Challenges Remain for Medtronic

By Aisling Maki

Medtronic Inc. on Tuesday, Feb. 21, reported worldwide revenue of $3.9 billion for the third quarter, up 2 percent from $3.857 billion in Q3 2011.

However, the Minneapolis-based medical technology company’s Spinal & Biologics Business, based at 1800 Pyramid Place in Memphis, continued to face challenges.

The company fell short of the $4 billion in sales that analysts expected from the company, which instead turned in a surprisingly flat quarter.

As reported, Medtronic’s net earnings in Q3, which ended Jan. 27, were $935 million, or $0.88 per diluted share, an increase of 1-2 percent over the same period the previous year.

And the company’s international revenue totaled $1.773 billion, an increase of roughly 7 percent as reported. Medtronic’s international sales accounted for 45 percent of the company’s Q3 worldwide revenue, and emerging market revenue increased 15 percent as reported to $395 million.

Medtronic’s Restorative Therapies Group – comprised of Spine, Neuromodulation, Diabetes and Surgical Technologies – saw Q3 worldwide sales of $1.889 billion, representing a 1 percent increase.

The group’s international sales were $621 million, an 11 percent increase as reported, with revenue driven by solid performances in Surgical Technologies, Diabetes and Neuromodulation.

While International Spine sales increased 7 percent as reported, U.S. Spine revenue of $784 million fell 9 percent as reported.

Core Spine revenue of $596 million – which includes core metal constructs, interspinous process decompression devices and balloon kyphoplasty products – declined 6 percent on a constant currency basis.

And Biologics revenue was $188 million, a 20 percent decline on a constant currency basis, driven by declines in U.S. sales of Infuse and partially offset by revenue growth in other Biologics.

“I am pleased that a majority of our business mix continued to report strong, consistent revenue growth in the upper single digits,” Medtronic chairman and CEO Omar Ishrak said in a statement. “However, this was masked by continued challenges in our U.S. ICD and Spine performance. Stabilizing these businesses along with delivering on our key strategic imperatives of improving execution, optimizing innovation, and accelerating globalization should position us well to deliver long-term sustainable growth.”