosted neurovascular access product sales.
Diabetes Group
Global Diabetes Group sales—which includes the Intensive Insulin Management (IIM), Non-Intensive Diabetes Therapies (NDT), and Diabetes Service & Solutions (DSS) divisions—mushroomed 15 percent to $445 million, or 7 percent as reported.
IIM products, designed for patients with Type 1 diabetes, benefitted from solid U.S. demand for the MiniMed 530G system with Enlite CGM sensor and its proprietary Threshold Suspend technology. NDT division revenue profited from the popularity of Medtronic’s Type 2 diabetes products like iPro2 professional CGM and the i-Port Advance injection port in the Americas, Europe, Middle East, Africa and Asia Pacific.
Lastly, the DSS division, which focuses on diabetes therapy, insights and services, mostly was sustained by strong consumer sales in the United States and the integration of the Netherlands-based Diabetes business.
Medtronic expects 2016 fiscal year revenue to grow between 4 percent and 6 percent, with earnings per share (EPS) to range from $4.30 to $4.40. Consensus estimates put EPS at $4.37 and total revenues at $28.78 billion.
Medtronic plc’s fiscal first-quarter (2016) revenues jumped 12 percent to $7.3 billion, beating Wall Street estimates of $7.1 billion and far exceeding the $4.27 billion generated during its courtship with Covidien plc in Q1 FY15. Contributing at least partially to the better-than-expected performance was an extra selling week, though company bigwigs were hesitant to directly link the two.
“Our first quarter results represent a strong start to fiscal year 2016, with all four of our groups contributing to revenue growth that was at the upper end of our goal when adjusted for the extra week,” said Omar Ishrak, Medtronic chairman/CEO. “We are driving solid growth in the United States and seeing broad acceptance of our therapies around the world.”
Nearly all of Medtronic’s reporting segments beat Wall Street expectations; analysts particularly were impressed by the company’s strong implantable cardioverter-defibrillator sales, which grew in the high single digits (after adjusting for the extra week). The solid performance perhaps was most imposing when compared with soft results from rivals like St. Jude Medical Inc. and Boston Scientific Corp., and taking into account the doubling of services (lead by CardioCom, a key element of Medtronic’s strategy).
Analysts also were pleasantly surprised by the continued growth of the Reveal LINQ cardiac monitor, currently facing more difficult year-over-year comparisons since its February 2014 launch hit its anniversary.
One weak spot was spinal product sales, which expanded a meager 2 percent yet still managed to meet Wall Street’s low growth expectations. Such miniscule gains confirm that Medtronic continues to lose market share to upstarts like NuVasive Inc. and Globus Medical Inc.
As a whole, however, Medtronic’s first fiscal quarter (ended July 31) was a lucrative one for the firm—its third consecutive quarter of mid- to high single-digit sales growth since the Covidien acquisition closed in late January. “Growth did slow modestly in fiscal 1Q 2016 vs. the prior quarter’s 7 percent organic pro forma sales growth rate, but we’re inclined to chalk this up to a seasonably slower summer quarter,” Leerink Partners LLC analyst Danielle Antalffy wrote in a research note.
Nevertheless, that “slower summer quarter” yielded some lucrative results:
Cardiac and Vascular Group
Medtronic’s Cardiac and Vascular Group (CVG) includes the Cardiac Rhythm & Heart Failure, Coronary & Structural Heart, and Aortic & Peripheral Vascular divisions. CVG global revenue jumped 15 percent to $2.56 billion in the first quarter (high single-digit growth when adjusted for the extra week) or 14 percent as reported. CVG sales, bigwigs said, were driven by strong balanced growth across all three divisions.
Cardiac Rhythm & Heart Failure sales ballooned 17 percent to $1.36 billion, or 9 percent as reported thanks to robust growth in high power products, mid-single-digit growth in low power devices, above-market increases in AF Solutions, and a near doubling of revenue in Services & Solutions, which includes the company’s Cardiocom and Cath Lab Managed Services businesses.
Coronary & Structural Heart proceeds spiked 12 percent to $788 million (3 percent reported) due mostly to solid gains in structural heart and coronary products. Medtronic executives attributed the Structural Heart business growth to solid demand for transcatheter heart valves in the United States while the Coronary business benefitted from strong drug-eluting stent sales, bolstered in part by the recent European launch of Resolute Onyx and the continued popularity of Resolute Integrity in America. The Coronary branch also profited from the launches of the differentiated NC Euphora and SC Euphora balloon dilatation catheters.
Aortic & Peripheral Vascular revenue jumped 11 percent to $410 million (77 percent reported) due to double-digit growth in peripheral vascular devices, particularly strong demand for the IN.PACT Admiral drug-coated balloon. The gains in peripheral vascular, however, partially were offset by declining aortic product sales.
Minimally Invasive Therapies Group
The Minimally Invasive Therapies Group includes the Surgical Solutions and the Patient Monitoring & Recovery divisions. Sales in this group climbed 11 percent to $2.45 billion, driven by solid gains in both divisions.
Surgical Solutions revenue surged 14 percent to $1.35 billion thanks to single-digit growth in advanced surgical products and strong sales of both general surgical and “early technologies” innovations. Likewise, across-the-board spikes in respiratory and patient monitoring devices, nursing care solutions and patient care/safety products helped boost Patient Monitoring & Recovery proceeds by 8 percent to $1.1 billion. Patient monitoring sales were particularly strong in the United States, as the firm’s nursing care business capitalized on strong enteral feeding proceeds.
Restorative Therapies Group
Strong performances from the Neurovascular and Surgical Technologies divisions lifted first-quarter revenues 10 percent (to $1.8 billion) in the Restorative Therapies Group, which also includes the Spine, and Neuromodulation sectors. Though all four divisions reported gains, the latter two barely improved upon FY15 earnings, struggling to achieve low single-digit growth, even with the additional selling week.
Spinal revenue rose 7 percent to $763 million—3 percent as reported or low single digits when adjusted for the extra week. While bone morphogenetic protein proceeds rebounded, core spinal sales were flat globally and declined in the United States; interventional spinal sales declined globally and fell sharply in the United States.
Strong demand for gastro/urology and deep brain stimulation products kept Neuromodulation revenue (barely) in the black, boosting it 1 percent as reported to $485 million, according to Medtronic’s latest earnings report.
Solid gains in advanced energy, neurosurgery, and ear, nose and throat device sales fueled a 15 percent increase (10 percent reported) in Surgical Technologies revenue (to $420 million), while double-digit growth in flow diversion products and stents sent neurovascular sales surging 31 percent to $138 million. Flow Diversion sales were driven by strong demand for the Pipeline Flex device for intracranial aneurysm treatment. Stent revenue, on the other hand, was well-served by the Solitaire FR revascularization device for stent thrombectomy, thanks mostly to the publication of several positive clinical studies in The New England Journal of Medicine, including Swift Prime, earlier this year. Use of the Solitaire FR and Pipeline Flex devices also boosted neurovascular access product sales.
Diabetes Group
Global Diabetes Group sales—which includes the Intensive Insulin Management (IIM), Non-Intensive Diabetes Therapies (NDT), and Diabetes Service & Solutions (DSS) divisions—mushroomed 15 percent to $445 million, or 7 percent as reported.
IIM products, designed for patients with Type 1 diabetes, benefitted from solid U.S. demand for the MiniMed 530G system with Enlite CGM sensor and its proprietary Threshold Suspend technology. NDT division revenue profited from the popularity of Medtronic’s Type 2 diabetes products like iPro2 professional CGM and the i-Port Advance injection port in the Americas, Europe, Middle East, Africa and Asia Pacific.
Lastly, the DSS division, which focuses on diabetes therapy, insights and services, mostly was sustained by strong consumer sales in the United States and the integration of the Netherlands-based Diabetes business.
Medtronic expects 2016 fiscal year revenue to grow between 4 percent and 6 percent, with earnings per share (EPS) to range from $4.30 to $4.40. Consensus estimates put EPS at $4.37 and total revenues at $28.78 billion.