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Medtronic plc
CEO : Mr. Geoffrey Straub Martha

Quarterly earnings growth(YoY,%)

Geoff Martha says,

Revenue Growth and Progress in Established Market Leaders

• Cardiac rhythm and spine businesses had a good quarter, growing 8% and 5% respectively, demonstrating continued strength in established market leading cardiac rhythm management and spine franchises.
• Strong market adoption of Medtronic’s micro-leadless pacemakers, Defibrillation Solutions business, and market leading ecosystem of Aible-enabling technology and associated pull-through of spinal implants.
• Surgical Innovations business grew sequentially as supply challenges were addressed, and there was strong adoption of advanced surgical products.

Advancements in High Secular Growth Med Tech Markets

• Structural Heart drove 11% growth in Q3, including 12% growth in the United States, with great physician reception of Medtronic’s Evolut FX system for TAVR.
• Cardiac ablation solutions grew 3% globally, with high single-digit growth outside of China, including low double-digit growth in the United States on the continued strong adoption of Medtronic’s leading Arctic Front cryoablation technology.
• Significant progress made on bringing Affera mapping and navigation platform and Sphere-9 catheter to the market, with enrollment completed in the pivotal trial during the quarter.
• Surgical Robotics saw positive sales momentum with the rollout of Medtronic’s differentiated Hugo robotic system in many international markets and the U.S. IDE trial for the urology indication started during the quarter.
• Neurovascular grew 9% and would have grown a couple of points more if not for the China VBP. Strong growth in several categories, including flow diversion, aspiration, and stent retrievers, with a long runway for high growth in this market approaching $4 billion.
• Diabetes business saw strong international growth and invested heavily in assembling the ecosystem of durable pumps, smart pens, patch pumps, sensors, algorithms, and customer service, with multiple programs under development to restore strong growth of the important diabetes franchise over the coming years.

Strong Performances in Synergistic Businesses

• Cardiac Diagnostics grew double-digits, ramping up production of LINQ II.
• Neuromodulation grew 12% in pain stim as the market continues to recover.
• GI business grew high single digits on strong adoption of GI Genius, which uses artificial intelligence to help physicians detect polyps during colonoscopies.

Progress on Aggressive Transformation at Medtronic

• Focused on reducing complexity, enhancing culture, improving capital allocation and portfolio management, upgrading global manufacturing operations and supply chain capabilities, and plans for significant cost reductions aimed at partially mitigating the impacts from macro conditions such as inflation on profitability and cash flow.
• Confident in delivering durable revenue growth over the coming quarters as recent revenue headwinds continue to dissipate and executing across businesses.

Sean Salmon says,

U.S. Market Growth

• Mid-single digit growth underlying for the U.S. market
• 12% growth due to the launch of FX
• Valve hemodynamics leading to better durability of valve over time
• FX levels the playing field on ease of use and coronary access

Spotty Procedure Volume Challenges

• Spotty procedure volume challenges worldwide
• Japan faced wave of COVID impacting procedure volumes
• Dependent on a particular faster access that was impacted by supply chain issues last quarter
• Launch of FX in Japan, returning procedure volumes and no constraint from vascular sheets expected to help grow the market there

Expectations for Future Growth

• Evolut FX roll-out around the world expected to perform well
• Expect multiple touch points of healthcare system required to get a patient in for therapy and through that therapy to abate and get better with time
• Fundamentals of the market are still very strong

Q & A sessions,

Transformation and Portfolio Management

• The company is aggressively transforming to reduce complexity, enhance capabilities, and augment management teams with new leaders that bring an outside diverse perspective.
• Decisive capital allocation and portfolio management are being exercised, with more capital being devoted to high-growth opportunities and divesting non-core assets.

China VBP Impact

• 80% of the company’s portfolio could be impacted by VBP, with 50% already impacted, and the remaining 30% to be impacted in FY ’24.
• The company is taking out some of its selling and marketing costs to offset the lower prices due to VBP.
• FY ’24 will be another year where China is a bit of a headwind, with a reset of the business and growth from there.

Business Performance and Outlook

• The surgical innovations business was hit hard by supply chain issues, but there has been a sequential improvement from Q2 to Q3, and another improvement is expected in Q4.
• China VBP will still be an issue as the company goes from 50% of its portfolio in FY ’23 to 80% by the end of FY ’24.
• The company has strong growth rates in the U.S. implant market for spine, driven by an enabling technology ecosystem.
• The company is optimistic about getting 780G on the market in the U.S. for diabetes in FY ’24.
• The company expects strong performance across the Neuroscience portfolio in FY ’24, with continued strength in ENT and the impact of mapping and navigation systems in the Cardiac Ablation Solutions business.