- Medtronic announced third quarter revenue of $7.8 billion, an increase of 0.8% on a reported basis and a decrease of 1% on an organic basis, beating Wall Street expectations by $30 million.
- CEO Geoff Martha said the medtech giant saw “notably strong” sales of capital equipment by hospitals, despite the negative impact of the COVID-19 resurgence on procedure volumes in late December and January. However, CFO Karen Parkhill observed that in February so far the company has “not yet seen a turnaround” as a result of severe winter weather in the U.S.
- While Martha contends that Medtronic is “well on the way” to returning to growth, the company is not providing formal annual or quarterly financial guidance due to continued uncertainty related to the pandemic.
Following a rebound in 2020 from the sudden procedure drop in March, April and May, rising cases of COVD-19 served to halt hospital operations at the end of last year and into 2021. Medtronic’s third quarter results mirror the financial impacts on other major medtechs that saw volume drop when cases spiked, while varying by geography.
Noteworthy is Medtronic’s Surgical Innovations division where revenue of $1.4 billion decreased 3.5% as reported and 5.3% organically, with Advanced Surgical declining mid-single digits and General Surgery high-single digits, both impacted by a deceleration of the global surgical procedure recovery.
Despite the impact of the COVID-19 resurgence on procedure volumes in late December and January, Martha said he is encouraged by signs hospital customers are “preparing for a robust recovery.”
“The use of our capital equipment, such as energy consoles, robotics and navigation systems, is tied directly to procedures. So, it’s telling that hospitals are prioritizing spending on this type of equipment,” according to Martha, arguing that the pandemic’s impact on procedures and the timing of Medtronic’s quarter “masked” some of the underlying market dynamics.
Looking at the fourth quarter, Martha said contends momentum will continue to build over successive quarters in 2021, driven by new products.
Among the businesses Martha said are outperforming rivals and gaining share is Cardiac Rhythm & Heart Failure, which brought in third-quarter revenue of $1.4 billion, a 1.6% decrease on a reported basis and a 3.7% decrease organically.
Martha noted that Cardiac Rhythm in particular “gained another point of share” in the third quarter “on the strength” of Medtronic’s leadless pacemakers on the continued global adoption of the company’s Micra transcatheter pacing systems.
At the same time, Heart Failure declined by low-single digits, as low-single-digit declines in Cardiac Resynchronization Therapy Pacemakers and mid-twenties declines in Left Ventricular Assist Devices were partially offset by low-single-digit growth in cardiac resynchronization therapy defibrillators from the recent launch of the company’s Cobalt and Chrome implantable ICDs.
Medtronic’s Coronary & Structural Heart division brought in third-quarter revenue of $873 million, a decrease of 7.9% as reported and 9.5% organic, with low-double-digit declines in drug-eluting stents. While transcatheter aortic valve replacement sales declined mid-single digits in the quarter versus the prior year, Medtronic estimates it gained share sequentially.
In drug-coated balloons, Martha said the medtech gained a “couple of points of share” driven by sales of IN.PACT drug-coated balloons, which increased by high-single digits.
Another bright spot in the third quarter was Medtronic’s Diabetes Group, with $630 million in revenue represented an increase of 3.3% as reported and 0.8% organic, reflecting mid-single-digit growth in durable pumps and continuous glucose monitors with the launch of MiniMed 780G in international markets and the MiniMed 770G launch in the U.S.
“In diabetes, we’re making considerable progress in our turnaround efforts and we actually returned to growth this quarter. While we’re still not growing with the market, we’re gaining momentum,” Martha added.
Martha said Medtronic will supplement its product pipeline with an increasing cadence of tuck-in M&A. The acquisition of privately-held RIST Neurovascular, which closed in August 2020 for an undisclosed amount, was the eighth in a series of tuck-in acquisitions Medtronic has announced since January 2020.
However, Medtronic’s third-quarter announcement notes no acquisitions made in the last year had a significant impact on revenue growth.