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VOL. 128 | NO. 226 | Tuesday, November 19, 2013

Medtronic Revenue Rises; Spine Business Sags

By Michael Waddell

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(Daily News File/Lance Murphey)

Medtronic Inc. on Tuesday announced increased net income company-wide, while business at its Memphis-based spine division sagged.

The Minneapolis-based producer of implantable heart devices, insulin pumps and spine surgery products posted overall net income of $902 million for its second quarter of fiscal year 2014, ended Oct. 25, for an increase of 40 percent year over year. Second quarter revenue totaled $4.2 billion, compared to $4.1 billion during the same period last year, for an increase of 2 percent.

“Our Q2 revenue growth was in line with our outlook for the year, and we’re performing at or better than the market in almost every one of our business lines,” said Omar Ishrak, Medtronic chairman and chief executive officer. “Q2 also represents another quarter where our organization delivered balanced growth, with strong performances in some areas offsetting challenges in other parts of our business.”

Medtronic saw quarterly revenue growth in its three main business units: the Diabetes Group, Restorative Therapies Group and Cardiac & Vascular Group, all of which grew between 2 percent and 4 percent for the quarter.

“Looking ahead we are confident that our three primary strategies: therapy, innovation and globalization in economic value will position us well to thrive in the transforming health care environment,” Ishrak said.

For Medtronic Spine, which is part of the Restorative Therapies Group, quarterly revenue equaled $746 million, down 3 percent year-over-year and down 2.5 percent compared to $765 million from last quarter.

The other two units in the Restorative Therapies Group are the Minneapolis-based Neuromodulation business and the Jacksonville, Fla.-based Surgical Technologies business.

Two of the spinal business’ products – BMP, commercially marketed as rhBMP-2 Infuse Bone Graft, and balloon kyphoplasty – remained as struggling areas for the company. BMP declined worse than expected, at 17 percent for the quarter, as some physicians continued to reduce their usage through both patient selection and the use of smaller kits.

“Second quarter revenue was a bit softer than expected, but our goals for the fiscal year remain within reach as we continue to find ways to expand our growth,” said Doug King, Medtronic senior vice president and Medtronic Spine president. “We continued to see solid momentum in key technologies across the business – particularly within thoracolumbar, cervical and other biologics – but those gains were offset by declines in BMP (Infuse Bone Graft) and balloon kyphoplasty.”

Infuse Bone Graft sales continue to suffer since revelations about the company’s handling of studies and marketing of the product. Last year, a U.S. Senate investigation concluded Medtronic helped write and edit journal articles about the graft that downplayed its risks.

Medtronic’s core spine portfolio includes therapies, implants, fusion systems and surgical instruments used to treat spinal disorders caused by degenerative conditions, trauma, tumors or deformities. Core spine also includes biologic bone grafting options.

“As we look ahead, we are on the verge of bringing a number of new therapies to market over the coming quarters,” Ishrak said. “In Spine, we continue to work with the FDA to bring our next generation cervical disc to the U.S market, and we expect before that launch a series of cervical plate launches in FY ’15.”

Medtronic has cut costs companywide this year, including employee layoffs, on increased pressure as U.S. hospitals push for lower prices and European austerity plans trim procedures and profits. In May, Medtronic announced it would trim 230 Spine employees among the 5,600 it employed worldwide, including 60 jobs cuts among the 1,300 Spine employees in Memphis.

Quarterly sales of cardiac and vascular devices were nearly $2.2 billion, an increase of 3 percent over last year. Quarterly revenue from implantable cardioverter defibrillators hit $713 million, an increase of 4 percent, while pacing revenue increased 2 percent to $477 million.

The company expects approval of CoreValve for extreme risk patients in the U.S. by the end of fiscal year 2014.

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