Medtronic Reports "Difficult" Quarter
BY LAUREN UZDIENSKI, AUGUST 25, 2010
Medtronic reported a disappointing F1Q:11 on Tuesday, missing analysts' revenue estimates and depicting slowing growth in their spine division. Spine sales declined by 9% as reported, to $829 million, though adjusting for currency shifts and extra selling days in fiscal 2010, revenues decreased by 5%.
Spine's performance was attributed to slowing procedure growth and pricing and reimbursement pressures. Among segments, as adjusted, core spinal sales declined by 6%, and biologics decreased by 1%. The company did not provide data on their kyphoplasty division, though they stated on thier earnings call that the segment faced tough comps following continued reverberations from the NEJM vertebroplasty studies published last summer. It should be noted that new reports are steadily being released showing vertebroplasty's efficacy, and Medtronic is also conducting its own KAVIAR study on kyphoplasty and vertebroplasty.
These challenges in spine are not exclusive to Medtronic, and these results could serve as a barometer for near-term performance. While 2Q:10 showed a deceleration in spine growth from earlier in the year, Medtronic reports off-cycle, suggesting that these short-term challenges may persist into the third quarter. Medtronic is now projecting flat FY11 revenue growth in spine, which targets growth of 3% to 4% for the remainder of the fiscal year, and report that they "continue to work on turning our spine businesses around."
On the call, Chairman and CEO Bill Hawkins spoke to broader macroeconomic issues as sparking a "transition phase," addressing concerns such as unemployment and rising deductibles, while highlighting the demographic factors that predict long-term growth in the medical device space. He also specified where the company saw opportunities to grow. In spine, the company is "refreshing" its portfolio and introducing new products. They're also anticipating FDA approval of Amplify, a new formulation of BMP-2, following a positive FDA panel in July. Emerging markets are also a key focus for the company, with Hawkins noting that a new patient care center just opened in Beijing. He added that the company anticipates that emerging market revenue will triple over the next five years.
