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VOL. 127 | NO. 229 | Thursday, November 22, 2012

Medtronic Quarterly Earnings Remain Flat

By MICHAEL WADDELL

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Medtronic Inc., the world’s largest medical device maker, on Tuesday, Nov. 20, announced overall net income of $902 million, or $0.88 per share, for its second quarter of fiscal year 2013, which ended Oct. 26.

After adjusting for a one-time, non-cash $245 million pre-tax charge related to litigation in its structural heart business, the earnings were flat compared to the same period a year ago. If including the pre-tax charge, net income for the Minneapolis-based company whose Spinal and Biologics Business is based in Memphis actually dropped 26 percent in the quarter.

The company’s U.S. Spine division continued to show signs of stabilization after declining 5 percent in the first quarter. Spine revenues equaled $782 million, declining 5 percent again this quarter, but Medtronic officials saw solid improvement in its U.S. core spine and other biologics business. Gains were offset by declining BMP sales, the slowdown of its China joint venture following the October announcement to acquire China Kanghui Holdings, and a modest decline in the spine market overall.

“The trend of market stabilization continues,” said Doug King, senior vice president, president of Medtronic Spine, said in a statement. “While overall business slightly declined year-over-year, we continue to gain market share in core spine, and see signs that our procedural innovations and recent product introductions, including the CD Horizon Solera system with its advanced biomechanics, are being well-received, laying the foundation for continued share gains.”

The company reported overall revenue of approximately $4.1 billion, an increase of 5 percent, after adjusting for a $118 million unfavorable foreign currency impact.

“We believe our organic revenue growth outperformed the Medtronic market by 200 basis points,” Omar Ishrak, Medtronic chairman and CEO, said in a statement. “Our second quarter performance reflects the results of our ongoing focus to deliver consistent and dependable growth in a changing health care environment.”

Sales of coronary and vascular devices and structural heart products continued to be a standout area driving the company’s global growth. Medtronic enjoyed double-digit increases for the quarter, including a 39 percent increase in sales of drug-eluting stents. Medtronic’s overall second quarter coronary revenue totaled $429 million, up 19 percent year-over-year.

Sales from implantable devices like pacemakers and defibrillators continued to decline, falling 2 percent in the quarter. Sales for these devices have slowed in recent years because of safety concerns and cost cutting.

The company reported revenue of $1.2 billion for its Cardiac and Vascular Group, representing a decline of 3 percent as reported year-over-year.

Growth in the company’s restorative therapies group was fueled by 15 percent growth to $344 million as reported for its Surgical Technologies business. After adjusting for the acquisitions of PEAK Surgical and Salient Surgical Technologies, organic revenue growth was 12 percent as reported.

Internationally, Medtronic revenues grew 1 percent as reported, rising to $1.8 billion. International sales accounted for 44 percent of the company’s worldwide revenue in the quarter, and emerging market revenue jumped 14 percent to $464 million.

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