Dive Brief:
- Medtronic announced fourth-quarter revenue of $8.2 billion for the three months ended April 30, an increase of 37% on a reported basis, beating Wall Street's consensus estimate of $8.13 billion.
- While some geographies are lagging due to the persistence of the coronavirus, CEO Geoff Martha said on Thursday's earnings call that most of the medtech giant's businesses are "returning to near normal, pre-COVID growth." Medtronic's neuroscience revenue jumped 54% and cardiovascular was up 45%, while medical surgical increased 21% and diabetes saw a 14% gain in the quarter.
- Medtronic on Thursday for the first time provided fiscal 2022 revenue guidance with expected growth of approximately 9% on an organic basis. CFO Karen Parkhill told investors that strong organic revenue growth is anticipated due to new product launches and end market recovery from the impact of COVID-19. The medtech previously did not provide formal annual or quarterly guidance due to uncertainty related to the pandemic.
Dive Insight:
The results demonstrate that the company, like other medtechs, is continuing to recover from the negative impacts of the coronavirus pandemic on elective procedures. Boston Scientific, Edwards Lifesciences, J&J and Stryker all recently reported seeing improvements during quarterly earnings as nonessential care rebounded.
"March was stronger than February and April was stronger than March," Parkhill said. "We were particularly pleased with the strength of the last several weeks of the quarter, which we believe sets us up nicely for the start of our new fiscal year."
Like other medtechs, the recovery varied by geography. The U.S. accounted for 51% of revenue and increased 47%, with non-U.S. markets representing 33% of revenue and increasing 20% as reported and 11% organically with "continued pockets of COVID resurgence in parts of western Europe, Japan and Canada," according to Parkhill.
While the impact of COVID-19 on procedures and timing of the fourth quarter "masks" some of the underlying market dynamics, Martha said Medtronic continues to gain share in a number of its core businesses.
In particular, Martha noted the cardiac rhythm management business has gained two to three points year over year. He said CRM is "now at the highest share level in more than a decade" driven by Medtronic's Micra leadless pacemaker which rose 74%, annualizing near $400 million.
The CEO also pointed to gains in its transcatheter aortic valve replacement business where its share was up more than one point year over year and stable sequentially. Martha reported that Medtronic in the fourth quarter reached an all-time record of U.S. TAVR implants. The milestone comes as Jefferies analysts tipped competitor Edwards Lifesciences' U.S. TAVR growth at 90% in April.
The exec acknowledged other Medtronic businesses where it "has some work to do." In its neurovascular business, he said the medtech "lost a couple of points of share" year over year due to new competitive products from Stryker and Terumo.
In cardiac diagnostics, the company continued to be "supply constrained" with Medtronic's new LINQ II insertable cardiac monitoring system, according to Martha.
"We estimate we lost about a point sequentially and mid-single digit share points year over year, primarily to Boston Scientific. We're working through the supply ramp-up and expect to have improved supply on the back half of the fiscal year," Martha said, adding that last week Medtronic implemented a shipping hold on the LINQ II as the company analyzes an undisclosed issue.
The CEO referenced a $35 million negative financial impact to aortic business revenue in the fourth quarter due to Medtronic's February announcement of a global recall of its Valiant Navion thoracic stent graft system. The Navion recall also resulted in the company losing high-teens share in the thoracic stent graft market, according to Martha.
In diabetes, Martha said Medtronic continues to "execute" on its turnaround strategy. Diabetes revenue came in at $647 million, a 14% increase on a reported basis and 9% on an organic basis. "This is still below market and we estimate we lost about five points of share year over year," Martha commented.
Looking at the year ahead, Medtronic executives told investors on Thursday that they feel confident as reflected in the company's fiscal year 2022 guidance, about a point higher than Street estimates.
"We're confident in the continuing procedure recovery around the globe and the resilience of our end markets," said Parkhill, who noted that if current exchange rates hold, revenue growth in fiscal year 2022 would be positively affected by approximately $400 million to $500 million.
Cardiovascular and neuroscience segments are expected to grow 10% to 11% on an organic basis in fiscal year 2022, while medical surgical is anticipated to grow 6% to 7% and diabetes to grow 3% to 4%, according to Parkhill.
At the same time, Medtronic is planning to increase its R&D spend by more than 10% in FY22, the biggest increase in the company's history.
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Medtronic revenue up 37% as electives make a comeback - MedTech Dive
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