Medtronic's FQ1:10 Shows Stability in Spine
BY LAUREN UZDIENSKI, AUGUST 26, 2009
Medtronic announced their FQ1:10 results on Tuesday, which included $915 million in spine revenues. This reflects an 8% (constant currency) increase over the year-ago period, though it should be noted that Medtronic had about an extra week of selling days in FQ1:10 compared to FQ1:09. Adjusting for these extra days, the revenue increase was closer to 5-6%. On the call (transcript available here), CEO William Hawkins addressed stability in spine, growing procedure volumes, Medtronic's robust product pipeline and the future of InFuse.
Core spine revenue, which includes Kyphon, increased by 11% (constant currency), though the extra selling days may reduce the growth rate to the mid-single digits. William Hawkins called the spine market "pretty robust" on the call, and he said fusion procedure volumes may have increased slightly during the quarter. OUS sales were also a significant factor in core spine, increasing at a rate greater than 20% over FQ1:09.
Hawkins also addressed Kyphon, notably in the context of the NEJM vertebroplasty studies that were released a few weeks ago. He reminded the audience that the study did not evaluate the efficacy of kyphoplasty, and he noted a "good outcome" in the company's Fracture Reduction Evaluation study (FREE) comparing kyphoplasty with non-surgical management. The company emphasized its commitment to building the Kyphon business, noting the launch of a new cement delivery system and alluding to other products in the pipeline.
Biologics sales were flat in Q1. Biologics comparables are challenging, given that concerns about off-label use of InFuse did not surface until late in FQ1:08. BMP sales were called "consistent" in the quarters since the release of the FDA notification. Hawkins said the company is "investing heavily" to expand indications for the product, notably to include a posterolateral fusion indication by the start of FY2011. The company's trauma and OMF indications are currently a "small part" of the business, but Hawkins believes that these indications can represent a $250-$500 million market opportunity.
Medtronic's filing completes the Q2 earnings cycle, and we calculate revenue growth in spine in the mid-teens for the quarter, accelerating slightly from Q1. These results have shown spine to be uniquely resilient in a difficult financial climate, particularly when taking into account share-taking sales growth from companies such as NuVasive (up 54% in Q2), Alphatec (up 35%) and TranS1 (up 33%).
