Medtronic’s financial results for its third quarter of fiscal year 2014, which ended January 24, 2014 showed revenues were a healthy 4% up, while net earnings for the quarter were 23% down for a variety of reasons, not least the impairment charge taken when the company’s Renal Denervation Study missed its end points.
Background
Medtronic reported worldwide Q3 revenue of $4.163 billion, compared to the $4.027 billion reported in the third quarter of fiscal year 2013. This represented an increase of 4 percent on a constant currency basis, a growth figure somewhat overshadowed by net earnings down by 23% to $762 million. According to the company’s release, this decline included factors such as benefits received in Q3 2013, as well as higher levels of interest expense and U.S. medical device excise tax in Q3 2014 compared to the same period last year. The most widely reported impact on Medtronic’s numbers in the quarter however related to the impairment of the company’s renal denervation in-process research and development and related long-lived assets following the announcement that the HTN-3 trial did not meet its primary efficacy endpoint. Quite how that’s all going to pan out is unknown at the present time, but the company clearly felt there was enough doubt about the therapy that it elected to incur charges almost as soon as the news of the study outcome was made public.
Across the world, international revenue, accounting for some 46% of the company’s revenue in the quarter, increased 4 percent on a constant currency basis. Even more significantly, emerging market revenue of $521 million increased 12 percent on a constant currency basis and represented 13 percent of company revenue.
By business area
Cardiac and Vascular Group
The Cardiac and Vascular Group is Medtronic’s biggest business by some margin and includes the Cardiac Rhythm Disease Management (CRDM), Coronary, Structural Heart, and Endovascular businesses. The group saw worldwide sales grow 2% to $2.119 billion for the quarter, the company’s release saying the key drivers were growth in Structural Heart, Endovascular, Implantable Cardioverter Defibrillators (ICDs), and AF and Other, which included growth from Hospital Solutions and Cardiocom®. Pacing, in common with other big Cardio players, saw a decline.
Restorative Therapies Group
The Restorative Therapies Group, including the Spine, Neuromodulation and Surgical Technologies businesses, saw worldwide sales in the quarter increase 5% on a constant currency basis to $1.608 billion. Group revenue was driven by growth in Surgical Technologies and Neuromodulation. Underpinning this growth was a stellar performance from Surgical Technologies, of 11% compared with a year ago, driven, according to Medtronic, by upgrades of the StealthStation® S7® Surgical Navigation System and NIM® ENT nerve monitoring capital equipment, robust U.S. sales of O-arm® imaging capital equipment, and continued strong adoption of the Aquamantys® Transcollation® and PEAK PlasmaBlade® technologies.
Neuromodulation revenue increased 7% to $478 million, driven by strong performance from Activa® deep brain stimulation systems and the RestoreSensor® SureScan® MRI spinal cord stimulator.
Spine meanwhile was flat on a constant currency basis at $744 million.
Diabetes Group
Diabetes revenue of $436 million grew 16 percent. The acceleration in growth was driven by the ongoing U.S. launch of the MiniMed® 530G with Enlite® continuous glucose monitoring sensor, which was approved late in the second quarter.
Company comments
“In Q3, our overall organization once again delivered balanced growth, with strong performances in some areas offsetting challenges in other parts of our business,” said Omar Ishrak, Medtronic chairman and chief executive officer. “We remain focused on building a track record of operational execution to deliver consistent and reliable results.”
Of the immediate future Ishrak said; “The U.S. approvals of CoreValve and the MiniMed 530G System marked important milestones and are part of an ongoing product launch cadence of innovative therapies. In addition, Medtronic is uniquely positioned to lead the shift to value-based healthcare, directing our products and solutions to help providers, payers, and governments achieve their goals in driving more value into healthcare systems around the world. We are seeing promising results from our early efforts, including both our Cath Lab Managed Services and Cardiocom businesses, and we believe that we have significant opportunities ahead as we transform our company from being primarily a device provider today into the premier global medical technology solutions partner of tomorrow.”
Source: Medtronic, Inc.
published: February 18, 2014 in: Cardio, Company News, Financial, Medtronic, Neuro