Two of Medtronic’s largest markets that have been struggling for quite some time were the very ones to show some improvement in the company’s first fiscal quarter earnings that it reported Tuesday.
Medtronic CEO Omar Ishrak told analysts that both the U.S. implanted cardioverter defibrillator (ICD) market and the domestic Spine business showed signs of “signs of stabilization” in the quarter.
In fact in the ICD division, Medtronic performed better than the market which declined 4 percent compared to the company whose U.S. ICD revenue fell only 3 percent, Ishrak noted.
In the quarter ended April 27, Medtronic’s domestic ICD business garnered $399 million in revenue, down slightly from $411 million in the first quarter of fiscal 2012. Implant volumes were up. However the positive effect was wiped out by hospitals reducing the amount of bulk purchases they do, Ishrak said.
The ICD market stabilization will likely be welcome to news to Boston Scientific and St. Jude Medical. Both Daniel Starks, CEO of St. Jude and Hank Kucheman, CEO of Boston Scientific, have previously said that while they expect the market to improve in the second half of the year, they can’t be 100 percent sure that the U.S. ICD market has bottomed out.
In the Medtronic conference call, Joshua Jennings, an analyst with the Cowen Group, remarked that the ICD business has “stabilized faster than we anticipated and you guys outperformed the market.”
In fact Medtronic’s U.S. ICD revenue of $399 million was higher than the $386 million that David Lewis, an analyst at Morgan Stanley was expecting.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Aside from ICDs, Medtronic’s spine business also showed some positive signs.
The Minnesota medical device company’s Core Spine revenue excluding the performance of its Kyphon business, actually increased 1 percent in the U.S. and 2 percent globally compared with the same period a year ago, assuming no currency fluctuation said Gary Ellis, CFO of Medtronic. Global Core Spine revenue was $645 million, with the U.S. accounting for $430 million out of overall revenue.
Later Bob Hopkins, an analyst with Bank of America that the results of the Core Spine business, excluding Kyphon, was the company’s best performance in “quite some time.” Kyphon is the multibillion-dollar acquisition undertaken under previous CEO William Hawkins that is yet to bear fruit even after five years.
The improvement in the Spine business, especially Core Spine, shows what a difference a quarter can make. Just last quarter, Ishrak had said that the continued poor performance of the Spine business as a whole is not sustainable over the long term.
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