Medtronic’s First Quarter Highlights Emerging Markets

In short

Medtronic, Inc. has announced financial results for its first quarter of fiscal year 2013, which ended July 27, 2012.

Background 

The Company reported worldwide first quarter revenue of $4.008 billion, an increase of 5 percent on a constant currency basis after adjusting for a $119 million negative foreign currency impact or 2 percent as reported.

As reported, first quarter net earnings were $864 million, or $0.83 per diluted share, an increase of 5 percent and 8 percent, respectively, over the same period in the prior year. Net earnings and diluted earnings per share on a non-GAAP basis were $883 million and $0.85, an increase of 4 percent and 8 percent, respectively, over the same period in the prior year.

First quarter international revenue of $1.781 billion increased 6 percent on a constant currency basis or declined 1 percent as reported. International sales accounted for 44 percent of Medtronic’s worldwide revenue in the quarter. Emerging market revenue of $438 million increased 14 percent on a constant currency basis or 9 percent as reported and represents 11 percent of Company revenue.

Company comments

“We delivered another quarter of improving revenue growth in a dynamic healthcare environment,” said Omar Ishrak, Medtronic chairman and chief executive officer. “Once again, our growth was broad-based across businesses and geographies and reflects the positive impact of well-executed product launches and stabilizing end-markets.”

“Our Q1 results represent another positive step toward our goal of delivering consistent and dependable growth. I am confident that our market-leading portfolio and pipeline, coupled with our focus on globalization and economic value, provide us with significant opportunities for growth.”

By business area

Cardiac and Vascular Group: Cardiac Rhythm Disease Management (CRDM), Coronary, Structural Heart, and Endovascular businesses.

The Group had worldwide sales in the quarter of $2.115 billion, representing an increase of 4 percent on a constant currency basis or 1 percent as reported. Group revenue performance on a constant currency basis was driven by solid growth in Coronary, Endovascular, AF Solutions, and Structural Heart, partially offset by declines in Pacing.

Cardiac and Vascular Group international sales of $1.165 billion increased 5 percent on a constant currency basis or declined 2 percent as reported.

CRDM revenue of $1.193 billion declined 2 percent on a constant currency basis or 5 percent as reported. First quarter revenue from Implantable Cardioverter Defibrillators (ICDs) was $675 million, flat on a constant currency basis, while Pacing revenue was $463 million, a decline of 6 percent on a constant currency basis. Continued growth of the AF Solutions business partially offset weaker Pacing sales, while the Company saw continued stabilisation in the U.S. ICD market.

Coronary revenue of $433 million grew 16 percent on a constant currency basis or 11 percent as reported. Sales of drug-eluting stents increased 36 percent on a constant currency basis, driven by significant share gains of the Resolute Integrity drug-eluting stent in the United States market.

Structural Heart revenue of $280 million grew 7 percent on a constant currency basis or 2 percent as reported. Growth was driven by strong sales of the CoreValve transcatheter aortic heart valves in international markets.

Endovascular revenue of $209 million grew 17 percent on a constant currency basis or 12 percent as reported. The recent launch of the Endurant abdominal aortic stent in Japan, the launch of Endurant II in the U.S. and Europe, account penetration with the Complete SE vascular stent, and the continued adoption of the Assurant Cobalt iliac stent drove growth in the quarter.

Restorative Therapies Group

The Restorative Therapies Group includes the Spine, Neuromodulation, Diabetes, and Surgical Technologies businesses.

The Group had worldwide sales in the quarter of $1.893 billion, representing an increase of 5 percent on a constant currency basis or 3 percent as reported. Group revenue, on a constant currency basis, was driven by growth in Surgical Technologies, Neuromodulation, Diabetes, and Core Spine, partially offset by declines in BMP. Restorative Therapies Group international sales of $616 million increased 7 percent on a constant currency basis or 1 percent as reported.

Spine revenue of $786 million declined 3 percent on a constant currency basis or 5 percent as reported. Core Spine revenue of $645 million grew 1 percent on a constant currency basis or declined 1 percent as reported. The Company saw improvement in its Core Spine business as new products reached greater scale and new procedural innovation drove increased surgeon interest in Medtronic therapies. BMP revenue of $141 million declined 19 percent, both as reported and on a constant currency basis.

Surgical Technologies revenue of $324 million grew 24 percent on a constant currency basis or 22 percent as reported. Organic revenue growth after adjusting for the acquisitions of PEAK Surgical and Salient Surgical Technologies, was 11 percent on a constant currency basis or 9 percent as reported. Surgical Technologies revenue growth was driven by strong capital equipment sales, as surgeon demand for navigated spine procedures drove greater utilisation of the StealthStation S7 and O-Arm.

Neuromodulation revenue of $419 million increased 8 percent on a constant currency basis or 6 percent as reported. Growth was driven by the continued acceptance of the RestoreSensor® spinal cord stimulator with its proprietary AdaptiveStim technology, solid new implant growth of DBS in the U.S., and strong sales of InterStim Therapy for both urinary and bowel indications.

Diabetes revenue of $364 million grew 6 percent on a constant currency basis or 3 percent as reported. Growth in the quarter was driven by strong sales of continuous glucose monitoring (CGM) products. The Veo insulin pump with its low glucose suspend technology, together with the Enlite(TM) CGM sensor, had solid growth in international markets.

Source: Medtronic Inc.