VOL. 126 | NO. 165 | Wednesday, August 24, 2011
Medtronic Fiscal Q1 Profit Slips 1 Pct.
By Aisling Maki
Medtronic Inc. on Tuesday, Aug. 23, reported its earnings fell 1 percent in the first quarter of its 2012 fiscal year, which ended July 29.
Based in Minneapolis, Medtronic is the world’s largest manufacturer of medical devices. The company’s Spinal and Biologics Business is in Memphis at 1800 Pyramid Place.
The company reported its Q1 net earnings were $821 million, or 77 cents per diluted share, from $830 million, or 76 cents per share. Adjusted earnings, which exclude one-time items, were 79 cents per share.
Medtronic’s revenue climbed 7 percent in Q1 to $4.05 billion, with most of the increase attributable to favorable foreign currency rates.
Medtronic chairman and CEO Omar Ishrak, who took over executive leadership of the company June 13 from retiring chairman and CEO Bill Hawkins, oversaw his first earnings conference call.
Ishrak said to drive growth the company will focus on three key imperatives – “improving execution, optimizing innovation, and accelerating globalization.”
“As a company, we need to better adapt to our changing environment,” Ishrak said. “We will significantly change the way we prioritize products in our pipeline, placing the highest emphasis on our ability to demonstrate not just clinical value, but economic value at both the customer and societal level. Ultimately, our goal is to use technology to both improve the standard of care and reduce health care costs, providing greater access to our therapies for the billions of people who are currently underserved. When we do this, we believe growth will improve.”
Spinal revenue was $825 million, a 3 percent decline on a constant currency basis. But international Spinal sales increased 7 percent.
Core Spinal revenue was $610 million, a 5 percent drop, while Biologics revenue was $215 million, a 2 percent increase, driven by revenue from acquisition of Osteotech, but offset by rapid declines in the sales of INFUSE, following the recent publication of articles in The Spine Journal.
That series of articles, published in June, claimed surgeons on Medtronic’s payroll failed to disclose complications that arose during clinical trials of INFUSE, a bone-growth protein whose purpose is to stimulate bone formation.
The Wall Street Journal in June reported that 15 of the surgeons who conducted clinical trials on the bone-growth protein over the last decade received at least $62 million combined from Medtronic for unrelated work.
That article also said the Senate Finance Committee was investigating whether the payments received by the surgeons were a factor in their decision not to report the health complications.
Earlier this month, Medtronic announced a $2.5 million grant to Yale University to independently review the safety and effectiveness of a bone-growth protein product.
But analysts like Jan Wald of Morgan Keegan & Co. Inc. still expected sales to fall as skeptical physicians turn to other products.
The Restorative Therapies Group at Medtronic, which includes the Spinal, Neuromodulation, Diabetes, and Surgical Technologies businesses, saw worldwide Q1 sales of $1.843 billion, a 6 percent increase as reported or 2 percent on a constant currency basis.
Restorative Therapies Group international sales of $612 million increased 22 percent as reported or 10 percent on a constant currency basis. That increase was led by solid performances in Diabetes and Surgical Technologies, as well as growth in Neuromodulation, offset by challenges in Spinal.
Medtronic’s Neuromodulation Q1 revenue of $397 million increased 7 percent as reported, or 4 percent on a constant currency basis, and the company said it expects to launch breakthrough technology in that business in the U.S. later this fiscal year.
Diabetes revenue was $355 million, growing 14 percent as reported or 9 percent on a constant currency basis, and Surgical Technologies revenue totaled $266 million, an increase of 13 percent as reported or 9 percent on a constant currency basis.
In July, Medtronic announced the acquisitions of Salient Surgical and PEAK Surgical, which are expected to leverage the company’s strength in Surgical Technologies. These acquisitions are expected to close later this summer.
Medtronic’s largest business, the Cardiac and Vascular Group, saw Q2 worldwide sales of $2.21 billion, a 9 percent increase as reported or 3 percent on a constant currency basis.
Cardiac and Vascular Group International sales of $1.231 billion rose 18 percent as reported or 6 percent on a constant currency basis. The company said that increase was driven by strong Structural Heart, Endovascular, Coronary, Physio-Control, and AF Solutions sales offset by weaker sales in implantable cardioverter defibrillators.
The Associated Press contributed to this report.