Medtronic plc reported first-quarter worldwide revenue of just over $6.5 billion, a decrease of 13% as reported. As Cowen’s Josh Jennings wrote, the company’s results were better than expected, with an organic revenue growth decline of 17% vs. the Street’s prediction of a 25% decrease.
“We reported solid improvement from last quarter, and our results reflect a faster than expected recovery from the depths of the pandemic we saw back in April,” said Medtronic CEO Geoff Martha. “Procedure volumes began to recover around the world, and we’re leveraging our pipeline of innovative products to drive share gains in a number of key businesses.”
Jennings noted that the cardiac and vascular group raked in $2.43 billion, easily beating the Street’s $1.86 billion prediction. Minimally invasive therapies group saw sales of $1.80 billion, which was ahead of the Street’s $1.75 billion.
Danielle Antalffy, an analyst with SVB Leerink LLC, noted Medtronic’s earnings cycle is off by one month. As a result, it has greater visibility into August trends, even as COVID-19 continues in the U.S. and emerging markets.
During a call on results, Bob Hopkins from Bank of America asked about what the company saw in July and August in terms of rescheduled procedures vs. new demand. Martha responded that there is a sharper recovery in the U.S. and Europe, with China being pretty steady. “But the whole pile of geographies and all of the therapy areas, all of them are improving,” he added, noting that there has been sequential month-over-month improvement.
With uncertainty surrounding the ongoing pandemic, the company declined to provide formal annual or quarterly financial guidance.
Work in diabetes
During the call, Martha acknowledged that the company has work to do in diabetes. “We're actively increasing both our near- and our long-term growth opportunities through increased organic investment, innovative funding with our recently announced Blackstone partnership; and inorganic activity, highlighted by the announcement earlier this month of our pending acquisition of Companion Medical,” he added.
In June, it was revealed that the Dublin-based company had an arrangement with Blackstone Life Sciences, which will invest $337 million over several years into R&D by Medtronic’s diabetes group. For its part, Companion manufactures the Inpen, the only U.S. FDA-cleared smart insulin pen system paired with an integrated diabetes management app. That acquisition is expected to close within one to two months.
Also in the business, he noted that the company is on pace for gaining Minimed 770G approval this summer. In addition, its pivotal trial for Synergy is underway. “Enrollment is going well, and we're getting great feedback on this disposable sensor that is 50% smaller than our current product,” he added.
Martha also noted that the company is “increasing our cadence of tuck-in M&A,” while becoming nimbler and more competitive. “And in the coming weeks, you're going to hear more from me on this topic as we begin to outline the new Medtronic.”
Against this backdrop, Antalffy praised Martha, who officially assumed the CEO chair this year. He “seems to already be leaving a mark on the business, with not only the energetic tone of the call, but a clear and tangible commitment to sustainable and consistent market share gains backed by continued product innovation and structural changes coming in the near-term to improve MDT's nimbleness and more effectively compete vs. smaller competitors,” she wrote.
For her part, Joanne Wuensch with Citibank asked about the theme of a reinvigorated or different Medtronic and where Martha saw the company post-pandemic. He replied that the company wants to be growing at or above market, doing better relative to its competitors. “And our pipeline is going to lead the way, and we're going to have great commercial execution here.”
He also emphasized that the company wants “to put the tech in med tech,” pooling digital technologies into its products. “[W]e're very device-centric, in addition to the devices, we want to pull in data and analytics,” he added, highlighting acquisitions like Nutrino in diabetes and advances in the minimally invasive therapies group for the soft tissue robot.
Martha also highlighted that the company is gaining share in its largest businesses, including its U.S. core spine. That business saw a decline in the high single digits, a figure that was better than the market. “We estimate that we gained over 0.5 points of share in the second calendar quarter. Our differentiated offerings of enabling technologies, which includes robotics, imaging and navigation, combined with our implants, is reshaping the spine industry.”
He promised that the investment community will get more visibility on these new Medtronic efforts Oct. 14, the date of its rescheduled analyst day.